Wait And See - September 20, 2011

[Billy]

Forum Clusters 110920.xlsx

Waiting for the Fed announcement, It logically feels like IWM is trying to find consolidation equilibrium around the weekly pivot (69.97), exactly mid-way between QS3 (68.17) and Yearly pivot (71.84). One of these two floor levels will probably become the first target after the news, depending on an initial positive or negative reaction. Serious follow-through will then be required to break through support or resistance, but floor support is much weaker than floor resistance. The most violent and extended move would be to the downside.

The robot keeps favoring holding and initiating new short positions, but obviously it cannot guess the impact and reaction that will follow the Fed announcement on Wednesday. We know that the ensuing move could be huge in any direction. Therefore, I have a personal preference to avoid leveraged positions until after the news.



The exact same reasoning can be made for GDX about a “ Fed wait and see” consolidation around weekly pivot (63.69). But here the easiest move will be to the upside, just based on multi-pivots. With a neutral stance for new long entries from the robot, there is nothing much to do apart holding existing long positions with disciplined respect for the trailing stop (61.24).
Billy