Jun 18, 2011

Weekly review / Седмичен преглед

I have shown 15min chart on Wednesday, the squiggles have played pretty well. Friday SP500 gapped up but there was no follow trough. Short term is difficult to say how exactly the next 1-2 days will look like. The two option are shown on the chart bellow. Lets see the open on Monday.

Intermediate term view has changed a little bit. I think we will see a relief rally which will ease the oversold conditions followed by a sell off(green option). Alternate scenario is that we will see soon a bottom and a rally to a marginal new highs(red option). Yellow option - selling climax and a bottom.

Why exactly bounce followed by a sell off?
Bounce - technical indicators (see the daily and hourly chart bellow), sentiment too bearish, Put to Call ratio, SP500 percentage of stocks above MA50, NYSE McClellan Summation index. All short term indications showing oversold conditions.
Sell off after that - trend following indicators and weekly chart showing no signs of bottoming. See this article too, is interesting showing swing trading using VIX/VXO.

The option with the highest probability is shown on DJ daily chart. MACD divergence on the 60min chat (see bellow) and histogram moving higher. I expect a bounce to start next week. Target ~12350 - 50% retracement of the sell off,the broken trend line, the falling trend line and MA50 - pretty gut cluster of resistance. Final destination of the sell off at least 38,2% retracement of the hole move since July 2010 and the next trend line.
Closer view 60 min chart with the alternate scenario.

Option players are very emotional and getting in panic mode like in 2008... after 7% correction:)

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