Monday, May 18, 2009

Breakdown or rebound?


Well I put a few key areas together here on this chart. First off we are still in the channel as you can clearly see - I hear many saying we have already broken it and I still do not quite believe it yet. We have been able to hold the 870-880 range as support and should continue to hold it now.

There are 2 easy scenarios to look for - a quick run up to 895 in the morning hours on low volume that should reverse quickly to break this range - or the more likely scenario of a continuation to see 900 again.

On the above you can see 3 key ranges - range one is the current support that we have not yet breached, the current upper ranges of 898 and the danger zone all the way above 920. A break of 898 will most likely lead us back to 907-912 so watch your shorts here carefully.

37 comments:

  1. tagged 895 twice now as anticipated. Volume is lower (considering its monday morning). Lets see how far it will take us here or if that was it.

    My feel is still a move higher here so need to watch it carefully.

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  2. closed GE puts as well. Still holding SDS

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  3. Goood Morning Chris,

    Thanks for the posts. I wasnt expecting a gap up today.

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  4. yeah quite painful. I hate trading in and out of long term shorts. Should have really closed them on Friday to avoid the risk of the channel bounce.

    Looking at charts on Sunday I was ready to kick myself taking such a risk over the weekend. Cost me quite a bit to close those positions today instead of Friday.

    While I was hedged, still not the best management of those positions.

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  5. we will get our chance soon hopefully. Btw i like your chart above, thanks for doing it.

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  6. Chrsi, I see neg. divergence. should drop from hear. what do you think?

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  7. yeap short here for a day trade but expecting higher ranges before I re-add the big shorts.

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  8. What is your higher range target now? 907? or it could go 920-924?

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  9. Chris, you think this could drop to 870 range for the day??

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  10. I call days like today "stepping days" ... cause they kind of look like steps. Break into new range, sideways within that range, break into next range, sideways in that range, etc.

    Coupled with low volume this is setup to go one more level up. However, looking a bit toppy here, once it breaks back into previous range it should continue to the bottom of that range, however, do not like trading days like this.

    Still a bit fuming from not closing out on Friday ...

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  11. Also look at RSI on the 1-min today. Not able to breach below 40 here. So for now, unless the market tells me otherwise, one more level up.

    Hoping not to get caught with my pants down here for not shorting the 903 level (as you remember one of my key resistance points).

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  12. Thanks very much Chris :-)

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  13. Just FYI, I had forgotten I had GTC for QID and it just got filled. For your sake, we may see 907 or better. But I am ready for this to tank. Neg.divg all over. I am holding until 850.

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  14. yeah looking very much like a top here. Continued selling into this rally in large blocks with small advances higher in terms of volume.

    Tape buying is getting very very very very (again very) tiring ...

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  15. It has broken down of rising channel. does this mean end of the of the up move chris?

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  16. it seems max pain for everyone. Bull or bear. Bulls got their scare last week when most of them were long. Bears getting their scare until tomorrow when all their gains evaporate just to capitulate before the next strong move down.

    We should be stopping all this either today, OR most likly tomorrow at the 912 range - My line in the sand.

    Next move down should be a minimum 1.61 ratio of move one. 930-880 = 50

    Next move 912 to 830-840. That should bring another leg up to close the month around 870 (as you remember from my previous comments last week).

    If we get a close of the month at 871, thats my perfect bear scenario.

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  17. samalamadingdongMay 18, 2009 at 2:57 PM

    chaugsy you're way too bearish here. no chance we trade anywhere near your sub-500 target this year (or next). too much cash on the sidelines. buyers will not let this thing die...not yet atleast. 950-1000 spx definitely coming over the next couple of weeks.

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  18. and yeah ... really is a perfect example of a stepping day here :(

    even got the fake break down that normally leads to previous step bottom. Days like this normally close at their highs - something I do not expect for today but hey .... while I am feeling good about my position management today - my balance not feeling it.

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  19. samalamadingdong, as you remember I had changed my outlook about 2 weeks ago when I had referred to another pattern building up that should not exceed 716 on the downside.

    Bear markets get at least one BIG 6+ month move that makes all the bad go away. And I have to admit, I think this is that move. While I am 100% confident of the 480 range (and quite a bit lower long term), the chances of seeing this by september are very slim. Seeing 912 again for the second time just lowered those probabilities another 50%.

    I wanted to post an update this weekend but got lazy again putting some attention to my significant other and other personal hobbies =)

    In a nut shell ...

    scenario one = 480 by sept
    scenario two (the all is good) = 716-780 range, big leg up to 1000+, <700 by November.

    Have some of the graphs ready but wanted to go into more detail on what confirmations to look for and what invalidates one pattern over the other.

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  20. in summary just in case it did not come out ... 480 = YES it will happen and the chances of this happening this year are still VERY HIGH regardless of where we are moving by summer.

    Just want to make sure everyone understands those views correctly =)

    What becomes important now to identify patterns correctly is this next 4-6 week corrective move. It should bring us all the way back to the 780 range probably by end of next month. By that time frame we will have a much better idea of which long term scenario has the highest probabilities.

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  21. and another one (and I really wish I had not slacked off this weekend to show the long term view better) - very long term - unless we get crazed inflation, something that should not be occurring for 2+ years, our final bottom will be lower then 400 on the S&P.

    I am kind of saying that at the risk of being ignored forever because I am a doom-sayer. I had mentioned before a statement like this is more meant as an observation of the problems we are in and not meant as a trade target and position target or anything in that regards - it may be called a philosophical statement that could be totally wrong because that type of prediction ... yeah its quite out there and it DOES NOT drive my trading and position management.

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  22. do not meant to sound defensive ... just stating what should have been in my long term view update this weekend =)

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  23. samalamadingdongMay 18, 2009 at 3:15 PM

    i'm curious why you close out "longer-term" bearish positions if you truly believe in 480. i would think you would use any move up in the market to add to the positions.

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  24. what is your target above 912? 200 sma? around 935-940 as worst case secnario. 1000-1200 may be too far in this leg.

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  25. Thanks for the updates.

    Disclaimer:
    "dingdong" is not the same person as "samalamadingdong"... I've been "dingdong" since I was 11...

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  26. "i'm curious why you close out "longer-term" bearish positions if you truly believe in 480. i would think you would use any move up in the market to add to the positions."

    because I trade what I see on the daily/60/15 min charts. Yeah I could just keep them here and come back in a few months but I manage positions quite actively. Closing out shorts this morning seemed to have been a good move in terms of improving my average price. I did readd a bit of the SDS at 900, but waiting for final push to 912 (or higher) that should be occurring either by 9:55-10:05 or 10:25-10:35 tomorrow. Will probably re-add all positions there or below 895.

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  27. even if I re-add them below 895 I will still have improved the average price.

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  28. samamehta, 1000 only if we get back to the 780-800 range. Once we are there we can make the call based on confirmations.

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  29. dingdong, glad seeing you back =)

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  30. samalamadingdongMay 18, 2009 at 3:29 PM

    i would think thats why you use your shorter-term hedges to capture hour-to-hour moves.

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  31. a bulls perspective at 3 Pm: they too are worried.

    3:07 pm

    - Oil futures reversing at $60 price resistance. Strong resistance at that level. If we break above that level market should rally higher and if we fail to break market will recieve more selling pressure I believe.I’m tracking the energy markets because it is the sector that gave us an extra boost higher after the financials and XLFFINANCIAL SEL SPD
    $12.12
    Change: +0.59 - +5.12%
    as of 5/18/2009 3:15pm
    . So when this falters we can be toast, since some profit taking has already occured in the tech and banks and it could continue if buyers give up.

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  32. new post to make my current short term views a bit clearer.

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