Tuesday, May 31, 2011

Equity Wrapup 5/31

Looking at the four equity markets (S&P, dow, nasdaq, and russell) we see that of these, only the russell actually broke a new major low peak (@813.4) in the last couple weeks, and the rest only seem to have made deep retracements. The russell is also the only one now that has firmly broken past the top level 61.8% retracement (@845) of this down move. The other three are either right at the top or still inside the major levels of the most recent move (all retracements shown in red on charts). It looks like barring a major reversal tomorrow (which is always possible), we are heading back to an uptrend in the equity market for the time being, with confirmation coming as all the markets break past 61.8% level or breaking new yearly highs. I'll go ahead and say it here that it might be time to BTFD if you haven't already.

Russell 2000 Index (TF) Last Hail Mary? 5/31

This is my last chance, bottom of the barrel, hail-mary, long shot, wish it would do it but probably won't final resort short opportunity on the russell 2000 index. We are getting strong divergence on the rally up from last night's greece bailout news on the hourly chart as highlighed in the yellow lines on the chart to the right. The daily chart shows us at the top of the retracement channel (shown in purple) for the full down move from its yearly highs. If this fails I feel we are into no trend or back to an uptrend.

Crude Oil (CL) Short opportunity 5/31

Dolemite posted earlier that crude was entering resistance and I also agree and further that this might be the time to sell. On the daily chart on the left hand side, we can see the yellow trend line that had been used as resistance and support multiple times is the high for today, we also run into the lowest retracement of the May sell off. Looking closer on the hour chart we are seeing strong divergence in the MACD, shown by the purple trend lines. We also have a nice shooting star at the top of the hour divergence, always good to have a candlestick signal before you take any divergence for entry. I like shorting it here and at least taking it down to 100, if not to the bottom of this channel (@96)

Natural Gas (NG) Daily 5/31

As a quick update to the trade idea presented originally to buy natural gas, and also to BTFD off a bearish number, it looks like its working out. It's time to start looking for a target on this trade and the previous peak (@4.729) or the 100% extension of the previous move (@4.827) are both good areas to exit this trade.

Interesting Volume Spike in SOXS (3x Bear Semiconductor ETF) 8:55AM CST 5/31

Interesting note:

SOXS, a 3x leveraged bearish semiconductor ETF, has done just under 100k contracts in volume already today (much of it at the lows near 54.50.

The daily average is 130k contracts a day. We are on pace to go way above that.

Is this the smart money making a bet that equities are poised to finally hold here and start to make a leg lower?

(UPDATE: 930AM CST - SNP500 is 50% from it's highs at 1337 and SOXS has now done 112k contracts 1 hour into the trading session we are 18k from daily volume avg.)

Crude Encountering Resistance? 5/31 8:20AM CST

(Chart 1 - WTI Crude Daily chart zoomed in)
(Chart 2 - WTI Crude Daily chart)

103.40-103.00 is very good resistance for WTI crude. We have a confluence of 2 Fibonacci levels here, as well as the top of the current bullish channel just a bit higher.