Wednesday, June 9, 2010

Bounce Continues in Premarket

Let me preface this piece by announcing that yet again the premarket strategy of buying at 7 AM and selling at 9:15 AM is a winner.  While the scuttlebutt will be "Chinese exports are up and hence the market is up" the futures were quite benign 6 AM to 7 AM just up 1-2 S&P points.  But we look to open about 6-7 so just as with yesterday you can get 5-6 S&P points employing this strategy which has been a huge winner since March 2009.


With that said, as I wrote yesterday in the morning we were prone to an oversold bounce... we are getting it.  As I wrote in the afternoon:

If 1050 can hold, might be an oversold bounce opportunity and my FFIV/TIBX sales will once again mark a short term turning point.

While the S&P 500 went down to test the mid 1040s again early afternoon, it bounced back over 1050 and from there it was off to the races as the "low to mid 1040s" support had held and traders were ready to make their short term forays to the upside.

Everything has become very technical in nature so looking above we have a huge range that can easily be divided into 2 subranges.  The huge range is 1040 to the 200 day moving average (roughly 1100).  That range can be divided into (a) 1040 to 1070 and (b) 1070 to 1100.   1070 being the dividing line, as you can see the prior 2 weeks this was an intraday low for about 4 separate sessions.  So it *might* serve as some resistance as we bounce but if you've been watching the past few weeks the bounces have been fast, furious and of the 3% variety so if the computers go into overdrive, 1070 can be obliterated if everyone piles in.   Other than that specific number everything else between 1040 and 1100 means little.

A good strategy if you were fortunate enough to jump in with 2 feet once 1050 held, is to sell long exposure just under 1070 if and when.  (nail a quick 16-17 points)  This makes your gains realized in case 1070 is the true resistance.  If not, and the market is strong enough jump over 1070 reacquire long exposure for a potential ride up of another 30 S&P points, using 1070 as the stop out level.

Does this have one darn thing to do with fundamentals?  Nope - but we live in a 'student body left' monolithic trading environment.  It is what it is, and to make money you have to adjust.

For the bears, a nice short set up is either going to occur at 1070 or up at 1100ish.  Have to wait and see which one.

The trend remains down, but nothing in a straight line.


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