This not your normal market. This is some sort of bi-polar market I am trading in. A market where yesterday’s news does not matter and today is a new day with student body left and student body right trading. What do I mean by that? Well, just look at volatility this past several weeks and I guarantee that you will come to the same conclusion as I have.
This morning I woke up from my deep sleep and right away opened the iBook to look at where the futures were. To my surprise they were in the 1050s and right away I knew that today would be a “RISK OFF” day. My assumptions would have changed if we were to gain the 1064 level during pre-market action; which from recent experiences is not entirely impossible. There are 3 to 4 important levels I have kept my eye on the past several weeks. Just a week ago the market rallied hard and closed over both 200 day moving averages. Yes, both the ema and sma. I personally like the ema, but I must respect the views of all the market participants. This area is one level, or two depending on how tight your trades are. The next level is 1070 in the S&P500 index, not the index futures which would equate to 1064-1065. Above 1070 on the index is the buy signal, “RISK ON”. Below 1070 is the sell signal. And that is where we are now. Below 1070 and on our way down to 1040, unless some magical news comes out and we are saved from the real moment of truth. Below 1040 is no man’s land and being long below that is wrong in so many ways. Here is the visual below.
EDIT 4:30 pm: So the market broke below 1040 but it did not close below it. I’d have to call that support! Tomorrow will be interesting because it is the last day of the quarter. A day that the fund managers like to “window dress” their funds and inflate the funds’ values a little by putting on a nice rally in the market. I think that and some newly initiated shorts will prevent the market from falling over the edge; think short squeeze. But what the hell, what do I know?
[...] weeks mid 2010, where every day was either risk on, or risk off; I am starting to sound like Market Miyagi . It does not look good for risk assets, and the last two days of the week the stock market was [...]