Tuesday, February 24, 2009


Ok, let me try to look at yesterday and figure out what happened there. First off let me say this, one of the main goals we set ourselves in our analysis here is removing surprises. We want to be ready for any move the market is making, determine what signs we need and wait for them to show themselves. We have had quite a downturn since we last saw 860 over 2 weeks ago - are we surprised to be at the lows of november now? No we are not, while others are running for the hills trying to figure out what happened we are sitting here knowing that those moves are normal and were expected.

Yesterday however I was very surprised, the way we had traded is something I would not have expected. On Friday I said we had a potential to turn very negative towards the 741 low, we did not break, yesterday my anticipation was a upward bias and we broke hard to the downside. Not rallying off the key support ranges of 741 is a very negative sign. As you remember I had said that my feel is we will break our November lows before we see any bounce - unfortunately we are right at the door steps of this important low and the market is not looking like it will rally. While yesterdays break was occuring on relativly low volume I am still concerned for a break here.

"Be greedy when others are fearful, be fearful when others are greedy"

Our trade channel as wideneded quite a bit, and we experienced quite a significant drop. Looking at our bolinger bands we continue to widen our range and are getting into areas we have only seen a few times in the past 2 years. On the daily our RSI is below the 30 line, while I do not use RSI on the daily as trade signals it is still an indicator to use for reference. MACD divergence is quite high on the negative side - you remember when I referred to our MACD as zero as an important trend change sign - the same can be applied here as we are on the edge of the channel here.

What do I expect today? Well it is quite difficult, but we should see a wide range today, none of this narrow range we had seen so many times this year. The first scenario here is a break of the 741 in the early morning hours with a rally followed right when we hit 735-736 - if we are not to rally here we will hit my next target I had posted last week of 724-726, this range will hold and we should see at least 30 points off this range.

The other less likly scenario is a rally of course with the upward bias I was hinting at yesterday but being so close to key support the market needs to reattempt this range to make a real decision, we arrived at the 741 range yesterday late afternoon after being heavily oversold - now that we had a night to sleep over it we need to reattempt this range.

Of course my wednesday change of trend call is out the window now as we have changed the way I assumed we would trade.

How to trade this?
STAY OUT - trust me. I had mentioned yesterday I went long and still hold this position, I definitly did not follow my trade book on this one and unfortunately have to say I am hopeful of this position - hopeful should be a word never associated with any existing position you hold, because more then 50% of the time it will end up being a looser, a big one.


  1. Thanks as always, really enjoy your blog!!!!

  2. I think many of your numbers are off by 100

  3. wow thanks for the post, I did not even realize that until now. I always proof read my numbers before publish but it seems I was quite off that day. Thanks for the tip.

    EDIT: edited blog post to change 800's to 700's where applicable

  4. wow, that was fast!

    fyi - posting comments to your blog is unusually difficult and aggravating (frustration is not with you but with blogspot). when i use firefox to post, i end up either not getting the anti-spam text and thus not even having the chance to post, or just getting a red error message 3 or 4 times before a comment goes through. Ive had more luck with IE but yesteray i tried to let you know about the 100 point typo for maybe 10 minutes and just got rejected until i had no patience left. Hopefully this technical difficulty is only something i have been experiencing and not the rest of your fans/readers.

  5. I have the same frustrations, many times I get duplicates in my post list due to the blogger autosave failing, same with posting and replying to comments. I have been looking at different blogger software recently as I am looking to add more features and sections on the overall blog, specifically for trade stragegies, videos, and other overall sections such as longer term outlooks, weekly numbers, etc. I guess I am going to spend some more time this weekend.

    Thanks again for the tip.