Robots Outlook for June 16, 2011

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Yesterday’s overnight bad economic news and Greek troubles destroyed the positive cluster setup scenario. IWM filled the previous day’s gap while SPY and QQQ experienced more damage and did undercut their Monday’s lows with QQQ closing below the 200-day moving average.
Three times during the day I had an old automatic discretionary reflex of pushing the “sell” button before holding back up, remembering that I was in a mechanical setup however frustrating that may be. The position is far from turning catastrophic with a -0.45% return from the initial entry on Friday and a + 0.76% return from Monday’s entry. But we are far from the expected 3-day return statistics initially indicated by the robot and the 20 DMF very strong buy expectations. The 3-day edge is now weakening a little while the 10-day edge remains very strong. This suggests that a last selling flush may be necessary before the position really starts turning positive for the longer term. As long as the trailing stop at 76.97 is not hit, we may be in for a good ride after options expiration.
I agree with Pascal: it looks like a base is forming here rather than a ledge.
I agree with Bob: the selling looks extremely well under control.
I listen to Mike and Jerry: the NASDAQ is below its 200-day moving average and is overshooting the 75% probability scenario of corrections limited to -8%. We are in the Ian Woodward/Mike Scott 25% probability ground of a +/-15% correction. This could quickly qualify as a bear market from any standards.
So, let’s be aware that if the current long position turns out to be a loser, it will be in the context of a transition from bull to bear. And this could be our last try to position on the long side before long if the transition materializes.
We are not exactly there yet. If a base-building process starts around here, the market will simply stay neutral for a while and only nervous amateurish traders will be chopped by overtrading. The robot will not overtrade and will quietly follow its trading plan.
The IWM cluster setup for today is neutral to slightly bearish with a support/resistance ratio of 11:12.
The GDX cluster outlook is very bearish with a support/resistance ratio of 4:12.
Billy

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