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TAM's Pedagogics - Monday 03/28/11

|Includes: SPDR S&P 500 Trust ETF (SPY)

Since the Markets’ top on the year, the 2/22 2%+ selloff Monday, they have shown 7 distribution days.  As for accumulation days, there has only been 1 for the NYSE and Zero for the NASDAQ (not including the quadruple witching two Friday’s ago).  When the Broadening Wedge formation arose and the intermediate-trend (NYSE:IT) was broken, we discussed a potential low-volume retest to confirm.  Friday was just such a day.

 

If the Bears are going to remain in control of the short-term trend, now is the time.  If not, like we penned late last week, the retest of the intermediate-term broken trends would no longer be valid and the Bulls will have a shot at redemption. Nonetheless, our camp is still pitched with the Bears as 3 of the 4 Sisters hit the underside and held; all except the Russell 2K – she managed an intra-day breakthrough, but managed to close just below.

 

Experienced money-managers, investors and traders know that the risk reward trade is what it’s all about.  This couldn’t be a better place to be.  Since the break we’ve positioned ourselves short, hedged the bounce and are ready, at a moment’s notice, to relinquish the hedge strategy and return full fledge Bear.  If the probabilities do not hold and the Bulls return, we’ll remain short-hedged until clearer skies arise. Moral of the story, do not attempt to predict what the market is going to do; rather ascertain probabilities of what is going to happen and position accordingly.

SPX/SPY Daily:

SPX Daily

NDX/QQQ Daily:
NDX Daily

Good Luck & I Hope this Helps!!!
KAT