Multi-Pivots Robot Setup - August 1, 2011

[Billy]

Forum Clusters 110801.xlsx

Now that futures are pointing to a much higher open, those among you who – like Pascal- entered or refused to get stopped out of IWM on Friday’s open are in a very comfortable trade development. Exceptionally, Pascal will be updating the trailing stop for that unique very strong buy signal daily on the robot page. Those in the same trade can confidently follow his updates. But this trade cannot and will not be included in the robot’s official track record.

The robot and the majority of subscribers including me are now in cash after 3 consecutive (small) losses. I wish the inauguration month for the paying service was more encouraging, but reading your posts and personal mails, there is a widespread understanding and indulgence due to the unexpected tightrope walking by politicians on the debt ceiling debate. Market players have historical references for almost all events, terrorist attacks, wars, financial crises, etc. but none for a US government debt default. This may explain some of the market’s deviation from usual positive expectancy probabilities. Let’s turn the page and prepare for the next trade setup.

Today’s buy limit of 80.07 is just above the 200-day moving average support (79.56) and well above Friday’s daily VWAP (79.35). It was the first time in a week that IWM closed above the day’s VWAP which is suggesting that buyers were tentatively in control from Friday’s opening gap down. But SPY and QQQ failed to close above their own VWAP’s. This is often a precursor of imminent outperformance by IWM after a long period of underperformance. This is the most risk-aggressive ETF out of the trio and Friday’s strength, which actually already started on Thursday’s afternoon is pointing to short-covering if not outright accumulation. The high for the day came just under the 3-day moving VWAP (blue line) from Wednesday big gap down that closed exactly at today’s limit entry of 80.07! Holding above that level at today’s close and hopefully above the 4-day moving VWAP will be a major victory for the bulls.

The first resistance cluster is marginally stronger than the first support cluster with a 11:9 ratio, something easily surmountable with a knee-jerk positive reaction to the weekend news. Strongest resistance in the first cluster really starts at the 50-day moving average (81.62) with another big barrage waiting immediately thereafter from SPP (82.19) and QPP (82.28).



Pre-market, IWM, SPY and QQQ are all trading around their respective weekly pivots, showing acceptance from futures traders of last week’s equilibrium price in a negative wide weekly range bar. This is very often a clue that a major reversal will be underway with daily closes above the weekly pivots. However, intraday reversals and a close below the weekly pivots would mean that institutional sellers are still pressuring the intermediate term trend by lacking to trust significantly any relief strength.

For SPY, the weekly pivot (130.60) is the lower border of the first resistance cluster which is rather strong (22) and this makes this the potentially weakest of the trio.



On the other hand, QQQ’s weekly pivot (58.42) is at the higher end of the resistance cluster and a re-test of YR1 (59.02) is profiling once again on the horizon.



The GDX robot is advising staying in cash today. GDX will be supported by an exceptionally strong cluster with a weight of 28 ranging from QPP and SPP (56.61) down to yearly pivot (55.19). The next robot buy signal coming before any decisive breach of that cluster will be extremely powerful from a multi-pivot perspective. A robot short signal would be much improved under the cluster.
Billy