Yesterday the S&P 500 spent most of the day flirting with its 200 DMA of 1380.90 after closing below that level on Thursday. Our standard action here is to take defensive action if it looks like the SPX will close below the 200 DMA on the second day. As you can see from the above picture, with five minutes to go it was above. A minute or two later it went below but inside of five minutes is not enough time to guarantee we can get an execution for all of the shares we need to sell so typically I base a decision on where it is five minutes before the close.
We did all the cipherin and figurin and had what we needed to trade loaded and ready to go so it was a lot of work but it would be fine if the work were done for nothing and the market goes higher from here.
I am not worried about not getting the trade done Friday because our objective is to avoid the full brunt of a large decline. Theoretically, if it stayed one point below its upward sloping 200 DMA forever then there would never be a large decline to be avoided. More realistically the SPX will not open down 20% on Monday morning so we will execute our strategy if and when needed as best as we can.
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