Legacy Funds

Liquid – Transparent – Alt Investment Strategies

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 »

  1. A lot of experts agree with the 1039.47 number. But, why couldn’t we have the same situation as in July. Whre it dropped below 930.17, formed a H&S and then rallied hard. So, conceivably we could drop all the way to 1000 and rally hard again?

    Comment by Macro_Man | September 29, 2009 | Reply

  2. Obviously anything is possible, but odds are greater now that any correction from here is going to be a larger decline than what we had in July, but again all we can do is play the odds and manage our risk.

    Comment by Suzanne Hamilton | September 29, 2009 | Reply

  3. well said….learning from you as always 🙂

    Comment by Macro_Man | September 30, 2009 | Reply

  4. thanks…I am honored… watch China also, been short via FXP at $8.89 on 9/22, leading the market on the downside now

    Comment by Suzanne Hamilton | September 30, 2009 | Reply

  5. yup, nice. Also watching…waiting for nonfarm payroll number..then may start legging into shorts again. Trying not to be too early this time. Prefer to be late than early or try to catch the top.

    Opposite of my usual practice..but got to try to be patient.

    Comment by Macro_Man | September 30, 2009 | Reply

  6. Hi there…what’s next…1100? 1120? Internals look weaker and weaker. After today’s 30yr auction, we may see higher rates and eventually a stronger dollar.

    Guess the bank earnings next week will be the real tell.

    Comment by Macro_Man | October 8, 2009 | Reply

    • Well, we can double top at 1080 but there is the possibility of 1100/1120. We are getting very close in my opinion.

      Comment by Suzanne Hamilton | October 8, 2009 | Reply

  7. Yup, but I am not still seeing 3 month LIBOR moving higher, though 2 year swap spreads have been steadily widening. The other possibility is something from the dollar, either a breakdown that leads to countermeasures or strengthening. Perhaps bank earnings next week. Perhaps Helicopter Ben may say something tonight in support of the dollar and actually do something for uncle bucky. Maybe, Obama’s approval rating plummets and the govt and the Fed get some religion.

    Just trying to see what is going to turn back this liquidity that is becoming bubilicious once again.

    Comment by Macro_Man | October 8, 2009 | Reply


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