What a week! Let me accept the fact that I have not expected the last fifteen SPX points this week. I was ready for it in the 1st week of January but not now. Each and every indicator we can think of is stretched beyond imagination and if this logic defying situation continues longer, the retracement will be that much harder.
Throughout the day, I have been following the moves of AUD and at the end of the day, it tagged 100% of fib. extension. (http://bbfinance.blogspot.com/2012/01/aud-tags-100-fib.html )
It also developed a RSI divergence at the 240 minute chart which needs to be resolved. (http://bbfinance.blogspot.com/2012/01/aud-trend_20.html )
The late gain in SPX is correlated with the gain on AUD.
When everything else fails, we have to look at what is working and at this point only thing that seems to be working is the following analogy which I showed yesterday.
Let us see if we get the long awaited correction on Monday/ Tuesday of next week. A short panic would be nice. The original plan was to go long by the last week of January following a correction and go short in the 1st week of February following the top. Depending on the price action in the early part of next week, I may close my short position, go long for a while and flip to short again.
Trading is not about being right all the time. It is about being right more often and quickly adjusting and minimizing the loss. While the retail has been absent in the current rally, the mutual funds have totally committed themselves and the available cash with the institutional investors is at record low.
The big sell off is round the corner but a higher high is going to come before that. I would love to take part in both. But will have to wait till next week for that.
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