LT charts and some random thoughts.

I'm looking to play the approaching oversold reflex rally. Soon. Not yet, but soon.

Ideally we will get a flush into OPEX. And I mean a gut wrenching flush with spiking VIX, High put/call and FEAR of the end of the world. The setup is there.

There were some signs of capitulation on Friday with MCD, PG , KO and some other bullish holdouts going into a nosedive. But I'm very confident that the energy sector breaks down here very soon too. Beautiful rising wedge on weekly charts with every indicator rolling over from negative divergence. Both price and internals. The last holdout is Ag sector. Don't know if it breaks down on this round, but its time will come too.

However, that said, if you look at the monthly charts, the spread between the 33 and 55 EMA s very wide, there is still momentum left on monthly charts, though its weakening significantly. So I'm looking to play a reflex rally off that leftover momentum.

So far the only index that came close to my ideal price objective is RUT. SPX and others will hopefuly get there on this last washout. If you look at the weekly charts, you can see what I'm looking to buy.

There will probably be a couple weeks of basing after the washout, so I'm not expecting anything dramatic right away. But looking at monthly charts, we "should" be trading up into February /March timeframe.

To be perfectly honest I'd rather buy positive momentum, then a reflex rally with a negative momentum, but it is what it is. I do expect that rally to be sold, and the current ceiling on SPX is 1460-1470 and RUT around 770. So the lower we go before it starts, the better swing we'll get.

At this point I'm watiing for a spike and for slowdown in negative momentum in summations that are falling relentlessly.

Overall there is no rush to buy at this very moment, since anything will be sold very fast, but it may be time to start digging through the rubble, IMO.

Edited by ogm, 13 January 2008 - 09:05 AM.

There is very serious risk that the market is going to break down here, though. So I wouldn't bet too much on any rally, and I'd be looking for exit points very fast.

There is very serious possibility that we are going into a multi year underperformance period for the stock market. And I mean YEARS.

OMG...Give me a wkly $RUT rsi14 under 30 and an ultimate under 30 and I'm a buyer.

OMG...Give me a wkly $RUT rsi14 under 30 and an ultimate under 30 and I'm a buyer.

One more strong down week would do it. Considering we have OPEX coming up, and possible delta hedging event, if we won't be able to bounce on good internals Monday/Tuesday.. there is a very disticnt possibility we'll get it.

Thats approximately what I'm looking for too.

Besides SPX just isn't oversold enough for me yet. And overhang from energy breakdown is looming.

I want to see a SPIKE though. I want to see all dip buyers of the past couple weeks and those who thought they could hide out in large caps to throw in the towel.

Edited by ogm, 13 January 2008 - 10:39 AM.

Test of August Low is logical place for bounce.

Test of August Low is logical place for bounce.

But its the break of August lows that would bring capitulation type selling.

ogm Interesting and logical as always. thx for posting

Thanks for the update. Sounds like a plan and you have planned accordingly. If it is one thing I learned is to get the Market to come to me. If not, no worries. There will be another opportunity next day, week, month, year and I see you are gearing up in the same way.