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Top may be in, waiting on confirmation

We have a 66% chance that SPX at 1080.15 we hit on Wednesday is the top. I arrive at this percentage in a straightforward manner, as we have 3 possible scenarios:
1. SPX topped at 1080 and is going to break below 1039.
2. SPX topped at 1080 and is going to find support near 1039, bounce to lower highs and then break 1039.
3. SPX made new high of 1080, is going to find support at 1039, and is then headed for higher highs.

So from that we formulate our game plan. We can wait for a break of 1039 which allows us to have a low risk short, with stops slightly above 1039. If 1039 holds we can go long with stops slightly below 1039. Regardless 1039 is key, just like holding $76 support for $USD is important.

spxline

A close below 1039.47 (which was the high on 8/24/09) would signal the top is in and prepare for reversal by either moving to cash or playing the short side. Like I said in earlier post, we don’t need to pick tops other than to wait for market to confirm a top is in.

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September 25, 2009 Posted by | Legacy Funds | 8 Comments

Don’t Try to Pick a Top in this Market

OK, now that I have your undivided attention, let’s get to work, we have a top to try to pick. What, did you think I was going to let you down? I will let you be the judge of that. Besides it wouldn’t be any fun if we didn’t at least give it a shot or two or three — but, and that is a very big BUT, only if we manage our risk while doing so.

So what do we have so far. The SPY still hasn’t filled its gap from Oct 6 of last year at 106 to 108, but is getting closer almost by the day. Again, no guarantee it will do so but it has come too far for too long (or depending on who you ask too fast) to just ignore it and tank here — though it is always a possibility. If that target is met then possibly after a brief pullback the SPX makes a run for 1100 to 1120 which coincides with the 50% retracement I have covered in previous posts. That will likely be it, but never any guarantees. This is why we will have scenarios along with predetermined risk points to get out before we even take a position. As always I will be lazy and let the charts do most of the talking for me — and if you don’t speak chart, then stick around here long enough and you will surprise yourself when even a traffic light starts to resemble candlesticks and moving averages. Let’s check the SPX on a weekly with the 50% retracement:

spx

You can see the 50% retracement at around 1120, and the 89 week moving average which corresponds roughly to the 20 month moving average. Many resistance levels above. OK, let’s see how the dollar is holding onto $76 support:

usd

It is hanging for dear life, but $76 should be good support, and odds are the bottom for now, which means we are very close to the top on SPX — 1080 to 1120. Now a lower risk way to position short is to wait until the SPX breaks the uptrend line from the March bottom. You won’t catch the top (yeah I know you won’t have bragging rights, but the risk doesn’t make it worthwhile) but you will have a better risk profile and avoid most of the decline:

spxd

If nothing else, this is not a time to be complacent in the market. Keep your eye on the uptrend line.

September 17, 2009 Posted by | Legacy Funds | , , | 2 Comments

Let’s analyze the dollar on a weekly chart…

Not only commodities, but most all asset classes have been trading inverse to the $USD. The dollar holds the key as to when the correction will begin. It has been holding $78 lately. There is a small likelihood that it will correct to $76, corresponding with the market rallying and SPY filling its gap. Again the charts can do this analysis much more justice than any words.

usd

Either the dollar is going to break up through the downtrend line, hence a rally for the $ and a correction for the market, or the $ is going to break support at $78 and head down to $76 area. That would correspond with a higher push in the markets and commodities. The important thing here is to watch the move in the $ over the next week or so.

You can also watch UUP , which is looking good on a daily chart today if it can get through the 50 dma slightly above:

uup

September 1, 2009 Posted by | Legacy Funds | , , , | 3 Comments