In the most recent break out, XLF has left two enticing gaps – one around $12.6 mark, and the other one around $13 mark. Aug 7th candle looks somewhat like a reversal candle.
$13 also marked the swing top in May. And $12.6 acted as a solid resistance for most of May, June and July. Any down move should take XLF down to $13 region pretty quickly. I will not be too greedy trying to wait for XLF to fill the $12.6 mark. If I am short, I will cover around XLF $13 mark. 10% haircut should move FAZ up to $33-$35, SKF to $33 and FAS down to $60.
The oscillators and BB on XLF look exactly same as those on the IYR charts in the posting on IYR. As always, any love shared is appreciated.
The currency markets have been used to explain what is going on in the markets lately. The principle that underlies the currency markets and ultimately everything else is supply and demand. Last year in the fall, the indicies plummeted like most of us had never seen before in our lives. We all watched that in amazement, but what happened then has serious implications now. The ease with which indices fell last fall seemed like slicing butter with red hot knife. The thing that most of us forget is that once we have sliced butter with hot knife, pulling the knife out is EVEN MORE easier. What this means is that if indices were to enter that free fall zone of last fall, then we will rip through that region. The move up through that region will be pretty much the way we moved up in mid to late March… in a blink of an the move would be over.
Posted below are the charts that highlight these regions for SPY, IWM, QQQQ, XLF, IYR and OIH highlight some interesting supply and demand regions. For your convenience I have typed up the name of the concerned security in big bold font on each chart.
Also, instead of typing up my conclusions at the bottom of these charts, I am writing it here in case you get fed up of the charts and don’t get to the bottom of the post: IMO, I would even say I strongly believe that the downside is very very limited. The QQQQs will power us up and then IWM and OIH (along with other commodities) will quickly pull SPY through to $100 which will power it to $110 mark… by end of July. That is where we will see any meaningful retracement, possibly down to $92.5 on SPY…
The way I WILL PLAY this is to go long QQQQs now and then move to small caps and commodities. Finally as SPY is nearing $110, depending upon how we move up (supply-demand) will determine which sector is the best to ride the 20 odd percent move down. That IMO will be the B leg of this A-B-C primary {2}.
As always, if you like what you see, please do share some love
QQQQ: We are already in the “NO” resistance region and we should keep powering up with minor retracements. This is what tells me that we keep going up from here.
IWM: We are 3% away from the “NO” resistance region. A decent up day will get us there and the small caps will just power through to $65.
SPY: This one is a bit tricky. The region shaded in yellow tells us why we have been range bound for almost month. Going back to late last year and early this year, there was a LOT of supply in this region. Having broken through 92.5 on SPY, we are now in a region of far less supply. However, whenever we get up to $100 on SPY, we will get to $110 in NO time… may be 4 to 5 days at max.
XLF: This chart best summarizes why FAZ has been going nowhere for a month. Lots of supply from late last year being burnt through. Even if XLF breaks through $13 mark, there is still a lot of supply to contend with. Given this FAS will not be a good play even if we are moving to the upside. There will be a lot of chop chop which will kill a lot of gains in the FAS. Shorting SKF might be a very good idea. The only region of relatively low resistance on XLF is $16.5 to $18.5. But I don’t think we will ever get there.
IYR: Pretty much like XLF – lots of supply all the way up. SRS is going to get murdered through the summer. I had called for $3 by end of year. I am revising that to $3 by late July or August.
OIH: NO resistance all the way up to 145. And we are just bordering that region.
The oscillators and BB on XLF look exactly same as those on the IYR charts in the posting on IYR. As always, any love shared is appreciated.
