Quote from ess1096:
FROM MARCH 6TH, 2009......
This (681) level held again.
IF there is going to be a technical bounce or bear market rally, this seems like a good level for it to occur. If so, first target is 800. Second target is 1000 (or 200 day MA).
As the S&P approaches my second target here is an update of how I see the chart. Not a prediction, no opinions, just an observation of the monthly, weekly and daily charts.
Monthly:
Looking at the bottom of the 2002 bear market I see a sideways range prior to the following 2003-2007 bull market. The top of the range was at 954 (breakout point). This level may be acting as resistance now as traders anticipate another rangebound market. However, the 20 month MA is currently well above this level at 1131.
Weekly:
The weekly relative high prior to the current rally was at 943. This is (was) a resistance level. Friday's weekly close was slightly above that which is bullish. The next previous relative high is at 1007, which has been my second target (1000), especially since the 200 day showed little resistance.
Daily:
The daily chart consolidated sideways for the month of May and then moved up above that consolidation level and now for the past 10 sessions has consolidated even tighter!! This is usually a sign of an explosive move pending as bulls and bears fight for control. To use a trading cliche..... it's a coiled spring.
The direction of the pending move is unknown, and anyone who says they know for sure is not a trader but a gambler.
I am much more bearish than bullish but I am very aware that the market could explode to the upside no matter how irrational I might think that is. I also think that the test of the 1000 level is a possibility.
So here is my current position. I initiated a short position in ESU09 on Friday and hedged it with long positions in June 97 and 96 SPY calls. This way, if the market explodes upward next week I am protected and walk away net even. If the market drops like a rock next week I have confirmation and will continue to build my short position. Best case scenario for me would be a blow off top next week followed by a huge drop. Then I could sell my SPY calls at SPY $100, then keep my short ES position. Worse case is the market trades to 960ish level and stays there which gives me a small loss on the ES position and my hedge expires worthless.
