Monday, March 9, 2009

Its time ...

Previous Day
"In summary, as you can see today is quite difficult to forecast - its anyones game."

Well, the bears were waiting and waiting to see how deep the rabbit hole goes. First some big short covering in the morning due to jobs report, it was not as horrible as everyone thought so bears assumed we would rally - however the lack of buyers played yet again in the bears favor and dropped the market to new lows. As it was clear the market went as far down as it could on Friday bears covered into the close being afraid of what the weekend may hold.

Today
Time is up for the markets and the mid term bottom could be formed as early as wednesday. From here on out we have to be ready for the run up and it will present itself very clearly. This will not be a "is this the bottom?" type of trade, you will know once it occurs.

We continue having pressure on the downside and VIX has narrowed to an extremely close range. From here on out we could be seeing a breakout either to the upside (meaning significant drops or wide ranges) or a break of the ascending triangle. Of course VIX is not the only indicator but I think it will let us know when the time has come.

How will we continue the next 2 days? Yet again its a difficult call, we lack any type of positive news in the market place that could push us higher and we are too far away from major support ranges - while the 700 represents a significant retracement point the market was not able to hold this range last week. I had discussed this in my long term forecast and mentioned that this is quite negative, regardless of the rally that is about to come.

If I was able to tell you how the next 2-3 days will play out I would be lying, because quite frankly its difficult to take it from here and know where we will trade. I will be posting updates in the comments as I see the market move.

How to trade?
Last week was a very light week for me in terms of trading, I would recommend to continue staying very light until we get our signs, no need to risk money at this point when you have guaranteed gains to be had after the bottom is in. Due to uncertainty it will be difficult to see how to trade to find the proper bottom and get in long. I will most likly fade into the drops once we see ourselves below 660 but depending on how we trade and how sellers/buyers are behaving I may wait. Fear should be setting in as we drop lower. Of course we can have an upward bias from here as well as traders and investors recover from the huge drop off the 800 range we have seen.

I apologize for not giving more precise guidance from here but as you can see its quite difficult to determine the direction and trade action here.

16 comments:

  1. Looks like crude oil (+ energy shares) is holding this market up; it's making a run for 50.

    Recently the trend has been: When oil turns flat/down, the market seems to drop. When oil is rallying, the market seems to stay flat/up.

    Also, 695 represents a 50% retrace from Wed 724 to Fri 666... let's see what happens.

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  2. yeap, I do not think we are done on the upside here but its a lot more difficult to say today. I feel very strong that Friday 666 was not the final bottom here and this counter move is a mere retracement to continue on the downside. Considering we have moved lower quite fast its to be expected to get a small bounce. I would love to trade this on the downside but have to admit I rather wait it out. I did a small attempt at the GAP fill this morning and stopped out as we continued higher.

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  3. I opened a small long position in gold and short on the SPX today... hoping to see 660s by the close.

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  4. yeap gold is a perfect trend play at the moment, formed the double top, nice sell off and bounced off the lower trendline (mid nov), if it breaks trendline get out, otherwise reattempt the upper ranges =)

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  5. That's how I see it, good upside and protected downside. I actually went long last week when gold hit that trendline, which happened at Comex 900. Nice psychological support as well. I sold before the weekend. Then we had a nice pullback today, so I went long again.

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  6. market setting up for a strong move here .. be careful and redo stop losses on current positions.

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  7. do you mean on down or up side?

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  8. could be either here, thats why I cautioned anyone that is in existing positions, technically its setting up for a strong down move, however, market is trying to break the descending trendline established for the day.

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  9. Thanks. you have been great.

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  10. Looks like a break to the downside. I'm looking for trend change around 3:25-3:30 (based on last week's action), at which point I'm covering short.

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  11. I am pretty confident it will be later if at all, you may be able to hold and cover 5-10 min before close. I do not think we will see a monster short covering rally like friday, the shorts got out and entered again knowing that our final bottom is not yet in and having much better protection over one day (and not the weekend)

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  12. I'm hopeful that you're right, but of course I'm keeping a close eye on it. I don't expect a big short covering like Friday, but even mid-week moves turned around 3:20-3:45 last week. I guess I shouldn't have said change of trend, but maybe low of the day?

    As I was writing this, my stop limit triggered. Even if we do go lower, I'm happy taking the gain. I'm still in gold which should head up as the market heads down. :D

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  13. looks like you were correct there, and we are getting some recovery, and yes I moved my stop loss quite a bit closer and got filled as well. Now again 100% cash waiting for the big move to occur. My call is still wednesday but it could happen any day now.

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  14. Why wed? You think there will be a change in the mark to market rule? This continous selling doesnt make sense, and technical analysis either.

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  15. as you can see I am not trying to forecast the current market enviornment because quite frankly, its very unpredictable at the moment. I rather be honest to all of you then start guessing around. I try my best to describe signs and possible scenarios but as you can see I am holding back a lot more then usual.

    We are nearing our overall bottom time targets and based on purely technicals it should start towards the end of this week (Friday). However fundamentally we can see a shift on wednesday with our marked to market rule changes - keep in mind this will be a "rocket" as referred to by one of our fellow readers - substantial changes in the market place. Will we see this on Wednesday? To be honest I do not think so, but we will be left with indecision and lack of precise guidance by the administration.

    One thing we have not yet seen and as you can see everyone is talking about it is the capitulation type fear selling. None of that is happening, all we see is continued strong moves towards the downside that fall consistently without wide ranges. At this point its even hard to say that we will see this fear selling at all? I mean how much more can we accelerate from here? Investors know its bad, they continue to sell into rallies.

    The only positive we can take from this, we will know once good news arrives, it will be black and white.

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  16. A hypthetical scenarion -- Politician are under pressure to turn around the market. Modify mark to market in a face saving way. Banks gets help. talking media will anounce more help on the way and bottom is here. market is oversold and gets reason to rally and everyone is happy for short term. where are the hoes in this theory.

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