Nothing has changed. Yesterday was the 2nd attempt at breaking out and closing above the June high. This breakout must occur if the SPX wants to get out of it’s neutral 50 pt range. Looking at the 5-day chart, the SPX is still in a sustained ST uptrend. A close-and-break below the lower channel’s segment will be an early warning again a ‘top’. Otherwise, the market is still trucking along.
I made a solid 1% yesterday. My multiple double-digit gains in HEB and SQNM did the job as I was about halfway through Season 5 of Lost. I’ve stressed the importance of careful selection many, many times. You will do well if you find stocks that move, regardless of what the general market is doing. Stocks, with minds of their own, can be your best friends as I’ve demonstrated time and time again.
The SPX is still testing the mid-June peak. In fact, there is so much strength that followed the continuation gap that it is just too dangerous to short. Shorting during a countertrend move is fine, but missing out on the primary trend is not. Unless you have exceptional timing skills, it’s best to stick with imminent breakout or breakdown (if short) plays that make your life so much easier. On some days, I don’t even bother keeping the SPY chart up because I don’t need it.
The COMP is the first and only index that is trying to fill the early Oct gap. Note the boundaries in orange. We can expect significant resistance at this level, primarily because LT breakaway gap downs have a tendency to reject initial attempts.
Finally, I look to the world indices so get a feel for how the rest of the world is doing. I charted the Japanese Nikkei, Hong Kong Hang Seng, S. Korean Kospi, German Dax, French Cac, and the London FTSE. I especially like the neutral range breakout executed by the Kospi.
The SPX is on the verge of breaking out, and it must break the June peak and close above it. The continuation gap from last week is doing what the textbook says. I don’t really care what the market does since I find plays that move up regardless of market direction. However, I do believe a pullback coming as it is necessary and healthy for the rally to continue.
Evey sector is either bullish or neutral:
I got back from LA about 45 mins ago. The 1st coaching session went very well.
The SPX appears to be in a short-term topping pattern. Don’t forget that the June resistance became the strongest resistance for the entire duration of this rally. It is not to be ignored. The normal and expected course of action would be a pullback to the 50-day MA.
A lot of people asked me how I caught the moves in HGSI and DRL right at the open yesterday. In case you are new, everything’s been documented in the previous post’s comments section as well as on my twitter. HGSI required a 1.5 month time frame to make the decision to buy right at the open. DRL, however, required only the previous day.
I bought HGSI at $2.84 and DRL at $2.219. I sold half of HGSI at $3.52, sold a quarter at $3.83, and I am currently keeping the remaining quarter. I sold half of DRL at $2.65, sold a quarter at $2.49/$2.50, and I am keeping the remaining quarter. This is typically how I scale out of positions as they run higher. Potential tops are determined at previous resistance areas on the daily chart.
Within 15 minutes, I recouped my entire CIT loss. I told you that I would go back in the green, didn’t I? I didn’t think it would be that quick. You can see the upper sym tri resistance on the 1.5 month chart of HGSI and how the open would have gapped completely above it. You can also see the high-and-tight flag on DRL the day before yesterday, the most reliable short-term long pattern in existence.
So, that’s how I did it. There are dozens of patterns that I look for that gap at precisely the right location at the right time. It’s all about grabbing your balls and executing the trade immediately at the open. There is no room for “thinking about it” as you are guaranteed to miss the initial move. As long as the setup is high probability, it’s a risk worth taking.
In the end, CIT failed to do damage to my portfolio. My weekly gains stand at approximately +6.5% and my 208%+ YTD gains never fell below the 200% mark. The more you don’t care, the more you are able to focus on making things right. I had no choice but to be more aggressive yesterday to quickly take advantage of these gains and contain the damage. Folks, I do this nearly every single day. It’s nothing new.
Imagine if you could bag a +20-30% gainer almost every single day? Welcome to my life.
Even better, dozens and dozens of people benefited from my trades. Read the comments on yesterday’s post or look at a screenshot of my @replies: http://i587.photobucket.com/albums/ss311/chartaddict1/1-8.jpg
Anyway, I’m thinking that the SPX pulls back to the 50-day support over the next few days. A breakout of the multi-month high would be an enormous victory for the bulls. It will confirm the possible continuation gap that was formed on Wednesday.
If you look at the COMP, you can see that the index actually made a new multi-month high. The pattern is extremely bullish on the daily. We can see a descending bear pennant and NOT a head and shoulders.
As you may know, I bought CIT yesterday, and minutes later, the stock was halted pending news. Currently, the government is refusing the bailout CIT and the stock is under the very serious threat of bankruptcy. This is a 9.5% allocation.
This was a high-risk speculative play, and I lost. CIT will likely be the biggest mistake I made since I started trading in late 2002 (I never got caught in a bk co) . No doubt, I am fully prepared to take a 100% loss on this position. The stock won’t open at $0.00, but let’s say that it does. Not only will it wipe out my entire week’s gains (so far), I’ll be in the red at approximately -2.2% for the week. This will also bring my YTD gains to about +198%, below the 200%+ level that I’ve been holding on to for a while. Who cares?
That’s nothing. In fact, it doesn’t bother me at all. I’ll be green by the end of the week, and I know it and you know it. Everyone makes mistakes, and not a single person here is perfect. I will be the first person here to say it. The important thing is to just let it go and move on and bite the bullet like a man (or a woman, if in fact, you are a woman). And remember, taking losses is part of the business, unless your Lenny “Roofless” Dykstra.
Now, if you bought a huge position in CIT, then you are screwed. Take it as an expensive lesson in money management. Everyone is responsible for their own actions.
Moving on to the SPX, yesterday’s move broke away from the descending channel. I stated in my previous post that the opening gap was enough for an intra-day breakaway gap. What’s important now is IF and HOW we consolidate from such a massive move.
Below are the 2-month/60-min, 3-month/60-min, and 7-month/daily charts of the SPX with noted support and resistance levels.
Below are the SPRD Select Sector ETFs (XLV, XLB, XLP, XLI, XLU, XLY, XLI, XLF, XLE, XLK):
How ’bout some GG?
