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More Of The Same…

By Red, on December 28th, 2009

Another light trading day on wall street allows the buy programs to come in at the end of the day, and close the market positive.  From a technical standpoint we are overbought and should rollover tomorrow, but I find that highly unlikely with such light volume.

Looking at the chart below (borrowed from Cobra’s Blog) you can clearly see how overbought we are, and that today produced a black candle.  That usually means a reversal the next day… but will it happen?  I don’t think so.  I’d be shocked if we fell to 112 spy, even though we should go down to the 20ma (also around the “gap fill” area).

cobra's-daily-spy-chart

I’m now looking at individual stocks to short or go long, as I don’t believe the market is going any where until they want it too.  There are a lot of area’s overbought now, like the “metal stocks”, and should have less manipulation in them.  That means the technicals should be more accurate.

Some of those stocks are Alcoa (AA), and US Steel (X).  I think they will start to rollover soon and pullback to the 20ma (daily charts).  I’m looking to enter a short position this week, if the opportunity arrives.  Start looking for doji’s and bearish candles on their charts.  That will indicate that they are struggling to break through overhead resistance.

If the market pulls back in January as I expect, these stocks should drop about 10% or so.  I doubt that the PPT will be too concerned about manipulating them, whereas the SPY could have some serious fakeouts on the way down.  You know how they like to screw both the bears and bulls.  Following what the market is doing is important, but I believe it might be better to play individual stocks… until a trend is started at least.

Red

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