Fly on WallStreet

Alright fuckers. Some of you have been complaining that Fly seemingly uses no technical analysis to aid his trading. In fact, I do believe Fly feels that technical analysis is for the mentally impaired. I don't argue with him as his "calculator brain" is beyond my levels of comprehension.

So, I don't know whether it is to quell you complainers out there, or whether he wants me to make an ass of myself on his blog so he can subsequently fire me and remove any hope I've ever had about having a few "mexican illegals" spruce up my yard for Spring, but Fly has agreed to allow me to post some charts and stuff.

I want to start with the Nasdaq. I think you've got to look at the big picture here.

A historical perspective is important to consider. Lets compare the start of our current correction with the correction that begain last May. Both sell-offs went quickly outside of the Bollinger Bands. In May, it took 6 days of sell-off before the Comp. moved back within the bands.

Volume on the May sell-off was above average, but not huge. Volume the past 4 days of this sell-off has been monumental. Because of the volume, I believe this move could be more powerful than in May.

There is an area of congestion between 2325-2350 that is likely to act as either the 1st. support or a speedbump to the current fall. It helps that the 38.2% Fib. level is right at that level as well. The 2nd area to pay attention to is the 2275-2300 level. That area will have the 200 day SMA and 50% retracement levels to contend with. Finally, the 61.8% retracement level at ~2210 stands a good chance of being touched, as every correction since 2004 has come very near or has breached this level before resuming the uptrend.

So what to do? This event, based on the volume and the spectacular performance of the Dow and Nasdaq on Blue Tuesday, will continue for some time. Don't fool yourself into thinking this will be over in a few days. It is clear from the chart that the Slow Stochastics can give entry signals for those who want to try and play the bounces. If you want to be long the bounce, just remember the spikes will be sold. You could also wait for the bounce, and then add to existing short positions. If history is any guide, the 20 day SMA should be a good place to sell your longs or add to your shorts.

Sometime soon, everyone will be talking about looking for a bottom. Keep in mind that in the past 4 years, every corrective phase has had two or three spikes up and back down before the actual bottom was in. Rather than trying to identify the bottom as it happens, it is more important to preserve your capital and your confidence so you can participate in grabbing a big bite out of the next run-up.