Friday, February 13, 2009

Someone opened the magic drawer ....

well I have been sitting out all week as I was waiting for all the signs to be put into place - I said that its important to see how the market is behaving at certain points and this information can be worth more then trading the ranges we have seen in the past 3 days. On Tuesday we had our big drop after the bailout plan was announced - a down move of this strength was to be expected as the market has been holding out for this information for quite some time now just to hear disappointing direction once the big plan was revealed.

While we neared oversold conditions at the end of the day we used wednesday to remain perfectly sideway to distribute and absorb buying pressures - I was getting more excited after seeing the market retracing 23% only. Additionally I made the reference to the DOW yesterday as another piece of information to confirm our direction - you could see how confident I was in those calls.

Everything was in place for our final confirmation yesterday and we started with a text book setup on the open. GAP open down - We failed an attempt at a rally/gap fill in the morning hours, we dropped into support at 811 and retraced 23%. We continued to drop towards the afternoon and around 2:30 had our decision. Head and shoulder pattern on the intraday, volume, the DOW strongly breaking major support. As we were approaching the low of the day we were unable to rally, confirmed the head/shoulder reversal and time, price, volume all came into play at one point to confirm everything we have been waiting for the past few weeks and past few days and we finally dropped to close the day 4+% down exactly as I had posted in my comment yesterday (previous day conversation).

Wait - this is not how it ended? - what happened? Well, we could all see what occured yesterday. Timing was impecable , it was clearly visible we were setting up for our big down move I keep on describing with all confirmations in place. It seems they have some pretty smart folks in the new administration that understand how the markets work and were seeing exactly the same thing we were yesterday - they knew what was occuring and had no choice but pick up the red phone at 3:00, call the boss and say "Boss, its time to open up your magic drawer and pull out one of the 25 envelopes we have prepared for you." - "Can I pick any?" - "yeap, any, you and me know that it won't make a difference but lets just do it anyways - for your enjoyment we made funny labels for each of them so pick them based on which you think is the funniest" Each envelope contains one page with the following information:

1. [Random Plan Name that we feel will help]
2. Available in 500, 600, 700 Billion or 1 Trillion
3. Two sentence summary
4. "Only to be used in emergencies"

Yesterday envelope's plan was called "Mortgages: pay your own, your neighbors, your neighbors red headed aunt and your neighbor's red headed aunt's hair dressers"

[yesterday] Technically we are still in an uptrend but the market needs to make a stand here - bulls need to step in and match volume on the stronger side - however without outside intervention that takes the market by surprise I doubt this is possible.

No need to say more ....

Yeah technically we had a great reversal yesterday, look at the extremely bullish hammer candle stick on the daily, extremely strong volume, v-bottom like recovery, close above our weak up trend line - don't get too excited though, even with all of this it was only a 38% retracement off our peaks.

We are entering very dangerous market times. The market is kept in this range longer and longer. This can turn out to be quite negative overall. Its like a bungy cord that you keep on pulling and twisting - at one point its going to snap back violently or break all together dropping whatever was attached to it. The longer we remain in this formation we are in the more dramatic the moves will be - unfortunately this is looking more and more like a very strong move to the downside.

I am quite frustrated with yesterday and for today - no review, I refuse to give in and forecast a market that quite frankly is unpredictable.

ok ok, maybe just a little bit - the bulls need a follow through today and continue with a 3+% day on strong volume if they want to maintain any type of uptrend. While this move is quite bullish we did not break Wednesdays top. This needs to occur today on strong volume and we need to see a test at the 850 range. If this is too occur the most likly scenario is trading towards 840-842 in the morning as part of the continuation, retrace slightly to the 831 range and rally into resistance at 850.

A break of the 831 range on the downside will bring is back to 820-821 where we will make our decision.


  1. well almost right. Seems we retraced first to my target and now made the rally towards the 840. I would expect another retracement down to the 835 before attempting the 850.

  2. battle is won or lost here. This is yesterdays top before all the crazyness. Bulls need to come in here. I am tempted to go short but do not want to hold over the weekend. Good luck everyone.