Thursday, 17 November 2011

One more sell-off before QE 3

Today was one of those days that raise my blood pressure to extreme levels. The risk instrument markets sold off, with the S&P 500 going down 1.55% to $1216 and with Gold crashing 3.14% to what is now $1716. Long term chart damage has been done in both of the instruments and it can be taken as a sign of trouble to come: the utter failure of the US budget committee or the failure to bail-out the insolvent Italy. At this point FED is waiting for a major sell-off in equities before announcing another QE programme.

S&P 500

I was pretty confident on this downward S&P leg and actually caught more than half of this weeks move on a short contract, but as usually covered it too early at $1225. I am guessing that the US index is forming a bearish triangle with the support level at $1210, and if it will bounce back it may reach again $1255. If the $1210 level is going to be pierced soon, we may even see a 2008 similar head and shoulder formation with the retest of the neck tie at $1260 (already happened) and a failed test of a below neck-tie congestion zone followed by a free-fall. I`m going to go short at $1205 if it is on high volume. 


Today, the gold sell-off caught me with my pants down, and with 70% of my usual position at an average price of $1749. While the $1695 stop loss has not been triggered yet, I am still rather considering gold trending down to $1670, or less probably to its 200 daily EMA which is at 1631. Take care and use stop-loss, especially if you are leveraged. 

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