By Sell Puts
Wow what a day makes! Nice 2+% drop across all indexes, i am not worried i am actually quite happy. WHy you might ask? Here are four reasons:
1. The market has been so overbought it throws most lower indicators like Stoch and MACD out of whack, any know it all technician knows this. YOU dont.
2. So many people (amateurs) have jumped into this market thinking, "man i am a great trader, i picked so many winners" or "I'm gonna buy more because i was right the first time!" -- these thoughts coming out of newbie market participants usually signal the bag your holding is filling with shit.
3. It's been a violent rally driven by the media, but have the fundamentals really changed? Has real estate bottomed? no. Has unemployment peaked? no. Has trust been restored? no.
4. VOLUME, where is the volume... we had a spike on may 6Th, when we topped. THE big money puked, taking on shorts today.
Thats why i am happy, because more volatility is coming.
Wow that was a lot of numbers, back to my task at hand. THe chart you see on the left is of the SPX ie S&P500. I know lots of lines, but if you look closely you can see the resistance met in the first week in may, followed by a candle falling out of the rising bear wedge. Have we broken down completely? Who knows. Here is my ULTRA bear theory:
ALright so what COULD be happening here in a nutshell is we are trading on a downward trend channel bullish breakout, which might have failed this week? The channel was formed in August of 2008 upper boundary, early October 2008 the lower boundary started. We traded in this channel up until the PIVOT point or BOTTOM @666 where THEY proceeded to bounce the price up until it broke the upper boundary the second week in April, trending up to resistance around 925. NOW this could be the current bear market rally top. If the news is bad enough and the selling really takes hold on Friday we could mind the right hand side of the triangle (thick blue line) pulling back into the channel continuing on till we test the bottom? I know this sounds far fetched but anything can happened. SOmthing is about to happen but no one really knows what the tipping point will be. Well see how the rest of the week plays out.
