Tuesday 6 March 2012


The long awaited 1% correction came today. Most of the people have forgotten by now what a correction looks like.  Did CNBC report that lots of people have broken their monitor because they thought the monitor has run out of green pixel?

Is this the start of Bear market? I do not know but it is still early for complete trend reversal. For a very short term, say just for tomorrow, I would expect a bounce after such a hard sell. For another, some of the indicators like CCO, ChiOsc and StockRSI are very low for a continued meaningful downturn.
Not to mention that a strong up trend cannot reverse immediately. Indexes will definitely try to test the highs and only when the next attempt fails, we can be sure of reversal.  The situation is very volatile and while we may see a green day tomorrow, it is also assured that we will see a lower low in the next few days. It is a good set up if you are a day trader but a lousy one for a swing trader.

With the McClellan oscillator below the zero line for the past 10+ days and standing at -266 level, it is difficult to see further down immediately. So my theory of a bounce tomorrow fits well into this when it can add some height and then continue to sell some more. Problem with this line of thinking is everyone is expecting this set up and the market may throw a curve ball and continue to sell-off.

Gold sold off another $ 35 and silver also joined the sell express. I expect more selling ahead for PM.

The trend table is turning red slowly but I would hold on to go short immediately.
While the “Advance Decline” line has turned south and lots of other indicators are signalling sell, I expect a whipsaw. I would be more confident to take action when all the indexes have moved together in one direction. Better be safe than sorry. I have done it in the past, when I have jumped the gun and paid the price. Instead of chasing the trade, let the trade come to us. I keep reminding myself that preservation of capital is the 1st priority. So now I am willing to give up some of the profits to make sure that the trade will move in the right direction.

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