i just wanted to share what i’m thinking here, fwiw. normally, i would be preparing to close most or all of my shorts and reverse into long positions if the SPY and QQQ both hit my targets roughly simultaneously (as i think they might). even the 60 minute charts are playing out as covered in the SPY video last week (prices putting in a lower low while the macd is at a higher low…i.e.- potential positive divergence). i have continued to maintain a bearish bias for months now and even recently while the bottom-catchers and dip buyers have been absolutely cut to pieces lately. however, although we might get those positive divergences put in place on the 60 min charts there are a couple of key points to realize:
1) positive divergence is not confirmed until the macd turns back up and the fast line crosses above the slow line (at least by my definition/criteria). 2) even if we get that positive divergence in place, that was the MINIMUM criteria that i was looking for before going long for either just a bounce or possibly the end of the downtrend and beginning of a new uptrend. 60 minute charts are usually good for looking out a few days to a few weeks, sometimes a couple of months. however, one of the biggest factors that has kept my bias firmly on the bearish side for months now and continues to do so are the longer term charts (daily, weekly and monthly). i covered those in-depth in the video last week so won’t expand on that again but will leave it at this:
the markets are quickly approaching key support (my intermediate final targe on the daily & 4 hr SPY & QQQ charts). we could very well launch the beginning of a powerful rally, possibly a resumption of the primary (long-term) uptrend from there or even a quick overshoot of those levels and that could happen as soon as today or monday if we get a big slide into the close.
however, with that being said and as i covered in the video last week, the longer-term charts have still only relatively recently given very powerful sell signals that historically, have led to considerably more downside than we’ve already had from the market’s peak around the beginning of april. that, coupled with many of the other red flags that i’ve highlighted over the last several months, and the extremely precarious situation in europe, i would rather miss out on possibly nailing the perfect entry on reversing from short to long than to get long too early, considering the aforementioned facts. to take it a step further, i might continue to hold a good percentage of my shorts (based on each individual chart) even if my index targets are hit as the odds for a major market meltdown continue to remain elevated.
i will do my best to share what i see but keep in mind that if the selling starts to pick up (so far, we have not seen a single panic selling day this year IMO), things can move very fast and so will i. something i see might change my mind at anytime & i could cover all my shorts and even go long and if so, it might be a while before i can annotated charts and post any commentary. therefore, it is imperative that you have your own trading plan with as many of the contingencies as you can think of covered (plan A, plan B, etc..) good luck and if you are unsure of what to do here, there’s nothing wrong with staying in cash and watching the action from the sidelines.