… And Now Looking To Go short! - June 8, 2012

[Billy]

I hope you did follow Pascal’s timely RT advise to avoid entering a long position yesterday near the closing bell when the buy limit was hit. The IWM robot will cover its long position at the open and will try to enter a new short position at a limit price of 77.30 with an initial stop (79.27) right above the 50-day moving average (79.04).

Yesterday’s gap up was not chased by large players and institutional profit-taking did hit the 20DMF all day long to the point of triggering a sell signal. In spite of all the tiring blah-blah about QE3 dreams and delusions, the market remains in a severe correction. If some large institutional players want to reverse it into a renewed lasting uptrend, they have to act today and accumulate long term positions around the 200-day moving average (75.72). Hints that they are actually buying should be seen in a Friday’s 20 DMF real-time uptrend coupled with a daily/weekly close above intraday VWAP, 5-day VWAP and Weekly pivot (75.15). Otherwise, the probability is getting high that new lower lows might be seen next week. Anyway, this market is much prone to choppiness and whipsaws and my preference remains to keep low overnight exposure.



Both the RT and EOD GDX models turned short yesterday with significant LT/ST settings edges. The GDX robot will enter a short position at the open with an initial stop 9.24% above execution price.

From a multi-pivot perspective, there is a hugely powerful support cluster encompassing QS1 (45.75), the 50-day moving average (45.36) and dual YS1/SS1 (44.77). Furthermore, there is the uptrend support line from the 5/16 bottom. Normally, such a cluster should favor a technical rebound – even after an undercut of the trend line. I would then be cautious and start with only a small short position-size until we see a daily close below the declining 50-day moving average (45.36 now but expected to be 45.28 at the close), which would coincide with a close just below the hourly Ichimoku cloud. This would confirm a sustainable trend reversal and I would increase my position from there.
Billy