GDX and IWM Clusters for June 7, 2011

[Billy]

For GDX, today will be a tie-break between the first support and resistance clusters, each with strength of 12. Yearly pivot (55.10) will be critical to monitor as it is the first major protection of our new short entry at 54.98. The initial stop at 58.46 is strongly protected by the huge second resistance cluster with strength of 26. The most probable 3-day short target of 53.38 is at the lower end of the first support cluster, suggesting a continuation to the downside would be relatively easy from there.



For IWM, the path of least resistance is clearly upwards and only daily levels (not shown) are hindering a bounce to our 81.18 short entry level. Support strength is now sturdy enough compared to resistance for a one-day-only bullish bias. The initial stop (83.03) of a possible new short position is well protected by the strong second resistance cluster. Billy

[Pascal]

For GDX, today will be a tie-break between the first support and resistance clusters, each with strength of 12. Yearly pivot (55.10) will be critical to monitor as it is the first major protection of our new short entry at 54.98. The initial stop at 58.46 is strongly protected by the huge second resistance cluster with strength of 26. The most probable 3-day short target of 53.38 is at the lower end of the first support cluster, suggesting a continuation to the downside would be relatively easy from there.

Attachment 8649

For IWM, the path of least resistance is clearly upwards and only daily levels (not shown) are hindering a bounce to our 81.18 short entry level. Support strength is now sturdy enough compared to resistance for a one-day-only bullish bias. The initial stop (83.03) of a possible new short position is well protected by the strong second resistance cluster. Billy

Attachment 8650

I would like to add the following comment on IWM: Since the 20DMF is now in oversold territory, we might have a buy signal at the close of today (or tomorrow). In such a condition, a bounce could trigger a short position by the robot. If we have a 20DMF buy signal by the close, the robot will cover its short at the close. However, if we do not have a 20DMF buy signal by the close, then we might fall lower tomorrow and in such a case, selling at target (QSI of 79.32) is advisable. This strategy (selling at target when in oversold territory) was back-tested (last week,) but is not programmed in the IWM robot.

[adam ali]

Pascal,

I have a simple question that may have been answered (many times) previous. In your note, you mention that if the Robot goes short today, it will close its position if the 20DMF gives a buy signal. Yet, in reviewing the backtests for both the Robot and 20DMF signals I see times when they are contrary to each other.

Does the Robot already trade in sync with the 20DMF signal? If not, why would it necessarily close today's short position if the 20DMF gives a buy signal?

Thanks.

[Pascal]

Pascal,

I have a simple question that may have been answered (many times) previous. In your note, you mention that if the Robot goes short today, it will close its position if the 20DMF gives a buy signal. Yet, in reviewing the backtests for both the Robot and 20DMF signals I see times when they are contrary to each other.

Does the Robot already trade in sync with the 20DMF signal? If not, why would it necessarily close today's short position if the 20DMF gives a buy signal?

Thanks.

This is a good question. In fact, the Robot is not "in sync" with the 20DMF, since the 20DMF is only one of the parameters. But, I noted that today's short settings are very weak. We can see that both the LT and ST settings have been steadily climbing. This means that when the 20DMF sends a buy signal, this will easily push the setting into positive edge. If no buy signal is issued, the settings will still climb higher I believe, but more slowly.





Pascal

[Artur]

Hi,

If I'm not mistaken, yesterday GDX Robot was in a BUY mode and also as a position (entry price 54.31 on 5/12/2011) and SL at 54.34.
Yesterday's low was 54.62, so today that position shoud be active.

Today the robot is in Short mode and looking for a short position at 54.98 (should be there already).

Am I missing something? Where is the former position?

Thanks in advance.
AT

[Billy]

Not much happening with IWM yet. It is in the vicinity of its most probable 3-day short target (79.92) for the second day in a row, giving clues that there is not much potential left to the downside for the rest of the week. It hovered quietly all day around the daily pivot equilibrium and never tested its first support cluster. This is a subtle clue that market makers have probably covered their own short positions by now, something they always do before taking care of their client's buy orders. The weak close is manufactured to help them start tomorrow from a low price compared to all recent timeframes VWAPs. If they are indeed planning to accumulate for institutions at a good VWAP from here, WS1 (79.43) and QS1 (79.32) should hold as support tomorrow, and a realistic long target would be the 5-day VWAP or 65-period moving VWAP on a 30-minutes chart (81.48). Interestingly, it is declining and approaching the robot short entry limit at 81.18 which is not expected to change much tomorrow.



The GDX robot entered a new short position today at the open (55.28) above the limit entry price of 54.98.
The confluence of Yearly Pivot (55.19) and WS1 (55.37), right at the beginning of the first resistance cluster area, acted as a bumper and reversal zone, exactly as anticipated and confirming the current (slight) bearish bias for GDX. Contrary to IWM, the most probable 3-day short target (53.38) still offers good potential.
Billy