The markets talking heads have been looking for a correction, or pullback, for many weeks now. Some say that Wednesday 23, 2009 may have signaled that turn is near or in progress already. The S&P 500 made an outside reversal day, in which the high and low of the day exceeded the previous days trading range. Yesterday, September 29, 2009, the ETF SDS showed signs that it would continue higher for at least the near term. Many of the ETFs that were mentioned weeks ago to possibly be bottoming out may be worth looking at again if the market enters a correction.
Using very tight sell stop levels and measuring your risk is important when trying to time a turning point from this big a move in the S&P. The market has shown extreme levels of strength from the March lows and it could continue higher as new buyers chase the large move it has made into the end of 2009. Many market watchers are unsure how the market can sustain such a move if the Federal Reserve eases, however bubble mentality will most likely prevail and it is hard to establish a time frame for any moves new or predictive from the Federal Reserve as they massage the market to “normality.”
SDS could set up for a long or short term trade here regardless. On this past Wednesday, outside reversal day, SDS made a low of 38.70. On a 30 minute trading time frame it tested this low on Tuesday the 29, 2009 trading to a low of 39.37. This was a good entry point. As well the SDS has so far traded to a low of 39.79, and today September 30, tested this low trading to 39.84, .02 cents off a .618 Fibonacci Retracement from the 38.70 low to the 41.65 trading high reversal since this low.
On a short term basis, use the 39.37 trading low as a sell stop to enter on the 30 minute chart. Trading levels could reach 45.29 and 49.37 in this time frame. Follow the trade from the link below in the trading alerts section. As well, use the 38.69 level low for a daily trading time frame sell stop if you believe the the turn may be in for the rest of the year or longer.
The trade analysis for SDS is being tracked in its trading alerts page.