IWM Stable, GDX Key Reversal Day - May 10, 2012

[Billy]

IWM is stabilizing around Monthly S1 (78.41) and closed less than 1 ATR away from our short entry limit of 79.81.

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Today’s speech by Bernanke could fuel the awaited bounce and IWM could hit our short limit. If that’s the case, be aware that the market is following closely its seasonal pattern of the democratic presidential election cycle. That cycle is in its very last days of a correction before staging a strong rally. The nice correlation YTD with the pattern is troublesome enough to think twice before shorting aggressively here with large position sizes or leverage.

14165

GDX staged a spectacular key reversal day with a pocket pivot volume signature. It closed above the 4-day VWAP, rewarding the average buyer of the last sessions selloff. The Precious Metals MF literally jumped to a mid-morning buy signal after GDX opened at a new 2-year low. Such a massive institutional commitment is exactly what’s needed to facilitate a forthcoming breakout above the strong first resistance cluster including Yearly and Semester S1 (44.77). The GDX robot will stay in cash due to the lack of ST/LT settings edges.

For RT model traders, today’s porosity is 0.122%. The buy signal is protected by the MF hitting -0.122%. Personally, I feel that if this is more than a short squeeze and the real start of a rally, upside follow-through should come quickly. It would be abnormal for GDX to trade much below the daily pivot (42.58) and Wednesday’s VWAP (42.54) and it is the area where I’ll keep an EOD stop.
Billy

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[brrim]

Billy; I have a different perspective on IWM which I wrote about last week and am reposting as this week's action adds support.
On a weekly chart of IWM there is a trendline connecting the 10/7/02 low, the 3/10/03 low and the 10/24/11 high.
This trendline was penetrated 3 weeks in a row in April, with the weekly close in each instance above the TL.
Last week the line was again broken, but the close was below it.
The line is at 79.50.
This week Monday's high was 79.60.
Today we hit 79.49 early in the day and then got as high as 79.55.
I don't think any of these numbers are a coincidence.
I think it's interesting that the IWM Robot short at 79.81 has not yet triggered. If we don't get the Robot price on Day 1 we usually do on Day 2. My perspective is that 79.50 is too strong a resistance line.

When this weekly trendline has been broken the corrections in IWM from the break to the low have been
46.46% 10/08
16.20% 5/10
20.93% 8/11
Thus either Major correction or Bear Market.

Right now this week's IWM action is scissored between 79.50ish and a head and shoulders neckline at 78. The week low so far is 77.97

We will see how this plays out, but it is my impression that this TL is providing important information about the intermediate trend at least for small caps. Of course a weekly close above this line would have potentially bullish implications.

Best regards,
Robert

[Billy]

Billy; I have a different perspective on IWM which I wrote about last week and am reposting as this week's action adds support.
On a weekly chart of IWM there is a trendline connecting the 10/7/02 low, the 3/10/03 low and the 10/24/11 high.
This trendline was penetrated 3 weeks in a row in April, with the weekly close in each instance above the TL.
Last week the line was again broken, but the close was below it.
The line is at 79.50.
This week Monday's high was 79.60.
Today we hit 79.49 early in the day and then got as high as 79.55.
I don't think any of these numbers are a coincidence.
I think it's interesting that the IWM Robot short at 79.81 has not yet triggered. If we don't get the Robot price on Day 1 we usually do on Day 2. My perspective is that 79.50 is too strong a resistance line.

When this weekly trendline has been broken the corrections in IWM from the break to the low have been
46.46% 10/08
16.20% 5/10
20.93% 8/11
Thus either Major correction or Bear Market.

Right now this week's IWM action is scissored between 79.50ish and a head and shoulders neckline at 78. The week low so far is 77.97

We will see how this plays out, but it is my impression that this TL is providing important information about the intermediate trend at least for small caps. Of course a weekly close above this line would have potentially bullish implications.

Best regards,
Robert

With all respect for your analysis, I don’t understand why you are connecting 2002 and 2003 bottoms with the November 2011 high (not even the 2011 top). It is a sort of regression line and not a support/resistance line at all. Is it derived from some technical analysis methodology that I ignore?
Billy

[brrim]

Billy; All I did was connect the 2002 and 2003 lows and simply extended the line. I was very surprised that the 10/11 price high hit it and turned down. I did not actively choose that point. Whether it's a trendline or a regression line 3 hits drew my attention and the weekly price behavior around it for the last month only adds to its significance in my opinion.
Robert