Thursday, April 12, 2012

On The Way To Re-Test The Highs?

Today was an example as why not to front run. It also validates my reason not to short the market even when the trend model gave sell signal and stayed neutral. I had many factors to consider like few technical parameters, trend model, cycle analysis and money flow. And they did not line up together. In the end, I decided to believe the cycles which tops next week.

The earning season has started. Alcoa started with a better than expected result and today Google came out with a better result as well and is up after market. I think the euphoria will be back tomorrow and next week and all talks of gloom and doom will be forgotten. That is how they set up the market.  Again, it is not the time to go long nor it is the right moment to short. Only good thing to do is to sell in the strength. We might see SPX reach 1450 next week if the euphoria continues but risks are high. And I am writing this over and over, unless we see a re-test of the high and its failure, we are not sure of trend reversal.

When the market sold off 5%, I got some hate mails, ridiculing my call of SPX 1450 and market top call by April Op-Ex. My favourite  south Asian (I think he is an Indian settled in US) troll even told me to stop writing. I fail to understand why the troll reads my blog and spend so much emotional energy to hate someone whom he has never met. Internet gives us anonymity and the chance to show our true character. May be the guy grew up in a hateful environment and had a difficult childhood. May be he saw his father abusing his mother. Who knows. But that guy is truly damaged.  The bottom line is, chances are we will still see a new high before the market rolls over. I still do not rule that out.

Today AUD gave a new buy signal and US $ broke through important Fibonacci support level. Michael Boutros has this nice chart: (Ticker: USDOLLAR)

Even the RSI broke through the rising trend line.

The Speculative Sentiment Index shows that the retail trade is long USD and short EURO and AUD.

SSI is a contrarian indicator and it signals more gains for Euro and AUD, at least in the short term. If that were to happen it will definitely benefit the risk assets including equity.

Tonight we will have Chinese GDP data release and I am sure it will add to some volatility tomorrow.

Gold is at a very interesting cross road. It is near the end of the cycle bottom, but we have not seen any capitulation of the investor sentiment yet. Today the Gold is up because US$ was down big time. But by end of April or early May, we are likely to see further strength of US Dollar. How PM sector behaves during the period of Dollar strength is to be seen. All in all, I am still waiting to see a good bottom for Gold and would rather give up some initial gains.

After a long 3 month up-trending market, we are coming to a period when we will see sideways and choppy movement in the market. I would not like to participate in such markets and will wait for clear and definite trend, whether up or down.  We do not always have to be active in the market.

Thank you for reading As usual, I always look for your comments and mails.