Could Be the Start of A Larger Correction: 5-16-09 stock market analysis

[bowenbo]

Yeah..I've made some dough on FAZ too...not so long ago it was at 15!

Haha..hope our positions play out and give us some cash for a good vacation.

Cya.

[bowenbo]

Hey Jun, nice reversal day today.

Yesterday's rally was on low volume, today the market gaps up and then closes near the lows...

Adding new shorts?

[SPYoptionstrader]

Indeed, a nice little doji today. Let's see if the bears can show some follow through. We are overbought on an hourly chart, so we could see some more selling tomorrow. Not to mention that it stopped right at the other gap at $92.

As for adding more shorts, I didn't, I still have my SPY puts. I have most of my positions in FAZ already. It's trying to put in a double bottom. I'm looking to get out around $10. If that happens, I'm going to Costa Rica for a week. Haha. Cross your fingers!!!

[bowenbo]

Today the bulls are out in force....I closed my dollar longs and cashed in profits on these trades.

I think maybe we can get a retest of the highs and make a "double top" and then get ready to reshort.

What would be your position if the market breaks the highs? I notice that you use moving averages and long term ones such as the 150 or 200 were breached or about to (200) and they are starting to flatten out, showing a change on the major trend towards a new bull market.

I

[SPYoptionstrader]

The market wants to test that gap at $91. If it trades above that gap, then I would say a retest of the $93.50 high is very possible.

I love using moving averages, they're great when the market is trending. We got a nice bounce off the 20 day exp moving average today. I still think we could use a larger correction. But that's just what I want, not what the market will do. If only I can tell it what to do. If we get a break above the 200 day ema, I would change my stance.

[bowenbo]

Hey great update.

I took this chance when the market was rolling down from overbought to put some shorts on and buy some dollar on FX pairs. Both trades working for now.

I had been previously stopped out in late april when I shorted the market, based on it's very extended overbought condition.

I hope this pull back comes down to the 50 day MA where it would be a great place to cover shorts and add to longs.

I infer that you think the bottom is in? What do you think if 50 day MA is breached

[SPYoptionstrader]

I got stopped out too in April, after the SPY broke $90. But I just got back in yesterday on some puts since it looks like its breaking down.

I think the 50 day EMA is a very good target, I'll probably unload some puts around that level, $86.

If that breaks, I would say $83 would be the next likely target. Not sure if we'll get there next week.

If you want to go long, I would focus on energy, coal, and chemicals. They've been doing well lately.