After 4 intraday reversal in a row in favor of the bull, I threw in the towel on paper yesterday after the market finished on high of day 42 cents above the 200 day SMA of 127.46. Today the streak finally ended and indeed this time was different. What if I actually took the loss yesterday?! Right. That has been the exact reason I couldn’t unload my positions in the last month and half holding short positions while the market rallied for 20%. My trade subscription keeps calling short everyday, when do I or should I fade the call, dump my positions, and go long instead? I said it was a curse much like feng-shui. If you don’t know anything about feng-shui, you can buy a house with a road leading straight to the front door without much thought. But once you know that’s a big feng-shui taboo, you would never do. Even if you don’t believe in a superstition, you don’t want to tempt it once you’re aware of it. Here, I was told the market would go down in 2008 fashion, how would I position myself during the past month and a half? I am bound, no longer free. I am cursed, unless the bear gains control.
People finally realized that Italy is next on the bailout chopping block with its rates well above 7%. If Italy goes, so goes France. Nothing new. But with that negative focus today, the bull exposed its weakness for the first time. Even the most leniently drawn up-channel line was broken today. The daily MACD histogram turned negative for the first time since October. The 200 day SMA (not shown) failed for the second time in 2 weeks. That’s significant because the market normally attempts something twice and if it fails, it would do the opposite. Given the 3.70% reversal between yesterday’s finishing on HOD and today’s finishing on LOD, one could also conjecture that the October high was attempted yesterday and failed on lower high. The 200 day EMA support which stopped the selling all week long was also broken today. So all in all, the bear finally has some underlying TA to support its case, rather than simply hopes and prayers, and the walls of worries.
During the last leg down the market fell short of reaching my 50 day EMA target, I hope this time around it does. And that’s where I’d exit at least 1/3 of my positions. If tomorrow the market closes above the 200 day EMA again, then we could be headed for a symmetrical triangle which is normally a continuation pattern — up in our case. So today was a good start, but we need to see more down side as confirmation; otherwise, the bear will continue to suffer.
Portfolio Value: $127,800