Tuesday, April 14, 2009

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 !!!!

27 comments:

  1. "Retail Sales Fell 1.1% in March. PPI Post Biggest Decline in 3 Months in March, Falls 1.2% Core PPI Unchanged."

    Talking about wake up call =)

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  2. Funny interview with Dylan Ratigan (guy left fast money about 2 weeks ago)

    http://www.fedupusa.info/Dylan_Ratigan_Interview.mp3

    Funny stuff ... so much anger in his voice.

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  3. Watching your posts with eagle eyes!.... best of luck for today....im sure many others like me are patiently waiting for best point of entry.

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  4. It will be quite difficult today. The open market has a LOT of information to absorb. GS earnings, retail numbers, GAP down.

    This is my game plan for today:
    I am looking for a small fill attempt around 23%, small short there (I entered some short pre-market already), another short at yesterdays low, last final short at Thursdays low. By that time you are averaged nicely and can absorb a retracement of 5-6 points without being down on the position.

    Its kind of funny, the first top yesterday I stepped away from and it ended up being a great trade. Hindsight is 20/20 but a bit frustrating to say the least.

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  5. another note on trade plan. Its a very short term trade with target of 832. Depending on how we get there I may switch strategies and close either 100% or 50% for better re-entry.

    Again all dependent on the first 30 minutes of trade today.

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  6. Thank you, the game plan is really helpful.

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  7. watch for a small bounce here to reattempt todays top. Potential to still attempt the fill.

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  8. bounce right on cue!!

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  9. short lived, entered another 25% just above (as per twitter)

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  10. just read from one of the blogs that you mentioned earlier that Obama is speaking in about an hour....do you think it may lead to a climb to complete the gap fill?

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  11. not quite sure. I have a tight stop just above todays top on the SDS. So we will have to see. May wait for better opportunity once I get stopped out.

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  12. just looking at the SPX 1m chart....a lot of indecision with gaps between the bars...i think you described something similar last week just before the market turned.

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  13. wedging slightly here and dropping on volume. Big players all waiting on the side now. This is retail money coming in especially on so little volume. Full GAP fill almost. Reason I stopped out just above the open price.

    Quite a crazy market that requires a lot of management of the position. Not sure if twitter works perfectly here since I manage positions quite a bit after entry. Will address that in a post tomorrow in terms of day trade position management.

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  14. would you kind enough to let me know what parameters you use when looking at MACD and RSI on a daily basis(i've currently got mine set to (MACD 12,26,9)and (RSI 30,CLOSE,14,70). Thanks

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  15. approaching the 842 mark...watching for a potential bounce

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  16. do you think bounce back to 860 today? or go starigh to 800 within 5 to 7 days?

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  17. Adam, yeah the default values are fine.
    Samamehta, do not think we will see 860 again for at least another 2 days.

    Quite ironic, the first time yesterday that I did not short a new top, and got shaken out of my sucker short on the retrace. Now look where we are. Of course this could all disappear again and we head higher. To be quite honest, not sure what to make of all this as the really bad retail data was quite a negative sign but we ended up doing a full gap fill and touch the 856 range.

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  18. It looks like we get a good short entry now around 852 -856?

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  19. if we end up getting there today. If so, yes I will probably take a small short position. Tech earnings starting which will paint a much more realistic picture of economy. Will probably be negative.

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  20. lets "hope" so. I went long off the bottom. But that was just an itchy finger trade lol, hence no post on twitter ;p

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  21. just missed out!...not sure if we'll get another chance today..not going to chase this.

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  22. here comes one more push on the upside. this time to 855

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  23. not so sure, that last wave there lost a lot of momentum and we retraced a bit too much for another wave up. Lets see. I will probably stay out all together and go into the close 100% cash.

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  24. same here. wait for 870-880 to go short. or 800 --815 to go long

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  25. we may never get that 870. As I said today, I did not short the 860 range there, for the first time not shorting a new top. Thats as good of a sign as capitulation lol

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