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Friday, March 23, 2012

Too Good To Be True

It's only 1 hour into the day, but it's a 4th red day in the making for the market -- in a row!  Almost too good to be true for the bears.  Being conditioned by the market in the past many months where dips are bought with a vengeance, I feel obliged to take off more of my bearish inverse ETF's  here, not trying to overstay my welcome.   But I did not take another whole 1/3 off because suddenly the bears's fear has turned into greed:  The MACD on the SPY daily chart has not crossed down, confirming negative divergence where higher high on the prices yields lower high on the MACD.   Granted, the ADX is still high at 31.63 but it is declining.   On the other hand, prices has retraced 38.2% of the last leg up since the beginning of March and we're at the proximity of the 20 day MA, so it's a good place to resume the up trend.  And as the projected channel (dotted line) shows, prices have refused to close below the channel.   In such dubious state, one can sit tight or in my case where I've lost much confidence, the best compromise is to take some off.   The "this time is different" mentality has proven hazardous in this bull market.

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