Tuesday, June 16, 2009

Today Could be the Day

It's been a long time coming but today could finally be the day the 20 day moving average is busted. Maybe spidey sense is beginning to work again after a month and a half hiatus; as I wrote earlier today it would be the probable course to buy at the 20 day moving average since that's what has been working, but this is the not the course I adopted.

It would take a major change in direction here in the last 2 hours... but we can't assume anything until 4 pm since so many rallies have been born 3:30PM or after each time we get to a point like this the past few months. Urgent buyer showed up again this morning happily pushing futures up in the 7 AM to 9 AM slot - so we have to look for "him" again in the afternoon - until he is overwhelmed by panicked lemmings he must be respected.

I am going to show both the "exponential" and "simple" moving average stories here since they differ quite starkly, with the caveat that I'm an exponential man living in a simple world. [Why I Use Exponential Moving Average]

The story in E(xponential)MA land ... a market that hit against 200 day moving average for 10 days, including yesterday's high before finally a reversal. We were "saved" last minute yesterday from breaking through the 20 day (which has been support) but now are below ... need to see 4 pm close to confirm this. If this breaks you don't see any real support until S&P 890ish which is the 50 day moving average.

The story in S(imple)MA land... a market that has for 10 days been above all key moving average but just hanging around (you don't see the resistance in this chart that the EMA chart shows) The exact same story on the 20 day moving average on this chart, but a key difference is "support" - on the chart below the 200 day is BELOW where the market trades today (but falling sharply by the day) and should provide support just under S&P 910.

Again it is quite remarkable on how different the two charts are... I still am sticking with what has worked for me for years (EMA) but potentially if we break down could have support at the 200 day SIMPLE moving average. Let's respect that case as well since so many use it.

Apple and Research in Motion are both still green so can't get too excited for the bear case here outside of that.

And now we wait to see if "urgent buyer" appears after 3:30 PM... personally I think urgent buyer might want the market to panic a bit here. Why? Because if I were the urgent buyer I'd want mortgage rates to fall back down. The only way to do that (on the cheap) is to panic the market, get them running back in US Treasuries (driving yields down) and get this overheated market back into a cage. This would allow the house ATM to re-open, and purchasing activity to pick up again. But this kind of talk would imply a very managed market which we don't have; I came upon that theory as I strolled past a grassy knoll so feel free to ignore it :)

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