Tuesday, November 25, 2008
Well I am still waiting for this market to show its direction. I am bearishly tilted right now simply because we have ran up 120 SPX points in 3 days and we are having a bit of trouble with the resistance overhead. Namely the 865 area we were turned away from today and for a while it looked like this market was going to fall off a cliff as it hit lows of around 835 before reversing higher in the last hour and closing pretty much unchanged for the day. We actually closed lower than we opened so thats something to take note of. 20 day EMA on the SPX is just overhead at 879 and I think the market will have a hard time breaking over that. With that said it is a holiday week and you should start to see light volume Wed. so we could see a continued dead cat fakeout rally into Thanksgiving.
I am still holding some SDS calls and will cut my losses if the SPX 15min chart closes above the 875 level. If we roll over from here I can convert my long call into a vertical call spread and roll down to lower strikes simultaneously lowering my breakeven without increasing my risk. I am starting to see a large falling wedge pattern develop on the daily chart, evolving from the descending triangle that has been forming for two months now. I will highlight this falling wedge in another post as it is still young in its formation. Even so it looks as if we are coming up to the upper part of the wedge/channel and should have a hard time surpassing the 875-900 area so be warned that probability of a selloff from here is higher than a rally. But like I said, holiday shortened weeks have a tendency to be quirky.