No trades on Friday

The money flow indicators came close to penetrating the downward sloping trendline but failed. Even if they had broken to the upside, the market is again near resistance and the weekly RSI is tracing a divergence. Both these conditions are in my opinion, poor setups for a long trade. As an update to a prior post, my macro indicator resumed its downtrend after meandering for a few weeks. Technically, it's still not at a low enough level for me to call an August 2015 top. Therefore, well just have to continue watching it's progress week by week.

Game plan for Friday 12/19

In reviewing money flow indicators this evening, I confirmed that inflows were not enough to take out the downward-pointing trendline since mid-November. However, it's possible that this could occur tomorrow. Specifically, I'll be looking for the Chaikin money flow indicator to continue it's advance as confirmation. Assuming that this occurs while the S&P is above 2044, I'll be deploying 100% of idle cash.

Patience

So the market rebound is obviously impressive and key levels are being penetrated that would normally cause me to jump back in. Most notably, the trailing ATR3 stop at 2044 broke today on an intra-day basis. I'll assess the technicals and ensure that money flow indicators confirm the health of the upward move before jumping back in.

Weekly recap

I executed two major trades by selling a total of 75% of core positions at two key levels 2040 and 2027. As usual, I could have done even better if I had sold earlier (i.e., not waiting until both of my longer-term indicators were showing negative divergences). Even if this correction is short-lived, it feels good to have taken some profits off the table. It's not clear what the re-entry point will be. There is some support in the 2000 region, but if the market doesn't hold here, I would be looking for support in two areas -- either 1945 or 1905-1920. The macro indicators are still pointing to a positive 2015 until at least August.

Took some profits

My short-term indicator flashed a sell signal last Friday but even though other short-term indicators I track (e.g., money flow) were confirming that a correction was possible, I didn't take any action. I didn't because, the longer-term (weekly) indicators such as RSI were not yet tracing any divergences. My objective for this week was to watch out for any divergences (i.e., a close below 2072) and to possibly take profits on 50% of core positions. Given the nature of weekly indicators, I would normally wait until Friday to draw any conclusions. However, given the apparent shift in momentum, I took sold 50% of my core positions this morning at S&P 2040. The next key level is 2027 which represents the ATR4 trailing stop. A break of this level will lead me to sell 75% of remaining open core positions.