Thursday, October 6, 2011

Approaching Resistance

On Monday I said, "The question is not if a sharp rally will occur, but when will it occur?"  We got the answer by Tuesday morning after the Qs came within 0.17 of the 8/9 low.  I bought the ES at 1074.75 Tuesday morning.  If it hits the 38.2% retracement tomorrow, I may sell for a gain of around 100 points.  If not, I may hold and add on a pullback.  The risk is that given the declining volume a pullback may be sharp.  But the main thing to understand is that this rally should last well into December at least and maybe even January, so keep your eye on the prize.  It will probably be choppy, and this could make things difficult.

So far the timing of the current market correction has followed the pattern from the 10/11/2007 top extremely closely.  The initial decline into the March 2008 low lasted 107 trading days, which would have equated to October 3, 2011 in the current correction, so it was off by one day.  If the pattern continues to hold, the market will continue up one or two more days, and then pullback for 3 to 4 days followed by another surge.  This may be a good time to look for intermediate term long entries lasting 6 to 12 weeks as well as short term trade setups.

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