….(if there’s not some sort of intraday correction as the markets rally)

This is a busy chart and I’m just going to give my 2 cents about the recent market action. With my timing signal flipping green earlier this week, it has been encouraging to see the market rally, but there’s something about the action that is making me nervous regarding the velocity of the move.

I have a much longer term chart of the SPX that you can’t see due to size restrictions, but where the NYMO closed at today typically coincides with some sort of market top. I like to use the position of the RSI and whether it’s bullish (trending between 40-80) or bearish (trending between 20-60) to gauge whether a move up is a top or a continuation move. Until we move above 60 with some force this is starting to look like a bullish move higher within a longer term bearish move.

How I’m going to play this is stay long with my remaining shares as long as my timing signal is bullish, despite any bias I have, but I trimmed half of my long contra ETF’s today because of what I just explained. If we get a big rally tomorrow that would be another warning sign in my opinion…over-exuberance as Greenspan would say.

The SPX can retrace back to 1300 and that would be a good place to add back my shares I sold today, as long as it’s a controlled decline on low volume and bounces immediately. Any lingering move around 1300 would be considered a sign of weakness.

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2 Responses to “Too Much Strength Can Be a Bad Thing”

  1. nick levis Says:

    Awesome posts lately Jeff… Really nice call on the bullish move and also your recent 50% profit taking… nailed it… I stayed skeptical a bit too long and although I covered most of my shorts around when you flipped green, I missed the rally and kept some put exposure… Feeling as though this is a selling or shorting opportunity — look at the trend line from the 1370 high to the right shoulder to the current levels… looks like a H&S pattern is forming…

  2. jeff pierce Says:

    Thanks for the comment nick. Often times our emotions about the markets betray us. Try this next time. When you “feel” that the market should do something, look at the market through the opposite view and see if you can find supporting indicators for the other trade.

    Just send you a friend request on fb. Have a great long weekend. We all deserve it.

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