Hope Is Not A Valid Setup – October 19, 2011

[Billy]

Forum Clusters 111019.xlsx

Still no “loud and clear” edges and signals from the robots to act upon. IWM was stopped in its advance once again right on the quarterly pivot (71.25) and the yearly pivot just above (71.84) also provides huge potential floor selling pressure. To successfully break the first resistance cluster with strength of 23 will require the most bullish news, euphoria and volume, while the first support cluster with strength of 11 is favoring another pullback and retest of the 50-day moving average (68.40).



GDX was saved by the yearly pivot (55.19) but still needs to conquer the 200-day moving average (58.05) and quarterly pivot (58.40) to comfort the bulls. Today’s floor clusters outlook is pretty neutral but much more bullish than yesterday.



Since there’s nothing to do but wait, I share with you some of my salient readings notes of interest to keep you busy.

“The leaders of France and Germany HOPE to agree…” The Guardian (in an article that sparked a sharp rally in U.S. equities Tuesday afternoon. The assertions from the paper of the deal have been denied by both the Germans and French.)

“Now, I’m not smart or close enough to the insiders to know what the real deal is. All I know is the HFTs are “jumpy” and the algos are programmed to jump on any news like this from Europe. The after the close of markets of a miss from Apple, some retractions of the Guardian article and a Moody’s downgrade of Spain should make Wednesday’s trading interesting. ” Dave Fry – ETFDigest.com

“We remain in a volatile market and despite confident projections you may hear, there is not a single person who knows with any certainty what the course of the market is for any period of time. Our most important job is to manage risk and that means honoring stops, trading reasonable size relative to your account and also objective recognition of the market environment. This market environment continues to shout uncertainty, your approach should reflect that message.” Brian Shannon, Alphatrends.net, October 18, 2011.

“SPY traded down nearly 1% Tuesday morning before rebounding to close up over 1%. The morning drop sent SPY below Steenbarger’s S2 target while the recovery left SPY above R2 at the close. This pattern has led to a lower S&P close the following session more than two-thirds of the time. The last two occurrences that coincided with a 10-day high in volume (like Tuesday) both led to down days in excess of 4%…” Rennie Yang – Markettells.com

“The move today in both the NASDAQ Composite and S&P 500 was above the threshold level required for a follow through day, but the action of leading stocks is still sub-par, and Apple Computer's disappointing earnings will have a negative impact on the NASDAQ-100 index. The model remains in cash for now.” Dr. K (Chris Kacher) - www.virtueofselfishinvesting.com

“An 'outside' day when below the 200 DMA favors a down gap the next day and fading it is risky” Scott Andrews – MasterTheGap.com

“Next Week is only 4-11 in PreElection years, since 1950 and negative in 7 of the last 8 cases.” Wayne Whiley – October 18, 2011

“The problem, of course, is that in this environment it has been an all or nothing type affair where we dramatically swing in one direction or the other and we don’t know yet if that is one trend that is going to continue within the overall range.” Charles Kirk – The Kirk Report