Monday, February 23, 2009


Shorter post today guys.

Previous Trade Day
Friday setup as a strong day towards the downside, we gap opened down and held the 764 in the morning, as you can see in the comments I had posted this is not the bottom for the day with a top out at the 772 - we topped at 774 before we turned down to create new lows.

I have to admit I expected further downturns into hte 740 range and we found our low in the 754 range before we rallied and filled the gap. Looking at the GAP open and the close we were fairly sideways for the day which is to be expected for options expirations.

We should continue on retracing as we have had quite a few down days the past week, with a top that should occur in the 799-802 range by Wednesday this week. Here we will make a decision to either reattempt the 820 range or break to revisit the 741 range with a break into the 720's.

How to trade this?
Remaining on the sidelines is the best thing to do until we determine if this is a simple retracement or a possible setup with strength to break out - it seems pretty obvious that new highs or rallies will be sold into, wednesday will let us know if we have a chance at further highs or continue on the down side. You keep on hearing me on the 800 range, once we break it on the downside it is very unlikly that we will get back above this number again so this presents a great trade for us.

Of course if we can get back into the 770 range I feel we can take this chance and go long with a decent 768 protection. Other then that I would try to stay out to see what the market is going to do.


  1. great post.

    About what's happening today, do you think this is the big drop? Or do you see a chance for a retracement back towards 800?


  2. I honestly feel we will try to retrace back, 800 by wednesday would be my perfect target however we have quite a bit of weakness already today. The reason for our GAP open were financials today and those have already sold off. The question remains if we have some buyers step in here hoping for the double bottom. As you remember on Friday I have been very bearish for that large drop you are referring to, I do not think this will occur today, if you look at our sell off its rather orderly on average volume, which leads me to believe that we do have a chance at retracing.

    I am slightly long at the moment wiht an exit on Wednesday so we shall see how that plays out. The morning sell off we saw was a typical reversal pattern that has completed (5 specific 15-min candle stick bars) and we should be done on the downside now.

  3. just so everyone knows waht I am talking about regarding the 15 min candle sticks. 2 15-min down bars, followed by a green spinner (small box on larger lines), then followed by another 2 15-min down bars. Look at whatever charting software you have and the first 3 bars are a typical sign with a very large chance of getting 2 additional 15-min down bars. I did not trade this pattern but rather used it as a chance to go long on the 4th and 5th bar.

  4. Thanks for the reply. I feel a little bit more confident in my analysis now. :-)

  5. well it seems I have been quite off for today. I did not expect to break Fridays low and create a new 52 week low on the DOW as well. It really shows the weakness that is present in this market place. Sidelines seems to be the best place as the short side is quite dangerous as well due to us being oversold, creating new 52 week lows on the DOW and being so close to the previous bottom on the S&P. If I were short I would try to cover here for better protection, on the long side, you need to assume a bit more risk but I do expect a rally even if its short term and only worth 20 points to occur either today towards the 3:15 or by tomorrow morning.

  6. take a look at the divergance we are seeing here with financials. We have had quite a sell off that was the reason for our drops, however while the selloff on the financials seemed to slowed down the S&P continued its downward path. We are not seeing "crazy run for the hills" type of sell offs on the financials so we can expect the S&P to get back inline here shortly.