Our update this evening will start with our one and only open trade, UGL. It regained some of the decline it suffered yesterday. The decline yesterday was well within the range of our protective trailing stop.
The other prospective trades we had mentioned. You can scroll down to see them, did not trigger. SSO would not close above $114; TBT would not close above $16.73. I would also like to see UDN close above $19.97.
I promised that each day we would look at the actual futures or instrument that drives the values of our stock market symbols.
The SSO refuses to co-operate by closing above its resistance level, so let’s look at the underlying that determines the value of SSO – the S&P 500.
As many of you know my methods have us in a world of trades as opposed to a trading world. Every once and awhile I take a look at the bigger picture. Not because it changes anything or that I really care – it is because I am curious, it is why they call me Whiskers.
Let’s take a look at the chart above. My first curiosity is the brick wall that is providing the resistance to the SSO. We experienced a horrible decline in the S&P 500 (in terms of points combined with the short amount of time it took).
I put a Fibonacci retracement on the chart and you can see that there is a level of resistance at 61.8% retracement of the down leg. What you may not know is that this is a fairly classic point for a rebound to stop rebounding. Now the next classic thing to follow is a further decline of at least the same amount as the previous decline, making a zigzag pattern.
The RSI, which I have said I don’t use in the typical oversold/overbought method is telling me the zigzag is more likely than the breaking of resistance.
What are we to do with this information? It is not anything close to a for sure.
We can remind ourselves that we are in the world of trades and in that world as opposed to the trading world we act on what we see. That means if the SSO closes above resistance, we will enter a buy just above the candle that does the closing above it.
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There will be a course to follow it.
This is a vitally important point. If you have any questions about it, please drop me a line: email@example.com.