Monday, June 22, 2009

Broken Trendline

The Qs have decisively broken the uptrend line from the March low confirming the negative divergence MACD sell signal from June 15. The talking heads are already bringing on guests who are suggesting the bear market rally has topped. I would say the guest commentators are evenly balanced between those calling for a top and those who say the rally will extend, to be fair, but it is interesting how quickly the cheerleaders can switch sides.

The fact is, the June 11 high in the Qs was a top, but probably not the top. We have at least 3 levels of support: 1) the 50 and 200demas, which coincide with fib retracement levels from the May lows, 2) the May lows, and 3) the Jan/Feb highs. It is now a little late to be shorting this decline given the obvious levels of support. However, a retracement to the broken trendline followed by a continuation of the decline could provide an additional low risk short entry.

I went short a 1/4 position in the Qs using the QID on a break of the low of the high day. I added to the position on a break of the low of the MACD sell signal day. I added to the position today on a break of last week's lows. I do not intend to add any more to the position at this point.

If volume does not pick up, I will be looking to exit as support levels are reached. If volume does pick up and the decline accelerates, I will look to hold for the Jan/Feb highs. I see nothing at this point that would give us a clue as to where we might expect the bottom in this correction other than an upcoming turn date on Friday June 26, which may mark a bottom going into the end of quarter window dressing.

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