Tuesday, May 19, 2009

Right and Wrong = recipe for disaster

Quite a frustrating start to the day. As much as I love to tell myself I made some good calls for the day I have to admit its frustrating when you do not include them all in your trade strategies.

As stated yesterday we were looking for a target price of 916 for a continuation. While we reached this target it was done so under different conditions. As described in comments continuation for a price target should not occur coupled with a sell off. We moved off the low of the day thus far towards this price point with good strength.

To top it off, the time target for this move was hit as well between 9:55-10:05 (low of the day at 10:01) and to make matters worse I had described in the comments that this time target may not be the high and could be the low as well.

In addition, my trade strategies were focused 100% on the 5 wave move that was violated today as the retracement target of 61% was exceeded.

So now its time to try to figure out what the next move will be. At this point of course the 920 test has very high probabilities. This in turn will give us some great new signs of direction. While we had major divergences on the up day yesterday we are seeing continued moves into the same direction which makes it a bit more difficult to figure out where we will head.

On the one hand we have little volume so a breach of 920 should not occur on the first test, however, my line in the sand of 912 has been breached yet again and we are not seeing any type of reversals to get below this range.

Overall, as much as I hate to admit it, and as much as I should be getting my bear cape off, we are continuing in the up channel in a bullish manner. Divergence or not, price is telling us a story even if volume is on the other side.

Rest of the day for me is sit and watch. I hit my daily loss limit as I was shorting (and of course violating my rules by moving the stops higher and higher).


  1. I am holding on to shorts. too bad we did not get to pick exact top. so what? here is blurb I got. Hope chrsi, you do not mind my posting other blogs here.
    The S&P 500 trend charts indicate the up trend of the last two months is over. We could get a back test of the 930 level before turning back down, just to clear out most of the remaining shorts.
    The S&P 500 is trending down with support at the 875 level and the 50-day moving average. Volume has fallen on the move down indicating a lack of buying interest, even with today's rally. The 800 is approximately a 50% retracement of the recent rally, which could be a logical target over the next several weeks. After that, we will have to see.
    The RSI is above 50, a sign of an up trend, though it is trending down. The MACD turned down through the 9-day moving average, giving a sell signal. The Slow Stochastic is above 80, where it will eventually turn down, giving a sell sign.
    Link to current version of the chart prices: S&P 500 6-month chart

    The 60-minute 3-month S&P 500 rebounded and tested the 50-hour moving average and the lower rising channel, as expected. In addition, the 200-hour moving average is just below, which will act as support.
    The RSI climbed above 50 indicating a new up trend. The MACD turned up giving a buy sign. The Slow Stochastic gave a buy sign by rising through 20 and is approaching 50.
    The 60-minute chart is indicating the market has rebounded to retest the break of the rising channel. This short-term rally offers investors an opportunity to add to downside protection such as protective puts options as well as add new short positions using the short ETFs.
    Link to current version of 60-minute chart prices: 60-minute S&P 500 chart

  2. no problem at all, hit me with everything you have =)

    just as an FYI, bear market rally tops will not get retested while in the same up move. Either a stall before (as I had expected with 907-912) or another high. While the other high can occur on low volume its still a new high.

    Flipping through channels the other day seeing the recruit - "nothing is what it seems".

    And there are no definite rules in the market ... everything is a variable and nothing can be predicted.

    I will post a chart up in a few minutes that may scare many shorts out there but are inline with the above post (and inline with yet again another justification for my bearish views).

  3. watch for possible stall at 918 here

  4. Like I said they listen to you Chris.

  5. it should make a new marginal high from here right at 917.50-918.50

  6. also our favorite XLF failing to confirm this up move here. If we can get some more tape buying here we will have a great short at 917 ...

  7. I hope and sure of it that you are right. I added shorts at 910 this AM may be too early but I am looking forward to big down next week.

    It is quite possible, now that bears and bulls alike are looking for 930 or so until Friday and MM may choose to cause pain for bulls too. It is thier turn and so they may not see 930 and turn around today. this is just a hope.

  8. well here we go. RSI confirmed a new direction, lets see how it does on the rebound off the slight triple bottom.

  9. samalamadingdongMay 19, 2009 at 2:10 PM

    don't keep fighting the market...embrace it! 950-1000 is coming for sure.

  10. just like some other traders have offered.

    S&P 500 > 980 = me in a bikini on Lincoln road

  11. samalamadingdongMay 19, 2009 at 2:12 PM

    not so sure we need to see that so maybe s&p 979... : )

  12. there you go =)

    and yeah I know, this bearishness has cost me a pretty penny. I am seriously considering taking one month off. market will be there tomorrow, next week, next month, next year.

    Why am I trading in a market that does not suit my style ... its beyond me. And it goes to show that its not about the ability to make decent calls, whats in the bank account at the end of the day separates right from wrong. And mine screams WRONG WRONG WRONG.

    Insanity = doing the same thing over and over again expecting different results.

    [raises hand]

    Enthusiasm = having the energy to continue after failing over and over again

    The way I am trading now, has definitely been very different then a few weeks ago, or even 2 months ago when this rally started.

  13. hmmm that second quote was wrong ... do not remember how it went lol

    something along the lines of

    success = having the enthusiasm to continue after failing over and over again.

  14. samalamadingdongMay 19, 2009 at 2:18 PM

    i hear ya chaugsy. the portfolio in my head is up much more than my actual portfolio. its been a brutal two months.

  15. what do you mean by RSI confirmed new direction? confirmed up or down? too on the edge to leave out any ambigueity

  16. RSI broke 40 on the downside which normally confirms a new range. However it needed to stay below 60 on the re-bound which it just broke.

    On the right side of the blog there is a link for RSI trend confirmations. Explains it in a bit more detail. Its a good addition to ones strategy but should be combined with other indicators and not used on its own.

  17. I will look into it. thanks Chris. But for now, does it mean good for bear or bull?

  18. made a marginal new high here at 916.39 ... looking like it wants to go another point or two higher first.

  19. I hope you are right. I am turning off the dollar loss window. It makes you nervous. Just focus for 850.

    do you think 898 in fist leg and retest 930 -935 to kiss 200 dma.

  20. nice sell off there and close blow 912 .... would have loved 907 but at this point I take what I can get.

    Today was more frustrating for me then a 3% down day on my cash for some reason. Good calls but bad trading.

  21. JUst FYI he is long for tomorrow
    The system will stay long if the adre closes between 33.97 and 34.93.

    Will go to 1.75x.

    ADRE colosed at 34.69