IWM Notes and GDX New Short Trade - March 5, 2012

[Billy]

The IWM robot remains neutralized in a fail-safe status. However, it is i!mportant to notice that, within a 20 DMF neutral context, the LT/ST statistics found IWM oversold enough to cover at Monday’s open the hypothetical short position that was entered at 82.24. But no edges were found for entering a new hypothetical long position.

Technically, the breakdown from consolidation is pretty obvious and Friday’s low even breached far below last week’s Weekly S3 and daily S3 which had a 95% probability of marking the weekly and daily low ticks. This is suggesting broad short-term weakness rather than a fast shake-out of weak hands and a stop-fishing excursion.

We have observed historically how important the quarterly floor levels have been for initiating key turning points in IWM. The fact that it traded below Quarterly R1 (80.45) for the last 3 hours of Friday’s trading and finally closed 0.25% below QR1 is indicating no rush for reloading inventories on behalf of market makers. They may target the 50-day moving average (78.83) instead and buy programs would then start kicking within the first support cluster. The multi-pivot 3:1 reward/risk buy limit is coinciding with Monthly S1 at 79.24, but is still not confirmed by the robot edges. A successful retest (and upside follow-through) of the old consolidation lower boundary around Weekly pivot (81.05) would invalidate the bearish short-term multi-pivot bias.



The RT GDX MF triggered a short signal with GDX at 55.29 and closed below 0% on Friday, triggering an EOD GDX robot short signal. A new short position will be entered at Monday’s opening price.

GDX is now at the extremity of a very tightening apex of a long term triangle and any decisive breakouts from such apexes are technically the source of very long and powerful subsequent moves. Today’s uptrend support line is waiting at 53.83 - just under Daily S2 (53.92) - and will likely be an important battlefield if hit intraday.



The vicinity of the Quarterly pivot (54.78), the 50-day moving average (54.45) and Weekly S1 (53.56) make them all important intraday floor levels for the beginning of the week. I expect a major downside price move if the GDX MF doesn’t revitalize very quickly from here.
Billy

[Billy]

GDX seems to stabilize around Weekly S1 (53.56) for the lunch doldrums. The RT GDX MF is visiting new 20-day lows.
The former long term support uptrend line at 53.83 is now a potential long term resistance. We must beware of an always possible bear trap reversal, but as long as GDX doesn’t close the day above 53.83 we have a winning short position with a lot more potential gain to come.
Billy