Painful Robot Trades - September 16, 2011

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The ongoing short trade from the IWM robot proves to be very stressful as price is nearing the trailing stop at 72.20. The best is to keep it mechanical only and avoid fear or anticipative regrets. If the stop is hit, we’ll take the small loss and move on to the next trade. All we know objectively is that each day passing without being stopped out, the better the probabilities of reaping nice profits in the end.

IWM could only conquer 2 other points of selling strength by closing above WR1 (70.56). The real test to prove long term accumulation by the bulls, versus a simple dead cat bounce opex short squeeze, is presenting itself now. The first resistance cluster starting at yearly pivot (71.84) has a record floor selling pressure strength of 31. If the bulls can defeat that pressure and close above the 50-day moving average (74.39) soon, we can then have little doubt left that a true transition back to a bull market is underway with long lasting accumulation. But until then, the odds are just stacked in favor of short sellers.

Even if the IWM robot was on a buy signal, the optimal buy limit entry would be 69.09 and we would have to wait for a pullback to the 4-day VWAP. Notice also that today’s 20 EMA ATR rose substantially which is tilting the risk-reward of new entries in favor of the bears.

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The GDX position was stressful too, flirting once again with the trailing stop (61.24). This was not very different from a similar move we experienced back on August 25 before the start of a strong rally to new highs. Yesterday, the reversal began as early as noon after hitting Thursday’s daily S3 and finished back well above the most important SR1 and QR1 (62.12) levels. These must absolutely hold successfully as launching pad support to new highs.
What’s different this time is that the precious metal miners money flow detected that large players were selling the afternoon bounce and the GDX is very close to issuing a short signal on Monday’s open. Make sure to read Pascal’s GDX comments for today.
Billy

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[QUOTE=Billy;16773][ATTACH]10431[/ATTACH]

The ongoing short trade from the IWM robot proves to be very stressful as price is nearing the trailing stop at 72.20. The best is to keep it mechanical only and avoid fear or anticipative regrets. If the stop is hit, we’ll take the small loss and move on to the next trade. All we know objectively is that each day passing without being stopped out, the better the probabilities of reaping nice profits in the end.

IWM could only conquer 2 other points of selling strength by closing above WR1 (70.56). The real test to prove long term accumulation by the bulls, versus a simple dead cat bounce opex short squeeze, is presenting itself now. The first resistance cluster starting at yearly pivot (71.84) has a record floor selling pressure strength of 31. If the bulls can defeat that pressure and close above the 50-day moving average (74.39) soon, we can then have little doubt left that a true transition back to a bull market is underway with long lasting accumulation. But until then, the odds are just stacked in favor of short sellers.

Even if the IWM robot was on a buy signal, the optimal buy limit entry would be 69.09 and we would have to wait for a pullback to the 4-day VWAP. Notice also that today’s 20 EMA ATR rose substantially which is tilting the risk-reward of new entries in favor of the bears.

[ATTACH=CONFIG]10430[/ATTACH]

The GDX position was stressful too, flirting once again with the trailing stop (61.24). This was not very different from a similar move we experienced back on August 25 before the start of a strong rally to new highs. Yesterday, the reversal began as early as noon after hitting Thursday’s daily S3 and finished back well above the most important SR1 and QR1 (62.12) levels. These must absolutely hold successfully as launching pad support to new highs.
What’s different this time is that the precious metal miners money flow detected that large players were selling the afternoon bounce and the GDX is very close to issuing a short signal on Monday’s open. Make sure to read Pascal’s GDX comments for today.
Billy

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Billy,

Interesting to see that IWM 71.84 was tested overnight - 71.85 - before falling back.

Trev

Billy, The advertised trailing stop for TZA seems to be off by more that a dollar. Dave

[QUOTE=davidallison@shaw.ca;16781]Billy, The advertised trailing stop for TZA seems to be off by more that a dollar. Dave[/QUOTE]

It is because the tripple ETF is not a real tripple. It is a 2.88 times leveraged ETF, based on intraday volatility differences. (This changes slightly every day) This means that if IWM moves 1%, TNA moves 2.88% and not 3%


Pascal

[QUOTE=manucastle;16778]Billy,

Interesting to see that IWM 71.84 was tested overnight - 71.85 - before falling back.

Trev[/QUOTE]

Thank you for mentioning this, Trev, I had not checked overnight highs and lows on IWM.
Crossing our fingers, this might have been a good confirmation that the yearly pivot is considered by large futures traders to be the end level of this week's powerful bounce where they are launching their profit-taking/distribution programs. The open reversal is further confirming the same, but we had identical weakness until 11:00 am on everyday of this week, before a strong recovery for the remainder of the day. Let's watch if today is different.
Billy