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Monday Market Movement – Waiting on China

Posted on the 03 February 2014 by Phil's Stock World @philstockworld

Mainland China (the Shanghai) will be closed all week for the Lunar New Year (horse) and the Hang Seng is closed today, so we don't know what the tone will be when the sleeping giant awakens and reacts to our ugly closing out in January.  

As you can see from our Big Chart, we have a classic "vomiting cobra" pattern, where the "spitting cobra" doubles over in pain and drops to the previous floor – all very scientific – like any TA pattern

At the moment (7:50 am) our Futures are doing what they usually do in the morning – rising on very low volume.  We went long in Member Chat already (6:44) because you don't have to show us the same move 10 times in a row before we finally get it.  Already we picked up a nice move off the bottom with our /NKD longs up 50 points already ($250 per contract) and the Dow (/YM) up 70 points ($350 per contract), which is enough money to pay for our Egg McMuffins – so we're very happy.

Now, as long as the S&P Futures (/ES) hold 1,780, we can enjoy the ride up but, if the RUT is rejected at 1,130 (/TF) and the Dow fails at 15,700 and the Nasdaq fails 3,525 (/NQ) and the S&P fails its line then the Russell will make an excellent short on the way back down.  

As noted by Dave Fry, so far, we're getting a healthy and much-needed distribution with a mild, 4% correction on the S&P to start our year.  HOWEVER, the Stock Trader's Almanac states:  "…every down January on the S&P 500 since 1938, without exception, has preceded a new or extended bear market, a 10% correction, or a flat year."  

A flat year (post-correction) is exactly what I predicted for 2014 so this is fine with us.  We love flat markets, they are much easier to make money in since we KNOW how to buy stocks for a 15-20% discount and we KNOW how to BE THE HOUSE – and sell premium to others and collect steady fees in a flat market.  It's been…

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