Wednesday, March 24, 2010

Why I got out

There were two reasons. First, the e-minis didn't advance above yesterday's 1169.50 close overnight. In fact, they dropped all the way down to 1162 before rallying prior to the pit open. This behavior was a warning sign. If yesterday's high volume breakout above 1165 was the start of a bigger move the market would have immediately moved above 1170 after yesterday's close.

The second reason was the inability of the ES to move back above yesterday's close after today's pit open. The morning rally only made it to 1168.75. After it rolled over I started to suspect that yesterday's breakout was a fakeout so I got out.

What now?

The market has dropped to the low of my range estimate for today, 1161. The move down showed pretty good volume relative to recent activity, but nothing spectacular. What really concerns me is the possibility that yesterday's action was a terminal thrust (false breakout) and that a reaction of 20-30 points is underway. So right now I am thinking in terms of 1156 as today's likely low rather than 1161.

My next trade will still be on the long side, probably after a reaction down into the 1150-56 zone.


Kevin said...

Carl, Would u please share your thoughts on why you do not play the downside by Shorting the SPX when it is obvious that the market will downtrend for more than a day. I have been trading for over 20 yrs. and have made more profits on the Short side than the long side over this time period playing the indexes. The only difference is I play multiple Options plays, spreads, etc. as the markets play out... Thank you for your insight via sharing your professionalism! It is appreciated from your followers more than u realize! :-)

janet said...

Sounds to me like a good plan...

spycharter said...

The S&P is down due to the dollar's big overnight up move

But the dollar has been very tradeable recently based on it's volume profile. I expect DX to settle back at 81.8 and the S&P to shrug off the dollar rally. Good place to go long Gold for a scalp