Deciding just to wait on the next overbought short-term signal or a strong bullish divergence to take a new trade. There were a lot of bullish short-term bullish signals triggered by last Friday. But the bounce on Monday was weaker than would be expected as far as breadth and advancing volume for Friday to be a lasting low. I suspect the market will hold up today and maybe/probably into tomorrow but almost certainly will become overbought at a lower high which is usually a sign that there is at least another leg down to undercut the recent low.
Also there is an FOMC announcement tomorrow. And as I always note on these, there has been a very consistent tendency for the market to gap up and typically rise prior to the announcement. But the best bet is usually to trade against any strong reaction to the news if the market becomes either short-term overbought or oversold around or after the announcement.
In this case that would be either....
1) strength today and into tomorrow giving us an overbought short-term signal to initiate a bearish trade
2) a sell off tomorrow or into Wednesday creating a nice bullish technical divergence on the hourly charts (MACD), and right in a region of prior support, giving us an oversold signal to initiate a bullish short-term trade
I'll update tomorrow.
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