Choppy, Gappy Market: Sleepy Robots – November 14, 2011

[Billy]

Forum Clusters 111114.xlsx

“ Less is better. The key is to stay patient and live to fight another day. This will pass, and you want to make sure you have your trading capital and your emotional capital intact for better times, they are coming.” (Zortrades, November 10, 2011)
http://zortrades.com/insanely-tough-market/

Exceptionally, I will post today’s algo & multi-pivots robot comments in the VIT forum to allow non-subscribers to have a glimpse of the algoforum content.

From my weekend perusal of opinions and analyses, I found a vast majority of bullish conclusions and predictions for the rest of 2011. Most of the bullish arguments are based on illusionary beliefs that the Euro-zone is saved, seasonlalities, vague trendy chart patterns and dubious volume or accumulation/distribution interpretations. I think that if the bulls are so numerous, they might soon be cruelly fooled by Lady Market who sends us subtle different messages.

First, I must thank Brian Shannon for directing us to the excellent article “Why Current Price Action Makes Me Believe We Will Revisit The October Lows” , it will spare me a lot of writing since I would tell you the exact same troublesome observations : http://www.zenpenny.com/?p=2908

Second, daily stages analysis is showing that the percentage of stocks in accumulation and mark-up stages is dropping fast from the most overbought levels in 18 months. In the context of a weekly stage backdrop still much tilted into a declining stage, such a behavior provides an edge for selling strength until the indicator turns back up above its 5-day moving average.



Third, my volume-weighted accumulation/distribution indicator of all stocks in IBD’s database is replicating almost perfectly the pattern it made in early 2009.



The date similar to Friday would be January 22, 2009. After enduring 2 weeks of choppiness with a slight bullish bias, IWM fell -22.44% from January 22 in the 31 days leading to the March 9, 2009 bottom.



Personally, I find enough troubles in the market to follow blindly the robot neutral stance, even if we may “feel” a bullish bias in the next two weeks. Furthermore, opex weeks are volatile and the most unreliable weeks for correct setups and analysis.

From a multi-pivot perspective, IWM has only weekly R1 (76.14) as floor resistance before hitting the strong second resistance cluster where the 200-day moving average (77.60) is in confluence with Semester S1 (77.56). This is the most logical level where a reversal to a correction could trigger. Floor levels algorithms are expected to start their distribution programs at the 3:1 reward-risk ratio limit short entry of 76.16.



The GDX robot is neutral too and the multi-pivot outlook is very slightly bearish with a minor imbalance in strength of the first floor levels clusters with 13 resistance vs. 11 support.
Billy