Safe Haven | 4 Weeks to Go

"No warning can save a people determined
to grow suddenly rich." - Lord Overstone

HOME

ARCHIVES

FORUMS

SITE MAP

ABOUT US

Home -> Archives -> Angelo Campione -> 4 Weeks to Go

Printer Friendly

eMail Article

July 26, 2009

4 Weeks to Go
by Angelo Campione

7/26/2009 7:15:39 PM

General Commentary:

The system remains on a Neutral signal.

Things have changed somewhat this past week, while we were expecting a consolidation and possibly a short sharp pullback, the market went on to make new highs and even closed at the highest point so far this year.

While on the face of it this is a bullish development, in the short term we're very susceptible to a sharp move lower. I've spoken about the rubber band effect before where prices get stretched too far one way or the other and eventually they spring back, just like when you let go of a stretched out rubber band.

While some indicators are presenting themselves similarly to the March break out, we don't have the same conditions that lead to the catapult in March and therefore it's best to be wary of this move and stay on the sidelines if you're in cash.

At this stage the medium term is looking bullish but depending on how the next down phase plays out, that picture could change.

For the week ahead it is possible that we go higher and hit 1000 on the SPX as more companies announce higher than expected earning, however at some point the reality of what a reasonable P/E is will kick in and at that point the rubber band may get stretched to the downside again.

On to the analysis...

SPX Chart - Bigger Picture

Now that resistance at 950 has been pierced, the SPX is shooting for the 1000 mark and that could happen this week. If we can then get a quick little breather in the short term down to at least 930, the SPX should then have a good basis to continue this run higher.

The MACD continues to look positive and as long as it doesn't cross lower, the bulls will remain in charge.

The V pattern drawn on the chart indicates that any dip we do get should be contained by the uptrend line at around the 900 level.

SPX Chart - Shorter Picture

The shorter term shows an interesting convergence at around 990. It coincides with the line of previous highs, the upper line from the trend channel and the steep mini uptrend line. All this seems to point to a good point for the market to reverse possibly on Monday or Tuesday this coming week.

Also note the mini bearish wedge that's developed in addition to the overbought RSI. The MACD remains positive and isn't indicating a break down yet.

For the week ahead, support on the SPX is 930 - 950 and resistance 1000.

The VIX Picture

The VIX continues to be firmly in a downtrend although we're now on the bottom of the channel, which supports the potential for a reversal early in the week. We also have a bullish wedge that adds some weight to this scenario.

Finally the MACD seems close to turning higher, which again adds weight to a possible reversal by Tuesday.

The VIX measures the premiums investors are willing to pay for option contracts and is essentially a measure of fear i.e. the higher the VIX, the higher the fear in the market place. It tends to move inversely with the markets.

Current Position:

The current position from July 20 is a full position in an SPX August 1020/1030 Call Option Spread for a net credit of $0.60.

The premium received if you entered this trade is $60 per $1,000 of margin required per spread (before commissions).

In relation to our open position, we have 4weeks to expiry and only 40 points from the sold strike. Clearly this isn't as comfortable as we'd like to be but with the next level of resistance just above us, lets see what happens here.

Current Performance for 2009:

Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
6%	8%	4%	2.5%	6%	10%	7%

(Please note, this performance is in percent and raw, i.e. without brokerage/commissions taken into account)

Quote of the Week:

The quote this week is from Joseph Campbell, "Money is congealed energy - and releasing it releases life's possibilities."

Feel free to email me at angelo@stockbarometer.com with any questions or comments.

Also, if you are receiving these alerts on a free trial, you have access to all of our previous articles and recommendations by clicking here. If you do not recall your username and/or password, please email us at customersupport@stockbarometer.com. If you are interested in continuing to receive our service after your free trial, please click here.

Regards,

Angelo Campione

About The Advantage Report Trader Alert:

The Advantage Report is a timing service that allows you to maximize profit in both bullish and bearish market, we have a proprietary system that issues buy or sell signals based on several algorithms.

The signals we have are:

BUY - This means go long in your desired investment vehicle.
SELL - This means go short in your desired investment vehicle.
PRELIMINARY BUY or SELL - This means be alert to a potential change of signal and be ready to take action shortly but DO NOT take action yet.
STOP - This means close your positions and go to cash

To Learn more about us: Click Here

Not a subscriber yet? Want to be? Click here and sign up for a no cost trial. Sign up for our TRADE TUTOR weekly newsletter at no cost to get a trading education from Pro Traders.

Important Disclosure:

Futures, Options, Mutual Fund, and Equity trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell Futures, Options, Mutual Funds or Equities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this Web site. The past performance of any trading system or methodology is not necessarily indicative of future results.

Performance results are hypothetical. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as a lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

Investment Research Group and all individuals affiliated with Investment Research Group assume no responsibilities for your trading and investment results.

Investment Research Group (IRG), as a publisher of a financial newsletter of general and regular circulation, cannot tender individual investment advice. Only a registered broker or investment adviser may advise you individually on the suitability and performance of your portfolio or specific investments.

In making any investment decision, you will rely solely on your own review and examination of the fact and records relating to such investments. Past performance of our recommendations is not an indication of future performance. The publisher shall have no liability of whatever nature in respect of any claims, damages, loss, or expense arising out of or in connection with the reliance by you on the contents of our Web site, any promotion, published material, alert, or update.

There is a very high degree of risk involved in trading. Past results are not indictive of future returns. Stock Barometer and all individuals affiliated with Stock Barometer assume no responsibility for your trading or investment results.