IWM Robot Reactivated And GDX Short Trade - March 6, 2012

[Billy]

We have decided to reactivate the IWM robot which is now in cash and waiting for a fresh signal. Pascal has updated the backtesting for the ST/LT edges with the latest available data and he wrote an article on his observations and the changes in the IWM Robot Notes.

After gapping down, the only floor level touched by IWM yesterday was Daily S1 (79.51) where it bounced quietly to finish the day flat, but well above the day’s VWAP. This is just a very minor accumulation which was not confirmed by the declining 20 DMF. Smallcaps’ outperformance yesterday may hint at some rotation revival from large caps into smallies which would actually be a risk-appetite signal and a positive for the future direction of the overall market. But as I underlined yesterday, the real tests must happen on stronger technical floor levels like the nearby Quarterly R1 (80.45) or Monthly S1 (79.34) for large professional players to show their hand.



The GDX robot entered its short position at the open (54.34) and starts Tuesday with a trailing worst-case stop at 56.98 near the 200-day moving average (57.05).

The former uptrend line broken yesterday has now risen to 54.03 and a retest is still a possibility. The selling in GDX down to yesterday’s daily S3 was fueled by large players with a declining GDX MF until the last hour when a sharp rebound in Money Flow developed and gained some momentum into the close. I covered all my leveraged positions then, but keep holding an unleveraged short position as a standard robot trade. The most likely cover-and - buy signal is now 2.62 days away. There are no advised new entries for today.

If the first support cluster with a strength of 9 is broken, there will be no key floor support left before Monthly S2 (50.09) which could become a capitulation target.
Billy