Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.
So far, we've talked primarily about trending days and what kind of early morning action brings them about, and what can be expected throughout the rest of the day. But lets change things up a bit, and let's look at what happens when the market is direction-less and what we can expect before it happens.
FIrst-off, these types of trading days tends to wear traders out, because whether you are long or short, nothing seems to really stick, and often times traders will see profits come and go, with no chance at capturing them, and that leads to this kind of behavior:
The wave iv for USO bottomed right at the top of the wave i in this current 5 wave structure. Since that time, it completed a nice 5 wave move up, and, thus far, seems to be within a wave 2 of the next 5 wave rally. The last top we saw this past week at the 33.75 region looks most like a b-wave within that wave 2, which likely means that we will see one more pullback in a c-wave to the 33.25 region, or even a little deeper down to the 33.00 region.
I think that pullback would be a buying opportunity for a short- term trade which will take the USO back to the 35.76-36.00 region. You should either use a stop of 32.40 for this trade, or 32.60 if you would like a tighter stop. But, in truth, I really do not want to see the market below 32.90, since staying over that level gives us the confluence we are looking for to it the 35.75 level.
We saw some big moves last week on the basis of talk by Draghi, backed up by Merkel, that the ECB would take whatever action necessary to save the Euro. Talk is cheap though and Merkel hasn't yet confirmed that she will accept the ECB printing money to save sovereign EU nations in trouble. I suspect she won't, and unless she does this move doesn't look likely to last long. Be that as it may some interesting things happened from a technical perspective last week so we'll go through those.
On the SPX daily chart the SPX closed at the upper bollinger band on Friday. This is an obvious time to look for some retracement though I note the overnight action on ES looks like a bull flag so far. If a new uptrend has started then there should now be strong support in the middle bollinger band and 100 DMA area around 1360:
Hell of a week, eh folks? Being patient with this range the past month has been challenging, but we knew that sooner or later it would eventually break.
I was fairly doubtful that we would break to the upside, but I learned my lesson in the first quarter of this year, that no matter how bad things look or feel, you have to HAVE TO wait for a support level to break before getting committed to the downside.
For me, SPX 1325 was that level to watch. I closed a few shorts that day as a precaution, after all, I could always get short again if the level broke. Now that we have in fact broken upwards, it appears my observation last month is still in play.
To summarize, I was expecting a 50-61.2% retracement (small blue box) followed by a return to the Mar/April highs. You can read it here if you want a reminder.