Thursday, July 28, 2011

Short Term Bounce Is Brewing

Hello fellow readers! Hope this blog post finds you in good spirits and good health!

Two of my favorite 'indicators' are starting to show signs that we are 'possibly and finally' seeing some sort of 'panic' which is often seen near short term to mid term market bottoms or bounces. With tonight's Postponement of the congress debt deal decision, this is sending the SP500 futures tanking which is exactly what is needed to really setup some more 'panic'! Many traders bought today expecting a debt deal to be announced by congress tonight. Intead, what we are seeing is a big gap to deal with come friday morning as congress postponed the entire decision.

All day long and and all week long pretty much i have been urging everyone(AOT members especially) to remain extremely CASH HEAVY this entire week. I am hoping most are starting to see the benefits and reasons why i have been urging this by now! Yes, it is 'boring' to be in cash BUT its what makes most sense NOW. Sometimes, we need to be long, sometimes we need to be short and sometimes, we need to be in CASH. This will not last for ever, we are going to get trading opportunities soon! Shoot, we could enter a bunch of trades tomorrow! In a news driven market the most ideal thing to do is to remain extremely CASH HEAVY as bad news begets more bad news until we see massive spikes in the VIX(fearful, panic selling) and the NYMO(McClellan indicator shows extreme OVERSOLD conditions which often leads to short term bottoms and sometimes strong bounces.

Take a look at the attached charts and you be the judge. How comfortable would you REALLY be being 100% short after tomorrow's gap down? Personally as a short term trader, IF I was short coming into tomorrow, i would cover my shorts. But hey, that's just me talking as a short term trader! Trade YOUR plan and YOUR time frame!

Trade em well folks!


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