Hey folks, here’s a quick update on the S&P price movement and what could possibly come next…as you can see below we are currently sitting on top of a W5 which usually indicates a change in trend where we also see the MACD throwing off several bearish signals; -first the bearish divergence, then the bearish cross and now the bearish cross of the signal line…does all of this mean the markets will head lower tomorrow? Not really, but it is indicating the markets are getting tired at these levels…should we have a pullback in order to give the existing S&P bullish move more strength I would like to see a pullback to the 50 EMA or 1195 (blue line) for some consolidation and then a move higher…similar to what happened beginning in early November….I will be watching prices closely to see if we can break key levels to the upside and then hold…that would be around 1245 for the E-Mini’s on the upside, but should it pullback I think a small pullback would be welcomed….I am on the sidelines now watching how the markets will go to determine my next move….

This chart below is the 10 Year Treasury Note Futures…as you can see how I laid out my comments, before the fall, we had some early warning signals to prep for the down move…first is the W5 as shown which indicates a possible change in trend…next up was the bearish divergence in the MACD showing lack of upward momentum and strength….now if you don’t trade the Futures markets the easiest way to play the bond market is using the ETF’s TBT or TLT….first up, the TLT is a 20 Year Bond Fund and will move in the direction of the chart below…so, rather than using Futures you could have used options on TLT by doing Bear Put Spreads…it would be have been (and still is) a great trade….the other way to play the Bond market is using TBT with is an Ultrashort 20 Year that moves at 2x of (and in the same direction) as Bond Yields….so you would have put on a Bull Call Spread in the TBT betting on rising interest rates….either of these trades would have performed very well for you….I think there is much more potential profits in the Bond markets with everyone placing their bets; -from the Feds that are betting they can keep the rates down, and the market participants that are betting they can’t….so far the winner is clear, but hey, all you guys should know that since you’ve been reading this blog….

As a reminder, our Saturday Trader User Group session is canceled due to me not being able to use my vocal cords…they are coming back but I suspect it will be a few more weeks…we will continue with our January session.

Trade Smart – Not Often

hpb