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Trader, investor and financial consultant. Former CEO of companies, owns an online service that helps market participants to combine momentum and mean-reversion in order to maximize reward/risk, and to time the market using the IndexCycles method.
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  • SPY And QQQ Stuck In A Range, Crude Oil And Gold Moving- Ongoing Market Analysis  0 comments
    Mar 30, 2014 9:09 PM | about stocks: SPY, QQQ, GLD, USO

    03/27/2014 Stuck in a range?

    During the first hour the market dipped quickly and almost reached the target we assigned, and then recovered even quicker. The rest of the day was spent lower the opening level, but with little change intraday. After all, a calm session and finally the S&P 500 lost only 0.19%, the Nasdaq still being weaker (-0.55%). The Russell makes -0.35%.

    Data today was still discouraging with a new decline in pending home sales and the final figure of GDP for the 4th trimester 2013, slightly below expectations. Admittedly, these releases did not prevent the market to recover, and this shows the market kept some strength. The Nasdaq composite had touched under 4132 before and never returned that low. It is not quite the 4115 that we contemplated earlier but is was a test of the 01/30 swing point, that forms the high of the support zone (see yesterday's graph). Given the calm of the action and the normality of the volumes it was wise to consider that the range was completed. Anyway, in the ranging scenario there was not much more to earn with a QQQ short, so we covered, but kept the short SPX calls.

    Detailed volume analysis brings its own dose of optimism since high volumes were recorded, by far, during the first hour when the market went back from the low and the last hour, and the last half-hour when it picked up again. Not unusual, but the comparison with yesterday and with Monday-the volumes inflated when price was falling-tells something.

    In other words the ranging scenario stays the most likely. It would be coherent with the shape of the long-term charts that does not show any threat of a market crash right now (remember that 3965/3980 is a major strategic zone in that respect).

    We expect for 2014 a difficult market for buy-and-holders. We will have to decode and trade our way through the year. But we will revisit this in the Weekly.

    For now let's refresh the look we have to the market:

    (click to enlarge)

    This market needs to go up tomorrow or Monday; otherwise potential buyers will transform themselves into sellers. The second point is whether the index will manage to quote beyond 4274, low and end of yesterday's session. If it does it would be an additional evidence for the ranging scenario. If it fails this for a couple of sessions we will be shorting again this market.

    (click to enlarge)

    The S&P 500 has a very different and more reassuring look but today the financial sector has been weak, which can hurt this market. The picture is unchanged and is 1839 a decisive level.

    Overall we cannot count on rebound at this stage; on the other hand shorting is dangerous now. Those who have small shorts may keep them and cover in the Nasdaq enter above 4275.

    (click to enlarge)

    Crude Oil broke out today and held above 101$. The move is a bit surprising but it is there and one may consider buying on a retracement down to 99/100 (around 36 for USO).

    (click to enlarge)

    We expect Gold falling to 1270/1280 (the current price is 1293) and maybe to stage a basis at this level. Gold is very under owned by small traders and the commodity will probably find new buyers at this level. To get a head start on this question one can monitor the behavior of GDX (gold miners).

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SPY over the next 72 hours.

    Stocks: SPY, QQQ, GLD, USO
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