This market is proving itself very difficult, to say the least. From a review of the EV charts, it looks like we could have a short signal on the 20DMF at EOD and at the same time have the OB/OS chart reaches oversold status. Pascal, is this an unusual circumstance in your experience?
The issue about market direction is the inversed ETFs. As you can see, three of them are now above their average, but that does not give certainty regarding to a confirmed short signal at the close. There is still much time left.Originally Posted by adam ali
I would say that if we have a sell-off at the close, then we'll probably get a 20DMF confirmed short signal. Otherwise, as far as I can tell, the IWM robot will again turn to a strong buy.
Regarding more specifically to your question of OB/OS. I have to go back to the data and see what the OB/OS signal was in the past, but out of memory, this level is not critical unless we go through it and then come back up. Finally, the ATR is still around 1.8%, while it should be around 3% to be in-line with the level during confirmed short signals.
I am not as confident about staying long as I was last Friday, but I am pretty reluctant to turn short here after seeing large players buying last week.
The issue is: what has changed today? Something has changed, but what is it? If I had to venture in an explanation, I would say - without any hard fact to prove it - that this is maybe a liquidity issue and I would say a "manufactured one". Knowing that the US Gov will soon be able to sell bonds again and get cash that it will be able "emergency lend". It means that for now, this cannot be done. Hence, if you attack some weak link (for example Italian banks) you might be able to cash-in before the cavalry comes to the rescue. Yes, the FED and China would help Europe to save these banks because of the now overused "systemic risk" argument. But, as of now, rescue possibilities are limited.
Anyway, this is just conjecture. What is important is our trading position. I will just keep the stops where they are and wait... By the way, the GDX robot might very well issue a buy signal by the close. As far as I can see, the MF direction model has moved back above the critical -1.4% level. Of course, it still might reverse back down before the close. So we will wait and act tomorrow.
Pascal
TWM:
After reading Pascal's comment below, I'd like to stress that in case of a very strong buy signal at the close, the limit buy entry for tomorrow would be around 78.07 if IWM closes below the 200-day moving average (79.56).
This is one of theses rare occurences - under rare circumstances - where you may give some more wiggle room to today's stop of 78.19, because if the matket bounces tomorrow, the new entry might not be touched.
The risk is of course a 20DMF short signal at the EOD close or a gap down tomorrow morning.
Cumulative Tick is hinting at neither buy or sell programs being active today, so the selling is not coming from large professional players but they are neither buyers so far today.
Billy
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