Thursday, April 30, 2009

Traveling tomorrow ...

To address samamehta comment from today.

"Many bear blogs are very scared to remain in short because of fear of rally to 900-1000 -- at least a talk. so many have stops at around 880, 890 900 etc. May be bulls will run those stop and then take profit for big the down move."

Closing at 870 is a bit too bullish for me. I too am scared ...

Keep this in mind, we only moved 20 points on the intraday today, on low volume. There was no sell off, there was no punishing the bulls. 2 days ago I had posted the triangle formation

http://2.bp.blogspot.com/_hE3pp93emY0/Sfga5feWFBI/AAAAAAAAAHk/4MW2zLgq9E0/s1600-h/basebuilding.GIF

We still are well within a continuation pattern, we did not even make it back to the breakout range here (circle). 868 was the low of the day.

Remember we talked about the large wedge (wedge of wedges). We failed a reversal and we closed 2 days in a row at 870, the top of the previous wedge - not even intraday test, a close price with intraday tests above that range - that invalidates the wedge.

Our weekly candle last week appeared bearish (like everyone likes to see it) - however, we broke the top of the hangman candle - regardless of where we close tomorrow the hangman candle was invalidated.

All this sounds very bullish and here I am short still with a decent sized position (closed out some after the close). If it were not for travel I would stay short fully but just as you mentioned - I am very very careful at this point. It is acceptable to pay for a great long term position but I have paid way too much in the past few weeks missing some great gains on the long side.

We sold off today, on little volume, on a day where in old times we would have set a mark at -5% yet we closed break even. Yes we have a lot of indecision here, all signs yet again point to a top.

Maybe this type of talk I am giving you now is exactly what is needed to mark a top. I am not sure, we have been through quite a few bear market rallies, this one is very different, as much as many want to say its just a bear market rally.

I have set the stop on my SDS @ 62.31.

Nocturnal Action ...

Getting ready to leave the UK today. Lots of packing =)

My trade plan as per yesterdays comment was as follows. Short above 890 or below 872. Well we never managed to get to 890 and I had added some shorts after we broke the 874 level. I had anticipated further drops to close in the 864 range but those never materialized. I kept the short into the close which turns out at this point was quite a mistake. I had a probability plan for my position (close at or near 864) that did not occur so I should have either exited there, or added a hedge. Hindsight is 20/20 but its important to follow entry position probability rules, something I did not do yesterday.

Futures wise we are currently at 888, just 2 points shy of my preferred short point. While futures are never a real indication of where the market will head this overnight action here contains a lot of volume, a lot more then usual at this early hour.

As I am in a short now I have to worry about money and risk management. 895 is an acceptable level for the high so I have no choice but to carry my average price of 874 with me all the way there. If we are to get to the 890 range I will add the other 50% of my intended position at this level. At the same time I will wait for a slight pull back here in after hours and go long futures to hedge the current short. Similar to all those other times in the past the biggest priority now is to protect the position and of course my capital.

Can we sustain another GAP up? Yesterday, today, no fills, on top of all other previous unfilled GAPs that now amount to 6+%. We will have to see.

Wednesday, April 29, 2009

GDP Falls 6.1%, Much Steeper Decline Than Expected

Copied and pasted headline from CNBC.

Current value of futures:
E-mini S&P 500 Jun 2009 +8.75 1.03%

Bank stress result madness ...

Blow off top or new bull market? You tell me !!!!

Fed meeting this afternoon. Its going to be a wild ride today.

EDIT: 3 posts this morning so don't miss the other 2

Did we really create a base here?

Fed Day today, lets see what happens and whether or not we will see a strong rally with a break of 874. We are fairly well positioned for a break on the upside here. While many had looked at last week as very bearish I had indicated that you need to remain objective and consider the fact that it may have been creating a base.

We have seen this pattern many times, move along an up trend line to form various patterns, pennants, wedges and triangles, break out of trend line to retrace to previous low point, then rally strong and takeout the high.

Of course I am still very skeptical of this occurring here but I am getting more careful. I had closed out of all shorts and will probably wait to re-enter any position until next week. Fed meetings have been very volatile in terms of price moves making it impossible to manage stops correctly. Even if we drop/rally 30+ points it is more important here to wait for a confirmation.

As mentioned the upper range is very limited at the 912 while the lower range below 800 is quite large. If we do rally to 912 of course expect me to short but I do not think we will get there so it will make it very difficult to pick an entry below this point considering I need to keep the position to at least 915 before I can place a valid stop.



We do not gamble and this is one of those times where we need to sit it out. From a pure perspective of graphs take a look at the following. We have had lower highs yes, but we did not have lower lows. Nice little triangle here. To top it off we tested the breakout range of the wedge and went back to the current wedge line as well. Take a look at the previous post regarding wedge breakouts. It seems we have hit the nail right on the head and now formed another pattern that is normally seen as continuation. Overbought indicators have leveled out slightly giving the market a chance to break out again. MACD at zero indicating a longer term move to come. Can it be up twice in a row? Very unlikely but so was the wedge breakout I had explained. The least likely scenario occurred here as well.

A little story ...

Friday: 1
Monday: 2
Wednesday: 6
Friday: [insert number here]

Taking the above pattern and assuming a base of 19 units the number we should be seeing on Friday is 18 (one extra special unit that is immune to anything so please count it out) . From a technical analysis perspective Wednesday we saw the breakout to finally hit 6 on the range and we are now ready to shoot for new highs with the absolute top at 18.

Honestly, I am speechless, how can one justify making such statements. First the banks are profitable, then we realize they are not, next they are all well capitalized, now its 6 that need more cash. Forget about the number 6, think about how it was presented. Officials stated that all banks passed and only one needs more capital, a day later "well I am not going to say I was wrong, but its 2 banks now that need more capital. woops". Waking up on Wednesday I figured "hmmm, 2 really was a bit too optimistic, I think I will go with 6 today."

What will they say tomorrow, on friday, next week? Who is even held accountable for anything that is being presented?

I have to admit, I have seen quite a lot of stuff when it comes to policies and administration but this one will go into my personal history books.

Just had to make this my little morning rant. Will post more charts and real analysis soon.

Tuesday, April 28, 2009

This is what I am seeing and trading.


Target 25 pts below 857.

Getting ready for travel ...

Going to keep it a bit short. Getting ready to travel back to Miami this week so I will not have as much time to dedicate towards the markets. Will be in the comments though =)

A few key things, the same applies as yesterday. Bottom of the channel keeps on rising day after day leaving the market no choice but to either break the channel to start the correction or rally strong and make a new high beyond the 874.

MACD on the daily has been zero now for 5 days in a row. The longer it stays in that range the stronger the next move will be. If we do get a break on the upside expect my target of 912 to be the top of this run, on the lower end of course the 780 range.

Current bottom of the channel at 842-845 so this will be the turning point. Futures are currently right at this point and have already tested the lower end of the channel.

I had stopped out of some of my shorts during the day yesterday and re-attempted a position, also added some short at the close as well. Not as good of a price as I had held before but still a decent average considering we did not see a breakout yesterday. While it violated my numbers I had no choice but to exit just to realize it was not the up move I expected.

Monday, April 27, 2009

More of the same ...

Previous Trade Day
Well Friday was quite a trade day. We had hit all price targets I was looking for and my "feeling" of not breaking the 864 was proven wrong. Opened right around my first 857 point and never managed to get strongly below this point. After breaking 864 we managed to get a few more points out of hit but did not create a new high. After reaching the top in the afternoon the sell off held the 857 perfectly. I had mentioned that I would short over 875 or 5 points below the high of the day if we are to get a sell off. I never managed to get a short in on the upper ranges but I did short as we started selling off just to see it rally again. I had kept my short position regardless as it was a smaller position and I had no choice but to assume a wider risk margin towards 874.

Today
Similar to last week we have a few points to look for. As futures indicate we have to get ready for a bit of a correction here but it is very possible to hold the 845-852 range as support and rally. From a bullish perspective last week was actually positive. We created a base and never managed to break the uptrend or make a new lower low. The market is actually well positioned to take out the 875 range here and rally.

From a bearish side of course we have to be a bit more careful yet again. It seems everyone is under the impression now that a real retracement is needed. All the divergences you are seeing now have to be corrected and there are two ways of doing so, either rally very strong right away to bring divergences inline again or retrace to try again under healthier conditions.

So look for the 845-852 ranges carefully today. 842 is the lower end of the trend channel at the moment so support here should be very strong.

Friday, April 24, 2009

Turning point again ...

Yet again we are at an important point in the market. We have spent 3 days on the lower end of the range and need to break into the mid or upper ranges of the trade channel to continue on the upside. In the past 3 days we have seen a great shift in momentum with the bears having the odds on their side. While we did manage to close higher yesterday we did not exceed the 852 as I had mentioned which is an important pattern we just put ourselves into.

We will have a very clear sign ahead of us today. A break of the 841-842 on the downside will break the up channel for the first time and we will be heading lower with a first target of 780. I know I have been referring to this number many times so today we will have a chance to build up a case for this move.

On the upside, we need to break the 857 to stay within the channel to have another chance at the 874. If we are to go higher I have a very strong feeling that we will not exceed 864. If we are to top out at 864 we have a new downtrend channel. That same channel I had hinted at earlier in the week. I know we need to try to stay objective but I have a strong feel that we have seen our top last week. Many indicators are showing weakness for the bulls and momentum dropping, on top of our MACD still being at zero for a second day.

To top it off, we have a very strong 5 day symmetrical triangle. If we are to see a breakout of this range we will be around 50 points away from the current price point within 4 days time. If you are to catch the right trend today, you should be able to have a high probability short term setup. Keep in mind I did say that it is my feel we will not exceed 864 so you have to be careful on the bullish side after a break of 857.

Thursday, April 23, 2009

Timing is everything ...

Yesterday
Well what a day. Nice bearish candle on the daily showing more selling pressures coming into the place. We broke out 3 day up trend line in the last 30 minutes on STRONG volume. Volume is finally picking up so we should get a move to the downside soon.

Shame on me
As the title of todays post, timing is everything and I timed it very wrong. Emotions came back into my trading yesterday which is the worst that can happen to a technical trader. I had exited my SDS at break even yet I still managed to incurr quite a few losses with other trades. I had very valid reasons for exiting, strong volume on the morning recovery, strong volume as we broke for a new high in the afternoon - 2 day strong up trend.

After exiting my SDS in the morning hours I tried again for a day trade as we made a new high. The run down towards 851 looked promising and I kept my short just to get taken out again as we made new highs. The 5-min candles yesterday as we rallied off the 851 looked weak at first just to come in strong on the second round.

As a result of my emotional frustrations I had experienced the past 2 days I had no choice but to stop pushing the buy/sell button - I had no choice after pulling up my P/L. Reviewing my past 2 days, my P/L report shows utter trading disarray after we had broken my 38% retracement on Tuesday. Large SDS position $0, many (way too many) attempts at trading all with losses.

Let my P/L speak for itself. I am still up the month but 2 days had taken out 2 weeks of work - instead of adding to my bottom line.

There are 2 important trade lessons on my blog, sticking to your system and over trading. I broke both of them in the last 2 days. The last time this had occurred was in early February and I have trade rules that I have implemented over time to prevent me from this occurring. Those rules are there for a reason and violating them will have severe consequences as you can clearly see above. So let me forget about the past month and start fresh from zero today as it were the first day trading for me after a long break.

Well, self criticism is a good thing I suppose ...

Today
Ok, lets try to take what occurred yesterday and apply it today. The strong volume sell off will put some sense into the bulls for once. Dropping this strong on much higher then usual volume set the mood for things to come. We have crossed MACD on the daily for the first time, this by itself is the final confirmation we need for a new trend to come.

I do expect another run towards the 851 today, possibly a last test at the 856 but this could be over right off the open. I will try to post up scenarios in the comments at the open to determine where it will lead us today.

Wednesday, April 22, 2009

Major Trend Change taking place

Yesterday
I had updated a post at the end of the day going into more details for the wedge breakout we are currently dealing with. Now take a look at SPY daily.


Take a look at our MACD divergence, Oh yeah, we are at ZERO after a long drop - you know whenever MACD is at zero I start jumping up and down. If I had to choose a middle name it would be MACD. Ok I think you get the point.

While yesterday should have scared a lot of the bears I am not very concerned just yet (emphasis on just). I should have managed my current short exposure a bit better as a retracement was expected though I did assume another drop in the morning hours before retracing here. Can't win them all.

Today
Now I had put a new bar up on the graph with my expectations of a perfect day. Gap Open down, attempt a small gap fill, and of course break yesterdays low and close below. When I say perfect day, as in relation to the current pattern we are in. Keep in mind we could also have a small spinner again here but I would not expect that one for today.

If we end up breaking yesterdays high at 851 I feel we may be going all the way towards 865 again, possibly 880 to make a new high. So we have to be careful here. My SDS will get a stop loss today around the 860 range.

Tuesday, April 21, 2009

Ok what happened today?

Ok I made a special post that describes how I trade wedge breakouts. For today, we had a great way of seeing it in action just as I had described.


S&P500 60 min
ok lets review first what we had said today. First off we never made it to the 816 target and held our up trend trade channel. I will add more to that later, but just as mentioned before the day started we have strong support at 826-828. Low of the day ended up at 826.83.

Now lets take a look at FIBs. 23% to 38% range. You can see we rallied right into that range and remained in that range to attempt to make a decision.

"From here we should retrace either to 23% or 38%. If we break the 23% retracement and go higher switch your graph to 5-min. If you see spinners (long shadow, narrow body) it should finsih the retracement there and continue lower for the last wave down. However if you see that the market is trying to create a base and you see strong volume candles with some up and down moves between 23% and 38% it is very possible to continue a bit higher as indicated in the white. This would be a test of the breakout range."

I had posted that this morning. As you can see we rallied right towards the breakout range of the wedge trendline. Just as anticipated. Now I also mentioned the 5 min spinners. Lets take a look at 5 min SPY to make it easier to understand.


SPY 5 min
Ok this one seems a bit busy so lets look at each of the phases independently. First the yellow, we rallied nice and strong towards the 23% (84.15) range. The candles you see there have full bodies and good volume indicating bulls are in charge. We had a slight retracement on the first test and then broke through strong to make it nicely above the 23% retracement. This was enough to scare the bears. Here is where it got very interesting. I had mentioned to look for spinners on the 5min bars. Look at the blue circle. Each bar in there has a long shadow and a narrow body. Volume was dropping and we even went as far as creating another wedge here. Bears were scared due to the volume we had before in the yellow circle and did not step in until the last bar reaching the 38% (84.64).

Here is where the bears took charge and handled the rest. Normally on uptrends I draw a trendline with the same angle downwards to act as a guide. So the pink circle, we have our trendline and every one of the attempts to reach the top trend line was reversed to close on the lower end. Bears would not let it close in the upper ranges. Everything was setup perfectly - you see full bodied red bars and any greens were reversed within the 5 minute time frame. We closed this range with a strong bar making bears think they won the battle.

Last cycle, with the light yellow circles, bulls waited till the last second to take charge and came in strong. Each bar had a full body with good volume behind it. Take a look at the first light yellow circle, this was a clear change of direction sign, look at all other green bars before then. Clear difference and sign that we were going higher - not a bar I wanted to see as I had indicated in the blog comments.

Bulls won this one and continued along on their up trendline at the bottom.




S&P 500 60min
Ok sorry for all those lines and areas in there. I added all resistance and support points to make it easier to see when to expect bounce/sell off. Also I have 3 channels in the graph. One for the wedge, one for the 60min channel we have been in for a while AND a new channel attempt again. You can also see that very tilted head and shoulder there, of course you can always put a pattern into any graph but it was worth noting. You may also want to draw another downtrend line in parallel from the top at 874 so you have a full channel with the 50% in the middle.

Wedge Breakout explained


As mentioned in the comments of todays post I wanted to describe a wedge breakout and how I trade them (or try to trade them).

Blue Line - as indicated it seems we have not completed the first down move to find a bottom, pre-market we are already quite a bit lower as I am writting this. My best case scenario target for short term bottom is the 816-817 range here. I had drawn fibs with that assumption. From here we should retrace (yellow) either to 23% or 38%. If we break the 23% retracement and go higher switch your graph to 5-min. If you see spinners (long shadow, narrow body) it should finsih the retracement there and continue lower for the last wave down (green). However if you see that the market is trying to create a base and you see strong volume candles with some up and down moves between 23% and 38% (within the circle) it is very possible to continue a bit higher as indicated in the white. This would be a test of the breakout range.

The last part is the green area that usually completes with a 68% move of the first cycle. By the time you have reached the final green circle you know your pattern is in play, and you have great protection if you got in at the top, its hard to explain how it will act further but it is very lily to reattempt the top of the retracement from down there (yellow) as a last move before finally ending up in the big light blue box.

Also on a side note, you can still see my channel from before that could act as another level of support so watch the action in the morning carefully.

Wedge Breakout

Yesterday
The title says it all, not much more detail to describe here. As I had posted in the early morning hours we had some clear signs to look for.

"an open below 853-854 will lead to more sell offs today"

We opened right at that range and sold off immediately. After the drop in the first hour we remained in a very narrow channel for the entire day and continued selling off. I attempted 3 long positions to try to get in on a retracement and stopped out on every attempt as we never made it out of the channel.

Today
As we hit the previous low point of the wedge we have to assume some retracement today. I had mentioned in the comments that wedge breakouts are difficult to trade. I mean you could have gone short anytime during the day yesterday to make money, into an oversold condition. Difficult to risk it there.

For today I would assume the best case scenario for a retracement would be the 843-844 range. If we end up breaking this range we can get all the way towards 856 and possibly higher to retest the lower trend line of the wedge. However it is my anticipation that any retracement will be very short lived. While we held the range yesterday our close was very bearish, right below the previous wedge bottom. We have to account for slight violations during intra day ranges but a close this low is quite bearish. This leads me to believe that we may have another push down today towards the 820 range and possibly lower.

So as a result let me just give you some of the lower level support range and indicate the strength each one of them have.

826-828 strong support
822 medium strength
814 very strong support - a break of this range will bring us back to the 790 range very fast

As mentioned again, wedge breakouts are very difficult to trade and they are over very fast, by the time you see it, most of the range may have already occured before a larger retracement is in play. Unless you have an existing position that works in your favor its difficult to try to get a piece of it. Its actually better to stay out until you get a sizable retracement of at least 15 points - as we saw yesterday every attempt of the market to create a rally failed.

Monday, April 20, 2009

Blow off top or first leg of new bull cycle?

As always I spent some time looking at charts again. Additionally I went through my normal blogs I frequent and was very surprised what I found on many of them - bulls all over. Everyone is calling for this move to enter a short retracement to continue higher. From one perspective I can understand where this is coming from, we have broken one of the trendlines I had outlined a few weeks ago and it seems we are in the process of breaking out of a bullish lowering wedge (9+ month time frame). You can find charts left and right at this point to validate any type of mid or long term pattern, bullish or bearish.

So what do you do? How can you make sense if all this and where will it lead. Lets assume for a moment that we are not going to make a new low below the 666 range on the mid term. We will retrace slightly and rally towards the 200dma, by the time the retracement is done and the rally continues that average should be below our 945 range (my 912 target I had referred to a few times). However, for this to happen, the past 3 weeks should have played out very different. Forget about patterns for a second and get back to basics. Look at the trade range we have experienced, low volume, huge GAPs, choppy behavior and a total lack of momentum. I keep on hearing people saying "do not stand in front of this bus" - what bus are you seeing? you mean this guy on the bicycle? Thats all I am seeing, there is no buss, not even a fiat pinto. I gladly stand in front of that knowing it will crash into the wall.

Now on the flip side, something happened on Friday that has me a bit concerned on the bearish side. GE reported good results, yes they were good results, this is not one of my sarcastic comments I make, I was very surprised at this. Many have always said GE is a measure of the overall economy due to their exposure to all industries. Earnings of GE have led the direction of the market in the past and this time around, we have to take this into account.

As a result of the GE results, I will approach my current shorts with a bit more care until we break 724 on the downside. Meaning I will take some off the table at important support points and place the stops closer then I normally would (~2 day closes). Once we get below the 724 range we are good for a new low but anything above needs to be traded with care.

Today
We have had 5 up weeks in a row, showing a great amount of strength in terms of price however volume has dropped significantly, something we need to take into account. Is it possible to make another high this week? quite frankly it is, but only a low chance.

Futures wise we are already a bit lower here, so there are 2 easy signs to look for. the 856-858 range here, an open below 853-854 will lead to more sell offs today, an open at 860 will most likely allow the market to maintain the current narrowing up trend to re-attempt the upper ranges.

If we are to get an open below the 854 and will get some sell off, we need to be watching volume very carefully as it will give us great signs. We will have many long stops to worry about on the way down, other retail investor longs that have been told over and over a retracement is coming, those will sell at the first sign of drops, and of course new shorts with many bears averaging down on their current short exposure or bears that were on the sidelines entering after a confirmation has been in place.

Good luck all !!!

Friday, April 17, 2009

We pushed alright

Yesterday
Not much review needed. I was glued to the computer around mid day and updated everything in comments. It seems the wedge won over the 3 possible patterns we have at the moment.

It was easy to identify with the ascending triangle, base forming and a big rally just as I had posted. To top it off, let me just quote it here.

"My perfect trade plan of course would be to re-attempt yesterdays top and hit the 856. Here is where it will get interesting, it is very possible that we keep on pushing further up the range to get back to the 864 and possibly hit the first 871."

Glad we got this nailed right on the money. High of the day 870.35. Additionally let me quote the following comment I made yesterday as well.

"
here is the thing I am afraid off, that number 871-878 may never come. I think institutions will start selling off before then, the same way my 640 never came and institutions started buying before then.

Bears are so freaked out now that no one is shorting anymore, everyone wants to wait for that perfect setup."

I am not sure if we marked the top here, of course technically we are seeing strong signs of this being the top, but so did we at previous tops. It seems every time I feel a top is in, we keep on rallying. We have reached the magic 20% range before wedge closure. Here is how the wedge can play out, scenario a is one last push up breaking the upper trend line just to reverse strong, and second is the breakout on the lower end.

If feel we had our push yesterday, so much negative fundamental news yet the market rallied on low volume, keep in mind that we had a 25 million shares SPY sell transactions right at the close. Thats a lot of money !!!!

We will need to wait and let the market tell us.

Today
Going to keep it short. We have our position now (whoever went short too yesterday) so now the first priority today is protecting this position. Earnings from GE and C today. They won't be very good. GE does not have the same luxuries the other financials have in terms of changing their reports to their liking (ok sorry). So far our earnings have been, amazing for WFC, great for GS, decent for JPM - I hope you are seeing the pattern.

I will not have as much time today but I will try my best to post whatever I am seeing during the day.

Good luck to all of us.

Thursday, April 16, 2009

Keep on pushing !!!!

Yesterday
Another day of crazy market moves. We stayed in a fairly narrow range off the open and kept on testing both lower and upper boundaries until we broke out of the range late afternoon. So what caused this rally? Yet another improved economic indicator (no comment yet again).

So what happened? It seems AMEX came out saying we have less credit card delinquencies then the month before. Yay !!! the recession is over, the bottom is in, a hand full of people started to actually pay for their bills, instead of spending it on a new toy, big screen TV or anything related to consumer spending (hint hint) - this is the sign we have all been waiting for. Forget about the quadrillion that is somewhere there on the side in some uncontrolled market, forget about cooked up books and unethical accounting reports, forget about housing, debt, leverage or the fact that no one can get any money from banks to innovate or grow. People are paying their bills a bit more now, thats worth at least 2% more on the market. Big price move, NO volume. Does not get more bearish then this.

We did top out at 852 and yet again I did not short even with such a bearish move.

Today
JPM earnings today at 8:00. I may make a move pre-market here around 8:00 when the fireworks will start. What do I expect for JPM earnings wise? Have to admit I am not so confident on a call here. I could go either way and we will know at 8:00 what direction we will take.

In terms of direction for the day, I will post more information once we see the earnigns report. My perfect trade plan of course would be to re-attempt yesterdays top and hit the 856. Here is where it will get interesting, it is very possible that we keep on pushing further up the range to get back to the 864 and possibly hit the first 871. If we are to see a trend up here I will scale in with hedge at the 852 as I expect it to top out here for the short term at least.

The other interesting observation is the lack of volatility we are seeing this week, usually during option expiration week we have much stronger moves and we have not yet seen those. This could lead to quite a bit of volatility today and tomorrow so be careful and keep your stops tight on day trades.

Keep in mind, the top yesterday may have been the top of the new channel I had described in yesterdays review. Today we will know for sure what pattern we will have to trade with, either uptrend channel (very weak at this point), the new downtrend channel (medium probability), or still within the wedge formation (highest probability).

Trade Review
(new section that reviews twitter trades in more detail, may actually add graphs going forward so we can analyse what could have been improved - every trade can always be improved, there is no perfect trade)

I did a few trades yesterday, long SSO in the morning as posted in twitter, which worked out. It had a typical 3 wave pattern with me closing out on top of the waves (again as posted on twitter and described in yesterdays comments).

I tried shorting mid day, first SDS got stopped out, I tried again and got stopped again. The second trade would have been in the money if I had managed entries and stops better. As you remember I had stated via twitter that if I did not see a sell off within 5 minutes I would close my position. The sell off never came and I had widened my stop after I saw the bigger jump on the 1 min as I wanted to protect myself from whipsaw action. As a result I had to take a much larger loss then I wanted right at the top. I went against my own recommendation. Bad trade management on my part.

1 winner, 2 loosers. Whenever I have a loosing trade strategy, the next strategy I take I generally use more money, not a lot but generally 50% more then previous position. Some may say its a mistake, I look at it from a perspective of wrong once, chances of being wrong again are less on second try, if and only if you trade a different pattern/strategy. Well it was the same pattern I tried and failed again. Managed to close the day up but not by much due to large losses on the second SDS trade.

Wednesday, April 15, 2009

New posts ....

3 new posts since yesterday.

twitter update
daily review and forecast
more details on possible new channel

Re-emphasize on the channel

Sometimes I make statements here without the proper detail for you guys. So let me re-emphasize what I am talking about.



As you can see here we have completed 5 cycles in this trade channel. While it seems we are still within the channel it is my belief we started a new trend here. Its difficult sometimes to anticipate a trend change and I think it occurred here with the final move in the pattern completed on Monday this week. Yes, the only top I did not short, that by itself is a bearish sign, because me being the most committed bear has held back - as good as a sign as capitulation.

Now time wise lets take a look at it again. We have had a great rally off the major low that lasted 10 days. Time in channel has been around 15 days. When looking at FIB time lines we have just reached 161%, a point that has a high probability of changing trends.

So from a trade perspective what are we looking for? First of course the support we will get off the 838 range if we reach it today. The next move up would be a fake up move, marking a lower high compared to Monday. I would expect it to top out around the 854-856 range either today or tomorrow. If that is to occur, the probability of a new channel are very high with the 856 marking the new upper range for that channel.

The new channel should have a downward trend with the same angles as the most recent up trend (our existing channel). I expect this channel to be 50% or 61% in length compared to the previous trend which brings us to a potential of 9-11 days. After this we either make another move to the upside or resume the primary trend. My bet would be the later one.

I will be watching this move very closely and keep everyone updated.

Prices down ... no volume

Yesterday
As we had anticipated the real non financial economic indicators are not going to be as [cough] amazing as the banks results. Retail data was horrible, Intel earnings after the close. Just more signs that our economy has not improved quite as much as many believe.

Regardless of the fundamentals the market never went into fear selling mode and held up fairly well. Volume was light, we filled the gap, reattempted the 850 range and closed above the 840 range, barely. If you look back at our 60 min trade channel, take a look at the center trend lines, perfect support there and one of my reasons for a short term long play I did yesterday.

I created a post yesterday regarding my twitter updates. I am still working on trying to find a way that works best, comments versus twitter.

Today
Before going into today, I wanted to re-emphasize something. We have the 60 min trade channel and the wedge formation. While it may be obvious to expect bounces we have to be careful. Just when the market is within a strong pattern, do not expect the pattern to continue very long term. I am looking for a change of our overall pattern that should start this week, meaning that the coming moves in the market will be following different mechanics.

I think we will have one last wave left. Take a look at the daily, We have not had 3 down days in a row ever since the rally started. Day number one yesterday, will it be day number 2 today or will we find support?

Trade wise, futures are down slightly but still close enough to the close price yesterday. One number I am looking at today for another short term up trade. 836-838. A break here and we will be seeing 826-828 yet again. Watch volume carefully today, we had our down day yesterday so will be interesting to see if volume picks up a bit more.

Tuesday, April 14, 2009

Twitter updates

ok today was my first day using twitters to post my trades. I realized that its not as easy as I thought especially for day trades. When making a day trade I use various methods for entries and exists. Move stops quite a bit as well. I realized after my morning SDS posts it is quite difficult to post up trades that are more meant as a short term play based on a plan that I identify before the day starts, especially when I move stops based on momentum, and other variables.

I never go into a position with one trade. I normally scale in over many trades. Take a look at the SSO trades I did at the end of the day.


So for now, I am going to keep twitter for longer term trades or important updates. Any day trades I will post in the comments if I have time. As you can see above a lot happens in a short time frame. 7 total trades there around one position, not even going to count the stops I moved.

Who is afraid? I am ....

Yesterday
I added a review post again yesterday just to restate our current trade channel and also describe the wedge that many have identified here.

So why am I afraid? You all know that I try my best to stay objective but I am a strong bear on this market. However, yesterday was the first time for me where my bear was shut down. Even after we reached the 865 range I did not short. I have been trying to short every new top that the market has given us over the past few weeks, of course I got stopped out or made a few gains or lost a lot. Yesterday was the first event where I had a top in front of my eyes and I hesitated and let the market continue with me on the sidelines. Of course you know my trade rules, no new entries after 3:00PM unless you hold overnight. As I had advised it was a good thing to go into the close all in cash or flat as the GS earnings could throw us a curve ball here. While we had some reactions after hours due to their new stock offering I want to wait to see what we do during regular trade hours. Nevertheless many bears are experiencing this same sentiment. Following other blogs no one is committed at the moment and many are waiting for better entries and stronger confirmations. As you remember a few weeks ago I had described who really needs to sell . It seems the time has come now.

Why is this important? Well, that's how tops get made, when even the most committed bears decide its not worth their effort and stay out. And everyone makes room for the "suckers" to come in and buy it up. Do I dare call the top here? Nope, will it happen today, tomorrow, this week? It could. If you were to go short today and come back in about 2 months you would be well in the money, yet here I am 100% cash.

You remember warren buffets quote, the three "i's". First comes the innovator (bought below 700), then comes the imitator (bought below 800), then comes the idiot (bought above 800). This cycle will then make room for the innovator again.

Today
I do not know what the market is going to do today - very honest. It could rain and it could be dry as well.

Regardless we have some numbers today. 871 and 878. If the market is going to find some traction today this is what I would be looking for. I may even use yesterdays top end range (862) as a guide and start scaling into shorts yet again. While futures are down we have recovered a bit already, the question remains if we are going to sell off the open or continue higher. On the lower end watch the lower line here of both the trade channel and the wedge. 842 is where we should see a bounce. So watch this number carefully.

We have retail numbers to absorb today and I feel they will be quite horrible. A wake up call finally with all this buzz about financials. Keep in mind, every rally that was fueled by financials has sold off, everyone one of them. I do not expect this one to be different.

I will be more active today in the comments and will try to post on twitter as well. My twitter link is on the right top so follow me if interested.

Good luck to all of us today. Lets start to make some money !!!!

Monday, April 13, 2009

Almost done ...


SPY 120 min
I have updated our trade channel that we had identified two weeks ago. This time I made it as a 120min and included after hour trades as well to make it a bit easier to see the GAPs. Also this is on SPY and not S&P500 but its the same principle, just easier to see the after hours action. As you can see we continue moving up on our channel and respecting the upper ranges as we continue. Also you can see how we are trending down in volume as we increase in price. This of course is a strong reversal pattern as well so we have to be ready for the turn.



S&P 500 120 min
While we are now operating in a fairly defined channel the overall setup of the rally could be wedging as well as some have suggested on other blogs. Keep in mind that when looking at wedges they normally come to completion around the 20-25% completion range and every wedge, if properly reversed, will cause significant retracements of at least 50%. Here is a potential chart for the wedge build up with targets for top and retracement marked in blue. If we do end up getting our retracement here we will not be able to reattempt the highs we are currently trading in. The yellow would indicate continuation in the trade channel to continue chopping back and forth.

From a trade perspective both of the above scenarios will give us great guidance and let us know what direction we will take.

When looking at this rally I have to admit it has quite a bit of strength. Every single retracement been on average on the 23% levels, only once we overshot it slightly and saw a quick reversal. That is quite significant considering we have moved almost 200 points on the upside without any stops. Keep in mind 200 points in our range is quite a bit more percentage wise then it used to be on our previous rallies.

More updates tomorrow. Retail numbers and of course getting a feel on how the market likes the GS numbers. The first major financial component WFC reported last week with their new cooked up books, GS (yeah yeah the govt's buddy) came in second and did extremely well (no comment). Under normal circumstances you safe the best for last - not here. Thats all the positive financial news we are going to get. Lets get ready from some surprises that are not priced in. The bar is set high.

Random thoughts ....

Ok someone had asked on Thursday if the major bottom targets I refer too are still possible or if this is the turn around. Well I am going to make 2 major statements here, not with an "if" or "should" be state very clearly.

Will we hit 480 at some point this year? Yes, there is nothing to prevent us from this target this year. My initial targets in October 2008 were towards the end of 2009 and beginning of 2010. I had revised my forecasts earlier this year and moved up the 4XX target towards September. Additionally I had warned that even now it is very possible that this target will be moved up even further. Based on my time cycle calculations I have seen accelerations occur during most of the year, accelerations that are getting more drastic. The time cycle moves we have seen here are not sustainable long term and will come to an end soon. The question is whether or not we will stop here, or once we reach the first major bottom target. I feel very strongly that our accelerations have not yet stopped and will not stop for some time to come.

So the next point. Will 480 be the final bottom of this market? No it will not. Again this is not a "maybe" or "should". We will make lows below the 400 range. When will those occur? I do not know, 18 months, 2 years, maybe 3 years. At this point it does not matter when they will occur because it is not a target we can trade against.

So why am I so strong on the bearish side? It seems we have improved a bit here, the government is doing the best it can to stabilize the market, improve liquidity and allow investors to do what they do best - invest into companies that will provide growth and stability.

But here is where we have a substantial problem, a problem that will take many years to unwind. Investments in the past, and when I say in the past lets turn back into the prev 1980 time frames. Money was put to work for companies with a strong business model, money was invested and returns were realized. When the major retirement plans and 401K's starting following this model many had amazing returns and economic growth helped them to support further investments. So why are we going to such extreme lows? Well, first off, the model used today is very different, we have huge amount of leverage in the market place. I am sure many know about the total size of the derivates market - staggering and completly uncontrolled. This is not investment - this is speculation, on a major scale. Instead of investing money many started to speculate and set a new mark for investment models. Investment models in the past 20 years have been heavily built on speculation - many do not want to admit to this but the amount of leverage that had been built up is more then we can even try to understand.

So lets leave that aside for a moment, lets talk about our lovely economic indicators that are showing signs of improvements - or do they? Yes we had some surprises but look at our base for expectations. Were those positive surprises? As a sales person you can put a spin on any fact and make it seem like its a positive number. But in reality, its just as bad as before. The market has lost objectivity from what is good and bad. Is the market a constant? Nope, are economic indicators a constant? No they are not - why is this question important you may ask? Well, quite simply, one cannot expect the market or any indicator to just move into one direction. All of those indicators are driven by human nature, companies making decisions - people, like you and me. What we considered bad not even 2 years ago is now positive. A big change in sentiment, objectivity and sensitivity. When expectations will be lowered due to constant downward readjustments any number that is not quite as bad as expected all of the sudden gives hope - again human nature.

Fundamentally, what is different from today then last week, last month, last year. Are we seeing any signs of improvements? None, in my opinion we have barely completed the first leg of this economic crisis - with another 4 legs to follow. One thing I know for sure is that this crisis we are in, its uncharted waters. Risk was rewarded and more risks were taken with even more rewards. This did not just happen over a few years - it has been a process that has slowly build itself up over decades - yes decades. The last 3-4 years have merely been the last push, but the problem that we are facing now has been building over a much longer time frame, much longer then anyone would like to admit.

I understand we are getting a bit away here from facts and I am making statements that do not have a lot of factual support here. I started collecting some links over the weekend that I will share in a much larger summary that describes this problem in more detail. Unfortunately after a few hours of trying to put everything together I realized it will take me a bit longer.

In the mean time some other news. There has been a lot of buzz on the net about this article from zerohedge. http://zerohedge.blogspot.com/2009/04/incredibly-shrinking-market-liquidity.html I invite everyone to give this a read - while it may go into an area of the market many know little about it is written easy enough to get a decent understanding. Read it again after you did it the first time =)

On another positive note, one of my favorite blogs is back. http://www.gannfann.typepad.com. Give this blog a read as well, similar to here with daily reviews, forecasts and support and resistance numbers.

Twitter
I finally got myself a twitter account. I will be posting trades and other important news in there. Its my first twitter so lets see how it plays out.

I will be posting more updates shortly with graphs and scenarios for the week. Wanted to get this post out first.

Thursday, April 9, 2009

Long weekend ....

Yesterday
Another one of those unpredictable moves, while it was assumed to rally off the 808 in pre-market I would have expected a test during trade hours but none occurred and instead we used the pre-market as support to continue higher. As I am witting this we are trading around 836 already - quite a move in a 24 hour period.

However, volume is lower, especially the rally towards the end of the day - yes we did close at the highs of the day but comparing the drop to the rally to follow - its almost an even wash but with a bullish close.

It seems the trendlines we had drawn are still intact and providing perfect support and resistance. We tested the upper range yesterday with the morning peak and were never able to get for another test. Keep in mind even the 60min now has a decision to make. I added the long term bearish trendline I have on the daily here so you can see what the market needs to do here.


Today
Volume should be even lighter and it is my assumption that we may continue trending up towards the 838 level, we may even see the 840 today. Look for a slow low volume crawl today towards the highs.

It seems that we are sheltered from negative news, you remember the bad bank test plan, we know the outcome already but its being held back until after banks earnings next week - I am not sure if they made any mention at all about results but if they are not even giving hints it can't be good. Now GM - I think time is up for them. If we were to gamble here, what are the chances of more push-em up good news to come over the weekend? Not that many, what are the chances of negative news? Quite a bit higher. I know we should never gamble and expose ourselves to this risk here but if we are to get to 838-840 today I may take a larger position over the weekend - even if we GAP up we should retrace lower, if we GAP down we may never see that retracement higher again.

Wednesday, April 8, 2009

Bottom of Channel

I had made an update at the end of the day to restate where we are comparing to the saturday post. As you can see now we are at the bottom of the channel I had outlined. Futures wise we already touched it so it remains to be seen if we can make a combination of higher lows throughout the day today.

Today
Its quite difficult to predict today - first off we have the 10:00AM meeting on the uptick rule that many will wait for before making any larger moves. We have 2 days left this week before going into a long weekend so if you want to build up a position that you want to hold over this time frame it should be occurring today.

On the other hand, I had said yesterday that the break off from the 3 spinning tops was a bit weak - if yesterday was a breakout it should be followed with another day of at least 2% down. I do not think this will occur today but if we get below the 800 we have to watch out.

Unfortunately I did not get to execute my short trades the way I wanted as I was away from the computer when we had build the top - I did not want to chase this trade so I only did some day trades here. If we get another chance at the 822 range here today this may be another chance to try to build a position to hold over the weekend (with protection of course).

Tuesday, April 7, 2009

Sentiment Change?

Ok wanted to post some updates right away due to what happened today. Please re-read my saturday post as all the info here refer to this as a base.

Special: Just some Review



60 min Channel

As you can see the channel we have identified on Saturday held perfectly within the trend lines I had put in. Break the outer channel and get in the middle, here normally you have a chance of either reversing back to previous range or go into the lower range. FYI for trend channels I always add a small middle channel for this specific reason.

You can see we gapped down today and reattempted the narrow middle channel here just to fall over. While we had a rally we were not able to get back to the previous top, not only did we stop before we reached it we also sold off hard towards the low of the day. That is quite a sign, big GAP down to break off the spinners, reattempt and fail on the upside, fail to rally towards the days peak and sell off into the close.

I had mentioned in the comments that we are seeing a few changes and rallies do not show the same strength anymore as before. While we are not seeing committment from the bears to sell stronger we are not getting the strong buying anymore. Think about this - this week we are seeing a bit less outside influences and what happens? We sell off? Of course we are still in a valid mid term uptrend here so I am just supporting a bearish case =)



SPY Daily
Ok we broke off from the three spinners up top but did not do so with strong commitment. While this is a good signal its not perfect as we reattempted the last spinners lower shadow. Would have been nice to have a total seperation there but this is still a great sign.

Also, you could pick up a book on candlesticks and see pattern after pattern in the last 10 trade days. It really is quite amazing seeing this first hand. Not only can we see it but also experience what the sentiment is during this process, something a book can never explain. We really have quite a luxuary here to get to participate first hand.

So in summary, the break off the spinning tops, while a bit weak it still is a sign. Cross over on slow stochastics, MACD divergence almost ready to give us a sell signal in the next day. However, we have one more piece of information ...



S&P Daily
I will let the picture speak for itself. You remember my light blue and yellow dots from saturday? However we also have the blue and yellow line to deal with here so tomorrow and thursday will be our final decision ...

Exciting times I tell you ....

Indecision ....

Yesterday
Well after seeing the pre-market action we had to be ready for selling off the open. We attempted a GAP fill that failed and then continued lower in a lowering wedge formation. We were down around 2% and sell volume was dropping, bears were not stepping in with strength and we turned around to recover most of the days range.

I had talked about a change of trend yesterday and of course it did not materialize as we had expected.

"I had mentioned that we should be seeing a change of trend today. Time wise the most likely scenario is the 12:30-12:45 window for a potential top."

The low of the day occurred at 12:39 and we changed trends there to rally into the close. Of course I expected this to be the top as my change of trend call played out a bit different in my head, however, we cannot ignore important turning points in the market and this was one of them. Not seeing strength to the downside yesterday was quite bullish. Yes it just seemed like another day on the market but it "should" have sold off.

Looking at the daily, yet again another indecision to show. Go back to April-May of 2008, very similar ranges there with lots of indecision but a slow uptrend. Of course this time around its a bit worse.


Today
Its quite different to continue to make predictions from here to be quite honest. One thing we can take from yesterday is that institutions are not selling into the rallys - maybe its the hope of things actually continuing on the upside for a bit longer. Bears are not stepping in because they have the fear of more upside. And new money is entering the markets - again AAPL is one of the "crowd" stocks I watch for confirmations - and its just going up and up and not showing the same signs of indecision.

So how are we going to trade today? Well, not going to try because quite frankly its not very predictable. Patience is important now and our time will come, whether bull or bear. I have to be quite honest, this could go on for a little while longer, especially next week earnings for banks, while many know it won't be good any surprises may create another upleg - I do not believe this will occur but it will give more indecision.

I will post in the comments if I see something worth mentioning today or if we get a strong day into any direction. Anything could happen =)

EDIT:



Just an FYI. Futures are down already at the lower side of this channel. So watch for support as the 50 unit average moves up and the lower part of the channel moves down. If we break this lower part we should be going back to 804-808 here where we should find support.

Monday, April 6, 2009

Short Week - Markets up?

I had made another post over the weekend. I said I was going to add some MACD examples and explanations but I ran out of time.

I had spent quite a bit of time yesterday going over all of my time targets. For you long term readers you may remember my update in the beginning of March where I was hinting at accelerations occurring much more rapidly then I anticipated. Ever since mid February all of my time windows that should have manifested are happening faster on every swing. I have to be honest I am not quite sure what to make of this and can only come to one conclusion - we either stop the acceleration here by trading a bit sideways within a 60 point range in the next 4-6 weeks or we will be seeing a drastic october 2008 like event. I had ruled this out last year after my crash analysis and stated that we should continue downwards in a much more controlled fashion with a hint of fear only. We will have to see what is going to occur but if this acceleration continues my 480 target will be moved up by at least 50%.

Last year july I was getting other type of signs that made me very cautious in any long positions and as you know I went 100% cash in August of last year as I was afraid of what may be lurking there beneath. I am now at this same point again, this time though for different reasons. I have advised some of my friends and collegues that are invested into 401Ks this weekend to protect positions and minimize long exposure. Of course we have quite a bit of upside potential - many are saying we are topping out and there are very valid reasons for it. Just take a look at this indecision we have been having the past 2 weeks. If we are to make a break to the upside we have to get ourselves into proper breakout range and at least give the 912 a test this month. If that is too occur we should see a retracement back towards 848 which gives everyone a great way to get back into the market with a final target price of 1014. So from a risk perspective minimizing exposure here is a great move. The chances of an upturn occurring are quite small but March has thought me a great lesson to try my best to remain objective. I had lost my touch and became too bearish which unfortunately cost me quite a bit.

Ok enough of this, lets focus on this week. Volume should be light and we should be trading a bit more on the upside. I had mentioned that we should be seeing a change of trend today. Time wise the most likely scenario is the 12:30-12:45 window for a potential top. If this will not occur at that time the second scenario is the 2:45 range.

Targets on the upper side are the 870-878 range, while I do not believe those will be hit there is potential. Of course reaching those now, this week, I cannot tell you enough how much of a present this would be for the bears because quite frankly we should not see this range, if we do, we should be done on the upside and start the major leg down.

Saturday, April 4, 2009

Special: Just some Review

Time to figure out again what is going on and what to take from last week. Again as always easier to let pictures speak so here we go.


60 min S&P 500
Here we can see a nice up channel that has been created ever since the feds have stepped in around our 780 range. Higher highs and higher lows with the bottom range providing support and of course upper range resistance. Now as you can clearly see we are moving upwards, one swing in the upper ranges, retrace down towards the bottom, another swing on the upper ranges. Time wise we have perfect harmony here. As you remember I had mentioned on Wednesday that I foresee a change of trend on the coming Monday. This would be perfectly inline with creating another wave towards the lower end of the channel. Keep in mind it is very possible to break the lower trend line here and use previous bottom tests as support to build a base. The 839-848 range is quite important and it is my feel that if we follow "proper" rules, we will need to build up enough strength to take it out. If we break this range prematurely we should fail but again, the market at the moment is acting quite crazy which leads me to the next piece of information.


SPY Daily
Now here you can observe something quite strange but also giving us a chance to take this into account for the coming week(s). There is a huge amount of indecision and whipsaw going on when looking at the daily ranges that we are trading in. Big ranges but very narrow closes. Out of the past 9 trade days we have had only ONE decisive day and even that was occurring on lower volume. All other days were marked with indecision though it is indecision in a up channel. This up channel of course can be explained due to the outside interference however you can see very clearly here that we are trading up not due to the market and fundamentals getting better but due to the feds pushing like never before. MACD divergence is dropping but still quite strong and not ready to give us signs of down turns. Volume rather flat, any previous bear market rally tops have had clear signs of dropping volume, RSI overbought for the first time in a year with a 3 test in this upper range (I am using RSI of 60 on the daily).

So lets take a look at what the market is currently deciding to do from a longer mid to long term view.


S&P Daily
As you can see I drew quite a few trend lines here to outline our channel. The Fib levels were from our major top which started wave 3 (if you assume my wave count). Now I still believe there is a chance that wave 3 completed at 666 and this is the wave 4 retracement. On the other hand it is very possible that 666 is the completion of wave 5 and we are going through a 3 wave correction that should last a bit longer.

On the circles you can see that any time we broke to the outside range we found ourselves back in the main channel quite fast. Now the big question - do we go for the yellow dot - or do we go for the light blues?

So take take this a bit further look at the colored circles and their time. First blue was only approached on intraday ranges, first green with only one day close above the major channel. Second blue we spent a total of 4 days on the edge, next green circle to follow 5 days.

You get the point right? The time ratio spent on the other side has been more on our previous 2 occasions.

The last blue we have been at the edge for 5 days. Right now, on the other side 3-4 days thus far. What conclusion can we take from this? Quite simply we have 3-4 days left to make a decision. Considering the change of trend I foresee on Monday we we know with a high probability by mid/end of next week whether or not we will continue in the major channel or break the major down channel here and move higher. How high I am not quite sure, I could restate major fib levels here and previous tops but you can all figure those numbers out yourself. If we find ourselves in any of the blue dotted areas by Friday next week we should continue staying above the major channel for at least another 4-6 weeks, possibly more depending on the momentum we get out of the break.

Conclusion
At this point I am still bearish with the anticipation of moving lower to continue the major channel, however, we cannot ignore the signs the market is giving us. The daily indecision on the SPY supports a move lower, however the FED interference at a top range supports a move higher. Whether or not we will move higher here in the mid term or lower - does not negate the fact that I strongly believe we will be seeing 480 this year. Also keep in mind the lower we move in the channel the higher our percentage gains and losses are even though our point range remains the same. The bulls can use this to their advantage stating that we have had the biggest percentage gain here in a long time - yes that is true but looking at the picture alone it does not look all that bullish to me - does it to you? The great thing for us is that time is on our side this time around.

Friday, April 3, 2009

First test at major resistance ...

Yesterday
Well we had hit both of my price targets I had been referring to over the past week. First test at the 839-842 range with a top of 842.xx. I would have expected this one to hold for at least another test or two but the second range of 846-848 may have been to close there and we marked the top of the day at 845.61.

So for now lets combine them both into the 839-848 range and state why this is so important. First off, from an Elliot Wave Theory perspective this range represents a major decision point for the market. It will either be the top to start our final leg down towards my 480 targets or could mean that this is a 3 wave corrective move after having completed a 5 wave major downturn. While this does not change our long term bearish trend it could mean that we have another leg to go on the upside bringing us to the ranges I had mentioned in the past. I will reiterate those this weekend in a more detailed review to outline some of the longer term scenarios.

Now as you remember I had stated that the Feds have made a move for the first time that has gone against everything else we have experienced in the past 2 years. Outside intervention has only ever stepped in at major low points and was the cause for a major rally to follow. Now this time it was a bit different, the market has gone from 666 towards the 780 range without that type of intervention. Then at this range the feds stepped in an nudged the market while it was about to form a top. When taking history into account, this could very well mean a continuation or start of a new rally which it seems we are setting up for. Remember, 780 is where the feds stepped in and during our retracements we have NOT been able to drop below this range - that is quite a bullish sign. I am not saying go out and go long but we need to ensure we know what our trends are - short, mid and long term. If this Fed interference at the 780 will stick (of course with all other major changes during this month), we have a potential to see 900 (I would expect 920 or 945).

Of course fundamentals have not changed and one may ask why we can rally so much when things are so bad? Same pinciple as trends, long term our fundamentals are quite bad, on the short and mid term side they are actually not that bad. Look at RIMM, look at NASDAQ. Very positive results. The jobs number today will tell another story but I honestly feel it will be interpreted to some degree as a bullish result. Some of you remember my definition of the truth - in short - its what you can make others believe.

Today
Again today is quite difficult because its based on interpretation of facts, not the fact alone. So wait for the market to tell us what to do. Keep our range in mind here and look at volume. I would expect today to be quite volitaile, very unpredictable and full of surprises (hmmm, I think every day this month has kind of been like that).

Go long? Go short? - Even if I had an strategy I would not recommend any at this point because the risks are just too high.

Thursday, April 2, 2009

Wrong yet again ...

Yesterday
Well it seems I was wrong yet again. For the past week I have kept on referring to our retracement into the mid 700's and it never occured. Every attempt to bring us closer to this level has been bought by the bulls and we have seen the same occur yesterday. While prices held up to my targets on the upper ranges we were not able to create any type of setup for a move towards the downside.

Today
Well going to be very interesting - and in my opinion today is for all of us to watch and see where it takes us. Remember my favorite quote "better being out of the markets wishing you were in, then in the markets wishing you were out". Lets not try to gamble today and try to catch a falling knife. Futures we are already on the upper most ranges (824-828) so we have to see how those hold up. World markets are rallying and G20 and M2M is affecting us pretty much all day today - there won't be much technicals today so be careful.

Remember my numbers from before on the upper rages - 839-842 and 846-848. If we reach those today I will of course post comments and give better guidance on what to do. My rule unless otherwise, stay out, do not try to catch this.

Note
I had mentioned this in the comments yesterday. But as you can see the past week I have held back on making mid and long term forecasts as it is quite difficult at the moment to predict those scenarios and quite frankly, they change almost daily. It would take way too much time to try to determine each scenario and outline every confirmation sign due to the ever changing enviornment. The only thing I wanted to add is the 3 trends that are currently all different - short term is sideways, mid term is a bit towards the bullish side and long term is bearish. So until I see some type of confirmation on a proper trend I will keep it light - may do an update on the weekend to show the bigger picture for each of those trends.

Wednesday, April 1, 2009

What to do from here?

Yesterday
Quite a day yesterday. We have inched up very very slowly towards the 800 range, very little volume and I had mentioned in the comments that this type of trade action should take us higher then 804. Unforuntately I was stopped out of my shorts here as I was afraid of another leg up towards the 816 range where I was looking for a better entry.

As you know one of my trade rules again is no new positions after 3:00, I have been beat too many times in the last hour whipsaw action so I had to stand on the sidelines as we continued dropping even in the after hours action. Futures wise we are already below yesterdays low of 792.

Volume wise was quite strong yesterday - strongest day in the past 3 days which has to say something - while we closed 10 points up its a very bearish close here and of course leading us lower in the short term.

Today
We should continue to retrace towards our major targets. I had mentioned yesterday the next stop is at the 769-771 range here. We have broken 792 in the after hours so I would "hope" to get a retracement back towards this range as resistance for another attempt at the short side.

The next few days are going to be important as they will give us signs for the next move to come, either finsih a required retracement to make new highs, or move towards the 709-716 which hold a lot of support. I had mentioned in the past that a break here will resume the primary bearish trend - I would even be inclined to say a test at this range is enough confirmation for me that we are moving lower. However, the signs are not yet in and we need to be careful of this being a retracement to make new highs in the 838/848 range.

So from a long term position perspective, wait for 709-716 before going in very heavy on the short side, in the short and mid term keep your overnight exposure minimal and try to stay light.

I will provide more updates after the first 15-min on the open so I can give more precise guidance on trade ranges and scenarios. Pre-Market data can be tricky at times and are not always reliable of the day to come so I normally do not involve them but they are quite important here as an important point was broken after the close yesterday (792).