intra-day: July 12, 2011

EOD COMMENT:  10:30 PM PDT

Nothing much to add at this point.  Many of the 60 minute charts look like they’re about to roll over to the bearish side — VIX, SPX, RUT, etc.   Most of the 60-minute charts also feature 10, 20 and 50 SMA’s in a bearish configuration, while the daily charts are getting there, with a 10 day still above the 20, but the 20 below the 50.  The 3 EMA crossed the 10 SMA today, and that’s an excellent bearish signal (once confirmed.)

Still looking for a bounce, possibly at the 50 SMA at 1315, but more likely the -1 std deb regression channel line, which coincides with the .382 Fib at about 1301.  We should continue to see /DX gains, as the situation in Greece, Ireland and Italy continue to concern investors.  Will this be 2011’s Lehman Bros?

UPDATE:  11:20 AM PDT

Just hit 1327, which is the channel midline AND the .618 fib level — a logical top for the day.  The /DX did a swan dive following release of the Fed minutes, but seems to have caught itself at the bottom of the falling wedge — which I’m now broadening.  Doesn’t change the bigger picture, but it buys dollar bears (and stock bulls) a little more time.

UPDATE:  7:55 AM PDT

Confusing situation.  The move I was expecting down to the -1 std dev line on the regression channel happened perfectly — but in the futures overnight (1296 on /ES).  The bounce back was supposed to be to the midline (1325 on /ES, 1326 on SPX).  But, we’re just shy of that now.  I think the algo’s are wondering if a dip in the futures “counted” or not. 

If we get back above 1325, I’ll be looking for additional short entry positions.  But, I think there is likely to be another, larger bounce on the way down — maybe at 1300 still — to take the place of the one that didn’t happen in the cash markets.   Just be aware that a bigger bounce doesn’t mean the bull market is back.

In terms of 2007 comparisons, yesterday was likely our December 11th — pretty clear cut.  But, on the 12th, SPX put in a rickshaw man, basically a doji with very long tails and a tiny body in the middle — indicating indecision.  http://thepatternsite.com/RickshawMan.html   The market opened up 10 over the 11th’s 40 pt plunge, soared 25 points in 5 minutes to recover almost all the previous day’s losses.  But, it gave them up to close down 1 point.  Talk about driving investors crazy…

The next 4 sessions it dropped 42 points, to complete a 6-day 90 pt drop from the top.  It was followed by a 5-day, 64 pt retracement that took prices to their final pattern high of 1499.  This move was incorrectly assumed by some to be the start of [iii] of 5 up.  Nine days later, the market was down to 1376, testing the previous lows.  It bounced a bit there, but hit 1270 9 days later. 

2007 TOP

ORIGINAL POST:  6:27 AM PDT 

In overnight action, the futures declined to touch the -1 std dev line in our regression channel.  This was exactly what I expected from the cash market when I wrote last night’s update — just didn’t think it would happen that fast.

REGRESSION CHANNEL ON /ES

 We’ll keep an eye on the cash market opening to see if there’s a follow-through, or if all the fun happened overnight.  If we do get a bump up, I expect it to be the last best opportunity to add more short positions.

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