Tuesday, June 23, 2009

Positioning for the next move

Well the bears definitely had their day yesterday. While I had some great profits I had closed out some of my shorts a bit too early in the fear of a mid day reversal. As a result I tried quite a few long attempts yesterday anticipating a move that never came. Considering the GAP down, and the breath we had yesterday I am really not sure why I kept on trying to get in on the long side when the signs for further downside were clear.

Either way, made good profits and closed out many positions. Overall I expect a bit further downside but not by much. You keep on hearing me talk about buffer zones, in this case the 900 range and I am always looking for a minimum of 10 points below a specific support zone for a clear break. This did not occur so from here on out we have to approach the market with caution. My primary focus is closing out short positions today to take profits and let the market show me direction.

I had entered some new bullish positions late last night to help offset shorts in case we get some strength here on the upside. One of the key drivers for me has been the dollar that I use as a strong base for position management. It has done well for me in the energy sector and commodities, however, those have had a strong run towards the downside erasing a large chunks of the gains that were made over the past 3 months. I have to admit, I was not as committed to this down move in terms of capital and leverage as I would have liked to, however, I am glad I approached this here with caution.

So for now I will remain rather flat going forward until the first week of July. I had mentioned in the past that time wise I was looking for the first week of June or first week of July for a top or an end for this rally. We are right in the middle and I will not yet commit myself fully on the short side. I do expect us to see the 900 range again in the short term, the question still remains whether or not we will setup for a test and possibly break of the 880. Something that should take quite a bit of work here.

Ryan, in regards to gold, I see the dollar pressure as quite a negative for upside on anything gold related. I would expect some rebound but overall I would not expect many gains to be had in this area. Commodities and Energy are quite difficult to trade at the moment (bullish or bearish) as we have had quite a down move already. One thing to keep in mind, energy and commodities have been leading indicators in the past to give us a clue of where we will head. Dollar is showing quite a bit of weakness today again and we have to be quite careful here on direction. The same way the market has been coiling in a narrow range the past month we are seeing similar signs in the dollar - so watch this very carefully for an indication of direction.

I really like the setup UNG is giving us, an easy mid term trade to take as we have some clear signs of where the bottom is, with great upside potential. My targets for UNG at this point are focused on the risk of the downside which is very limited in terms of trading - upside should be great once we see a confirmation of a move. Great risk/reward ratio. My position is very small in this area and I am playing Oil and Nat Gas on both sides - short and long until we have a direction.


  1. Morning Chris; doesn't seem like there are going to be any major moves; would it be fair to expect a slow decline during the afternoon session?? Steve

  2. not sure about today. Leaving today on the table without any attempts to get any position built here. I would expect a spinner today with some more slow bullish short term build up.

    Staying on the sides to figure out what this market wants to do for the next 2 weeks.

  3. Should mention I have kept my shorts in place (SRS, FAZ, and ERY); tageting about 800 on the S&P by 1st to 2nd week of July, then will go long into September. Steve

  4. I currently have a mid term target of 716 for mid october here. Not yet positioned for this move and do not mind waiting to get "absolute" confirmations.