Thursday, May 23, 2013

Market update

I posted "short term top" post 2 days back. I hope you read it before the bell yesterday. I was not surprised by the market action yesterday, not at all.
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GE is one of the key stocks that market timers follow to time the tops and bottoms. I made a post on the market when SPX kicked 1600 level upside, that 22.75$ was the area to watch on GE. GE has done quite well to hold the level and pushed upwards. If you watch the overlay in the chart below, SPX made new highs in the last few days but GE is merely struggling against the March 1st week high. That to me is a divergence, atleast in the intermediate time frame.

The difference would be clearer on individual charts of GE and $SPX. Both GE and $SPX posted ugly candlesticks yesterday which indicate atleast a short term top. What would invalidate the short term top call? A close above yesterday's highs for both GE and $SPX.
What will confirm intermediate term top? GE closing below that yellow box.
What is our course of action right here? I have been fully long the market going into yesterday, although we had a caution before yesterday. I didn't close any longs yesterday. Today as I type this note, the market is still down but I am reducing my short term long holdings. On a further rally tomorrow, I will close more longs. If the tape pushes above yesterday's high and closes on a daily basis, I will add the closed longs. Long story short, I am still long. Anyone who has been long this year from day 1 would  still hold long. Why? Market is still up 16% at this time. I will close all longs on a close below 1620 SPX which means our portfolio will still be up for the year. I will go short below 1590 $SPX close.
I could go short on a very short term timeframe, but I would not advocate that to my readers - only because we cannot manage individual portfolios.
Market update
ST - Bearish
IT - Bullish
LT - Bullish


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