Tuesday, March 16, 2010
Why I got out
I was bothered by what I saw in these two charts. The lower chart is a five minute bar chart of day session e-mini trading. You can see that this morning the market took a peek above its previous day session high at 1150. At first I thought we were seeing a high volume breakout (red dash oval and red arrow). But then the market stalled and started to drift lower - raising the real possibility that the high volume marked the end of a move, not a breakout.
Normally this alone would not shake me out of a position. But I was also worried by what I saw in the top chart. This shows the daily count of the advancing issues on the New York Stock Exchange. You can see that so far today, despite an apparent upside breakout, the number of advancing issues remains visibly lower than on previous up days. This bearish divergence at the top of a rally accompanied by potentially climactic volume near the last top sealed the deal for me. I stepped out of my position.
I still am very bullish and intend to get long again, even at a higher price if necessary. But the Fed announcement comes out at 2:15 pm New York time today and I am hoping that it will give me a chance to reestablish my long position on a break.