After teetering all day on a new Sell signal, the SPY and XLF closed with the existing Buy signal still in effect. As of the close, both ETF's are in a sideways range and additional weakness tomorrow could trigger a new signal. After taking several small losses, it will be nice to take a couple of profits.
I have had a couple of questions about why I reversed the 2 PM trades made last week, in the levered short Gold and Silver shares. It is all about limiting loss and even though the Momentum Change indicators are still flashing a decline, the Failed Auction pattern reappeared during the day, and as it is one of the most reliable, though relatively rare signals, it was warning of a reversal of the momentum. Rather than sit and wait for a Momentum Change, I thought it best to get out.... while there was still enough profit in the trades to cover the nominal commissions. It is possible that the short position will re-emerge and we can take another crack at a decline in PM's.
Near the close, we got stopped out of the QID at 10.99, with a $.56 loss.
Earnings season is upon us, and the first to report, Alcoa, reported good earnings, beating estimates by $.02 per share, but reported gross sales missed consensus estimates by $100,000,000. This is a continuation of what we saw for most of the past year.. corporate earnings looking good, while sales showed YOY decline. It some point in the near future, with out an improvement in either pricing power, or increased production and sales, margins are going to get crushed by escalating cost of raw materials.
Sovereign debt problems are again in the news today, with Portugal asking for ECB help in cushioning debt re-alignment. Is Spain far behind?
Tomorrow is again going to be a nail bitter, as a Momentum Change again will be possible.
Best to Your Trading!
Bill
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