Today we opened
with a big downside gap in the SPX due to news over the weekend concerning President Obama and GM/Chrysler. To me, a news-based gap and subsequent drop feels like a bit of mini-panic.
Technically speaking,
it's just a retest of the break above the R2 downtrend line, which is very common and nothing for the Bulls really be concerned about. The drop should find some support on R2 as old resistance often provides support but there's nothing all that comforting with "support" that's dropping as fast as R2. In other words, the SPX could drop day-after-day riding R2 lower and still be "supported".
Additional support,
should be provided by S3 at ~765, but its very short-term in nature. S3 is the level of an old top in the prior move down. Old tops often provide support for markets temporarily correcting down in an uptrend. S3 was also confirmed by supporting a drop on 3/20/09.
And then there's the gap.
That opening gap will tend to pull the SPX back up as long as traders don't completely give up on this rally. We're currently trading at 781 while the bottom of the gap is at 809 which is 3.6% overhead.
Lastly,
The SPX has an historical upward bias on the last day of each month and the first three trading days of the next month. For the March case, the SPX has shown a gain since 1942 over those four days 60% of the time (slighty more than normal) with the SPX appreciating at an annual rate +2.5 times normal. Since 2002, this bias has been strong with no losers, one break even, and the SPX appreciating at a 106% annual rate.
Therefore, I will take this short-term trade
with accounts not managed by mechanical accounts. As long as the SPX is between 765-790 at my Rydex cut-off time today, I'll go 100% long and sell at the first day that either today's opening gap partially or fully fills and I have a profit at the close, or at the close on the third trading day of april. However, I may change that sell plan and will make notification in this space.
Monday, March 30, 2009
Nothing Bearish About Today's SPX Drop yet.
Today we opened
with a big downside gap in the SPX due to news over the weekend concerning President Obama and GM/Chrysler. To me, a news-based gap and subsequent drop feels like a bit of mini-panic.
Technically speaking,
it's just a retest of the break above the R2 downtrend line, which is very common and nothing for the Bulls really be concerned about. The drop should find some support on R2 as old resistance often provides support but there's nothing all that comforting with "support" that's dropping as fast as R2. In other words, the SPX could drop day-after-day riding R2 lower and still be "supported".
Additional support,
should be provided by S3 at ~765, but its very short-term in nature. S3 is the level of an old top in the prior move down. Old tops often provide support for markets temporarily correcting down in an uptrend. S3 was also confirmed by supporting a drop on 3/20/09.
And then there's the gap.
That opening gap will tend to pull the SPX back up as long as traders don't completely give up on this rally. We're currently trading at 781 while the bottom of the gap is at 809 which is 3.6% overhead.
Lastly,
The SPX has an historical upward bias on the last day of each month and the first three trading days of the next month. For the March case, the SPX has shown a gain since 1942 over those four days 60% of the time (slighty more than normal) with the SPX appreciating at an annual rate +2.5 times normal. Since 2002, this bias has been strong with no losers, one break even, and the SPX appreciating at a 106% annual rate.
Therefore, I will take this short-term trade
with accounts not managed by mechanical accounts. As long as the SPX is between 765-790 at my Rydex cut-off time today, I'll go 100% long and sell at the first day that either today's opening gap partially or fully fills and I have a profit at the close, or at the close on the third trading day of april. However, I may change that sell plan and will make notification in this space.
