The reason for the title of this post is that I've received a number of very thoughtful and cohesive arguments from readers postulating that Monday will be the end of the "c wave" we are in and will kick off the "wonder to behold" wave 3. In other words, folks think the market is going to keep fighting its way higher (and the past two days have been fairly brutal, let me tell you!) until sometime on Monday, at which time things are going to fall absolutely to pieces for our bull friends.
On the surface, the market looks terribly strong; I had thought mid-day we might enjoy a reversal, but it was not to be. The Dow closed at its highs for the day, causing havoc to bearish portfolios everywhere.
Looking at the Fibonaccis, however, is a little more encouraging. The retracement I've put in bold appears to be decent resistance. I will note that those calling for Monday as the reversal would surely put the Dow's target (and, thus, the DIA's) at a higher level than this. "S&P 500 to 1325" has become virtually a cliche lately.
Crude oil's strength today held the Transports back so that they were actually in the red, in spite of the Dow's nearly 200 point jump (adding to yesterday's 250 point jump!)
I am somewhat chagrined to have written about DUG yesterday. I had a pretty big position in this – 2,000 shares – and early this morning I decided to sell it. Thank goodness, because I scored a very healthy profit, and by day's end it was actually a loss. I consider the red line I've drawn to be important support; if we seem to ease around the $32 level, I'll probably re-enter. You have to be nimble in a market like this, and when I saw this morning that we were not making new highs this month, I wasn't confident enough to hang on. My intuition was right this time.
Looking at the EUR/USD, we're at an important decision point – – the price is right on the fan line, yet it is also positioned for a potential breakout (see red horizontal line). My money is on the fan line being broken, which would naturally result in a drop in energy (and, thus, a rise in DUG).
Another arrow in my "energy bear" quiver is the USO, which is approaching the underbelly of its broken fan line.
As for OIH, can you see the three high prices around $212.50 in late June and eaerly July? I don't think those are going to be breached. That's my stop-loss level.
I bought puts on the $NDX (which were actually in the green during the middle part of today, in spite of the Dow's strength…….) and the $COMPQ seems to be bumping its head up against its lower channel line. Naturally my stop price on my index puts is set to the highs set on July 23rd.
As for my best friend the Russell, this is by far my largest put position, and my stop is set to 726.27 (if memory serves). If we begin to seriously fall within the coming week, this could turn out to be a once-in-a-decade opportunity to be short this index. A push above May's highs would completely wreck that prospect.
Now, in no particular order, a few favorite shorts of mine. Although I won't comment on these individually, I will point out that I am ga-ga excited over Bank of America. Just take a look at those retracement levels, particularly the one I've boldfaced.
Tomorrow morning's GDP report (8:30 a.m. EST) is going to be vitally important. That will probably dictate whether "the fall" begins Thursday or if we're going to have to stomach a push higher (much the same can be said of Friday morning's unemployment figures). The past two days have been no fun at all, but I think relief is coming soon.
