Today was quite a day for intraday momo traders. The setup was almost perfect.

First, the market opened with a nice cliff dive before finding a bottom where it was supposed to – near SMA50 and fib retracement on the SPX daily. It actually fell slightly below and had POMO(Permanent Open Market Operations) not kicked in, it may have gone ever further. As you may know, there were 2 POMOs today:

November 29, 2010
Outright Treasury Coupon Purchase
$1.5- $2.5 billion

November 29, 20103 (afternoon)
Outright Treasury Coupon Purchase
$6 – $8 billion

The second POMO, being much larger than the first, was enough to spur a nice rally this afternoon and managed to push SPX back up to the top of the channel. It was a perfect setup.. notice the SPX 3 minute intraday chart:

Despite the afternoon rally, the overall market direction concerns me.  As a day trader, I love large intraday swings similar to what we experienced today.  However, there is great money to be made in swings given the right environment.   Until we get out of this box, swings will be a small percentage of my portfolio and I’ll stick to day trading.   Swinging is for market/sector leaders right now, in my opinion.


Why I’m still concerned:

  • We finished below SMA10
  • ADX (DI+-) is becoming more bearish.
  • SMA20 is gettign further away (3 days in a row of lower highs).

What now?

Same as yesterday.  I’ll stick to day trading – lots of winners if you’re looking in the right places – and minimize overnight exposure.  It’s that simple.  If SPX gets over SMA20, I’ll start going long and taking home more swings.  Until then, stay nimble, my friends.  If we fall below today’s lows, I’ll start shorting the market.. no doubt about it.



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