Saturday, November 22, 2008

Weekend Update

Here's what I'm looking at for this week:

I put in retracement levels from the highs of November 4th, down to the lows on Friday. There is strong overhead resistance in the 84-85 area (click on the chart for my comments). I think if there is any legitimacy to Friday's last half hour rally (just in time for OpEx), then 84-85 has to be overtaken on sizable volume. Above that, at 90 we run into more resistance and any rally past that would get me in on the long side for a multi-week rally. But before we get too far of ourselves, let's stick to that 84-85 range.

As we have a shortened week this week, and with Thanksgiving usually being an up-week on light volume, I think a test of the 84-85 resistance level is definitely in play for this coming week. But, the fact that we've seen light volume in the past will make any rally attempt at that resistance, suspect. If we test it this week and aren't able to take it with force, then we should be in for another round of selling into the 60s on the SPY. Remember, there is basically no support level underneath the 01-02 bottoms of ~77; there is a long way to fall if we can't hold this area.

I bought puts (SPY & IWM) on the rally late Friday, and will look to add more puts if we hit that 84-85 range.

I'm continuing to watch and compare the "aftermath" of what happened in Taiwan's stock market after Ma Ying-Jeou was elected president, and that of Obama's election. In Taiwan, on the 13th trading day after the elections, their general index (TWII / TAIEX / Taiwan Weighted Index) rallied off previous support and ended up fully retracing back to where the markets were before the post-election drop. Now, this past Friday was the 13th trading day after the U.S. elections, also with a significant up day. If the U.S. markets are to follow what the Taiwan markets did, the U.S. markets should rally back to 99-100 on the SPY, the high on November 5th. But, that is very unlikely as of this point. Something that may turn out to be a better fit is taking the days prior and after the Taiwan inauguration of Ma Ying-Jeou, and that of U.S.'s elections.

Although they are for different events, looking at the charts around these two events have a much higher correlation between the two. Using the Taiwan inauguration, that would give the U.S. markets a rally up to the 38.2% retracement level (see above) [the TAIEX actually pierced through it intra-day, but fell the next day], before falling back down. This would fall in line with what would be a reasonable situation this week. But, for it to be valid, the rally up to the 38.2% retracement would have to occur soon, as in Monday or Tuesday; Wednesday would put the rally much too late when compared with the rally in Taiwan.

Anyways, probably not that much to look into there. I definitely wouldn't base any plays off of purely that. Obviously I may be creating things that aren't really there, but I just think there's a lot of similarities between Taiwan and the U.S. right now in terms of the presidential electoins/politics (and maybe markets). If something does pan out, I'll put up a chart comparing the two, but for now- just something I'll watch for, for fun.

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