Wednesday, June 10, 2009

Where to go from here?

Had quite a few personal issues to address the past few days. While I have been watching the markets I did not do much at all since last week Friday. The past 1.5 weeks have probably been my lightest days in terms of trading - and here we are having broken the 947 pre-market already.

It has been quite crazy. Dip buyers everywhere - yeah schismatic, it still works as unbelievable as it may seem =)

We have been consolidating around the 930 to 947 range and are poised for a breakout. The last time the market got a little ahead of itself we had sold off right away after we had hit 957 pre-market. This time around it may be a bit different. As mentioned in the past when we GAP over 1% in either direction there are 2 very high probability setups. The open +/- 2 points as the high/low of the day with continuation to close at the highs (potential stepping days) or a strong sell off after the open with a failed re-attempt at the high.

The other aspect I have mentioned many times is the buffer zone. Whenever a strong support/resistance point gets broken the market normally tries to put a large buffer onto that point within a short time frame to allow this range to be changed from support to resistance (or the other way around). We have had over one week now in a fairly narrow buffer zone of less then 20 points. We had one breach above this range that was reversed right away. At the same time we have managed to put in higher lows but kept the 947 area the same. Again another sign of this range being broken as the same resistance gets re-attempted with sell offs to various support ranges that will find its way back.

Now some other things to look for. 9 up days for apple in a row - last time that happened was our rally last year around the same time frame. AAPL ended up making another high around 2 weeks later followed by the 4 day bear market top. So what will it be this time? Top of this rally today or tomorrow or another 3 weeks. As per my long term outlook time wise we should have seen the top in the first week of June - I had mentioned we have a possible time overthrow of approximately 4 weeks which would put the top of this rally in the first week of July with a target of 1014 - I am not sure if this will occur and not saying thats how it will play out but I wanted to re-iterate what my past analysis has shown - again an analysis I did not profit from but we knew that already.

Now looking at the dollar, we have pinched the upper trendline early last week and have sold off from then. We managed to reverse the past 2 days however have not been able to retest the upper ranges - at the same time oil is making new highs - a strong divergence between those 2 components.

We are currently in divergence heaven here so the market needs to find its way back to a neutral zone. Regardless of those divergences from a pure charting perspective this is still tradable for some - I just decided to stay out until the market becomes a bit clearer even if that means having to wait before I can short again. Even a normal bull market would not have such strong disarray of indicators (for all the bulls out there heh).

So lets go back at the charts then.

I had removed my normal indicators and just focus on charts and volume. I have circled previous distribution zones that had always lead to a strong price move into the next range - this is not occuring here even though we are above the 200dma - instead we get indecision on every daily candle here with a narrow open close price on each of them. While the bulls have the upper hand it is only marginal.

If todays open can stick and be protected with higher prices and strong volume we may have seen a short/mid term decision for a new range. So watch today carefully.

Also take a look at cobras market review. He has some interesting information as always about topping zones and patterns he is using - especially the divergence from advancing issues and advancing volume is quite interesting.

I will be a bit more active again starting today so expect updates in the comments if I see something.

Key ranges again to look for today:

956-964 = I had mentioned that in the past, especially the 956 that we had tested last week pre-market. ANY break of 964 should be reversed within hours so watch out for this range here - only 10 points away at this point.


  1. Interesting quote from a poster (glenfiddich - got to give credit) at slopeofhope.

    "sad that I am not long, glad that I am not short"

    combine that with my favorite of ...

    "better being out of the markets wishing you were in, then in the markets wishing you were out"

    Fun times we are in for sure.

  2. Another one to add. FTSE failing AGAIN at the 4500. Not sure how much longer it can do that here ...

  3. how is that for funny. So got myself into trade mode again today and figured I would long the GAP close. 3 tries, all 3 stopped out (tiny loss on each of them).

    Still 100% cash ... the day I go long is the day the market will turn. Best indicator =)

  4. haha, thanks for the nod in the daily report Chris.

    Schismatic update:

    Still holding all longs. Picked up FIG today on 50-day daily support. Added to ABAT. Bought some KV/A around 1.90 for a swing trade.

    Other holding include:


    All swing trades, with stop losses. No position over 5% of account (with exception of ABAT & CENX, 10% a piece)

  5. quite a frustrating day for me. Back to trading and already taking a beating hah. Stopped for the day, otherwise I enter "over/revenge" trading mode. Nice move off the top there at 955. I was so sure we were going to go higher today - and if not higher at least retest the upper ranges before heading down.

    Seems the market has been in "lets really screw with Chris" mode here. Sigh

  6. I figure until we take out 920ish area we have to give upside the benefit of the doubt. It has earned it.

  7. I tend to agree there. I would even go all the way to 898-901 before I would start saying "the trend may have changed".

  8. Agreed. I was more talking short term. IT I still hold 875 as my bench mark.