Not much of a sell off on yesterday's gap. S&P futures reversed and bobbled at 1280 before punching through it handily. The best thing was that my calls covered the loss in the BGZ hedge and I sold the entire position for a tiny profit. As soon as I posted my thoughts, I realized that I couldn't remember a time that the market had reversed on a Wednesday. So I tried to sit back and relax while viewing the day as a set up to a possible turning point. Are we there yet? No, but with one more up thrust I will be testing shorts again. Wave counts, Fib targets, trend channels, historic sentiment figures and market internals all suggest we are very close to a turn. Back in 2000, things were lined up in a very similar way and the market kept going 'til March. But it will first have to get through January.
This morning, the futures have just tested 1280.25 and are bouncing because that's where the volume accumulated yesterday. I'd like to see a new high before that level gives away. As I said above, I'll be testing shorts if we get new highs. 1285-1287 is the next spot.
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