Wednesday, April 22, 2009

Major Trend Change taking place

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.

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.


  1. Thanks for this. Im going to look into MACD to try and learn a bit more. Best of luck for today.

  2. stopped out of my large SDS order. 100% cash now, and staying cash for a while.

  3. :/ pretty annoyed with myself for selling my long position yesterday, looking at it now i could have made something instead of breaking even...

  4. Same here Adam, just didn't think this had strength. Though I do have to say thanks Chris since I've been following your blog for a few months and didn't understand how to short the market, but bought SDS on Friday (due to the suggestions on this blog) when S&P hit 871 which I sold on Monday for a good profit. Market is too much of a yo yo for me to make any long positions.

  5. Bought some SDS SRS with SPX at 859

  6. Kat,
    Im new to trading myself and on a steep learning curve. Chris has been a massive help to me and his analysis is great, he tells it as it is. Were lucky to have an experienced & knowledgable trader like him willing to share his knowledge with us and to help us navigate through all the data and info out there, especially during these turbulent times.
    Btw well done on your SDS trade! ;)

  7. I agree with Adam .Thanks to Chris for his guidance. I AM NEW TO THIS ALSO.

    I saw negative divregence with SPX at 859 so I jumped in. I will put tight stoploss.

  8. well spotted samamehta. im staying on the sidelines for the time being, just too scary for me right now.

  9. copy and paste from

    am permitting myself three instances of mentioning my survey with respect to a technical-analysis alternate investment fund. If this is of interest to you, please do the quick survey, as it will only take one minute (if it's not of interest, please ignore this - - and my two subsequent - - reminders). Thanks.

    In a post from yesterday - the one about pain avoidance - Dutch asked some good questions in the comments section:

    Tim. You lost nearly HALF of your account, then octupled it in about a year. That is incredible!
    What did you psychologically do in order to turn the corner?
    What did you change in your trading plan?
    How did your attitude change?
    Has it changed again since the turn around?

    Those are great questions, especially on a day like this when I'm experiencing some pretty rough sledding (shorts getting stopped out left and right). I'll try to tackle this issues one by one:

    Psychology Needed to Turn the Corner: I've spoken many times about need to be relatively numb about gains and losses, but let's face it, we're all human. We're not going to be totally numb. Of course it feels good to make money, and of course is stings to lose money. But the more objective we can be, the better. Sustained downturns are psychologically really unsettling. Just think about what one is going through: your confidence in your abilities is damaged; you are probably suffering embarassment in front of family (or clients!) at the downturn; and it's very easy to extrapolate the losses continuing, which puts devastation plainly on the horizon. That's a very tough place to be in one's mind! For me, the key is to get one's confidence back. If you are down on yourself and running scared, it's only going to cause mistakes. If you are doing poorly, it makes sense to scale back - - maybe even way back - - and, with great care and thoughtfulness, trade lightly until you get some wins under your belt. You need to reassure yourself that, yes, you can make money in the market, you can act rationally, and, simply stated, you are not all-thumbs as a trader.

    Change in Trading Plan: The cruel irony of the above is that, by scaling way back, you are far less exposed to the market, and oftentimes it is at these instances when the market actually turns in your favor! Let's take last year as an example: from May 15 through July 15, the market went pretty much straight down. Did I, as a bear, make a lot of money during this time? No, not particularly. And the reason is that I had become far more conservative with my bearish stance since I had suffered so horribly from mid-March through mid-May. Was it a mistake for me to get more conservative? I don't think so, and the "money left on the table" is only visible in hindsight. This period of time was critical for me to gain my confidence back as a trader, and I had a string of successful months under my belt by late summer so that I could really rock 'n' roll for the September/October downturn.

    Attitude Change: I think the emotion that I felt most was frustration and exasperation, and those can be poisonous to a trader, which is why I keep coming back to getting one's confidence back. Take this week for example. Monday was a sensational day for me. My analysis very clearly pointed to a tumble, and I took advantage of it. Yesterday and today, however, have stunk for me, because I am tilted so heavily bearish, that even a couple of relatively modest "up" days can do some real damage. What do I do during times like this? The principal thing is something I don't have to "do" at all, which is let me stops take care of themselves (and, believe me, they've been doing that today!) The other thing I do is back off and give myself time to reassess. No matter how good the charts may look, if I'm suffering a drawdown, something is wrong, and it's not the time to be aggressive.

    I hope this has been helpful.

  10. sOLD MY faz, srs, sds at SPX 851. it will go down more but will wait

  11. Amatuerish attempt on my side: It is now going up with low volume so another opportunity to buy short--maybe? What do you think Chris? 860 the top or we may see 880?

  12. I got back in FAZ, SDS, SRS I hope this is for long haul up to 800

  13. got stoppoed out now all in cash. wait for 875

  14. Back in with small position FAZ and srs

  15. saw 10 M red bar on spy. going down now

  16. I hope this is not a bear trap