More Big Picture Stuff
Following up on yesterdays daily setup coming for a short entry into the S&P I thought it would be a good follow up to show some more larger picture things. This does all tie together even though at times short term trading can and is done contra to what my big picture views are.
Here we have a weekly SP 500 chart with alot of stuff going on. First as I have mentioned in the past, we are clearly into longer term resistance zones being basically at a 50% retracement to new highs position. This does not mean we will stop here, but it is a place to start looking for other things to support a reversal happening here. If we don't find them then we just move on. The next panel is Larry Williams Will Go indicator which attempts to time market swings with the relationship between stock and bond yields. It is at this point not really giving up any clear read in either direction. This indicator at times can be fantastic, but has been lousy recently. Nothing is perfect all the time, it is a tool nothing more nothing less, albeit it generally a good one.
The next panel is my Hybrid COT index which I have posted here before, although it also has had a recent miss or two, has generally been pretty good. Let's face it, this market move recently has defied alot of logic and some of the best traders in the world have been wrong about how far this has gone. When the government takes it upon itself to intervene to this degree it logically follows that tools based on free market forces are going to go haywire, and they have. Some of my colleagues have mentioned how strange it is that the Fed took a day off the other day and low and behold we had a big market decline. Kind of one of those things off a Seinfeld episode that just makes you say "Hmmm." I have railed enough on this subject to annoy just about everyone, so lets move on.
The last panel is the Bradley astrological model which is used by a few very good traders for stock market swings. It basically involves Planetary relationships which explain the tides and all kinds of other things that occur. I have not studied this a great deal but it is an interest of mine to investigate. As you can see the swings it has picked have been very good. It is now telling us that we are in a flat to down mode with a late summer early fall low predicted. This picks mostly time and not magnitude so keep that in mind when viewing it.
When you put all this together it does give us a reasonable conclusion that the next large move should be to the downside. The key zone is the 1014 - 1026 area where we recently bounced from. If that gets taken out it is our green light to get short with both barrels. As an aggressive shorter term trader, I will be in way before that, but may get smacked around a little bit in the process. We know that powers that be do not want a decline here, so I would suggest tight stops on shorts. As we saw in the preview Friday and actually Thursday in the electronic markets, once this does get away from them it is going down in a hurry. As a result it may not give us the ideal break and retrace and then go pattern that is the best one to wait for.
I am also going to start building my short position with ETF's on Silver tomorrow as long as the market is not down too much on the opening. The following chart shows my justification for that trade.
A new pattern I have been playing around with is shown here. A friend of mine who trades recently showed me an oscillator he was using and I took it upon myself as I always do, to start messing around with it. I found that when we reach an extreme with it as indicated with the first red arrow approaching a 3 standard deviation band, that we need to start watching for a reversal. Once a higher price accompanied by a lower peak occurs as indicated where the 2nd red arrow is, the divergence pattern is complete. Now we have to look for a pattern entry. There are other things supporting this trade I have discussed in here recently. Most notably the largest commercial short position ever in the metals, accompanied by the largest long positon in small specualtors.
This market has lagged GOLD by a tremendous amount, so it is the market to short. Always short the weak and buy the strong in a complex. I know there are readers of this blog that do not agree on my metals views, but I have to go by what I have studied for years. I just cannot get caught up in all the hype. The hype has been correct and I wish I had been long coming into this area. However, that is water under the bridge, and this market is setup to take a tremendous fall. Will it go to the moon or decline?
That is why they turn the machines on everyday so we can find out!!!