No Reversion To The Mean - October 4, 2011

[Billy]

Forum Clusters 111004.xlsx

Please make sure to read today’s Pascal’s comment of the day about the 20 DMF, the potential bottom process and the next buy signal.

After yesterday’s plunge, the IWM robot is now trailing the stop (65.48) well below the initial entry (68.05) providing a worst-case unleveraged gain of + 3.78% on the trade.

IWM is into a bearish trend-following setup after failing so miserably to hold YS1 (64.40). There is no hurry to cover short positions as long as it stays under that level, even if it were to be retested on a snap-back reflex bounce. There is little floor support left before the confluence of QS1 (56.54), MS3 (57.00) and WS3 (57.41). This is where the next short-covering rally is most likely to start. Below these levels is a big hole in the floor down to YS2 (50.56) and it could only be visited in case of a total crash of the market.



The multi-pivots outlook for GDX is once again awful, with a weak first support cluster providing little protection for the stop (53.56) to be hit. Yearly Pivot (55.19) really needs to be regained fast and serve as a launching pad for a rally. Otherwise a new entry at a limit of 50.61 just above a strong support cluster looks interesting with the very strong buy LT/ST settings of the robot.
Billy