Let me start off by saying this – – – if and when the S&P 500 finally breaks 1261, that level is going to change from our worst enemy to our best friend, because it is going to represent a wall of resistance that will be very tough for the bulls to overcome. Because this level is getting hit again, and again, and again…………and again……….it is getting stronger all the time. That is bad for us now, because support is strengthening all the time. But if anything manages to act as a catalyst to finally push the S&P below this level, we have a new best friend. Time will tell.
There was a time on Wednesday when it looked like the market might finally crack, but no such luck. The thick red line you see for the $INDU is continuing to do a yeoman's job as support.
Whereas IWM is clinging like iron to a magnet to its own Fibonacci level, which represented the exact midpoint between today's open and close.
Most mesmerizing of all, of course, is the S&P 500 itself. This is, by my count, the eighth instance of the market trying to push below this level and failing to do so. If 1261 is breached, you are going to see an incredible rush for the exits.
A closer look via minute bars amplifies this point.
Today was a very good day, however. I was especially delighted with the third day in a row of a meaningful drop in the $UTIL. Just one more day like this would crack that neckline without question.
As I mentioned earlier, I took a fair bit of my oil/gold/ag profits off the table. Just look at the volume soar on OIH over the past week! I am thinking the dollar is going to weaken temporarily and gold/oil will push higher. This doesn't mean they are entering a new bullish phase; it simply means there could be some short-term strength.
I have found USO to be another helpful chart to monitor when crafting a "theme" for my trading. Its approach toward the fan line compelled me to take some profits, but I would also note that any countertrend rally, for me, will simply represent new shorting opportunities.
As an object lesson, take a look at how a security can cut through its fan lines one after another. I expect the likes of OIH and USO to do the same.
Knowing when to take profits is very tough – perhaps one of the toughest chores a trader faces. I saw enough charts that looked like the one below to convince me it was time to take some money off the table. This isn't a bullish graph, but the price levels certainly have reached a level of at least medium-strong support. A cut beneath such a line, of course, would be bearish, but I lightened up a lot of positions by 1/3rd, and in some cases, I took them out of my portfolio altogether.
One item I sold (near its high today, in fact) was DUG. This has had a super profit in the very short time I've held it, but I'm not comfortable banking on it breaking above the summer's highs. Not yet, at least.
There were a few standout issues today. MasterCard (MA) is seriously breaking down.
First Solar's failed breakout has created a marvelous bearish chart. I bought puts on this a week ago, and they are doing very well.
And Foster Wheeler (FWLT), in spite of having lost nearly half its value already, looks like it has plenty farther to fall.
I'm trying not to get greedy, since things are going so well. Responsible and "fresh" stops are the key, as is taking at least partial profits. I'm looking forward to seeing what happens next.
