Friday 14 February 2014 2:00 p.m. New York time
The S&P 500 has done far better than I expected a few days ago, recovering all the ground it lost since its breakdown at 180.93 (on the SPY) and then some. I covered my short position at 179.98 (the trailing 10-day high) 4 trading days ago for a small profit. We now remain flat - in the gray area between a covered short and a new long position, which would not be declared until the 20-day high is exceeded (currently 184.77). The 5.7% rally from 173.71 is more impressive than I expected, but the market will do what it will do, not what you want or expect it to. It is more important to adapt to the unfolding situation than to dig your heels into an entrenched position.
A few caveats remain:
- volume on up days continues to be less than on down days, and to be declining, indicating a market that is attracting fewer convicted buyers;
- the average gain after the blast off from the 173.71 area has been progressively less;
- the market is approaching resistance at the old highs around 184.94 and is currently in congestion - an old brief trading range between 181.34 and 184.94.
Consolidation and a pause or pull-back are more likely at this point than a continued parabolic ascent, but stay tuned.
China, by the way, is pausing after gapping across a downtrend line. We shall see if it can break out, but the chart does not look convincingly bullish. A continuation in the downtrend would shift the focus in the United States from relief over the Congressional debt ceiling authorization to continued worries about a slow down in the world's 2nd largest economy.
The S&P 500 has done far better than I expected a few days ago, recovering all the ground it lost since its breakdown at 180.93 (on the SPY) and then some. I covered my short position at 179.98 (the trailing 10-day high) 4 trading days ago for a small profit. We now remain flat - in the gray area between a covered short and a new long position, which would not be declared until the 20-day high is exceeded (currently 184.77). The 5.7% rally from 173.71 is more impressive than I expected, but the market will do what it will do, not what you want or expect it to. It is more important to adapt to the unfolding situation than to dig your heels into an entrenched position.
A few caveats remain:
- volume on up days continues to be less than on down days, and to be declining, indicating a market that is attracting fewer convicted buyers;
- the average gain after the blast off from the 173.71 area has been progressively less;
- the market is approaching resistance at the old highs around 184.94 and is currently in congestion - an old brief trading range between 181.34 and 184.94.
Consolidation and a pause or pull-back are more likely at this point than a continued parabolic ascent, but stay tuned.
China, by the way, is pausing after gapping across a downtrend line. We shall see if it can break out, but the chart does not look convincingly bullish. A continuation in the downtrend would shift the focus in the United States from relief over the Congressional debt ceiling authorization to continued worries about a slow down in the world's 2nd largest economy.
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