Saturday, July 13, 2024

Weekend Update…

bull-bear-107-mark

Here we sit at line in the sand. With just a few points away from an extremely important closing price of 107.65 on the spy, it seems that the Bulls might just have the juice left to get there? Monday is Columbus day, and many traders will be gone. Plus, there is NO major economic news on Tuesday either. That means light volume for sure on Monday, and nothing to push the market down on Tuesday.

So, the Bulls must close above 107.65 on Monday, and push on up to that gap fill line at 110 by Tuesday. If that happens, then you can surely expect a lot of selling at that point. On Wednesday JP Morgan will release earnings, then Goldman on Thursday and Bank of America on Friday.

What's all that mean? Heavy volume... that's what! And what has heavy volume brought us in the past? A big sell off! Light volume equals an up market, and heavy volume equals a down market. Will it happen? It depends on whether or not the market believes the funny numbers that the banks are going to report.

Make no mistake about... they will beat estimates. Probably kill estimates! But, the bar is set so low that just about any company can beat estimates. When they changed the accounting rules back in March it made it too simple for banks to fabricate their earnings. So beating estimates is a given now. But, the market wants to see them beat the "whisper numbers"... and that might be tough to do.

It's really a tough call here as the market really wants to close that October 2008 gap at 110 (spy), which would be the Dow over the 10,000 mark. That sure would look great for the 3 stooges (Obama, Geithner, and Bernanke), as it would appear that the recession is officially over! Yeah right, and I'm qualified to be president too. Hey, actually I am qualified... I coached a softball team for many years. That's about equal to "community organizer" right?

Anyway...

The big cycle turn window is in effect now and the market should roll over next week. If it makes a run for 10,000 first, then it had better do it on Monday... as that will be the lightest volume day of the week. However, I don't expect it to happen as too many people expect it... hence it won't happen. I see a flat day Monday with a slight upside bias.

Tuesday through Friday the volume should pick up quite bit. How the market reacts to the banks' fake numbers will be the real question. I'm going out on a limb and I'm going to take another short position on Monday or Tuesday as I expect that to be the top.... where ever it is!

profile-chart2

On Friday the TBT rose again, as you can see the 2 day rise in the 5 day chart above. This not good for the market folks. Something is going on that is signaling a change. A plunge is near, that's for sure. If it's from the current level or the gap fill level around 110... I don't know. But, Tuesday through Friday should be down.

Now, keep this in mind...

Once the down moves starts the first level of support is at 1040, then 1020, and finally the 995-1000 area. I give the 995-1000 area an 80% chance of a bounce, so I'd get out of all shorts at that mark. I also expect the fall to be fast, taking out the 1040 level quickly and the 1020 level too. It will fool many bulls that buy those support levels, only to see them fail as the market falls further.

On the other hand, many bears will be fooled too, when the 1000 mark is broken (remember, the support is 995 to 1000), and they will pile on short. They will be squeezed, as a nice bounce from that level occurs. It could go back up to the 1040 area, or possibly higher? But, I think 1040 will provide good resistance, so that would be a safe place to get out of any longs you may take from the 1000 area.

However, let's play it one day at a time. I'm not saying to go short again at 1040, as I don't know how high the bounce will be. Only to take profits there and look for another place to short. We'll cross that road when will get there.

All of this assumes that the market doesn't rally to the 1100 area first. If so, then time line is off. On one hand it's worrisome as everyone is expecting the market to rally to 1100 first before tanking, and on the other hand it's refreshing to know that I'm not in the majority this time.

crystal-ball1

Well, that's about the best I can do to help guide my fellow traders.  Sorry I don't have a crystal ball.  Just be patient when the market does start to fall, as the 995-1000 area should be the first stop before any decent bounce.  Hold on to your positions till then and get out and go long,  as I will be doing so.  Whether or not this happens before next Friday is anybodies guess?  We definitely will have the highest chance of that happening in the coming week, as the banks reporting are big movers of the market.  If the market doesn't like what they report, then the move might happen by option expiration?  Let's hope so...

Red

P.S. Here's a interesting video for you...

Red
Author: Red

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AntG624
AntG624
14 years ago

Red, I'm still with ya. If we rally above 1080 I'd like to see a reverse by the close or following day. If we reach 1100+ and close above it we could be starting another large run. I think its unlikely though. Everyone is calling for 1120, but this could violate the 88/89 week SMA resistance, especially if we close cleanly above it. Still find it a little odd that we're making 52-week highs in October.. feels like we're trading opposite to tradition.

Red Dragon Leo
14 years ago
Reply to  AntG624

“feels like we're trading opposite to tradition.”

Yeah,

Me too… I remember when everyone was talking about the “head and shoulders” that formed and broke the support line at 870 in early June. It was suppose too keep falling, but instead rallied up to now with 1080 as the high.

It was talked about everywhere, much like the 1100 area is today. Will it also fail like the head and shoulders did? I guess we'll see next week.

Red

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