The Insightful Trader

Archive for August, 2009

Time to Tighten Stops

by on Aug.31, 2009, under Market Commentary

I think it’s getting time for everyone to tighten their stops on any intermediate swing trades. Though I feel we could have another little push up here, our rally is getting a little long in the tooth. Back in early March, I stated that we seemed to be hunting for a bottom. Now I think we’re hunting for a top.

First of all, as you can see from the chart below on the SPX daily, we’re banging our heads against the upper TL. This chart is representative of most of the major indexes. Though many Elliot Wave theorists feel that we could have another push slightly higher in a 5th wave extension and a slightly higher move puts us in a thin  area of resistance that could carry us to the 1100 range I believe it’s time to be extremely cautious here. Nearly every major sentiment indicator is screaming over-bought and though this alone is not reason enough to sell, history has proven that it is definitely a red flag. We’re over the critical 38% fib retracement, about 40% now and though the 50% has a nice ring to it, are too many people anticipating it?
$SPX daily 83109
 
Additionally, the dollar seems to be hunting for it’s bottom in the near term if it hasn’t already found it and gold seems to be acting toppyas well. And though it’s hard to think of selling when the Fed has an open purse policy, are we running out of arrows in that quiver. With the clunker rebate winding up last week and many of the other programs winding down, have the give-aways started to cease?

Also, see the chart below. The Chinese market has been on fire this year until the past few weeks. In fact, it looks as though it’s forming a nice bear flag at the moment. Since the Chinese have been leading the recovery, especially in certain commodities, cracks are starting to once again appear in their economy. This can’t be good for the resource stocks, even though the impending threat of inflation at some point may keep a floor under some of them.

$SSEC 83109

One further note, I’ve started posting some of my trades and other info on my twitter account. Be aware however that these may not be suitable for everyone, use your own judgement and analysis.

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