TradeStalker’s

R.B.I. Trader’s Update

6 / 16 / 2009

(Published Since 1996)

The market opened higher on Tuesday and the early strength was sold as the ES backed away from the 924.00 level. A pullback to 919.25 was bought, and the market tested its highs. After getting turned away from 924.00 for the forth time, the market finally broke lower and a little bit of panic selling hit the market. The ES bounced off of the 908 support level, but failed at the 912 updated resistance area and then the market fell to new lows for the day. The ES reached 906.50 before reversing, and then bounced to the 60ema on the 5 minutes chart before the move fizzled out.
With the trends and momentum favoring the bears, the move was sold and the market fell into the close.

The daily internal gauges all look worse than prices do at this time. The short term overbought/oversold indicators are now at an extreme. In addition, the Vix jumped another 6% on Tuesday and is set to give several buy signals if it reverses. So, unless things are really bad, then this current selloff should be near a low that gives us a decent oversold bounce. The market looks like it wants to go lower first, but a reversal from the 900 area should set up a trade on the long side. It would also fit the quarterly expiration games, if they take them down then run them up at the end of the week.

We get the CPI before the open on Wednesday. If the market opens higher, it’s a short as soon as the move stalls/reverses. If there is follow through selling and the ES goes down to the 902.00-900.50 zone in the first 20-40 minutes and then turns up, it should be the start of a decent rebound. However, if the market gets down there and can not get turned back up, then the market is in for another bad day. The first good bounce will likely be sold if the move doesn’t have much gusto, so beware of a wimpy rally reversing.

Good Trading,

Mike Reed

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