Thursday, February 19, 2009

Continuation ...

Well, lets first address what we have been waiting for this week and lets go back to previous days comments.

[tuesday] I see a change of trend on Thursday around 2:45-3:15 so watch it there for a possible short term bottom - if this call holds true you can see that we have quite a few days of down moves.

[wednesday] 764/774 = now this is something we have to watch with care here, many are saying its the retest of our previous lows to form our double bottom. You know I do not believe this to be the case and we should blow right through it to create new lows but we need to be mindful of support. This could provide a bit of a stronger bottom. It is possible that this will be the final target for my change of trend call on Thursday afternoon.

We created a new 52 week low on the DOW at 15:42, while this is off by almost half hour I still feel it was an important enough point to consider, not a trend change but a significant enough low, especially considering we had made this call well ahead of time. On the S&P we reached 777.03 at 15:42 as well, off by 3 points from my target range.

What support did we see of this important range? Especially when combining with a new 52-week low on the DOW? - none, even the 5 point jump was sold off right away. This is not how a double bottom would behave.

[tuesday] Keep in mind probability of longer term change of trend calls are not accurate enough to use trade signals by itself so don't go short blindly with an exit order on thursday afternoon

Well it seems I should not have listened to myself here and just gone short to stick it out to my target. Just kidding guys, trade wise we have had quite a difficult few days. We have know the entire week what we are setting up for, however, every day we are presented with almost impossible trade ranges. Even if you had a perfect entry either on Tuesday or Wednesday you were able to gain only a small point range that could easily be eaten up if held overnight with a big GAP open the next day - so its hard to take this big risk and keep a position into the close.

I have to admit I am very surprised at the moves the past 3 days, this is something I will have to come back to in a few weeks with a different mindset to determine why this was occuring. We have had a HUGE GAP open on tuesday, that GAP range alone had more points then our entire trade range we have had this week. Considering we are at the major lows of the market place, broken down trend, lowest DOW close - all we saw was calm and collected moves. As we discussed in the comments yesterday this could be the market waiting for some sign of outside intervention, but it still does not justify the moves towards new lows. Remember the strength and moves around the 800-840 range in our Jan 19th week - we saw none of that this week.

Now, there is a slight chance that this sideways trend is a setup for quite a big drop to come on the very short term, meaning most likly today - I do not believe this to be the case but we have to take into account why this is occuring right here.

Well, here we are again on a Friday with a weekend ahead and just having closed as bearish as we can the day before. Now being short I would not feel comfortable keeping it over the weekend so expect some short covering, and on the long side there could be some bargain hunters playing the double bottom play.

If we do end up with a day on the stronger side we have a chance at the 800 range I was hinting at Wednesday, on the downside of course we have the next levels at 764 and 741, I do not feel we will go lower even if we have a massive sell off.

I apologize for not giving more direction today, this is one of those days where I need to watch the open and the first hour of trading before I can make a call at what should be occuring.


  1. Thanks for the very helpful insight, it looks like we have breached 764 in the futures market and are currently working with 761.25. I dont think that qualifies as a break since the 764 you mentioned corresponds to the stock index itself rather than the front-month futures contract right?

    Ill be looking forward to what you think of the first 30-minutes :-)

  2. do not go long yet, we are not done dropping. I know its 764 but it will not hold.

  3. watch for a possible top out at 772 before we drop again. Regarding today, still a difficult call especially since its option expiration today. It is very possible that I was wrong, and this is the big drop that could occur today, I said I did not believe this to be the case but its looking a lot more like it. We definitly have a chance at the 641 range today that I feel we could break. If we are to get a turn around look for the same time window yesterday in the late afternoon around 2:30-2:45 as the final bottom. I would honestly try to stay out today, its a difficult trade here as it could whiplash anywhere fast.

  4. wait... so you think we could drop to 641 today?! Wow. that would be terrible. Good for those shorting, but terrible for the country.

  5. I assumed that was a typo and he meant 741

  6. while its possible its hard to trade for this range. And keep in mind option expiration today, we could remain sideways here all day. Better to sit it out today.

  7. oh yeah sorry, typo. 641 would be a bit too much. Thanks for clearing it up Alex =)

  8. HAHA. Whew!
    Thanks alex, thanks chaugner.