Wednesday, October 12, 2011

Short Term Overbought at Resistance - New Bearish ETF Trade

Click on Chart to Enlarge

A marked bearish divergence is present on the 30 min MACD chart of SPY and it also exhibits a "three push" type pattern that is often the end of a move. The MACD has been making lower peaks on the last two bearish crosses, but the SPY has continued substantially higher.

So now we are at a chart resistance area around 1207-1230 on SPX and there is loss of momentum on this move. So we should see a pullback here. At this point my suspicion is that this move down will fill the gap up at 115.65ish on SPY and we may see a retest of 1120 SPX, but I don't have any degree of certainty that we will see new corrective lows before there is further upside.

I am going to post a bearish trade here because I think that it is very unlikely the SPX will be able to push through this resistance area without pulling back to reload the guns first, so to speak. I then expect that most likely a bullish trade will present itself within a week or so.

New Blog Trade:

Buy SDS at the open tomorrow. I am not going to post a stop loss on this one, but exit at the next hourly MACD oversold bullish cross. Also, we could us a limit exit order at the fill of the 115.65 gap on SPY.

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