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.

15 comments:

  1. difficult call still. Thus far hit all price targets I was looking for but not in any position. After the test at 864 and came right back to 857 and bounced - this is quite a bullish sign. However even the bulls know that so they do their best to protect this point.

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  2. I was holding SDS since friday, I was greedy/stupid and didn't let go Monday. I just sold for break even, do you still expect a drop? Stay out or switch to long? Thanks

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  3. don't beat yourself up. I had kept mine too all the way and had to stop out break even. Even worse because I had emotions step in as my unrealized gains were dropping and kept on shorting on the way up incurring quite a few losses (as posted 2 days ago).

    I did try a very small long off the low of the day today but closed out a few points ago, this rally cannot be sustained but its difficult standing right in front of it going short. I will be waiting for a test of the top again today, depending on how we get there I may go short again over the weekend with a decent size position. However, at this point, waiting for confirmation and giving up 30+ points may be the best thing to do here.

    While I love perfecting the entry for a longer term position, may have to leave this one on the table.

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  4. While fundamentals and news are all backwards and divergences are all over the place it is still rallying. Does not make sense I know, but at the same time we need to ensure we have a trend that we can trade. Its not about being right or wrong, its about making a trade that will make you money. Your trade account is the only indication whether or not you are right or wrong.

    Sometimes its best to stay light. I have been fairly light the past 4 weeks after incurring my largest drawdown in March (yeap). I had stepped it up again last week thursday/friday just to get beaten again.

    Someone said this a while ago about our past 4+ weeks.

    "No one is making money at the moment, the smart people are either doing nothing or loosing money".

    I belong into the group of people loosing money (or having lost money). Our time will come I am sure, patience is all that's needed.

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  5. Thanks for your guidance and your blog. I've never posted before but I've always come to read your posts and comments. So if we reach 875, do you think the risk of entering short for the weekend would be pretty low?

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  6. its a difficult call, honestly. If we get there today I will probably go short but not a full position. Most likely 33%-50%.

    I will post here and on twitter if I make any decisions. So if you do not hear from me, no shorts =)

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  7. and congrats on your first post =)

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  8. HI Chris, again an amateurish observation on my side, I see a negative divergence on Es. Also SPY the volume is going down as it rises.

    I am holding to shorts position for now. If it turns out be bullish, there will be retracement to get out of short.

    what is your opinion/

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  9. Yes 100% agree, under normal circumstances I would be scaling in here, but I am a bit afraid of another push up around 1:45 that may give you quite a short squeeze.

    I am planning to add SDS and SKF today. Either above 874 or after 5 point retracement from top.

    However, we have had many bearish divergences the past weeks, yet here we are on our 6th week in the green.

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  10. and FYI, I am not going in very large today. If it makes new highs I can double down at the next level and get in on retracement to break even as you had mentioned. Thats why I had mentioned earlier I will not expose more then 50% on the position I want to build.

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  11. we should get a big push here in the next 15 minutes. Its a high probability setup (not to trade) but based on cycle changes.

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  12. The market is soooo thin. I just got stopped out of SDS even though it was set at three points below. But the story is that to sell 100 SDS it took them three transactions of 34, 14, and 52 shares. i HOPE THE BORKER DOES NOT CHAGE ME FOR THREE COMMISSIONS.

    WEHN IS THE TEST STRESS MODEL GOING TO BE RELEASED/ AFTER THE MARKET CLOSES? tHEY SAY mONDAY COULD BE BIG DOWN DAY NO MATTER WHAT THE TEST LOOKS LIKE -- TOO FRIENDLY OR TOO PUNISHING TO THE BANKS.

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  13. SPX is up only 10 points but it sems like 50 points because our expectations are diferent. I am staying short.

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  14. interesting to see how the 857 held perfectly even with such a volatile market.

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  15. The circus is back in town again. Another tape for the memory book.

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