The SPX closed over 1400 today, a three year beneficiary of quantitative easing. For the Friday trade, it is all about the futures overnight. Any hint of green and the bulls will launch another move higher since the SPX closed at the highs. Overhead resistance then occurs at 1406, 1407 and 1409.
The market bears must keep the futures red overnight to stop the bull momo. If the bears can push the SPX down under 1393, the downside will accelerate, likely moving down thru 1391, 1389 and testing 1386. A move thru 1394-1402 is sideways action. Thus, 1403 or 1393 tells the story for Friday's trade.
· 1424
· 1419
· 1415
· 1413
· 1409
· 1407
· 1406 (5/29/08 HOD)
· 1403 (3/15/12 HOD and Closing High for 2012: 1402.63, 1402.60)
· Thursday HOD 1402.63
· Thursday Close 1402.60
· 1399
· 1396
· 1394
· Thursday LOD 1392.78
· 1391
· 1389
· 1386
· 1378
· 10-day MA 1373.07
· 1372
· 1371
· 1370 (5/2/11 Intraday HOD for 2011: 1370.58)
· 1368
· 1366
KS, is the RUT negatively diverged also? Goldman Sachs just told clients to go long on the RUT and that their target is 870. That would take TZA down to the low teens. I am concerned since the RUT has been lagging the SPX. What do you think?
ReplyDeleteSteve
Hello Steve, GS is probably pumping and dumping, they have to distribute shares to a bagholder. On the small caps, they have lagged the broad markets this year and this behavior is one of the skunks at the rally party. For markets rallying as they have over the last three months, the participation by small caps should be much stronger.
ReplyDeleteThe bulls say that the small caps will catch up and this will take care of itself, kind of like how you see the trannies bouncing and trying to verify a higher high currently. Only time will tell.
The RUT, however, has lagged the broad markets as mentioned, looking at the RUT weekly chart, price is almost at same highs as last six weeks, but the RSI, histogram, stochastics are negatively diverged. The RUT dialy chart shows the matching highs and negative divergence as well so the price move higher does not appear sustainable. Can it go a bit higher? Sure it can. But the charts are not favorable to the upside, instead, the charts favor the bears. If bearish, however, you should be glad the small caps are lagging, in true bull markets, the small caps should be flying higher since traders chase momo growth companies, that is not happening now on the broad scale.
Another 40 dollar move would be about 5% upside if the GS 870 target is hit. What is very interesting with GS commentaries like this is that typically you will see a pull back, but many times their estimates will come to be, but then they are quickly followed by a down draft.
It typically works out where you cannot criticize GS for pumping and dumping since many times the price will come up to hit their target, but, it may be so short-lived, that a trip to the can results in missing the move. In other words, a scenario may work out where the RUT potentially flushes down to 780-800, then spikes back up to 820-840, then spikes quickly down again for extended down. The long players may complain since the upside was fleeting but GS can then wave a banner and say that the target was hit. All that can be done is to take things one hour at a time and watch the fun play out each day.
Thanks a bunch KS! You are providing so much insightful guidance to us shorts. Know that it is greatly appreciated. Take care and have a nice weekend. Markets were very flat today despite options expiry. Where is that event that we need to trigger the sell signal? I can only keep wishing and hoping at this point in time.
ReplyDeleteSteve