Don't Get Trapped! - June 26, 2012

[Billy]

The IWM robot is trailing its stop down to 79.17 and is ready to enter a secondary short position at a limit of 77.47. The strong support confluence of a rising 200 dma (76.13) and QS1 (75.90) allowed for a close above WS1 (76.20). If the confluence confirms its supportive role for igniting a bounce, a test of WPP (77.64) is the most logical next step, near the secondary entry price. I must stress that all IWM correlation scores were barely hurt by Monday’s plunge and that market structure is still able to turn quickly into a summer rally configuration. I find no reason to be overly aggressive in any direction for the short term.



On GDX, the failed undercut of YS1/SS1 (44.77) followed by a close above the 50 dma (44.99) on strong PM Money Flow and a GDX Model RT cash signal suggests that a temporary key bottom has been made at Monday’s lows (43.87). The multi-pivot cluster structure is strongly bullish and the ratio of positive IBD’s Accumulation/Distribution ratings among component stocks is at a new recent high. The PM stocks declined on lower volume and rallied on higher volume pointing to institutional support.
Billy

[Wei]

Hi Billy,

With the ex-dividend gap down, does that affect the pivot calculation (and thus affect the stop and support cluster)?

Thanks.

[Billy]

Hi Billy,

With the ex-dividend gap down, does that affect the pivot calculation (and thus affect the stop and support cluster)?

Thanks.

Theoretically, everything should be adjusted. But all backtests have shown that it didn’t make any difference on average. If IWM was trading near the stop, I would advise to adjust it for your discretionary trading on the ex-dividend day only. But the robot stop is far away today.
Billly