Stock indices were down sharply Friday with financial stocks getting hit the hardest. Volume increased which is an indication of aggressive selling. S&P500 down 31.6 points at 1064.88. If you read my previous post from the other day, you would know that the stock market was at key resistance 1100 while also being in an overbought condition. When we have this kind of situation, the market usually (but not always) sells off and that is exactly what we saw happen on Friday.
I sold half of my SPXU at the low of the day, not too bad for a 6% gain in two days. I will sell my other half probably at 1055 which is the 50% fib retractment level of the current rally from the low of 1010 to 1100. The next support after 1055 will be 1045-1047, 1045 is the 61.8% retractment level and 1047 is the neckline of the head and shoulder.
My prior post mention that this rally probably will bring this market to a high level so as to build up the secondary high and this secondary high might need to take around 20 to 30 days to establish. And a strong and healthy rally need retractment, however if an rally doesn't recuperate at 50% or 61.8% retractment levels, then the momentum of this rally will be broken. Therefore 1055 and 1045 are two critical supports market has to rebound.
I will sell the rest of my SPXU at 1055 tomorrow and I will buy this rally again if it rebound at 1055 or 1045.
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