Puts have been kind to us these last few days, will it continue? I think it will, but how low depends on some trend breaks. We cannot be sure that this is the ultimate top we have been looking for until those lines are broke. I have thought we have formed a top more than once only to see the bulls thwart gravity time and time again. Today, we again had some buying into the close, but it was followed by more selling. This mkt. has a bearish feeling for sure. There is some econ news coming out tomorrow that could move this mkt. , and other than new home sales, it all comes out before the open. On Tues I bought puts on the SPY at 108, and sold them at the end of the day. Today I bought puts on the SPY as soon as the housing numbers came out, and got stopped out with about 1/2 my max profit for the day. This was because I had a meeting and could not watch the mkt. I then bought some more SPY puts right at the close. You can see I still do not trust this mkt. I am very reluctant to hold over night, but I felt that Friday may be a good day to be on the short side, especially if the new home sales come out wte. So I am positioned short and will likely sell if we gap down. RIMM was crushed after reporting after hours, and that my friends is a mkt. mover. Now onto the charts:
The VIX has shown good strength the last two days. Even when the mkt. was moving up today, the VIX showed strength. Notice we never had a close beneath that 22.77 support line. The next level to watch is the $25.75 area to see if it offers resistance.
The DOW has formed a spinning top on not impressive v. It did close beneath the up trend line, but not by much. This would actually be a decent reversal spot for an up move here, but the other indices don’t seem to be lending to that theory. Watching for support at 9633.
The SPX looks exceptionally more bearish to me than the DOW. A very nice bodied candle today forming a hanging fruit. Now the mass of trend lines you see there are not that strong. All of them broke to the upside fairly easy, so if we keep falling I think we will likely see support near the 1035 area.
Remember this resistance line? Well it held pretty strong. We cannot be sure that this is the ultimate hold quite yet, for a re-test could be in the future, but for now it held strong. There is an up trend and a 50% fib line nearby to offer support, but they are both a little ways away. Still bearish looking chart.
I really would love to short the QQQQs again, but I will wait until this up trend line has been broke. In fact, I will be very tempted to buy some calls when it hits it again. Note the good v, not great but good v the last two days in conjunction with this down move.
I really like that the SPY broke beneath this pivot line. It looks pretty bearish with almost identical v. Watching for multiple up trend lines to offer support.
The $RUT looks like it set up a perfect drop off resistance from a rocket move up. To make it more perfect, we would see a re-test of that resistance after some move down.
It looked like XLU would breakout, but it stalled out and is trending down. I would watch for this to find support at around $28.50 if we are to maintain this pattern of higher highs and higher lows. If not, then a new down trend will be in effect.
Double top came to fruition on XLI with nice v today. Looking at $25.60 for support.
Still watching this range within a range. I have been watching for a breakout of this mini range, and after this nice v pop today, we could be on the verge of a breakdown. When we do, we could have a $3-4 move down, very profitable.
PHM finally broke down neckline of H&S. Would love to see a little move up here and then enter a short position. But a break of this %61 fib, equals a great short entry for probable long term down move. Tomorrow’s housing data will play a key role.
Dell has found support after announcing the offer for PEROT. But it looks like it wants to fall off this cliff to me. A break of $15.65 should be a good put play, a move up from here and I would be looking to short at around $16.75.
Finally, waiting for a breakout / down of IRIS from this wedge. Note the 200 ma is very close by to offer support. A break beneath is should be pretty bearish.
In closing: I lost power half way through this post, so I didn’t go into as much detail as usual on the charts so I could get it uploaded. Short term I am bearish, long term I am bearish, but we will probably have an up move in the intermediate. I am not yet sure this is the top, and until we break some trend lines I will not say we have. Trade well and prosper. AKOT
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