We'd consider closing off or trimming short stock positions and trimming bearish legs of options volatility positions, at this point.
No strong buy signals exist, so long positions in stocks could still be considered rather risky, but if the potential positive divergence on MACD on the hourly chart of the S&P-500 (SPX), below, is correct, a short-term pop is quite possible. A fairly quick move to the upper hourly bollinger band at 720 would be a good possibility, if the positive divergence is confirmed.
Update on Friday, March 6, 2009 at 05:17PM by
Asher Pinto
Here's a quick follow-up at the end of the day's trading...
So, there was a nice little jump in the last hour. After forming an intraday low of 667, the S&P-500 rallied as far as 685, before closing at 683. Although that was a nice little short-covering move that was tradable for very short-term traders, there is nothing to signify that this was anything more than a blip, designed to soften some of the oversold conditions on the intraday charts.
The index has already rallied to its flat upper bollinger band on the 15-min chart (not shown here) and RSI on the hourly has risen from the 30-line to a level of 43, which provides the bears with room to pummell the index again, early next week.
What about the potential positive divergence on the hourly MACD that was spoken about in the original post? Remember that that signal only confirms itself if/when MACD breaks the intervening trough (a line signifying the "confirmation" point has been provided on the chart below). As mentioned earlier, if the positive divergence confirms itself, a rally towards the upper end of the channel and/or the upper hourly bollinger band becomes a good possibility.
As has been mentioned in the Nightly Commentary pieces in the Members Area, the daily charts are not showing any buy signals at present. The indices are oversold but have not reached extremely oversold levels that would signify a minor/intermediate low. As such, we'd not be buying stocks at this point; instead, we'd start nibbling at limited risk bullish options strategies (or volatility strategies with a bullish bias).
The indices are still in the throes of capitulation, as is evidenced by the daily charts (refer to Nightly Commentary in Members Area), and fingers crossed we'll get a complete washout sometime in the next week or so, after which a breakneck rally of 15-25%+ can be expected. The charts will have to be reassessed at that point.
Coming back to the hourly chart... If we had to made an educated guess, we'd expected the markets to actually break below the lower line of the descending (and expanding) channel as part of a selling climax, before the next low on the minor/intermediate trend is in place.
« Hourly SPX showing positive divergence on MACD »
We'd consider closing off or trimming short stock positions and trimming bearish legs of options volatility positions, at this point.
No strong buy signals exist, so long positions in stocks could still be considered rather risky, but if the potential positive divergence on MACD on the hourly chart of the S&P-500 (SPX), below, is correct, a short-term pop is quite possible. A fairly quick move to the upper hourly bollinger band at 720 would be a good possibility, if the positive divergence is confirmed.
Here's a quick follow-up at the end of the day's trading...
So, there was a nice little jump in the last hour. After forming an intraday low of 667, the S&P-500 rallied as far as 685, before closing at 683. Although that was a nice little short-covering move that was tradable for very short-term traders, there is nothing to signify that this was anything more than a blip, designed to soften some of the oversold conditions on the intraday charts.
The index has already rallied to its flat upper bollinger band on the 15-min chart (not shown here) and RSI on the hourly has risen from the 30-line to a level of 43, which provides the bears with room to pummell the index again, early next week.
What about the potential positive divergence on the hourly MACD that was spoken about in the original post? Remember that that signal only confirms itself if/when MACD breaks the intervening trough (a line signifying the "confirmation" point has been provided on the chart below). As mentioned earlier, if the positive divergence confirms itself, a rally towards the upper end of the channel and/or the upper hourly bollinger band becomes a good possibility.
As has been mentioned in the Nightly Commentary pieces in the Members Area, the daily charts are not showing any buy signals at present. The indices are oversold but have not reached extremely oversold levels that would signify a minor/intermediate low. As such, we'd not be buying stocks at this point; instead, we'd start nibbling at limited risk bullish options strategies (or volatility strategies with a bullish bias).
The indices are still in the throes of capitulation, as is evidenced by the daily charts (refer to Nightly Commentary in Members Area), and fingers crossed we'll get a complete washout sometime in the next week or so, after which a breakneck rally of 15-25%+ can be expected. The charts will have to be reassessed at that point.
Coming back to the hourly chart... If we had to made an educated guess, we'd expected the markets to actually break below the lower line of the descending (and expanding) channel as part of a selling climax, before the next low on the minor/intermediate trend is in place.