S&P 500 close = 1093.48

Signal = L/S

Position = S

Markets were quite volatile in the first hour or so this morning. I waited for the dust to settle before trying to figure out which way to trade. Once we broke the 1093-1094 area, next stop was to the 10 min fibonacci level around 1097. Then, markets broke back down and whipped around again in the afternoon. Luckily, or maybe skillfully, I was able to make some decent money today going long first and then shorting around 1097.

The daily trend still remains bullish above the 1029 level. The short-term trend is still down based on the break down on Thursday. To ride this short-term trend down further, I am holding onto TZA through this weekend. Recently, some of the larger moves have come as either gap ups or downs on Monday mornings. Let's see if we get a gap down on Monday.

Overall, the markets are starting to look like they are topping out. However, let's not jump the gun and call the recent high the high for the year. We still have another 7 trading weeks left before the new year. Levels to watch for Monday:

S&P 500:

1094 - 10 min FIB resistance

1084-1085 - next level of decent support

Russell 2000:

587-588 - 10 min FIB resistance

575-577 - next level of decent support

S&P 500 close = 1087.24

Signal = L/S

Position = N

The day started out quite mixed. Markets were up and down for the first hour. Then, markets broke above the minor resistance level of 1099 and hit a high of near 1102 only to start the downward slide. It took a while before the 1093 level was taken out, but once that happened the markets slowly continued down the whole day. The momentum on the downside was a little lacking and never escalated. This made be be a little more cautious about continuing to hold my BGZ position that I initiated at the 1093 breakdown. I had mentioned the 1087 level throughout the day saying that would be the next support level. That level represents a fibonacci level and is also the area of the 5 DMA. Interestingly the markets closed right at that level. So, what now?

If we break down below 1087 tomorrow morning and stay there for at least the first half hour, then the next stop could be 1075. However, all of the time frames from the 5 min to the 60 min are now oversold. Given that we are oversold near a decent support level, I think a small bounce tomorrow is fairly likely. I am in cash for the moment and will be watching for clues to see which way we go tomorrow. The levels to watch for tomorrow are:

1094 - previous support level, now a decent resistance level

1087 - fibonacci level, 5 DMA area; a decent support level

S&P 500 close = 1098.51

Signal = L/L

Position = N

I was working out this morning watching CNBC, which I absolutely hate. I watch it with a completely cynical viewpoint to see what the idiots are saying. Once again, all the morons were jumping on the bandwagon this morning when the futures were up saying that the markets are forming a new base and we are going to go much higher. Every time the markets are up they think the markets will continue to go up. I think they constantly mislead the average investor to buy at the top and sell at the lows. Bunch of bullshit if you ask me. The markets could very well continue to move higher, but based on the price action today, it looks kind of risky to go heavily long at this point in time.

The S&P 500 made a new year high at 1105.37 but failed to close above the recent high around 1101.36. The NASDAQ is also still below its yearly high at 2190.64. The DOW is the only major index that closed at a new high for the year again. The Russell 2000 did manage to close above its 20 DMA today. So, all in all, there are a lot of confusing signals across the markets on the daily charts.

Looking at the shorter time frames, the markets look like they could have a little more gas left for an upward thrust. This will happen only if the markets can break through the 1099 level on the shorter time frames in the morning tomorrow. Otherwise, a break of 1093 should revert the short-term trend back to down. The close today was right between this 1099 and 1093 area that I tweeted about earlier today. Levels to watch for tomorrow:

S&P 500:

1099 - minor resistance; a break of this could mean we continue higher or at least retest the 1105 area.

1093 - a break of this will reverse the short-term trend back to down.

Russell 2000:

588.2 - a break of this will reverse the short-term trend back to down.

S&P 500 close = 1093.01

Signal = BL/L

Position = N

Market closed essentially flat. A very narrow doji day today after yesterday's big move. The trends are still aligned up for now, so bulls remain in control. Interestingly, the Russell 2000 once again failed to close above its 20 DMA. I think this is an ominous sign of what is to come. I could be wrong, but I think the Russell is leading the markets. We are fairly overbought in the near term, so a reversal in the next day or two would not be surprising. Levels to watch for tomorrow:

S&P 500:

1101 - year high and likely an area of significant resistance

1087 - new significant support level; a break of this will reverse the short-term trend back to down

Russell 2000:

592.3 - 20 DMA

583.8 - new significant support level; a break of this will reverse the short-term trend back to down

S&P 500 close = 1093.08

Signal = BL/L

Position = N

I am making a little change to my signals. From hereon, the "Signal" will mean what the objective signal is at the current time. It will not reflect my subjective viewpoint. Instead, the "Position" will reflect where I stand. In other words, the market could be showing a long signal but I may be neutral in my position as I am as of close today. The reason for this change is that I want to separate the objective and subjective portions of my analysis.

So, today the markets pushed higher through their 20 DMAs. All except for the Russell 2000 closed above their 20 DMAs. In fact, the Russell 2000 is showing a lot of weakness relative to the other indexes. Its 20 dma has crossed below the 50 dma which usually means their will be more downside in the near future. It will be interesting to see if the Russell is leading the market. The other indices may follow suit, but don't bet on it just yet.

The S&P 500 closed 8 points from its high for the year. The DOW closed at its highest level for the year. The NASDAQ is about 37 points from its high for the year. I am not sure what to make of any of this, but one thing is certain and that is the fact that the weekly, daily, and short-term trends are still pointing up. Until that changes, the bulls are in control for now. People have been talking about this latest rally lacking volume. I think that is a very valid point and something to keep an eye on. However, don't bet on short positions until we have a break down on at least the shorter time frames. The levels to watch for tomorrow:

S&P 500:

1101 - year high

1065 - most recent significant support level

Russell 2000:

593.5 - 20 DMA

589 - minor support level

S&P 500 close = 1069.30

Signal = BL/N

Quick post tonight. Since I have been away from the markets for a whole week, I have new energy and a clean perspective. Looking at the price action from last week, looks like we had a decent rally from the 1029 level. We never hit the 1019 area that I was expecting the markets to touch. Instead we now have a close just under the 20 DMA which is at 1070 right now. Tomorrow it is very important for the markets to close above that 20 DMA for this rally to continue. Otherwise, we will have a swift breakdown. Levels to watch for tomorrow:

1070 - minor resistance

1065 - a break of this level SHOULD reverse the short-term trend back to down. Will look to go short here tomorrow.

S&P 500 close = 1036.19

Signal = BL/S

To be a good trader you have to consider all possibilities. Yesterday, it looked the markets could do no wrong and that we would perhaps pause a little and then definitely move higher. In fact, the futures this morning were not that negative until just prior to the open things started to look weaker. I was expecting a mild pullback at the open to the 1060 area where I thought the markets would find support and then resume upwards. However, looking at the premarket activity in the SPY and IWM, I saw a mild discrepancy. IWM was opening below yesterday's last support level while the SPY was opening at or just above that level. Thus, I knew to be very cautious at the open in terms of going long. In fact, just after the open as the Russell 2000 broke through yesterday's last support at 578 area, I immediate went short with TZA. That was the right call because the S&P 500 soon followed. The mistake that I made was selling way to early. I want to briefly talk about exiting a position.

I find that finding the entry point is the easier of the two. Exiting a position takes a lot more finesse. I will often exit half of my position once I hit my stop loss amount. In other words, if my stop loss is about 30 cents and the stock moves up about 30 cents, I will sell half. This way if the other half gets stopped out quickly thereafter, I have lost nothing. The harder part is holding onto that other half even when you know you have a decent profit waiting to be had. I could have simply followed the trade today placing stops all the way to the end of the day before I would have gotten stopped out. Instead, my greed took over and I sold way too early. Trading requires a lot of discipline. Discipline is something that needs to be practiced over and over. I need a little more practice in that department from time to time.

Last, I just want to touch upon the longer term picture. Clearly today was a horrendous day for the bulls. Giving up all of yesterday's gains and then some was not what people expected after a positive GDP number. Whatever the interpretations are on why the GDP was better than expected are irrelevant when it comes to technical analysis. Everything is priced into the broader indexes and reflected on the charts. Based on the charts, the key support level still rests at the 1019 level. This is the most recent major support level on the daily chart. Although it seemed far away a few days ago, that level is now only 17 points away. Will we test that next week? I can almost guarantee it. Whether we bounce up a little on Monday or not is to be seen, but 1019 will be in the near future for sure. The key thing to watch will be the price action near that level. If we briefly go below it and bounce back up, no big deal. If we close below it significantly or close below it for more than just one day, that will be very important. If that happens, that will mark the end of this crazy rally from the March lows. One other support to watch will be the weekly 20 dma which is currently at 1003.

I will be off next week in the Caribbean and will not be writing any posts. I will write my next post on Sunday - November 8. Good luck next week!