Tonight, I've developed a new theory that deals with a very basic mathematical strategy to the problems we currently face. It's simply the ratio equation of [a/b = c/d]. I decided to see how directly proportionate this rally is compared to the one we experienced in November, both for the $SPX and FAZ. Oddly enough, the results were quite interesting:
As odd as this next fact may seem, if we're going with the same time spread as the November rally, we're due in for a pullback of a large scale within the next three days. I figure this not only because of the current near-term overbought stage and the fact that the government can only prop our market up for so long, but because the November 21 to December 8 rally was 17 days long. Simple math shows us that 17 days tacked onto the starting point of this rally (March 9) gives us an approximate date of March 26 to begin a substantial pullback. That theory has a VERY low probability of occurring, but if it did, that would be pretty cool.
Again looking at mathematics, it's possible that FAZ has averaged in a bottom for the time being, closing at $19.20 at the end of the trading session today. As glorious as that may be for my cronies holding FAZ with me and suffering major losses, it also gives me and others time to analyze how long this bull run will last.
Thus, charts for UYM and TNA:
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UYM 30 Day, 60 Minute
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TNA 30 Day, 60 Minute
If either have a pullback, don't just watch the support and resistance levels. Ask yourself:
- Where are the moving averages? (50 SMA, preferably)
- Where will the trend line lead the ticker price wise if there is a pullback?
- What are the current VIX, $TRIN, $UVOL, and $DVOL levels?
- How is the market reacting to the sector in which I am currently looking at? (In this case, Basic Materials)
Besides TNA and UYM, tomorrow I will also be looking at FSLR, STLD, PCX, and ERX. Until tomorrow night, enjoy your spoils from today (if you weren't like me and got hit in the face with a polished leather boot).
ZM
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