Monday, September 3, 2012

Daily and Weekly

It has been a while since I posted. I have been busy trading but had nothing exceptional to share. The tape has been volatile the past few days. For those with ability to play in such an environment, it must have been a great time. Not so much for me. Most of the calls I made during this time (very short term bullish calls) panned out but reversed course the moment I took the eyes off the tape. Sometimes, even when I had the eyes on the tape :-)

 So, what do the charts tell me?

On the daily ES, the Stochastics have crossed and turned up. Early yet, but in the past few years, this has been enough to get the BTFD crowd excited. I expect no different this time if the trend is still up. It is cruical time for ES. It cannot reverse course tomorow. Ideally, it should take out 1412 if its intent is to the upside and close above the Bollinger midline followed by another green candle. If it does not, especially, if it closes in red below the Bollinger mid line, it will setup a sell formation that would be trend changing.

Down below, I present weekly and daily charts on SPY and VIX. The weekly Stochastics is in the overbought area on SPY and in the oversold on VIX. The daily is the opposite. So, from a weekly perspective, if the price action turns bearish, it would be a good time to go short or at least sell the longs to the late comers. The daily should provide that opportunity if we cross the hurdles I mention above.

In the past few years, even when the weekly Stoch turned overbought, it did not bring about a selloff. As a matter of fact, the Stochastics spent most of the time in the upper region of the band. When it did reach the oversold line, buyers have stepped in and reaped rewards to the long side. If the trend continues to be long, weekly Stoch turning overbought may not be a reason alone to get off the long bandwagon. There has to be a follow through with price action.

On a short term basis (say this week), the following makes me favor the long side -
  1. NYSE McClellan Oscillator bullish divergence.
  2. VIX sell equity buy signal.
  3. Momentum indicators are bullish on ES now. Especially, the daily Stoch has crossed over and is now moving up. Trades to the upside are favored again.
  4. All indexes seem to be bearing an ABC correction (finished).
 On a long term basis, I am still keeping an eye out for that bearish price action.

No comments:

Post a Comment