What To Do? - September 13, 2011

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[B][I]“We all know what to do; we just don’t know how to get reelected after we’ve done it.” [/I][/B]
Luxembourg Prime Minister Jean-Claude Junker.
[B][I]« The robot knows what to do ; he doesn’t care about being reelected after he has done it.”.[/I][/B] Belgium’s Prime Bystander Billy O’Nair.

And the robot is holding its short position in IWM and suggesting a new short entry today at a limit price of 68.05. My human subjective impression is that the opex week bullish bias I discussed yesterday is indeed trying to emerge but so far in a very shy and unconvincing manner. The HFT algorithms only really turned into aggressive buyers 30 minutes before the close, pushing the cumulative TICK just above the 195-minute average right on time for the closing bell.

The final move started from under a declining VWAP which has not been retested. As it increasingly looks like today will open with a down gap, if price holds above yesterday’s VWAP (67.24) while cumulative TICK holds above the 195-minute average, we will have a clear indication that algorithms are set to buy the down gap and probably support price for most of Tuesday’s trading. But the task won’t be easy for HFTs if trading starts below the strong confluence of floor resistances SS3 (67.70), QS3 (68.17) and weekly pivot (68.24). A rejection from this confluence could easily precipitate falling prices toward WS1 (65.19) or even YS1 (64.40) because there is no support to be found in-between.

The 20 DMF ended strong yesterday (+183%) and it will be interesting to observe if large players are following through with their accumulation as it could influence the ST/LT settings for the coming days.

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GDX overreacted to the downside below daily S3 yesterday, but the strong up reversal in the vicinity of SR1 and QR1 (62.12) suggests that large floor buyers are ready to accumulate at this important intermediate term inventory threshold. This is encouraging as it seems our trailing stop at 61.24 could not be hit easily this week, especially with the added protection of WS2 (61.41).

Settings remain neutral for a new position, but patient traders can safely buy a new position today at a limit entry of 63.25.
Billy

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