Tuesday, September 27, 2011

Trade Adjustments

Place a "day only" order to sell TWM at a limit of 55.36 for Tuesday 9-27-11. There is powerful bullish divergence on the underlying IWM/Russell 2000 index. While my previous post is still my main line of thinking here, the current set-up is very similar to March 2008 where after the initial meltdown, there was a retest of the low (some indexes undercut it and some didn't just like right now) and then a more substantial and broad-based rally before continuation of the downtrend.

Also there are some time relations between the recent moves that could place a bottom in at the recent low and then a move up into early November. So, I'll exit this trade here with a possible re-entry if conditions look right in the next few days or more.

Also, place a GTC buy stop on SLV at 36.50. Given the dramatic swoon in silver, I have every reason to believe we have seen a major high. Also, a few weeks back I detailed several time frames on gold and suggested a possible MAJOR top. I still think that is most likely the case. So we should see silver and gold continue down over the coming months and continued strength in the US Dollar.

However, the time relations between the prior moves in silver don't suggest a bottom for this move in silver until mid to late October. I am tentatively thinking around Oct expiration. With 3 huge gap downs in a row, today's rebound is to be expected in silver. However, I think that a re-test and undercut of the low is likely in order to create some divergence on the daily chart before a sustained rebound. Also, the $26 chart level is the really the first chart support from the last low in the uptrend before the peak. From experience, I expect that low to be exceeded to wash out sell stops before a more substantial rebound. I have GTC limit order to sell those Oct 34 puts I am holding @ 8.00.

As a side note, if we get a lower swing high in TLT/bonds I think a short is in order. I may post a trade on TBT if things look right in the coming days.

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