Saturday, April 6, 2013
Batten down the hatches!!!
Let me state for the record, today's market action was NOT bullish. After the market close, one of the recurring themes throughout the financial media was that because the Dow Jones closed down just 40 points after opening the trading day down 170, was that it was a major positive for the markets. This type of logic is why the common, retail trader/investor has no chance of making money over the long term. Understanding that over the long term, the market behaves in a manner that transfers money from the masses, to the pockets of a fortunate few, is the first principal every investor/trader should sear into their memory. In addition to that thought, one has to put day to day market action into a longer term context to extrapolate what the direction of the next major move will be. That brings us to the following charts. In my previous post, I opined that a previous (intraday) bearish setup appeared to be failing around /es 1542. /ES 1549-1555 is where I thought the bounce would terminate. The market touched 1549.25 in the last hour of regular trading and closed extended trading at 1547.
The next two charts show my intraday price objectives were met in the futures and cash index. Because these objectives were achieved TODAY, I believe that it is very possible Monday/Tuesday could be a trading day to remember.
The final chart I want to show is the CBOE Equity Put/Call ratio with a 5 day exponential moving average to smooth out the data.
negative breadth, waning momentum and you have a compelling reason to be cautious going forward.