Here is what the weekly SPY chart looks like right now:
The late rally from the low isn’t helping much. Even if SPY rallies all the way back to 136.40; we will have the dreadful Doji bar against the 61.8% Fib retracement. Either way, I’m taking my 85% cash with me over the weekend.
Oh yeah, I bought back half of THLD I sold this morning. The chart looks so strong I can’t help but feel that it will go much higher next week. I still have my TZA starter position but my SKF was stopped out.
Notice the last red bar is now below the 61.8% retracement of April 6th high and June 8th low. This can only validate the resistance power of the Fib 61.8%. If we have a red candlestick bar by end of the day (which mean a red weekly bar), there is a high probability the price actions will roll off to the downside.
Hence, I’m mostly out of my equity position:
Long-term equity: 11%
THLD: 3%
TZA: 1%
Cash: 85%
Good Hunting!
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I, for one, hope you’re right about rolling off to the downside, Zen.
Let’s see how the day end. If we drop further down from here, the odd of rolling off next week is high.
There was bound to be some chop in this area (2011 highs). I figure the market should rally next week into earnings, but the USD, EUR and bonds are saying SPX could drop like a rock right now to fill that massive gap.
The earnings season is another factor that may or may not contribute to further downside. With employment still at 8.2%, will earning guidance be any better?
Doubtful, but it is just the premise that the bid will rise into the first week or so of earnings, up until the strongest companies report.
My next large position will probably be after that in puts.
Journal update:
Bought TZA and SKF starter position.
Bought TZA, did you? In the infamous words of John McClain/Bruce Willis – “Welcome to the party, pal”
Using the intraday high from 3/26/12 and the intraday low from 6/4/12 to calc Fibonacci levels, the 61.8% retracement level on $RUT is 809. We got and stayed above $RUT 809 the last 2 days. Will be interesting to see if we close below $RUT 809 today.
If I had any conviction here, I would buy more TZA and more UVXY on a close below $RUT 809. But this past week has made me gunshy so I’m going to be satisfied with holding what I’ve got.
A pullback here would also put into place the 3rd consecutive lower $RUT high on a closing basis;
3/26/12 $RUT close 846.13,
4/27/12 $RUT close 825.47,
7/3/12 $RUT close 818.48
Ie, $RUT downtrend.
I’m getting approximately 803 on the 61.8% retracement using the high (847.92) of 3/27/12 and the low (729.75) of 6/4/12.
Regardless of 809 or 803; your 3 consecutive lower high make sense. Nevetheless, it will look much better if the 3rd lower high started 6/19/12.
Whereas 6/19/12 took out 5/29/12 high which, in my book, began an uptrend. Therefore, unless price took out the low of 6/26/12; this uptrend may still be intact.
In other words, you are right to be gunshy.
Thanks for the comment.