Thursday, August 12, 2010

08/12/2010 Sellers now in control

Good evening traders,

Lets start this post by stating the obvious, sellers are now in control. Looking at the charts you can see the clear double top where I drew the red line. In previous posts I pointed out the 1128-1131 level for an upside target. Bernanke and our friends at the Federal Reserve had nothing good to say yesterday and now we find price reversing. And rather strongly. If I had a "trading magic 8 ball" it would say "all signs point to bears"!

We have a heavy economic calender ahead, which means more choppy waters for the markets. Tomorrow we have Michigan Sentiment, CPI, and the all important Retail Sales. Each one is a potential landmine. We also know that GDP is going to be revised lower due to the massive trade imbalance. Those are the fundamental reasons for the markets to continue to sell off, now lets look at the technical...

Tonight's chart is marked with horizontal support and resistance lines. Shorting rallies is the play now. Price has closed below the 20 and 50 day moving averages, lower Bollinger bands have expanded, RSI is now below 50, and the MACD has crossed it's signal line. Also note the MACD histogram is negative and volume has picked up confirming the move has a good push behind it. I would like to initiate shorts in the 1099-1105 resistance area which should coincide with 20 day moving average. My initial target is 1056, then if prices punch through that level I'll look for 1040.

I want to add some comments on the structural deficiencies with the economy but I procrastinated in doing this post and its late now. Maybe tomorrow! Keep an eye on the key levels I noted above and follow along with my game plan. Maybe we can make some $MONEY$ together! Good Luck


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