Tuesday, May 26, 2009

Bulls controlled the day

While the market opened right near support, and a bounce was expected, an all out massive rally was not. The bulls put the foot on the gas and didn't let up until the gap from last Thursday was well and filled. Volume picked up, and we certainly have the possibility of a rally to new highs. However, the bulls are not out of the woods yet. Key resistance is sitting overhead in the spx 914-920 zone. Not only does this zone include multiple pivots over the last several weeks, but it also includes the 786 retracement off of the previous high. How price reacts at this price level will be key.

Here are some scenarios to be watching for:
- price breaks below 900 before testing 915 (very bearish)
- price consolidates near 915 (very bullish)
- price touches the 915 zone and gets slammed (very bearish)

If we do consolidate near 915, then I'll be exiting my short positions as the next move higher should at least be to the 940 area, where I might reconsider.


  1. are we consolidating near 915 or getting ready to fall off the cliff is a million dollar question...any ideas RICH or anyone?

  2. iv - that is the million dollar question. We are certainly consolidating. Price was rejected near the resistance line in the overnight session and again today. However, action to the downside is not yet 'convincing me', so I'm currently hedging my shorts with some covered puts/calls (QID/FAZ), and some long ES.

  3. do we have the answer now or tommorow is conformation of scenario 3.....

    long IWM puts as i write.

  4. iv - the move off of today's high (which just touched the bottom portion of my target zone) looks impulsive. In addition, it sliced through key support. I did exit my ES longs, and I'm hoping for a little bounce tomorrow morning to add to shorts. I'm still massively short with puts, QID and FAZ.