New Short Triggered - September 8, 2011

[Billy]

Forum Clusters 110908.xlsx

IWM had another day at the races yesterday, hitting and closing right around our limit short entry price of 70.81. One can see at once on the cluster chart that the move was facilitated by the lack of floor resistance and actually all IWM could really conquer was the weekly pivot at 70.15.

Now the serious resistance will start in the first cluster which presents impressive potential floor selling pressure from the yearly pivot (71.84) up to QS2 (72.70). HFTs and other trading programs are normally anticipating such heavy resistance and should slow down their buying before distributing quietly in some consolidation. The robot is signaling a solid shorting edge for the next few days and a pullback of -2% (from yesterday’s close) has over 66% probability of happening in the next three days. The total floor selling pressure for the next two days is (27 + 19) = 46 compared to a total floor buying pressure of ( 17 +15) = 32.

The “worst case” stop of 75.09 is adjusted for the high ambient volatility and could only be hit after a massive high volume buying wave breaking out decisively above the first cluster and above the August 31st highs.



GDX finally briefly broke the volatility stop, hitting yesterday’s buy limit before quickly bouncing back from the weekly pivot (63.80). The MR1 (66.64) and WR1 (66.45) should soon be retested before leading to much more heavy resistance starting at SR2 and QR2 (69.65). A new buy today at a limit of 64.51 looks reasonable in spite of presenting only a neutral edge setting.
Billy