Tuesday, August 5, 2014

Dump Out of the Blue

When I am making trades, I find myself often to be a bit early.  For example, today, when I got out of the ES long at 1923.50, something didn't smell right.  We went up higher after I closed out the long, to hit 1930, but only briefly.

We had a big rally yesterday and we steadily dripped lower in AH, even lagging the perennial laggard, Europe.  Of course, the long side is quite forgiving, so we got a move back up to 1930 off the gap down open just to give a bailout card for those who got long yesterday.

Now suddenly the market drops 10 SPX points in 10 minutes out of the blue.  The bears are in control here.  But it is too early to call for a break of the recent range right now.  It would surprise me if we broke 1910 today.  I still would try to play the range of 1910 to 1940 till Thursday.  After Thursday, all bets are off as we could get that capitulative wave down to 1880.  Capitulation usually comes as a down move matures, it is still too early for the capitulation.

I still want to buy the dip here, as there should be one more rip higher to 1935 or so before we cascade down to 1880.  The crowd is getting bearish, so this down move is not going to last for long.

No comments: