Wednesday, July 16, 2008

Short Term Bounce

another short term bounce alert is in effect for US markets....

while not here yet, the setup that we are watching closely for is a big fast move downward -- a "wash out".

the idea is that this would create an opportunity to base and move higher for a couple of weeks, getting us into august at which point active traders would want to reinstate short positions.

the one caveat: tons of people are looking for the same thing right now. oft times, paradoxically, for the bounce to happen, people have to stop looking for it -- that's what will trigger the capitulation and subsquent "felinius mortus" bounce.


p.s. the move in the metals would be (likely) toward 1k/oz (or an assault on the all time high), then a retrace, into the mid to low 900's (at least), basing and marching back northward in late summer/early autumn.

p.p.s. skf would move counter to these trends, violently.

p.p.s. how do we know when a washout is a washout? look for the volatility index (VIX) to post a number solidly in the 30's (it spent time there today). the last two or three reversals posted big "red candles" on the VIX where it opened the day high and closed decidedly lower -- this gets triggered by an overnight scare and stick save bringing the markets higher during the trading day.

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