Monday, March 23, 2009

Even out the playing field?

I have spent quite a bit of time this weekend reviewing the past 2 weeks and tried to determine how this may play into the remainder of the month. Give those 2 a read first before you continue. While they are rather long they provide quite a bit of guidance on how to navigate through the waters here.

1. What is going on? (2 week review)

2. What to expect now? (forecast)

Based on technicals we have a narrow boundary that gives us more signs, 780-785 on the upper ranges, a break here and we will retest the 800 range. On the lower side we have the 862-863, a break here will bring us back to 741 (with a small stop at either 752 or 745).

However, as mentioned on Sunday we have to be ready yet again at outside influences, in this case the details of the toxic asset plan. While bulls and bears may differ on what it means for us short, mid and long term the market generally gives us a better answer – and the signs are pretty obvious at this point. Asian markets are trading at 2 months highs, futures at 784 at the time I am writing this. We will know the final answer at 8:45 AM eastern when the final details are being released.

I had mentioned that in the past 2 years any major outside influence has normally resulted in a major market bottom being formed. This time around it’s a bit different as we were in the process of creating a top, whether it was the final top or a mid term top is yet to be seen. Now the one thing to consider which is rather important is the first reaction the market had towards the lack of details presented by the administration that occurred back in February.

[Mar 2 – Special: Review of Reviews]
“The consumer needs to see that the administration has a handle on this crisis and has all the right people in place to ensure that America as a nation will emerge stronger once this crisis is over. Thus far I have to be honest I am a bit disappointed and if we are keeping score its crisis 1 : administration 0. Lets see if we can even out the playing field in the next 2 months to come.”

After this disappointment back in February the market gave us a clear response – 860 to 666. Will the details being provided today give the market the confidence back? Will this be the excuse to say “its not all that bad?”. Well if it is, get ready for a second month of strong gains.

From a trade perspective, I am still short and need to see a break of 800 first before I give up and accept defeat. A break of the 800 will give us great protection on the long side and of course a primary target of 870-880 with further potentials.


  1. considering how important today is, volume is rather low. Definitly something to look for as it unfolds in the afternoon. I would have expected a lot more buying behind this move. Something to consider, not saying its bearish or bullish. My finger is still itching on the cover button so we will have to see what happens.

  2. It did gp past 800. What do you think for today? test back 760 in the cards?

  3. depends on how we close. There is a good chance of closing above the 800 today. If that occurs the best scenario is maybe towards 790 but the market is going to try its best to put enough margin in there to leave the 800 as support. If we end up selling off towards the 780 range we got to be a bit cautious. It could either be the ascending triangle I was talking about or a failure of important support. Depending on how we trade there it will give us more signs.

    I covered my shorts by the way and will be waiting out the next few days. It was a rather emotional cover as I am a strong believer of there being more downside gains then on the upside. Unfortunately it was a fairly large and leveraged position so at one point I have to say stop.

  4. take a look at MACD on the 60min. We have some room left to hit the 820 from here. That of course would be a great short but 20 more points is not going to happen today. Its a coin flip at this point.

  5. it looks like it will make new high now. how do you feel it will end today?

  6. So if we hit 820 you would go short? I guess I don't understand as I assumed from reading through everything once we broke 800, we would go long.

  7. I am tempted to go short around 820 for short trade. what do you think Chaugner?

    I went long on FAS at pre market at 6.04. I am out of it by this hour.

  8. at home sick :(. I will provide more details tomorrow of course. At this point no need to chase it but we made an important decision today.

    When I said 820 I was more referring to a short term short as 820 today would have been too much too fast.

  9. Hope you feel better. You have been of great help

  10. regarding to 800, I was more referring to what type of sign this would be for our long term targets. There is trading below 800, and then there is trading above 800. There is never trading around 800. So from a trade perspective 800 is the border line for wide ranges in either direction therefore offering amazing protection for long and short positions on both sides. Of course I would have NEVER expected to run as far as we did today but I did mention that the market needs to put enough margin in there to allow it to retrace and use 800 as support. Being at 818 now (I would have never thought I would say this today) is a good amount of room to allow sell off to happen tomorrow to get back to the 800 and a chance to play the long side potentially. I am still cautious, we have gone up VERY FAR VERY FAST but we also got some great confirmations today.

    7 minutes left. 820 anyone? lol amazing.

  11. of course do not go short now at 820. Too late in the day now.

  12. high of 823.37, close at the highs. Speechless.

    Inverse head/shoulder completion
    bullish wedge breakout
    strong break of 50dma on daily chart
    v-bottom like rally
    highest RSI value (daily) since May 2008

    Unfortunately WAY overbought, more then I have ever seen here in the past, HIGHEST momentum value on the daily chart in like ever.

    Good thing I played "lets be a bull for a week" on sunday. Could I have in any way seen this occur? Nope, the extreme levels from a technical perspective we are seeing here are incredible.

    I will be providing more details, maybe get myself out of bed to do some charting.