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Yesterday I went long when the index was plunging because I trusted my cycle analysis and my calculations. And today Santa came thundering down to vindicate me. But then I sold my long position one hour before the close, just like yesterday, only the other way round. My logic is simple and you can read them in my trading philosophy here ; http://bbfinance.blogspot.com/p/swing-trader-heaven.html
So I took the money and ran. Do I think that the rally is over? Heck no! There is more to come. But as of now, the index is over stretched beyond imagination. Like the elastic band, it has been pulled too far too soon and it has to come back to equilibrium before it can start its journey again. Today was a Major Accumulation Day. Yesterday was a Major Distribution Day. According to my good friend Cobra, we will definitely see a down day tomorrow.
I want to break a myth I see portrayed everyday in the media. The myth of “These people know what they are talking about.” Trust me, they do no not. But unlike most when I make such an accusation I am not being flippant. Let me give you a real life first hand example on why things are the way they seem, and why these so-called “evil people” are not putting money to work in the economy.
It’s very hard for most to truly understand just how far-reaching some innocuous regulation is or can become because it makes for such a great sound bite. i.e.: “If you’re not for it, then you must want polluted water that kills women and children.” So let’s cut through this crap perpetrated by the requisite debate teams and I’ll put just one tiny little face on a monster of an issue.
Apart from the fact that Bank of America (BAC) is up 3% the day after it hit a low 4.93 yesterday, the lowest level since March 2009, let's notice that current strength has not inflicted any meaningful technical damage to the nearest-term downtrend — at least not yet.
BAC must hurdle and sustain above 5.23 to inflict preliminary technical damage. However, upside continuation that climbs above 5.29/30 to hurdle my 30-period exponential moving average is needed to really get my attention on the long side of BAC.
That EMA tracks directional price movement very closely, and in the recent past has thwarted upside continuation on all (failed) rally efforts. Inability of BAC to hurdle the 30-period EMA will keep me neutral to bearish.