Today is Thursday, May13th and the market started to pull back after hitting overhead resistance.
Well, the market hit the overhead resistance I had talked about in the night trading. It came within a couple of points at 1175 before the sellers took advantage of the offering. I would bet you will have some holding on for big potential returns. If it does not happen, they may get stopped out for a 2-3 point loss, but if it does go down like I mentioned in yesterdays blog, it could be a big runner, potentially to 1120 area.
I saw overhead resistance at the previous break, it is not rocket science, but a pull back from that point would be a market play and I am sure there were many looking to get short after the open as well. There were a few good opportunities to do so, with one run producing a trade-able 13 S&P points.
I came into today late, at the last hour and missed all the fun. The market was in that big sell off when I started watching it. I did have a very nice trade just at the close of session for about 4.50 points. It was that big counter trend move back up. Before that I had a couple of trades I would call bad trades. All losses are not bad trades, they are just losses and that is trading, but if I go against my rules and enter at a point that is not consistent with my method, I call that a bad trade. Even if a trade turned into a gain and I did enter properly, I would still call that a bad trade.
I was able to come back and then some, still hitting my daily goal, but I don’t like it coming so late in the day. You may not have enough time to recover if you are down. Well, that again is my fault for starting so late.
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Just a short word on the market sentiment numbers released on Wednesday morning. This is the investment newsletter writers weekly survey of bullish or bearish opinion. After hitting the tipping point on Wednesday morning the market watchers may have used that to sell it off. All the major Indexes were in the right position to sell off. They were on the right side of the chart as a top had been established with definable short entry points. The break that started on last Wednesday is exactly what we hit in the night trading from today’s session. It basically came all the way back up as if nothing had happened. The sentiment numbers being so bullish at 56% had something to do with it. At 55% and above, is typically the time when you will see a reversal. With so many people thinking one way, that is a sign that it is about to go in the opposite direction. It lost no time as the decline really started on Wednesday and you now know the rest of the story.
Currently the numbers have dropped off to 47% and that is a good start. At 45%, that is considered neutral and 35% will usually trigger a bullish rally. If we see a pull back as mentioned, the numbers should come off again by next week. The newsletter writing community are usually trend followers and as the move becomes obvious to the majority, it then is time for a change in direction. We are not there yet and are still working off this overly bullish stance.
We will need more time for anything new to develop. You will usually see 3 to 5 good turning point signals from this tool per year. I will keep you posted and interpret as things progress.
That’s it for now, hope to see back again, for another session tomorrow.
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