Risk/Reward

By: Erik Swarts | Wed, Nov 14, 2012
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As expected, weakness has continued in the equity markets this week. However, based on the NDX/SPX topping comparative that I have been highlighting over the past few weeks, the downside exhaustion-proportional equivalent of the pattern is ~2525. Considering that the NDX finished today at 2531.87, the risk/rewards for continuing to press shorts here is weak. Based on this comparative, risk will shift to the upside in equities through the balance of November into December.

I would estimate that the downside risks for the NDX could extend in the short-term to the zone of the June 5th/6th gap.


Larger Image

*This note and chart were edited at 4:30 EST to include todays close for the NDX.

 


 

Erik Swarts

Author: Erik Swarts

Erik Swarts
Market Anthropology

Although I am an active trader, I have always taken a broad perspective when approaching the markets. I respect the Big Picture and attempt to place each piece of information within its appropriate context and timeframe. I have found that without this approach, there is very little understanding of ones expectations in the market and an endless potential for risk.

I am not a stock picker - but trade the broader market itself in varying timeframes. I want to know which way the prevailing wind is blowing, where the doldrums can be expected and where the shoals will likely rise. I will not claim to know which vessel is the fastest or most comfortable for passage - but I can read the charts and know the risks.

I am not a salesperson for the market and its many wares. I observe it, contextualize its moving parts - both visible and discrete - and interpret.

I practice Market Anthropology - Welcome to my notes.

Erik Swarts is not a registered investment advisor. Under no circumstances should any content be used or interpreted as a recommendation for any investment, trade or approach to the markets. Trading and investing can be hazardous to your wealth. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This is strictly for educational and informational purposes only. All opinions expressed by Mr. Swarts are subject to change without notice, and the reader should always obtain current information and perform their own due diligence before making any investment or trading decision.

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