Due to time constraints, I will have to be a bit brief with this post.
Index started the day flat, dipped into negative territory, then rose into the afternoon. Some sellers dumped the close.
One of our astute readers, Kishore, made this comment
On tick charts, the volume per tick was high in the morning while the prices were flat. This indicates that institutional traders were active in the morning, distibuting.
The volume per tick was low this afternoon as the prices went up and peaked out. This indicates that the retail investor was buying in at the top.
Despite the rise in prices, today was a distribution day.
Very interesting observation! Thank you Sir!
I would like to add that 20-period Tick on the 1-minute chart below barely dipped below zero during the past 4 days of bear hunting.
As long as prices find positive bids, any selling may turn up being temporary.Notice the change in OBV, which is in line with what Kishore mentions. Also notice the last bar volume yesterday and the day before.
Will this, on its own, mean, collapse? Not necessarily. Will it mean correction? Not necessarily. As long as there is a bid, there will be seller to oblige. But Kishore’s observation is important as a warning sign that it may be a bit late, at least from a trading, short term point of view, to try to catch the train on the long side.
I also would like to add to his keen point that we seem to have another complete-looking wave set.
Take a moment to study the chart above.See how momentum diverged on July 14. Looked like we had a wave 3 or a C in, but the index gapped and extended itself. In doing so, it made higher momentum peaks.
We, again, have short term divergence and the appearance of a complete wave.
If I am correct labelling the latest advance as a wave 3, then any correction should be a wave 4, to be followed by a 5th wave.
4th waves should alternate in structure from second waves. Wave 2 was a zigzag. So wave 4 can be flat or a complex correction.
A theoretical target for a wave 4 is the area of the previous wave 4 of a lesser degree. So, the 925-930 area may be all the bulls may throw at bears.
Watch the 935 area and the band around 928. If index starts going sideways around there, relieving its short term overbought readings, it may be a warning that another leg up is brewing. If 925 is broken and recaptured, then a larger, more complex correction may be forming.
Nas100 confirmed and uptrend today and joined Nasdaq composite. All my intermediate sell signals on S&P are now reversed.
Technically, the best I can read is that market is poised to go higher and bulls are in control. It is up to the bulls to either press their case or drop the ball. Bears are back where they were a month ago: in detention
So, let’s pay attention to critical levels and pivots and see how price behaves around them.
Techies are too strong for this market to fall. I kept saying that I liked to see techies underperform if we were going to see a serious decline. I still believe that should be the case. People who are gearing up for days and weeks of weakness do not typically buy chip makers and software developers.
Nas100 made a marginal new high. I still have my QLD that I have mentioned a few times. I have a few more. And my plans, at this time, are to add on weakness.I may change my plans. My strategy is double-dip, hedge-and-increase. One can buy a batch. I buy twice as much as I want. If it gets stopped, fine, if it runs, one can sell half, and hedge the rest at some point when one feels uneasy, and wait for the next buying opportunity.
For example, Yesterday’s close could be a point to sell 1/2 and sell some covered call, and, if one were really paranoid, to buy puts further below. Playing with options is a tricky business, and one needs to find a few strategies one understands. I personally prefer to sell options. No not necessarily naked selling, but selling and buying in way to either not pay anything or pay a little.
I basically want to keep it slow and steady, and try not to lose much.
Have a Nice Day!
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