Sunday, February 22, 2009

Hmm...

You know, I have no idea where we're gonna go. But what I do know is that if we crack these levels and go lower, we're in for another roller coaster drop off (in my opinion). Below is a chart of the S&P 500 and the light green highlighted area represents support.

Personally, I think we get a bounce from here:

1. The trading day on Friday (2/20/08) generated what's called a "bottoming tail hammer". It's a signal that a possible reversal is coming. Look for a close above Friday's opening price for further confirmation.

2. The MACD indicator barely shows some divergence. Meaning, the SPX (S&P 500) has gone lower on less momentum. 1/20/09 the MACD delta was at -9.15 and SPX closed at 805. 2/20/09 the MACD delta was at -6.34 and closed at 770.05.

3. The Stochastic indicator is WAY WAY WAY oversold indicating that a pull-up in the markets could be soon (I don't personally put a lot of weight on this indicator).

But here's what's important...I could be dead wrong! And I'm ok with that; the point is that I believe there's a low risk entry here to go 'long', because if I'm wrong, I'll lose very little.

Never FOCUS on how much you can make with a trade; FOCUS first on how much you could lose!

Happy Trading,

-Matt J

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