TradeStalker’s R.B.I. Trader’s Update

7 / 9 / 2009

(Published Since 1996)

We were shorting early strength, then taking cover and getting long on the first decent pullback. The ES popped up on the open and reversed from 882.25, just under the 882.75-883.50 resistance zone. The ES dropped 6.50 points to 875.75 before a stall/ reversal came from. After that, the market chopped its way higher until there were 90 minutes left in stock trading. Then off of the 884.50 high the ES made a little 1-2-3 top and fell to 876.75 before bouncing. The bounce didn’t stick and the ES fell from 880.75 to retest 876.75 and then firmed into the close.

The market is still short term oversold, and it did try to base out for another bounce at Thursday’s close. However, it doesn’t look like there is a whole lot of upside potential from here just yet. If the market slips under the initial support areas and cannot quickly reverse back to the upside, then a drop back to the 872 area would be the next support area that would need to hold to avoid a bad end to the week.

On the other side of the coin, if the late Thursday lows were little double bottoms that are setting up a rally, they will not be broken and a rally will start early. If that occurs, then beware that a rally will likely fail and reverse as soon as the upside fizzles out. A turn from a resistance area would set up a good short if that stall/reversal occurs. If the market has a good day, the ES could revisit the 888.25-889.00 area and possibly make it to the 892.50-893.00 area before the move is reversed.

So it looks like the market will be “okay” as long as the initial support holds, or is quickly reversed if broken. If the market opens lower, but turns up from initial support, it should set up a trade on the long side. If the market rallies early, beware that there are plenty of “trapped” longs that would welcome good strength to sell into.

Good Trading,

Mike Reed

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