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Shutdown Showdown ... Yawn

That's what they call the current fiscal crisis. Yawn for the markets as this is the third time in 3 years the government wrangling proved to be more of a hindrance to economic recovery than what they are voted for.


Obviously, traders are again speculating a vertical rally if the issue is resolved. Possibly better discount prices for equities if not.

We have Compq as the primary bullish pattern together with Russell200 on the daily and intraday charts. Compq is the easier to interpret:

<< Compq Before:

>> Compq Now:

Compq made a vertically strong intraday rally today that bodes well for this particular index, at least, since it is less affected by the current government crisis.

<< SnP500 Before:

>> SnP500 Now:

As expected the bearish pattern for SnP500 was taken advantage by majority of traders and it went down fast toward the Daily 50ma Major Support. Whether the 50ma will hold or not remains to be seen.


Trading Strategies:

As indicated in the last Instablog; the better trading strategy is to wait for an a-b-c down that may last 2 to 3 weeks. Compq and Russell2000 are obviously Flat Patterns on Intraday. SnP500 and Dow Jones are acceptable a-b-c Zigzags but they can easily morph into 1-2-3-4-5 run downs if the Shutdown Showdown turned out negative for the markets.

The markets are now at it's 8-th trading days from the top. A little less than 2 weeks but with current trades being news driven it can suddenly rally or go into a vertical meltdown in short order.


EWA and/or Technical Analysis can help buy bottoms but not a guarantee a trade is going to be successful specially during news driven market environments. For now, the first opportunity to get long was given early this morning. What's next remained to be seen.

- IF a rally happens; upside targets remained as they were on the Weekly Charts illustrated on the last Instablog;

- IF a meltdown happens; the better course of action is to wait some more and watch what will happen next.

I bought some YM today as SnP500 tested it's Daily 50ma Support with stop loss below today's low. I use the futures instead of SSO this time since it can be protected against possible meltdown over-night.

For those less nimble or more timid to take such aggressive action; the better trading strategy is to try to catch up if a rally happens. That method worked well in early January when the Sequester Debate was finally resolved in Dec 31, 2012.

See: 1H2013 = Trick Or Treat of Jan 8, 2013 for trading strategies similar to the current one. For myself; I was not active in Dec 31, 2012 and was not able to buy the bottom run thus got left far behind when 4 days of vertical rally happened. Instead of chasing the rally; I waited for a minor pullback down that lasted only 2 days before buying using the gap support on the SPY 60min Chart.