Do You Dare Bet Against Magical Mondays?
Courtesy of Trader Mark at Fund My Mutual Fund
S&P 1085 continues to be the current floor – while we have a bounce, thus far it’s pretty contained. We are right back to where we were mid afternoon yesterday where we are at an unattractive place to short, just being a 5ish points above the 1085, with an oversold bounce expected.
Further, we soon face "the market can only go up on Mondays". [Jan 25, 2010: Mondays Continue to be Wonderful] I am going to cull half of the TNA short which was our insurance policy in case of some sell off late yesterday, with the exact same logic mentioned 24 hours ago. I want to be short (a) below 1085, not "hovering above it" OR (b) somewhere quite a bit higher i.e. S&P 1100-1110. I don’t find this area to be attractive to be short…
The only question is do you go very long for the now expected Monday bounce? Something so obvious as 16 of the past 18 Mondays in the green should stop working. But it has yet to relent. I am hoping to see a bounce Monday (and today) so I can get a lot more attractive short set ups on individual equities.
As for Freeport McMoran Copper & Gold (FCX) that we mentioned yesterday – bounced smartly off the 200 day. Despite a stronger dollar. That is not unexpected – what it does after the cursory bounce is important. Continues to be a name I am watching while everyone else focuses on Apple (AAPL).
The dollar continues to look excellent as mentioned earlier this week.
We’re heavily in cash now, our hands being sat on.
EDIT: Well as I was writing this piece, the S&P fell from 1092 to 1086ish… interesting. Will be aggressively short on the indexes below 1084ish.
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Trader Mark follows up:
A Picture is Worth a 1000 Words
Some key thoughts on the S&P 500 below… keep in mind usually downturns will finish by a large swoon day, followed by an intrday reversal back upward. Unfortunately with the "urgent buyer" pushing futures up almost every morning it is hard to have a very bad start to the day nowadays, so these conditions are difficult to fulfill.
If we can have a cleansing panic attack selloff we might finally get our oversold bounce. Thus far this has simply been a grinding slow motion selloff.
Downside targets – S&P 1078 (yesterday’s low)
If that breaks, the gap just below S&P 1070.
If that breaks, the 200 day moving average, roughly S&P 1045
If that breaks….
Certainly there will be countertrend rallies back up to shake off bears before we have to worry about those lower targets – for now yesterday’s low is the key, along with 1085. I don’t know if we rally first, but with some very bearish technical situations setting up (i.e. the 20 day moving average about to cross below the 50 day) the rallies will be selling opportunities until proven otherwise. Technically this is the worst the chart for the S&P 500 has looked since summer 2009 (July).
Wouldn’t it be ironic (don’t you think?) after 16 of 18 Mondays in a row where the markets finished in the green, if the 19th Monday was the knife that finally cut the legs out of the bulls glee?
[chart with comments below – click to enlarge]
