Waiting for a Better Opportunity

Click on Chart to Enlarge

Yesterday the S&P 500 reached as low as 692ish which is about 5 points above the 127.2% retracement of the Nov-Jan rally. Today we saw an advance and a swing low formation where the lows of Monday and today are higher than Tuesday's, forming a potential inflection point.

Today's advance was looking nice, but faltered into the close taking some "power" away from the candlestick formation that formed. It is nice to see the "smart money" end-of-day buyers pile on into the close (which didn't happen) when looking at a potential major turning point. It is also nice to see the close higher than the mid-point of the candlestick 2 days ago. We almost got that, but not quite due to the sell-off into the close.

The chart above is a chart of the March S&P futures. The reason I am showing this is that the reversal on the futures chart looks more legitimate though still far from perfect. Also in the overnight session last night (Tuesday night) the futures went as low as 681 which is a good bit lower than the cash S&P 500 went (692 and change). So maybe that overnight low flushed things out and this reversal will stick, but I would not be surprised to see things roll over one more time before bottoming.

As of the close today, the short-term models were nearly overbought, but not quite. However I am not interested in making a bearish trade if they do become overbought tomorrow. If the markets do go to new lows, then that should give a good bullish trading opportunity for the blog. If they don't, and this reversal sticks, then probably the next trade would be a week or more away assuming the markets make a sharp advance during that time frame and give us a good bearish trade opportunity.

As far as current trading opportunities go, maintain the limit order to buy QLD at 19.72 in case the market rolls over again to new lows. If that order is not hit the next couple days, we'll just cancel those orders and wait for the next clear opportunity.


Pete