SH @ the bell 5/15/12: Taking our own advice | Stock Haven | Stock Chat Room | Penny Stocks | Options |Stock Haven | Stock Chat Room | Penny Stocks | Options |

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SH @ the bell 5/15/12: Taking our own advice

One of the mistakes many traders make is not reviewing their own prior analysis. Granted market factors change so quickly that analysis made a few years, months, weeks, or even days earlier may prove useless, however that is not always the case. In fact, market factors changing so quickly is the whole reason its important to review your prior analysis. Put another way, analysis made prior to recent market developments might be more objective than your current analysis because you might not realize you are subconsciously taking subjective matters into consideration.

We are determined not to make this mistake, thus we have reviewed some of our prior commentary and come across some thoughts that seem especially relevant today. On April 17th, when the S&P500 had just put in a higher low at 1,357 after declining from its 1,422 high we noted the following:

“Moving forward there is absolutely no reason for SPX to retest its 1,357 low from last week. If that happens and 1,357 breaks we would expect for a much deeper pullback to the 1,250-1,300 range. Many people are touting 1,340 as the key support level for SPX and that’s the problem — many people believe that is the key level. In order to be a successful trader, you must be able to think like the person with the most money would think.

We surmise that if big money thought they had a chance to go long SPX between 1,250-1,300 that they would take it. So the problem with everyone viewing 1,340 as the key level is that any approach towards would likely lead these big money players to do whatever they can to break SPX below it. Why? Because they know that everyone is focused on that level and if it breaks they would likely take it as a technical signal to hit the sell button.

That’s why bulls must avoid a date with 1,340 all together. If it comes into play we’d bet our top dollar that it will fall because it would likely lead to a dip into that 1,250-1,300 range. Why would you support SPX at 1,340 if you could let it fall and get in cheaper instead? You wouldn’t, and neither would big money, the only people who matter in this discussion.”
-@ the bell 4/17/12: Our bottom call looks accurate 

What we suspected back on April 17th proved true on Monday as SPX did indeed fall thru  1,340 and will enter trading Tuesday below that mark for the first time since mid February. Now we’ll have to wait and see if our suspicions of a further move down to the 1,250-1,300 range are validated as well. The main problem for the market is that there is momentum in all of the wrong places.

There’s definitely technical momentum to the downside in SPX, where we expect resistance to come into play on rally attempts back above 1,357. The VIX is on the verge of crossing a key level after a continued breakout on Monday. The dollar has been positive 10 days in a row and is staring at its highest close since January. The chart of oil looks similar to how Aladin might look if carpet wasn’t so magic. Tech trendsetters AAPL & PCLN started the week out by falling below their lows from last week, and appear to be in no mans land technically. If all of that wasn’t enough, Spain’s 10 year yields rose to their highest levels since November. All in all, the market looks to be extremely vulnerable here and we expect bounces to start getting sold into until some type of bottom has been found in oil.

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