Winning

Winning

Sunday, November 23, 2014

Outlook for the week ahead 11/23 through Thanksgiving

Hey everyone. Rough week at the close of last week. I finally had to let go of yellow and MMM. Fortunately as I construct my trading neural net, those trades wont happen twice. However the CLDX put? I still stand by that call and would do that again 1000 times. It was the right call. However, options expiration might have had something to do with that.
Enough of the past, lets look at whats coming up in the market for this week:

The Market is now like a runaway train. With runaway trains, there is no rules and you don't know where the top is or when the actual top is going to happen:

As you can see above, the RSI is in the maxed out position, and the MACD is also in the maxed out position and is ready to cross but hasn't yet. Ive see when the market is like this. If it keeps wandering up, you will see the RSI just skirting along the ceiling like smoke and sometimes even going above the ceiling, with the MACD doing the same thing.
How to Play this: In a case like this you really don't know how long the market is going to keep climbing before that big first down day and the beginning of the down over the next week or so. The indicators say reverse and start selling, but the market itself continues to inch up day by day. What I would do is invest long in short little not long term plays, and do so realizing that there could be the big drop any day. It is not time to short, we have to wait for the market to actually tell us when its time. So, exercise caution. Looking at the chart above would be like looking at a stoplight with both the green light and the yellow light on at the same time.

In order to verify the above and make sure what we have called is correct, we go down a layer to the underlying foundation of the matter: and that would be the QQQ weekly. This has the technical build that the upper layer, the daily chart (above) is working on. Lets take a look at that:

Again, you can see that the RSI is right near the top, but actually has a bit more room to go before it hits the ceiling. The same can be said of the MACD.
Now: if the falling trend of the RSI continues, (draw a line across all of the tops of the RSI, you will see that the ruler is angling down) then the RSI should be at the ceiling and this should be it. The same with the MACD. However the daily RSI is still showing up.
With the daily and the weekly still showing up, I say we still have a bit of room to go up. Perhaps a week to be safe. But the daily is showing cracks.
Again: now is not the time to get in long, so play accordingly.
We are going to stay away from CLDX as I believe there is still some action underlying its price movement from the earnings announcement of the 14th, just a week ago. My amended rules are no bouncing a stock for two weeks after an earnings announcement.
ENTA: announces tomorrow, we wait for the price movement. I would expect a 1-3 day hold as we see what shakes out from the coiled spring.

Thats all for tonight, see you in the trenches Monday.

Mark

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