I have a high degree of confidence that we are near a IT top so I am ready to go short. Since going short against a strong uptrend is risky whatever the context, I have two requirements that need to be met:
> a significant rally in the first part of the session. I looked in the past and previous tops happened after the market was at least 0.5% above the 7 h EMA. In our case this would mean SPX around 1305.
> a spike in the put/call ratio. This is a bit of a problem given the recent behavior of the cpc:
It is oversold despite the recent rally in the markets. This is typical behavior before a more important top, in my experience. However, usually tops do not arrive before a more significant bullish spike in the ratio. So, what I will do is check the intraday reading after the lunch and, if that represents a spike from current levels, I will consider this condition met.
This plan is highly dependent on good GDP data. I will not chase the market if it gaps down and does not rally. In this case I think that there will be another opportunity to sell next week.
2 comments:
Adi, Thanks for the update about the IT Top. For me, I won't short until I see the pull back since I don't want to be killed in front of the fast running BULL bus.
Good choice
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