Thursday, January 15, 2009

Are there any bulls left here?

I had added my cautionary notes in the comments in the morning hours due to our drastic pre-market moves. The call was either for a v-bottom or an ugly day - well we had an ugly day something I would not have expected. As you can see the 848 should have been the turn around - we stopped at 847.92 after the gap open and attempted to hold this range. Here is where I went long. I had stressed the importance of volume and you could clearly see there was none setting in - I closed out the position after 10 minutes - while it was in the reds it was a good protective trade.

As you can see the past 3 days I have been rather bullish assuming a rally and staying one way in my attitude. This is the same hopeful perspective many have in this market place and I was warning everyone about. One of the main reasons for this is my fear of the cycle we are about to enter which can be very dramatic and very bearish leading to new lows in the short term. I am a bit surprised to be honest we have traded this low in such a short time frame - it is definitly setting the tone of things to come.

The rest of the day was driven by fear with minor attempts at recovery. Higher volume than yesterday which is a good sign for us traders as we will have much better ranges ahead of us for trading. I am going to use a quote that many of us have heard already - "be fearful when others are greedy and be greedy when others are fearful" - I think that by itself says enough.

Well from a technical side we are very oversold but take this with a bit of caution. We need to account for fundamentals as this is the fear driver at the moment. Purely technical take a look at the bollinger bands on the daily - we have sliced through the lower range yesterday and as you know this will call for a reveral but it may not be time yet. We closed below the 850 range at 842 and are 22 points away from major support. I am going to make a statement now I normally do not do - we will see a bounce from the 820 range.

Take a look at BAC, AAPL and watch JPM earnings today - those will be drivers for todays tradeing.

Support and Resistance
As we have entered new ranges its time to present some more numbers again.

880-885 = we know the importance of this range - if we are to get a rally this could be the top but I think we will stall before then.

870 - 871 = another mid point of lesser importance but something to consider in order to get into the 885 range

865 = this should be the top from our rally as we have broken the 850 on the downside

848-852 = this will be the key resistance to break on the upside if we are to see any further highs. It should be broken for a short time frame but may not hold.

836 = yesterdays low but its more meant as an orientation as it does not provide strong resistance nor support. The proper support level is in the 829 range which is 7 points away.

815-820 = this will hold as it provides major support in this range. We have only traded below this range for a short term in this recession so it will provide enough support for a small rally.

Long Term
We are about ready to have everything in place to make another long term call and properly fine tune my October and November calls. I apologize for not making this earlier and waiting so long. Thus far I have been correct with those calls so I want to keep that track record as you may understand. The other reason is that I am fearful myself of the cycle that may be coming and want to hold off as long as possible before giving such bad news. We have the potential of possibly 25+% drop from where we are now (842) in a fairly short time frame. Before making a statement like that I rather have all my facts in order with the proper justification.

How to trade?
Well as you can see I have been rather bullish and keep stop lossing out of my longs. Yes I did have a bad beat 2 days ago but lets scratch that one off the list as it was one of those days you wish you could remove from your trade log. Keep in mind while we have been trying to go long we had great protective trades thus having only minimal losses.

If we are to reach the 820 range which is very possible from here we have a long opportunity however we also have a wider risk range. Anywhere from 830-815 is an acceptable range for a long entry so build your position slowly instead of going all in.

Shorting again I would avoid as we can snap at any point from here making your shorts risky and require constant monitoring.


  1. Be careful here, while we have quite a bit of volume when looking at the 1 min bars we have small bars on top of large lines. We need to get bottom to top boxes for a real rally here. This could be short lived eventhough we hit the first 829 target (828.91)

  2. bottom imminent. 15 more minutes max.

  3. I moved big off 820, but the volume is low no? I am just wondering if you see this as the bears catching their breath and move lower toward 800, or a viable bottom for the foreseeable future?

  4. we'll have to see. Volume is good especially considering we have the 3:00-4:00 still waiting for us.

    I will post more details on where we will head in tomorrows review. We have a lot of up volume at the moment but this could die down soon as bears sell into the rally. The last hour of the day is important and we could be closing up between 8-12 points.