This week it's about knowing what you're made of by managing you're trade and not hiding from it. If you've avoided the downslide, congratulations you've made the best trade of the year. My refusal to absorb a loss will perhaps be my downfall, but that's ok we all have our personal lessons to learn and I'm no different than anyone else. For me, managing my TSP account takes a back seat to my ROTH IRA and I did a great job of protecting myself there. For my TSP account I'm staying in, choosing time as my weapon. If we go down much further I'll pull out the big guns by starting up my contributions again, accumulating shares, establishing a lower cost basis per share. Many of us remember the trauma of 2008, the worst thing you can do is sell at the bottom, then refuse to acknowledge a reversal of the trend, it's just something to keep in mind as we tread through this correction. I use the word correction because the Transports have past the 10% threshold, pulling back -12.30% off the 7 July swing high.
On the Transportation Index the 6-month dominant green trendline has been violated, that's a major trend change. In addition, the 200 SMA/EMA has been violated 3 times with 2 closes under. That's the bad news, the good news is the red trendline gives some semblance of support off the previous 2 pullbacks, with a previous swing high providing an anchor of support.
I don't like to use the S&P 500 because it generally doesn't lead the markets, but since so many of us speak in S&P 500 terms, I'll identify some key levels we need to recapture. 1285 is where the 200 SMA is, this level is watched and followed by many, if we can close above it we'll have a huge moral booster. 1300 is a 50% bounce off the previous swing high to today's low, at a minimum I'd stay bearish until we recapture those levels, 1300 is also a round number, the market likes round numbers.
In a worse case scenario expect to drop about 100 points below the 200 SMA at 1185ish. This is also an area of support from the November 2010 pullback, and roughly the same type of 200 SMA drop we experienced during the June 2010 correction.
Draw a yellow line from point 1 to 5, then draw a yellow parallel line and bring it down to point D and you can see today's prices closed at point F, right at the line. Call this a line in the sand if you will, we have to remember that the small caps (and the Transports) lead the markets, and if these levels break, we should heed the warning that the current down-trending channel has broken further to the downside. The Transports have already broken this channel, but the difference is on the transports it was a rising channel. From point 6 to F a 50% bounce is 686 I might attempt an exit here, then look for a lower re-entry.
This week I posted a Bull Flag on AGG, yo that was tight, it's already met its price objective, I hope someone caught that move based on what I posted, too bad I didn't.
Take care and trade safe...Jason
On the Transportation Index the 6-month dominant green trendline has been violated, that's a major trend change. In addition, the 200 SMA/EMA has been violated 3 times with 2 closes under. That's the bad news, the good news is the red trendline gives some semblance of support off the previous 2 pullbacks, with a previous swing high providing an anchor of support.
I don't like to use the S&P 500 because it generally doesn't lead the markets, but since so many of us speak in S&P 500 terms, I'll identify some key levels we need to recapture. 1285 is where the 200 SMA is, this level is watched and followed by many, if we can close above it we'll have a huge moral booster. 1300 is a 50% bounce off the previous swing high to today's low, at a minimum I'd stay bearish until we recapture those levels, 1300 is also a round number, the market likes round numbers.
In a worse case scenario expect to drop about 100 points below the 200 SMA at 1185ish. This is also an area of support from the November 2010 pullback, and roughly the same type of 200 SMA drop we experienced during the June 2010 correction.
Draw a yellow line from point 1 to 5, then draw a yellow parallel line and bring it down to point D and you can see today's prices closed at point F, right at the line. Call this a line in the sand if you will, we have to remember that the small caps (and the Transports) lead the markets, and if these levels break, we should heed the warning that the current down-trending channel has broken further to the downside. The Transports have already broken this channel, but the difference is on the transports it was a rising channel. From point 6 to F a 50% bounce is 686 I might attempt an exit here, then look for a lower re-entry.
This week I posted a Bull Flag on AGG, yo that was tight, it's already met its price objective, I hope someone caught that move based on what I posted, too bad I didn't.
Take care and trade safe...Jason
