Thursday, May 23, 2013

Marking the Boundaries

There was something to take from Wednesday's price action.  There is a 90% chance that we break 1600 before 1700.  The uptrend was getting parabolic, put/call ratio was getting too low, and after 6 months of going almost straight up, gravity eventually takes hold.  This doesn't mean we have to have a sharp pullback right away.  We will likely hold support at 1625 and make another attempt at 1680.  But it does mark the boundaries of this move higher, which is ES 1680, Nikkei 16000.

The overnight action in the Nikkei was dramatic.  But that is what happens when you get a parabolic move higher and blow out all the shorts in the process.  The Nikkei looks like a bubble, fundamentals are still horrible with zero growth there.  What is surprising to me is that the USDJPY is not really panicking down on that Nikkei crash lower.  I guess the market view is that Fed tapering will mean a stronger dollar, although I don't agree with it.

I missed the short opportunity, and I want to kick myself for trying to time the perfect short.  But I mostly gave up on trying to top tick short parabolic moves a long time ago after a few bad experiences.  Right now, I am only interested in the short side, even though I think we will probably bounce back to 1680 sometime in June.  Likely to stay on the sidelines in index trading until I see the ES bounce back to the 1680 zone where I will put on shorts for a big move down to 1540, which should happen sometime in July. 

No comments: