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20-Jan-09
Double bottom set ups and/or possible Oversold Retracement
We broke all kinds of support levels today. the steepest downward trending support line, the 80.85 level. We are dipping into the bottom range of November '08 with higher volume. We are nowhere near exhaustion levels, not in in sentiment and not technically but we are sitting on heavy support levels above the bottoming range of November.
McClellan indicator divided by SPX is only beginning its downward slide and I expect we break the lows in the end of this intermediate term dump.
Any gains or losses we have in broad stock indexes flow 1 to 1 (roughly) with the Euro.
It would be scary look downwards for the dollar when we start the next bull cycle.
Even though we are not at exhaustion levels and financials are very very weak there are plenty of double bottom set ups that I've scaled in with really tiny positions. I will cut the losers and add to the winners:
Blue arrows indicate a close at or a daily low at the current level of 23.75 - 24 range acting as short term support. I'm out of FXP. I don't want to push my luck on a volatile ultra short like this one. +8.60 is good enough for me even if this dump continues from here.
RF is close to its all time low of 4.35 and is oversold according to its Keltner channel.
The double bottom set up is broken already and this break down smells like bankruptcy is looming by any second here.
200 shares will not kill me but I will cut this loser if there are no signs of strength whatsoever.
A very pretty strong sector that is always on my watch list is the energy sector:
XOP, XLE, ERX (x3), DIG (x2)
Its probably a good set up here but I have plenty of exposure 100% long for tomorrow, so it depends on the sentiment this week.
On a final note, its good to be prudent and scale in instead of being aggressive even if the set ups look like bargains. Its much more comforting to start with a tiny position.
Posted at 19:30 in Market Report | Permalink | Top
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