Too Early To Draw Conclusions - May 23, 2012

The IWM entered its new long position at 76.05. A secondary entry has positive edges today at a limit of 75.79.
Yesterday was nothing else than a range day with price action contained between daily R1 and daily S1. The highs of the day were stopped by the downtrend resistance which is quite usual with a first breakout attempt. It is the subsequent attempts that will matter the most. The last hour pullback was heavily bought into the close by institutional programs and both the 20 DMF and OB/OS indicators finished strong.

At this time of writing, pre-market is indicating an opening gap down around the 200-day moving average (75.29) and today’s daily S1 (75.30) confluence. Daily S1 is deemed to be a normal daily low area in an intact uptrend. A downside overshoot is always possible in early trading, but today will be a big POMO-liquidity injection day. This opening outlook could simply be blatant manipulation by market makers to scare the public and hit cascading stops before using the fresh liquidity for cheap buying.


Anyway, if you bought yesterday’s setup, you are ready to weather weakness down to the 73.51 stop, which is well protected by the Yearly pivot (73.55). The multi-pivot clusters strengths are disproportionally to the advantage of potential support with a total Support:Resistance strength ratio of 39:8.

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With the GDX robot’s persisting lack of edges for entering a new position and with the current adverse effect of a strong dollar, staying in cash remains the wisest decision for now. The EOD and RT models are in a buy mode but fighting against a very strong intermediate downtrend with high strength multi-pivot resistance clusters. I feel that GDX needs to build a stronger base and consolidation to achieve a major bottoming process. This is typically creating frustration and choppiness for impatient bulls and I encourage them to act very defensive here with low position-size and tight stops.
Billy

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