September 02, 2011 at 8:22 am | | Comments 4

Which Side Are You On?

We’re in an interesting spot here, no matter which side you find  yourself on.  Both the bulls and bears have reason to believe they’re going to win this one, so let’s take a brief look at the arguments of each.

From the bullish perspective, we’ve just carved out a higher (incremental) low compared to the early-August low, which was confirmed by a higher high this week (including multiple closes above the mid-August bounce high).  We’re now pulling back after a sizeable short-term run, possibly to fill the gap from 8/29.  A change of direction begins with the creation of a higher low and higher high, and we’ve seen both of those get created.  The worst is behind us.

Here’s the SPY daily chart with notes for the bullish case:

Chart courtesy of TeleChart

From the bearish perspective, this is a low-level (albeit wide) counter-trend consolidation following a major decline.  Advances have not seen meaningful follow through…the 8/9 to 8/15 bounce was met with nearly a complete retracement, and the bounce which completed August is again coming under some pressure here.  This correction is just getting started.

Here’s the SPY daily chart with notes for the bearish case:

Chart courtesy of TeleChart

Charts don’t lie, but at times like this it’s all about perspective.  The next direction is in the eye of the beholder, and that’s exactly what makes a market.  What’s your perspective?

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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  1. jesse livermore:

    “There is only one side to the stock market; and it is not the bull side or the bear side, but the right side”

  2. I couldn’t agree more, excellent quote and thanks for stopping by to post this.

    Keeping an open mind is always a must, particularly right now when both bulls & bears have valid arguments.

  3. so it looks like we are healding back down to the 115 area.. Question how do you handle limit stops when the mkt opens way up on mainly way down. They are blowing right through my stops!!

    Jim Dallas Tx

  4. Hey Jim, I use ‘stop sell’ for stop loss orders, that way I’m out as soon as the stock undercuts my level. No sense in trying to save pennies when a stock is heading south quickly, I need to be out if that’s the case so I don’t use limit stops.

    Thanks for your comments!

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