Last Opportunity For Shorting Into Strength? – September 15, 2011

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[B][I]“As I was examining today’s computer scans, I was reminded of a lesser known phenomenon, sometimes referred to as the 401K or midmonth bulge. The theory is that over the last couple of decades, many investment programs have began to make midmonth contributions which tend to give the middle of the month a little push as well. This midmonth bulge normally occurs during Opex Week and when the 15th occurs on a Thursday, which is always the day before Opex, the result is a noticeable statistical bias to the plus side. I can’t say whether the Bulge or the Opex is more important, but it is, what it is, 17-3 this century.”[/I][/B] Wayne Whaley
[url]http://library.constantcontact.com/download/get/file/1104076872181-36/The+Midmonth+Thursday+Bulge,+17-3.pdf[/url]

This observation by Wayne Whaley should remind us that there are many factors at play that can contradict any probabilistic system like the robot. The short entries at a limit of 70.81 are offering an optimal backtested trading plan for the next three days with improving reward-risk and expected gain from yesterday. Even if today were to be another “strong “ up day, bulls have a very different battleground than yesterday in front of them. All they had to fight were two daily levels from pivot up to R2 (70.47 Wednesday), before climaxing and reversing below Daily R3 (71.47 Wednesday) and failing to hold WR1 (70.56) at the close. That was only 5 points of resistance strength to fight against and they only won 2 points!

Today’s first resistance cluster has a repelling resistance strength of 25 and I doubt that the pros’ algorithms will remain as enthusiast as yesterday. The 20 DMF clearly proved institutional selling into artificial strength.If we see a mid-month bulge effect, I expect that the motto of the day will be “Sell into strength again” and we’ll observe a reversal in cumulative TICK at some point today or tomorrow. I am short unleveraged with the robot and ready to add leverage today on any strength above 70.81.

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GDX is consolidating after a shallow pullback into what appears to be a great accumulation opportunity for multi-pivot traders. The support/resistance cluster strengths are impressively in favor of the bulls. But the neutral setup for new entries keeps reminding us that instant gratification is never a given.
Billy

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