Possible Whipsaw Ahead - March 9, 2012

The short position of the IWM robot was stopped out 35 minutes before the close at 80.57 and closed above quarterly R1 (80.45) at 80.51. Such a strong advance of 1.30% would let you believe that the 20 DMF would have been positive and switched back to neutral but it didn’t and actually dropped for the day. It also never touched the +0.10% porosity level intraday and remains on a sell signal.

Such a divergence from large players participation simply hints at a possible dead cat bounce going on, in line with the robot looking to enter a new short position today at a limit of 81.07 or almost equal to Weekly pivot (81.05).
But of course this Friday is an important day for institutional investors who are relieved from Greece’s concerns and ready to move on an important catalyst like the unemployment report. This could easily lead the 20 DMF to experience whipsaws intraday. Therefore, I can only repeat here the excellent advice from Pascal’s IWM Notes: “If the 20DMF shows money moving in to the point that we cross over the porosity level (+0.1%) before the IWM Robot's new short entry level is hit, then it is safer NOT to enter the IWM Short position. If the entry price is hit and then the 20DMF covers its short position in RT, I believe that the IWM short position should be closed.”

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Just like the overall market, there was a negative divergence at the close between GDX and the GDX MF hinting at a similar potential dead cat bounce scenario. The GDX market model is 2 days away from a “buy from oversold” signal and GDX could at least retest Tuesday’s lows in case of a final selloff. There is no new advised position.
Billy

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Article on using pivot points to trade in this month's Futures magazine:

[url]http://www.futuresmag.com/2012/03/01/trading-stocks-with-pivot-points[/url]