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Thursday, April 12, 2012

The Market Is At A Crucial Pivot

Yesterday's inside day got everyone prepared to break one way or the other.  Well, it broke upward and never looked back.  It's one of these strong trending days that I hate.  Oscillators were rendered useless.  And I'm not the type who'd chase, much less chase from the long side.  Needless to say, my SPY day trades got killed. The saving grace was that I was never lighter in terms of my bearish position trades.   I sold a few VXX naked puts and added a token 200 shares of SPXU.  I was simply not so gungho to get back to being heavily short after last 6 months of fighting.

Looking at the SPY daily chart, we are at the vicinity of 20 day EMA of 139, the horizontal support/resistance at 138.30, and the broken/recaptured up trend line.   On the 60 minute chart, we're near the 50% Fib retracement of the 2 week selloff at 138.99, the upper trend line of the projected down channel around 139, and the 50 SMA at 138.80.  In short, we're upon a blob of pivot points around the 139 area.

Should bears be worried?  Of course,
  • the momentum was tremendous bouncing off the 50 day MA, 
  • the daily STO is still oversold,
  • the daily RSI is healthy just above 50, 
  • the MACD has reset near 0,  
One can't help but wonder if we're going to retest the 142 high on this bounce.

On the other hand, bears kind of wished for a dead cat bounce or a bear flag, in order to pave for the next leg down.
Tuesday's low didn't really bounce off off anything, aside from filling a gap. But the worst part about being bearish is the constant haunting of the fact that Chairman Bernanke and President Obama team up in this presidential election year.  This combination can trump all.  If nothing else, they can always, ALWAYS, kick the can down the road until after the election.   May be I'll quit trading for a while.

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