Tuesday, July 14, 2009

Trading Tues 7/14: ST Bias Negative, IT Bias Positive

Breadth was extremely lopsided today. On the NYSE, advancers out numbered decliners by a factor greater than 5 to 1 while up volume exceeded down volume by a factor of more than 10 to 1. Looking back for similar occurrences, we find:

  • In the last decade, there were 19 such occurrences. In 15 cases the market was trading lower within 3 days.
  • However, in the majority of the cases (17 out 19), the market was trading higher 20 trading days later.

We also have a sell triggered today on the BKX based on a system that was influenced by the famed 'Double 7' system. The BKX closed above a 7 day high while still trading under it's 200MA. Historically, if we had shorted every such occurrence, we would have made 133 trades, with 101 producing winners within 3 days (or ~76%).

Ideally, the best setup tomorrow would be to sell/short into early strength. This setup is very probable given that GS is reporting early.
If GS disappoints, then the best strategy would be to wait for a relief bounce to short.


Anonymous said...

Been following you for a couple of days. Great calls so far. Not sure about this one tomorrow however. If GS reports positive, it may get market excited about other banks earnings.

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