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Market Recap: Close Day Craziness

November 13, 2008 5:16 PM

energyorbit.jpgWell, I said one of two things were possible if the SP lows cleared - we were either going straight down and close at the low of the day or reverse and go straight up. Those were the only two possibilities. Why? Because it was a close day off a new low on the SP. I was hoping we would stay negative today and then be long above the Dow low tomorrow, which I have said should not clear or at the very least HAD to hold. Did they make it that easy? Uh no.I saw the low at 818 and said “this is a pretty strong rejection of the low”. I just wasn’t sure if we could close positive, which we had to do as there was still over 2 hours left in the day. Obviously we did.

This is why I continue to mention close days. They are extreme risk/reward days. You either win big or lose big, there is nothing in between. Today was even a more critical close day because the SP low was taken out. This is what led to the massive rise into the close. Close days that make new lows or highs are the most extreme. Once traders saw that today was going to close positive, all shorts covered and we went straight up.

This is what i was hoping for yesterday and why I went long. I was hoping for a close day homerun. I picked the wrong day. Anyhow, know the close day risks and possible reward. Those are the critical days when huge moves are made.  Close days tend to make their high or low in the last 5 minutes of trading. That is why I said, “it looks like the only thing to stop this higher is the clock”. Another 15 minutes and we may have been up 800 today as shorts scramble to cover and nothing can stop it.

We now have in place a very clear SP low. I was extremely critical of the previous SP low, and said it was complete nonsense. I also said the Dow low was important, the SP low was not. If we get lucky, we will retest this low in coming days. Chasing this higher is exceptionally risky as we have exactly one low to hold - today’s low. Therefore, it could drop 800 points. Personally, I am going to sit and wait as long as it takes to be long this as close to todays low as possible. I just don’t know where the likely low will be. It is also “possible” we could go straight up here, I am not sure. My guess is if they do that, they have just increased the risk to the downside dramatically. Just going to have to wait this out and see where the place to be long is, with as little downside as possible.

Another thing that led to trading positive was oil. I was convinced that the low of the market would likely be seen once oil makes a firm low. Today was the day. It spiked to a 22 month low at $56.35 and reversed. I saw the action in oil and should have known to be long. This is because it would likely lift all of the energy stocks, and therefore, the market.

The other clue should have been AAPL. The low of $85 was one of the best lows in the market. It hit a low of $86.02 today. The trade there was obviously long above $85.00. I had thought before that the low of the SP might come when $85.00 on AAPL was challenged, but forgot all about that until looking at charts tonight.

Written by Tom@StockBlade.com · Filed Under SP Futures 

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