Ok - since the numbers are out the market reacted - or did it? GDP numbers released and we are pretty much right where we left off yesterday at the close. Nothing has changed, yes we did drop 10 points after numbers were released but futures have edged up slightly all night.
So what does it mean for us? To be honest - not quite sure. Smart money has decided to take some off the table pre-market, lets see what we do during cash hours.
At this point its anyone's game, the market may have looked for an excuse to initiate profit taking and this was it. Low volume here even pre-market for such an important event makes me think that we will retrace slightly and then for the 1000 range during the month of august.
I am getting my forex account funded today so I can finally trade markets that suit my technical stype a bit better. Expect a review of the forex market from me in a few weeks time to share my experiences. I have been playing quite a bit with it recently so we will have to see =)
Friday, July 31, 2009
GDP Today
Very short - either confirmation of island reversal on the daily OR a new high. Unfortunately the new high has a very high range. Here are a few key numbers to look for ...
998 - 1004 = big range yeah but anything in this area is possible, I would actually consider a stall before the big 4 digits as the most likely scenario, its a bit odd but the market has its own ways.
1014 = you all know this number by now as we and others have been talking about it for months (though I did not come a believer of this number until the past 2 weeks even though we had considered it in the past). I went back to my posts all the way to March 2009 Why did I ignore my own analysis there? I really have no idea, of course back then we were over 200 points away and I had NEVER in a million years anticipated a run up this strong. Lessons learned I guess.
1021-1022 = yeah, I know lol
8:30AM EST is all I have to say, lots of fireworks today and some good confirmations for us going forward.
998 - 1004 = big range yeah but anything in this area is possible, I would actually consider a stall before the big 4 digits as the most likely scenario, its a bit odd but the market has its own ways.
1014 = you all know this number by now as we and others have been talking about it for months (though I did not come a believer of this number until the past 2 weeks even though we had considered it in the past). I went back to my posts all the way to March 2009 Why did I ignore my own analysis there? I really have no idea, of course back then we were over 200 points away and I had NEVER in a million years anticipated a run up this strong. Lessons learned I guess.
1021-1022 = yeah, I know lol
8:30AM EST is all I have to say, lots of fireworks today and some good confirmations for us going forward.
Thursday, July 30, 2009
The run for 4 digits
Looks like we have a good chance for a stepping day today. Easy to detect what will happen. Open should be the low within 2 points and by 9:45 trend higher all day via our famous stepping day mechanism. If this is to occur we should have another 10 points on the upside from the open with very small retracements until 2:50 PM.
Other scenario of course is sell off - we will know the answer to this as well around 9:50AM this morning. If we are to see ourselves lower by at least 5 pts by that time frame we could continue to trend lower all day.
My assumption of course is a move higher from here out of our consolidation zone. We have now had 5 days of removing any short and mid term overbought conditions and are ready to take the market higher. Yes we are quite overbought on the daily but this is due to the crazed short covering - so ignore the daily overbought condition on the short term, it will resolve itself as time passes.
Other scenario of course is sell off - we will know the answer to this as well around 9:50AM this morning. If we are to see ourselves lower by at least 5 pts by that time frame we could continue to trend lower all day.
My assumption of course is a move higher from here out of our consolidation zone. We have now had 5 days of removing any short and mid term overbought conditions and are ready to take the market higher. Yes we are quite overbought on the daily but this is due to the crazed short covering - so ignore the daily overbought condition on the short term, it will resolve itself as time passes.
Tuesday, July 28, 2009
Comparison
I wanted to post a comparison of our major low back in march and our most recent major low here off 865. As you can see - this looks like the same graph with the only difference of seeing even less retracements now. As you remember our old rally kept on going higher and was only stopped once (the top red circle) - after this magic one day wonder the market continued higher and higher towards yellow. Can this be the case here? We are so close to 1000 on SPX that it would almost be a shame to not even give this a test.
GDP numbers on Friday I believe (I think it was this Friday). Do you think they are going to tell us all is bad? Really? I just found this comparison here interesting as this most recent rally seems to have MORE strength in terms of price then our rally off the 666 low. Of course volume was quite a bit different but we have been going higher and higher on lower and lower volume.
Just wanted to share this with everyone =)
Vaction time
as mentioned in the comments. I closed out the remainder of my shorts with a loss of course. While it is possible that we could go down from here - the bull flag is scaring me a bit too much.
Now that this bear has "given up" its time for the much needed correction lower and the resumption of the bear market =). I think timing wise this would work out amazing. Of course I will be kicking and screaming but I am sure I am not the first that has done this.
Though do expect updates from me about my views on the market after this week is over and lets see where we will turn next after this move resolves to either the up or downside. It seems there is a lot of tension in the market at the moment and its getting ready for a big move this week.
Now that this bear has "given up" its time for the much needed correction lower and the resumption of the bear market =). I think timing wise this would work out amazing. Of course I will be kicking and screaming but I am sure I am not the first that has done this.
Though do expect updates from me about my views on the market after this week is over and lets see where we will turn next after this move resolves to either the up or downside. It seems there is a lot of tension in the market at the moment and its getting ready for a big move this week.
The Big 3
As I am still in short positions that I had initiated quite a while ago I am doing my best to try to properly manage an exit. As always I spend a lot of time yesterday going over charts again and as you know there are 3 key areas I always watch. XLF, IYR and the EURUSD. All 3 of those charts are not giving me confirmations for this upside move we have been seeing. Pretty much the only reason I have left to stay in those shorts and not totally capitulate.
XLF - not confirmed
XLF has not yet confirmed the SPX move on the upside and has a bit of room left to go before even reaching key resistance. Break here of course and the market has much more upside.
IYR - not confirmed
Same as XLF, this sector has not yet confirmed the SPX moves. Almost at key resistance that needs to be broken.
EURUSD
The mother of all charts. This here is the most important for the direction we will be facing over the next few weeks and possibly months. 6 days of consolidation at the top here. The trendline is a longer term almost one year trendline that has not yet seen a decisive close above. We attempt to penetrate during the day but are unable to get 3 closes above this trendline. If we manage to break this on the upside we have the other 3 peaks to deal with but this could turn out as a slow grind higher for the markets as the tape buys up the dips and EURUSD attempts to test the previous tops.
Summary
I do not know what to expect of the markets at this point. I have to be honest - we could be consolidating here for a much stronger move higher into the 1014 range which represents key resistance. One could expect such a move even in such overbought conditions. We have now had 11 days of not being able to retest the previous intraday low. I am not sure when that has occured the last time but its been a while. I have to admit, my bearish views are coming back full force BUT those are not affecting my current strategy - I am still 100% committed to exit my short exposure in the next few days. I will continue to scale out as I have done over the past few days. I know this may not be the smartest idea in terms of getting the best out of your position but lets face it - the bearish side has not done so well. Yesterday the VIX increase was a key indication that investors are not looking to take profits but instead buy protection with the anticipation of further price increases. This makes a lot of sense with the current sentiment and supports more upside during this earnings season and the remainder of summer.
XLF - not confirmedXLF has not yet confirmed the SPX move on the upside and has a bit of room left to go before even reaching key resistance. Break here of course and the market has much more upside.
IYR - not confirmedSame as XLF, this sector has not yet confirmed the SPX moves. Almost at key resistance that needs to be broken.
EURUSDThe mother of all charts. This here is the most important for the direction we will be facing over the next few weeks and possibly months. 6 days of consolidation at the top here. The trendline is a longer term almost one year trendline that has not yet seen a decisive close above. We attempt to penetrate during the day but are unable to get 3 closes above this trendline. If we manage to break this on the upside we have the other 3 peaks to deal with but this could turn out as a slow grind higher for the markets as the tape buys up the dips and EURUSD attempts to test the previous tops.
Summary
I do not know what to expect of the markets at this point. I have to be honest - we could be consolidating here for a much stronger move higher into the 1014 range which represents key resistance. One could expect such a move even in such overbought conditions. We have now had 11 days of not being able to retest the previous intraday low. I am not sure when that has occured the last time but its been a while. I have to admit, my bearish views are coming back full force BUT those are not affecting my current strategy - I am still 100% committed to exit my short exposure in the next few days. I will continue to scale out as I have done over the past few days. I know this may not be the smartest idea in terms of getting the best out of your position but lets face it - the bearish side has not done so well. Yesterday the VIX increase was a key indication that investors are not looking to take profits but instead buy protection with the anticipation of further price increases. This makes a lot of sense with the current sentiment and supports more upside during this earnings season and the remainder of summer.
Friday, July 24, 2009
Confused Bear here
Well I wanted to make it official here. The market has done an amazing job at questioning my core beliefs. I had mentioned some of this in the comments yesterday but I wanted to go into more details.
As many of you know I am as bearish as it can be with expectations of the S&P500 falling even further with significant low below the 500 range most likely 480. I had my justifications and reasoning from a technical and fundamental perspective. Regardless - I have to accept that I could be wrong and that my overly bearish views have prevented me from seeing the obvious.
This rally off the march lows has been incredible, no one can deny that. Bears and bulls were surprised. But I think the bears were the ones that are now at a difficult point. We have broken the previous highs of the last bear market rally, are above the 200dma and have been able to hold above key support ranges. Regardless of whether I feel the markets are being manipulated - it does not matter. They have been for years, decades, longer then any of us have been trading so there is no one to blame.
At this point I am accepting the fact that the bear market could be over - yes I fundamentally believe very strongly that this is not the case but belief and what is actually happening has to be distinguished.
I am a pessimist by nature and I asked myself - looking back at lets stay 2003 or even 2004, with the information that was available back then, I am pretty confident I would have expected the market to turn lower. Consumer credit through the roof, leverage, etc. Ultimately we turned lower in 2007 but not before recovering ALL of the losses from the dot com crash. So here we are again with my fundamental views very negative - however, many people I talk to on a daily basis, cnbc, the general public of the belief that this will be over soon. Everyone is scared but they are hopeful as the news presents a much better outlook.
Can this go higher here? Could it be that the general public believes the worst is behind us? You tell me, I for one think its possible. I am not going to say anyone is being fooled here and that things are bad, well they are bad no question, but they were bad to some 5 years ago, 10 years ago, 15 years ago and before. You can always make a case for a negative point of view and my pessimism and negativity is the one that has gotten the better of me.
Look at the positives - banks are solvent, they have the support of the govt. While we still have a huge amount of bad and toxic assets they will eventually be washed and written off. It will take time but the cat is out of the bag - we know its going to be bad, and we are ready to deal with it as it arises. We are now much more confident then we were last year when it came as a shock to everyone without really knowing what to do and how to fix it - this is different now - we are confident that we have more control over the problems and are implementing fixes so it won't happen again.
I think we have the making of ending this recession here, maybe this quarter, maybe next, possibly this year and my long term prediction of 480 will never come true.
Most traders do not care about direction and I keep on hearing "I trade what I see" - well thats easy to say after the fact. Yes I am seeing the long side is working amazingly here (as I had described in my long post a few days ago) and the short side is meant to burn money. As my views are bearish BUT a few key events have occurred that put my bearish view into question, I have no choice but to step back from the markets until my views and the markets are aligned again. At this point, regardless of price I am very uneasy taking a long position due to the fear I personally have of more downside pressure, of course trading on the short side has been nothing but a disaster and has put my account to the largest drawdown yet. So if I cannot go long confidently and shorting brings me no money, what am I really doing here?
The "easiest" scenario is usually the right one - do you see a sudden change in direction here? to turn lower? After having 4-5 months of confirmed upside? Remember we are talking about a large time frame here, not just a 1-2 months bear market rally. This move has been building up for almost half a year. For me a sudden turn to the downside would be very surprising and could only occur due to a catastrophic event - even horrible earnings will not let this market move lower.
The easiest scenario for me at least seems to be more upside for a trend that has now been established for 4-5 months. Longer term investors say its impossible to catch a bottom - maybe this was it? What arguments do we have against it?
Either way (I love saying that heh) - I will be taking a considerable break from the market here. I am still exposed on the short side and will be looking for exists over the next few days or possibly close out with a fairly large loss. After that its time to dedicate towards some other things in my life that at this point seem to bring more joy to me. I will be around and will enter a trade here and there but more as a passive trader/investor.
And if I was right, and we get to 480, well then I can surely be a buyer there with confidence that we have a great base for a long term position =)
Feel free to get in touch with me or add me on MSN - chaugner (ad - @) hotmail (just removed some of the things for spamming reasons but you can figure out the address). Also, if you have any questions market related or not - I am always there to help out so don't be shy.
Of course I will make a post here and there again to share my opinion and other things. I wish everyone the best and if you are looking for more information. There is a great deal of blogs out there with good technical info - cobra, evil, slope - those are the three main ones I visit frequently.
Good luck all ... and I am sure we talk again soon.
As many of you know I am as bearish as it can be with expectations of the S&P500 falling even further with significant low below the 500 range most likely 480. I had my justifications and reasoning from a technical and fundamental perspective. Regardless - I have to accept that I could be wrong and that my overly bearish views have prevented me from seeing the obvious.
This rally off the march lows has been incredible, no one can deny that. Bears and bulls were surprised. But I think the bears were the ones that are now at a difficult point. We have broken the previous highs of the last bear market rally, are above the 200dma and have been able to hold above key support ranges. Regardless of whether I feel the markets are being manipulated - it does not matter. They have been for years, decades, longer then any of us have been trading so there is no one to blame.
At this point I am accepting the fact that the bear market could be over - yes I fundamentally believe very strongly that this is not the case but belief and what is actually happening has to be distinguished.
I am a pessimist by nature and I asked myself - looking back at lets stay 2003 or even 2004, with the information that was available back then, I am pretty confident I would have expected the market to turn lower. Consumer credit through the roof, leverage, etc. Ultimately we turned lower in 2007 but not before recovering ALL of the losses from the dot com crash. So here we are again with my fundamental views very negative - however, many people I talk to on a daily basis, cnbc, the general public of the belief that this will be over soon. Everyone is scared but they are hopeful as the news presents a much better outlook.
Can this go higher here? Could it be that the general public believes the worst is behind us? You tell me, I for one think its possible. I am not going to say anyone is being fooled here and that things are bad, well they are bad no question, but they were bad to some 5 years ago, 10 years ago, 15 years ago and before. You can always make a case for a negative point of view and my pessimism and negativity is the one that has gotten the better of me.
Look at the positives - banks are solvent, they have the support of the govt. While we still have a huge amount of bad and toxic assets they will eventually be washed and written off. It will take time but the cat is out of the bag - we know its going to be bad, and we are ready to deal with it as it arises. We are now much more confident then we were last year when it came as a shock to everyone without really knowing what to do and how to fix it - this is different now - we are confident that we have more control over the problems and are implementing fixes so it won't happen again.
I think we have the making of ending this recession here, maybe this quarter, maybe next, possibly this year and my long term prediction of 480 will never come true.
Most traders do not care about direction and I keep on hearing "I trade what I see" - well thats easy to say after the fact. Yes I am seeing the long side is working amazingly here (as I had described in my long post a few days ago) and the short side is meant to burn money. As my views are bearish BUT a few key events have occurred that put my bearish view into question, I have no choice but to step back from the markets until my views and the markets are aligned again. At this point, regardless of price I am very uneasy taking a long position due to the fear I personally have of more downside pressure, of course trading on the short side has been nothing but a disaster and has put my account to the largest drawdown yet. So if I cannot go long confidently and shorting brings me no money, what am I really doing here?
The "easiest" scenario is usually the right one - do you see a sudden change in direction here? to turn lower? After having 4-5 months of confirmed upside? Remember we are talking about a large time frame here, not just a 1-2 months bear market rally. This move has been building up for almost half a year. For me a sudden turn to the downside would be very surprising and could only occur due to a catastrophic event - even horrible earnings will not let this market move lower.
The easiest scenario for me at least seems to be more upside for a trend that has now been established for 4-5 months. Longer term investors say its impossible to catch a bottom - maybe this was it? What arguments do we have against it?
Either way (I love saying that heh) - I will be taking a considerable break from the market here. I am still exposed on the short side and will be looking for exists over the next few days or possibly close out with a fairly large loss. After that its time to dedicate towards some other things in my life that at this point seem to bring more joy to me. I will be around and will enter a trade here and there but more as a passive trader/investor.
And if I was right, and we get to 480, well then I can surely be a buyer there with confidence that we have a great base for a long term position =)
Feel free to get in touch with me or add me on MSN - chaugner (ad - @) hotmail (just removed some of the things for spamming reasons but you can figure out the address). Also, if you have any questions market related or not - I am always there to help out so don't be shy.
Of course I will make a post here and there again to share my opinion and other things. I wish everyone the best and if you are looking for more information. There is a great deal of blogs out there with good technical info - cobra, evil, slope - those are the three main ones I visit frequently.
Good luck all ... and I am sure we talk again soon.
Thursday, July 23, 2009
USD
Everyone, you keep on hearing me refer to the USD. As you can see this is the SAME trendline we have been using for weeks now as a guide and its acting as perfect resistance. Now to be quite honest this is looking rather bullish here - we do have a tri star bearish reversal pattern but I do not put that much significance on the 3 dojis here. Yes they can lead to a reversal but many times its a re-grouping move before taking out the high.
Other blogs have talked about the dollar as well and of course the effect it would have on equities. I am glad that the trend lines we have been using continue to help us through this market here.
I have to admit, today was the first time I questioned myself and tried to determine if I could be wrong - could this have been it? Was the 666 the low, will my 480 number ever come? Well, its definitly looking like market participants believe the problems are resolved and that the problems have been addressed to a point of avoiding any collapse or breakdown. Maybe I am just high on meds - who knows.
Forecast wise I have not much to add here - we are still moving higher along a very steep trendline and have not been able to retest the previous days intraday low while at the same time taking out very long term high pivot points - inredible, unbelievable, impossible. How can one make a call here?
Wednesday, July 22, 2009
Retracement and retests
It is now the 8th day that SPX has not been able to even give an intraday test at the previous days low. It seems even after negative earnings the market is unable to even try the most basic move - even a bull market allows for profit taking and re-grouping - however not this market here.
If I had just done scalping the past 4 trade days. Every day I have had amazing gains at one point that all evaporated yet again as I was too stubborn to hold on thinking it would be a nice position for a good retracement lower. Every time do i have to micromanage this position and all I end up doing is improving the avg price slightly and close the day break even.
Guess I should have stayed in bed resting and getting better instead. Would have been the same.
If I had just done scalping the past 4 trade days. Every day I have had amazing gains at one point that all evaporated yet again as I was too stubborn to hold on thinking it would be a nice position for a good retracement lower. Every time do i have to micromanage this position and all I end up doing is improving the avg price slightly and close the day break even.
Guess I should have stayed in bed resting and getting better instead. Would have been the same.
Tuesday, July 21, 2009
How old were you when this happened the last time?
Many times when you go through important points in your life you wonder how old you were when it happened. Well I am going to pose one of those for all of you today.
We have just closed day number 7 in the greens for the DOW. The last time the DOW closed 8 days green in a row was 3-21-2003 (yes 2003). Can we make a new record this week? You tell me ....
We have just closed day number 7 in the greens for the DOW. The last time the DOW closed 8 days green in a row was 3-21-2003 (yes 2003). Can we make a new record this week? You tell me ....
Still Sick - small update
Ok, still a bit sick but wanted to give you guys a small update. While the market is going higher here (again) we should get profit taking soon. Keep in mind the 965 range will not be exceeded on the first try - no matter how many bulls we have, no matter how good news and everything else is. This range will NOT get exceeded on the first try and requires everyone bear and bull alike (and maybe converted bears cough cough me?) to regroup for a takeout of this important range.
If you are short now - its painful, yes, but we will get ourselves back to 920-930 to have a chance to cover and exit shorts. I will be looking for a short entry here soon most likly in the first 30 minutes of trading.
If you are short now - its painful, yes, but we will get ourselves back to 920-930 to have a chance to cover and exit shorts. I will be looking for a short entry here soon most likly in the first 30 minutes of trading.
Monday, July 20, 2009
Small update
While I am sick its still exciting to watch this crazed market. Day 5 now with extreme overbought conditions. We had entered overbought at 906 - we are not at 952 and still overbought. Yipppeeeee !!!
Highest DOW and SPX close this year. Sign of things to come? you tell me - I am not quite sure anymore.
Highest DOW and SPX close this year. Sign of things to come? you tell me - I am not quite sure anymore.
Sick at home
Sorry no post. Quite sick laying in bed. Though I did manage to cover all my shorts break even today. Not what I had in mind but not going to have time to focus on the market when I am sick.
No down pressure at all - bears covered, bulls are in positions - there is no need for this to turn down. I guess I was the only "sucker" left thinking he could make money on the short side.
No down pressure at all - bears covered, bulls are in positions - there is no need for this to turn down. I guess I was the only "sucker" left thinking he could make money on the short side.
Friday, July 17, 2009
My 2 Key Sectors at support
Take a look at XLF and IYR. Both of those sectors are not participating on the upside and are very close to yesterdays lows. Definitely something to watch carefully as a break of either one to the downside will take the other sectors with them.
Its OPEX today - so no big moves expected and a normal narrow range to close flat. Do not think we will see any surprises on the upside or downside today.
Its OPEX today - so no big moves expected and a normal narrow range to close flat. Do not think we will see any surprises on the upside or downside today.
If I was the market and could screw the most amount of people what would I do?
Ok let me share some more philosophical thoughts with everyone here. This is not meant as a direct comparison to me - but I am taking what I have experienced in the past few weeks and combine that with the overall theme of the market to inflict the most pain to everyone - bull or bear.
Ok lets start this a bit closer to the end. We had an amazing bear market rally - the biggest we have ever experienced to the disbelief of many bears and even to the bulls that never thought we could run this higher - if you remember my longer term outlook on the right hand side under must reads you can see that I would have NEVER EVER thought we could make it this high. But here we are. Even the strong bears out there are regretting not having seen this move ahead of time for the MANY easy gains that were had on the long side - and boy were those gains easy to be made. The perfect channel without any violations for week after week. No double bottom tests, no fake breakouts to the downside - just up up and away.
So a smart bearish investor (not me but in general) sits here patiently and patiently until the right time comes. We make a new high at the 950-965 range - a range that any bear knows must hold for their case to remain valid. This range has a much longer term significance so a smart bear knows that this cannot be exceeded or this is more then just a bear market rally. So he waits patiently for a confirmation. We hold the key range of 965 and sell off lower. As we approach key support ranges we of course make a stand for the rally and slowly creep higher on lower volume and many divergences. This bear is finally waking up and getting ready to fire off some positions. As we fail to make a new high we stop at key resistance that had been previously established and the bear finally makes its move [this is in reference to the 92X attempt after we had made the top]
[Chris: of course I did not wait patiently and have been shorting way too soon during this rally but lets leave that out for a second - remember this is meant as a story]
Now - the bear got in at one of the best possible places for his position. He waited for the confirmations of a failed attempt at a previously key support/resistance level and had assumed minor risks for great gains to be had. Of course concerned for more upside the bear is cautious but is given a present with a nice drop right away. NICE - things are finally moving. As time goes on the bear has a chance to continue to increase his short exposure as prices move lower. While its a bit slow with some whipsaw in between position and money management allow the bear to continue to add to positions and make profits - finally. After 4 weeks the bears system is finally paying off and the bear looks back and analyzes what happened. Great gains for 4 weeks - great entry and an abundance of open positions that are all in the money and showing signs of even more downside as many break support and fail at attempts of a rally.
However, being the smart bear that he is he decided to put in some bigger protection for his bearish positions. The week closes very bearish but of course more upside risk lingers so the bear hedges with a fairly large exposure to the upside just in case. Being out of hibernation the bear spends the weekend enjoying bee hives and rolls around in the green grass that seems to be getting greener by the minute.
A new week starts and to the bears surprise no more upside seems to occur. Many who entered protection were stopped out of this protection as it seems that we will not move much higher and this is just a weak attempt at a rally.
[Chris: of course I got taken pretty bad this week when I got stopped out of ES due to the GS schenanigans].
As the upside seems very limited and controlled the bear decided we are finally ready to enter the next stage and continue lower in prices. Well he thought wrong. What occured was one of the biggest and strongest rally we have seen during this rally. 4 weeks of hard work had been wiped out in what appears to be a humoungous stand of the bulls. What is so frustrating about this is that the bear had waited months to make a move - week after week easy trades on the upside went by but the bear held true to his belief that we are in a recession. He did not care what he missed on the upside as he assumed the downside will be more profitable. So after weeks of sitting [Chris: or loosing money for me] the bear had a chance - took it and got taken for everything he had.
Now, after such a move one has to wonder. We had seen the easy trade on the upside pass by us, we had a chance to make money on the downside and everything got taken in such a short time frame that it seems 4 months had been in vain. Now what appeared to have worked for the past 18 months is now in question. Look how easy it is to make money on the upside? You could have gone long at any point this week, at the close, at the open, during the day and had minimal risks and came out on top. Wow - why is the bear not doing it?
After all of this frustration to bear gives up - the doubts that have been in his mind all along seem finally confirmed and whatever system and strategies that had been used in the past are not working anymore. Of course we are all in it to make money so what do we do? I think its time to make some money right?
So the bear now has a different hat on - the hat to make money regardless of his views. So now I am waiting for the first chance for prices to drop to get in on the long side for the upside that seems so easy from here. How high can we go? No idea but all I know we will go higher and higher ... so I want to profit from it. Any retracement will be bought, if we drop lower its quite ok as we have all the way down to 870 to average on our positions knowing it will bounce from there. So we keep on buying as the market drops - more and more as the market has shown us quite clearly that there is only upside to be had.
Or is it so?
As some of you remember I had made a long post a while ago about who needs to sell? I still believe that is the case - that there are many large institutions that hold HUGE amounts of inventory with high risk that need to be sold. So how do you manage to get buyers into place? You convert the bears, and you get in the last bulls that were waiting on the sidelines. And you ensure that they have only ONE thing in mind. That is buy - no one should be having any desire to sell or go short. Looking back at what has happened in the past 3 months or even 5 months when you consider the beginning of March - I think we can make a strong case here that most people at this point in time want to join the buss that seemed to have given such easy profits. I mean look at this week - how can this not be ignored? Incredible strong move in price and even good volume behind it - 4 weeks of drops wiped out with a snap.
Be fearful when others are greedy - be greedy when others are fearful. Is there any fear in the market at the moment? Nope - everyone is ready to make money and of course make it easy. The easier the better and one has to admit - after seen the past few months the money is definitly very easy on the long side.
As a bear - when you have doubts left and right and when your system is put in question, when it will be almost impossible to press the sell button - thats the time you should stick to your belief. As I had mentioned in the comments I do think we have put in a top here - not a top in terms of price but a top in terms of final move. As a result I have increased my short exposure again. Keep in mind we have NOT yet broken the long term key resistance of 965. I now have 25 points of pain - and even if we get there we shall have a chance to average down and get back out on a retracement. The bull or converted bear now has a lot more pain to assume. All the way down to 870 for the bullish case to be declared void. So tell me? what would you rather have? 25 points on the upside or 70 points on the downside as your risk profile?
The market has done one thing very good this week - incredibly good - removed any desire for anyone to short. I mean look at this rally. There has been no selling, no profit taking (so it seems unless you consider those huge volume spikes at the close buying).
Sorry for the long post. Again this is not meant as trade advise - its more a random collection of thoughts. So take it as that - not as an objective technical post but as some random words from an emotional trader =)
Ok lets start this a bit closer to the end. We had an amazing bear market rally - the biggest we have ever experienced to the disbelief of many bears and even to the bulls that never thought we could run this higher - if you remember my longer term outlook on the right hand side under must reads you can see that I would have NEVER EVER thought we could make it this high. But here we are. Even the strong bears out there are regretting not having seen this move ahead of time for the MANY easy gains that were had on the long side - and boy were those gains easy to be made. The perfect channel without any violations for week after week. No double bottom tests, no fake breakouts to the downside - just up up and away.
So a smart bearish investor (not me but in general) sits here patiently and patiently until the right time comes. We make a new high at the 950-965 range - a range that any bear knows must hold for their case to remain valid. This range has a much longer term significance so a smart bear knows that this cannot be exceeded or this is more then just a bear market rally. So he waits patiently for a confirmation. We hold the key range of 965 and sell off lower. As we approach key support ranges we of course make a stand for the rally and slowly creep higher on lower volume and many divergences. This bear is finally waking up and getting ready to fire off some positions. As we fail to make a new high we stop at key resistance that had been previously established and the bear finally makes its move [this is in reference to the 92X attempt after we had made the top]
[Chris: of course I did not wait patiently and have been shorting way too soon during this rally but lets leave that out for a second - remember this is meant as a story]
Now - the bear got in at one of the best possible places for his position. He waited for the confirmations of a failed attempt at a previously key support/resistance level and had assumed minor risks for great gains to be had. Of course concerned for more upside the bear is cautious but is given a present with a nice drop right away. NICE - things are finally moving. As time goes on the bear has a chance to continue to increase his short exposure as prices move lower. While its a bit slow with some whipsaw in between position and money management allow the bear to continue to add to positions and make profits - finally. After 4 weeks the bears system is finally paying off and the bear looks back and analyzes what happened. Great gains for 4 weeks - great entry and an abundance of open positions that are all in the money and showing signs of even more downside as many break support and fail at attempts of a rally.
However, being the smart bear that he is he decided to put in some bigger protection for his bearish positions. The week closes very bearish but of course more upside risk lingers so the bear hedges with a fairly large exposure to the upside just in case. Being out of hibernation the bear spends the weekend enjoying bee hives and rolls around in the green grass that seems to be getting greener by the minute.
A new week starts and to the bears surprise no more upside seems to occur. Many who entered protection were stopped out of this protection as it seems that we will not move much higher and this is just a weak attempt at a rally.
[Chris: of course I got taken pretty bad this week when I got stopped out of ES due to the GS schenanigans].
As the upside seems very limited and controlled the bear decided we are finally ready to enter the next stage and continue lower in prices. Well he thought wrong. What occured was one of the biggest and strongest rally we have seen during this rally. 4 weeks of hard work had been wiped out in what appears to be a humoungous stand of the bulls. What is so frustrating about this is that the bear had waited months to make a move - week after week easy trades on the upside went by but the bear held true to his belief that we are in a recession. He did not care what he missed on the upside as he assumed the downside will be more profitable. So after weeks of sitting [Chris: or loosing money for me] the bear had a chance - took it and got taken for everything he had.
Now, after such a move one has to wonder. We had seen the easy trade on the upside pass by us, we had a chance to make money on the downside and everything got taken in such a short time frame that it seems 4 months had been in vain. Now what appeared to have worked for the past 18 months is now in question. Look how easy it is to make money on the upside? You could have gone long at any point this week, at the close, at the open, during the day and had minimal risks and came out on top. Wow - why is the bear not doing it?
After all of this frustration to bear gives up - the doubts that have been in his mind all along seem finally confirmed and whatever system and strategies that had been used in the past are not working anymore. Of course we are all in it to make money so what do we do? I think its time to make some money right?
So the bear now has a different hat on - the hat to make money regardless of his views. So now I am waiting for the first chance for prices to drop to get in on the long side for the upside that seems so easy from here. How high can we go? No idea but all I know we will go higher and higher ... so I want to profit from it. Any retracement will be bought, if we drop lower its quite ok as we have all the way down to 870 to average on our positions knowing it will bounce from there. So we keep on buying as the market drops - more and more as the market has shown us quite clearly that there is only upside to be had.
Or is it so?
As some of you remember I had made a long post a while ago about who needs to sell? I still believe that is the case - that there are many large institutions that hold HUGE amounts of inventory with high risk that need to be sold. So how do you manage to get buyers into place? You convert the bears, and you get in the last bulls that were waiting on the sidelines. And you ensure that they have only ONE thing in mind. That is buy - no one should be having any desire to sell or go short. Looking back at what has happened in the past 3 months or even 5 months when you consider the beginning of March - I think we can make a strong case here that most people at this point in time want to join the buss that seemed to have given such easy profits. I mean look at this week - how can this not be ignored? Incredible strong move in price and even good volume behind it - 4 weeks of drops wiped out with a snap.
Be fearful when others are greedy - be greedy when others are fearful. Is there any fear in the market at the moment? Nope - everyone is ready to make money and of course make it easy. The easier the better and one has to admit - after seen the past few months the money is definitly very easy on the long side.
As a bear - when you have doubts left and right and when your system is put in question, when it will be almost impossible to press the sell button - thats the time you should stick to your belief. As I had mentioned in the comments I do think we have put in a top here - not a top in terms of price but a top in terms of final move. As a result I have increased my short exposure again. Keep in mind we have NOT yet broken the long term key resistance of 965. I now have 25 points of pain - and even if we get there we shall have a chance to average down and get back out on a retracement. The bull or converted bear now has a lot more pain to assume. All the way down to 870 for the bullish case to be declared void. So tell me? what would you rather have? 25 points on the upside or 70 points on the downside as your risk profile?
The market has done one thing very good this week - incredibly good - removed any desire for anyone to short. I mean look at this rally. There has been no selling, no profit taking (so it seems unless you consider those huge volume spikes at the close buying).
Sorry for the long post. Again this is not meant as trade advise - its more a random collection of thoughts. So take it as that - not as an objective technical post but as some random words from an emotional trader =)
Thursday, July 16, 2009
The broken charts
For the visual people just wanted to update the most broken chart of this year. We are still finding ourselves in what we should call the death zone for bears. Many have capitulated (me included) - many are just at awe with what this market has done. I have kept the proper trendlines from yesterday to outline the megaphone pattern I had been talking about. Someone at bostonwealth picked up on that too but a pattern of a different nature that I seem to like quite a bit (butter fly). Keep in mind that those type of patterns are extremely rare especially on such a long time frame. They develop very often during intraday ranges before a 3+ day trend is established but not often on such a scale.
The butterfly indicates continuation (and is MUCH larger in time then this pattern - try 3 months and you can see the same but in reverse). The mega phone indicates reversal to the downside.
NOW - you all remember my insane love with monthly spinners - meaning a month where open a close is the same. I will go back and do something a chartist should never do - massage a chart - well here it goes.
For the month of may we are going to use the close price of the first day which is 907 and not the open (which is 880). I know that this is a violation of technicals and you can spank me all you want but I am going to do it anyways. Where we are now - we had a 10 point open/close range for the month of May, less then 10 points for the month of June and our current price levels for july is a mere 10 points as well.
The reason I am manipulating this a little bit here is to show the extreme levels of indecision we are seeing. Incredible formation from a longer term perspective we are seeing here. Of course my gut feeling is the downside but who knows anymore. And if that is not enough - 5 months up in a row. Please tell me the last time a bear market has done that?
Short Update
There is really not much more to say with this crazyness. From best quarter in a decade to best day in the quarter. While I am glad I managed my short exposure correctly yesterday by closing out in the morning hours I am still baffled at this week overall. I have never seen such overbought indicators on the 60 min. The only thing that compares is the october 2008 crash in terms of oversold indicators - and we all know what happened - a rebound or retracement never came. We have sold off a bit in the overnight sessions but most of it recovered due to the amazing JPM earnings - forget about everything else - if a bank can manage to make money, all things are good, everything else is irrelevant.
For today - I am not sure what will happen. I got into some shorts at the close yesterday but those had a clear plan - a gap down overnight was the only way for me to hold on to those and it seems we are not getting a chance to have this scenario play out. I will be going back into cash most likly within the first 15 minutes of cash hours - I will keep it updated in the comments.
Lets see how far this crazyness will continue. This week has definitly been a blow to any bear out there - and many are still left to cover. More covering in this range here with the fear of higher ranges is definitly in the cards today. Now the bear in me talking again sees a few things. How do bear market rallies end? (haha I know don't bash me for not being on the long train - I tried and failed so eat it).
1) bear market rallies end on good news - CNBC stated the recession is over (hah) = check
2) bearish blogs turning bullish = check
3) many blogs talk about higher numbers but no one has a clear plan nor a clear target - everyone keeps on stating we will go higher, make new highs but no one knows for sure, the only thing we keep hearing is that we will go higher = check
4) even the most committed bears capitulate - I did, quite a few others did, many are still to follow = check
EDIT: 5) complete dis allocation of asset classes, price, volume and time = well check on this one too
Of course I am being a bit silly here as I said the same thing 2 months ago - but I am going to say it again. Keep in mind - we are still at the same exact ranges we were at in the beginning of May. That is 3 months of indecision now - I said after month 1 it cannot go on, I said the same after month 2, now in month 3 I am saying it again. What will month 4 bring? you tell me ...
For today - I am not sure what will happen. I got into some shorts at the close yesterday but those had a clear plan - a gap down overnight was the only way for me to hold on to those and it seems we are not getting a chance to have this scenario play out. I will be going back into cash most likly within the first 15 minutes of cash hours - I will keep it updated in the comments.
Lets see how far this crazyness will continue. This week has definitly been a blow to any bear out there - and many are still left to cover. More covering in this range here with the fear of higher ranges is definitly in the cards today. Now the bear in me talking again sees a few things. How do bear market rallies end? (haha I know don't bash me for not being on the long train - I tried and failed so eat it).
1) bear market rallies end on good news - CNBC stated the recession is over (hah) = check
2) bearish blogs turning bullish = check
3) many blogs talk about higher numbers but no one has a clear plan nor a clear target - everyone keeps on stating we will go higher, make new highs but no one knows for sure, the only thing we keep hearing is that we will go higher = check
4) even the most committed bears capitulate - I did, quite a few others did, many are still to follow = check
EDIT: 5) complete dis allocation of asset classes, price, volume and time = well check on this one too
Of course I am being a bit silly here as I said the same thing 2 months ago - but I am going to say it again. Keep in mind - we are still at the same exact ranges we were at in the beginning of May. That is 3 months of indecision now - I said after month 1 it cannot go on, I said the same after month 2, now in month 3 I am saying it again. What will month 4 bring? you tell me ...
Wednesday, July 15, 2009
Speechless
There is not much more to say. Take a look at some of those charts. SRS and SKF on the daily - wow.
XLF, SPY, everything looks severely - well lets say like a healthy market =)
XLF, SPY, everything looks severely - well lets say like a healthy market =)
Noob Index Update
For some of my older readers you heard me refer to the noob index and I did a write up a while ago on the very precise relation between AAPL and SPX. AAPL just made a new high - if we are to follow this index and it will do the same as it has done over EVERY past rally here we will have a new high on SPX at least 4 days away. So taking this as a measure - SPX can reach a new high on Tuesday or Wednesday next week.
I may make another write up on this some time this week to show the correlation. Interesting view for sure.
I may make another write up on this some time this week to show the correlation. Interesting view for sure.
Update
Thus far we are trading in a stepping day as expected. Days like today especially on such low volume normally end at their highs as many are sitting on the side lines giving retail buyers a chance to buy at the top with the promise of higher ranges.
The total lack of volume really shows what will be in store for the market long term. I think every other blog is referring to this low volume as well - probably one of the only positive signs for bears at the moment.
Now looking at the above chart - what a chart I tell you - things I have never seen in my young trading live. We blew through resistances without any step - highest RSI value on the 60 min in like ever. 3 waves on the MACD. It seems the market has finally found a point to hold at at this very important resistance level here - though that does not mean we will not see a breach on this level to go higher.
Now an interesting formation that could be taken from here is the megaphone pattern. Ranges are expanding and if this pattern holds true we should try to attempt the upper most ranges at least - of course this is one of those instances where I look for a bearish pattern when everything seems bullish - so please do not misunderstand what I am trying to say. Yes we should get some pull back but the question remains how much higher this may go here. As a bull or a bear this needs to be answered to continue in this difficult market. IF this pattern plays out (and I am not saying it will) this could be another extreme waiting for us ... an extreme to the downside. Of course this is all nice and great to "dream" as I am not using this as a guide for any trading.
I never watch cramer and when I walk by our TV on CNBC I keep on seeing his "stop trading sign" not sure what the context is but maybe its something we should all try to go by.
Either way - I hope many of you manage to keep losses at a minimum and hopefully make some money. As mentioned by a fellow reader in the comments - the market will be there tomorrow. So on that note - let me ask you. Would you rather short here? or would you rather go long at 800 if we ever get there? What do you think has a higher chance of success. Maybe this chop here is the BEST learning lesson we as traders can take from this - patience and waiting for the right position, even if that means having to wait months for this to happen.
New Business Idea
Based on my most recent success on the market I had a different business idea. I am currently looking for investors for "Chaugner's International Lemonade Stands".
Please let me know if you are interested. I will be providing business plan and funding needs shortly. I have just called the broker to close the account and created a new business entity that is now accepting funds.
Please contact me at 1-800-ZEM-ONEY (true to my german heritage) !!!!
Please let me know if you are interested. I will be providing business plan and funding needs shortly. I have just called the broker to close the account and created a new business entity that is now accepting funds.
Please contact me at 1-800-ZEM-ONEY (true to my german heritage) !!!!
Extremes: RSI on 60 min
I am now seeing the highest RSI value on the 60-min chart we have seen all year. The ONLY time it was higher was on Jan 5th the top - our 945 top - and it was only above this level for one day.
From a technical indicator perspective yes this looks like it will pull back but whenever indicators are at such extreme values its best to stay out. The last time I traded with big money on extreme indicators was the october crash - and of course the oversold conditions did not reverse - can this be the case here? I do not think so but I am not willing to put my hand in the fire for this.
From a technical indicator perspective yes this looks like it will pull back but whenever indicators are at such extreme values its best to stay out. The last time I traded with big money on extreme indicators was the october crash - and of course the oversold conditions did not reverse - can this be the case here? I do not think so but I am not willing to put my hand in the fire for this.
Possible Change Coming
Sorry for the late update. Had a long morning meeting this morning so I did not get a chance to finish the post before open.
Yesterday
What a slow day yesterday. As anticipated we held the 906 range by a few cents - I guess there was a reason why I kept on talking about this number yesterday. I had mentioned that this is my new line to determine short and mid term direction - bullish above and bearish below.
"A close above 904 today will be quite difficult for the bears to manage, a close above 908 will be devastating and may confirm prices to move above 918."
Well unfortunately we kind of got both. Closed at 906 and got a big push after hours into 916 range - probably worst case scenario for the bears at this point. Lets hold off until we trade those numbers during cash hours but the overnight sessions does not show any type of sell off - actually made a new marginal high at 918 around 7:00AM.
Positions
I have opened quite a lot of new short positions yesterday and unfortunately closed my hedge before the close. At this point I have no choice but to unload those new short positions again at the first possible chance. I have closed the majority of my shorts at the open this morning. At this point the market has given me signs that cannot be ignored. Month 3 in this chop zone and I have to admit its getting a bit tiring. While I will probably get a good chance to get out at a better price point on a pull back I am fine taking this loss here on my account. Pretty much given back everything I have gained for the month - same as always.
Today
I had mentioned the importance of 918 yesterday so this will be key today. Now remember what we said about large GAP openings. It is very probable that the open plus/minus 2 points can represent the low of the day and we have a stepping day higher. This will be decided in the first 15 minutes of cash hours so at least we will have some guide for the remainder of the day.
For the bears - unfortunately if you are in a position at the moment you have no choice but to either feel the pain, add a hedge or make a longer term decision by closing out (its dry or it will rain I know). I have decided to exit out of the majority due to the current market environment and will wait for the market to show me a clearer direction.
For the bulls - buy the dips? did someone say that again? At this point the bulls have every advantage in the book. Many bearish EW counts have been thrown out, any type of sign for corrective short term bullish retracements are out the window as well. The first target the bulls are now shooting for is of course the 930 SPX range with a break of 918 already. I had mentioned that yesterday that we have a potential to break 918 for more upside and it has occured.
Special Note
What a week - I am quite speechless but I cannot ignore what the market is showing me here. Of course being a bear you have hopes that we will fail at the 930 and reverse lower but it is my feel that the bears had their chance and did not take it. I am watching the NOOB index very carefully - as some remember I use AAPL as a primary guide to identify retail buying. This specific stock generally leads the way and can be used as a leading indicator for SPX highs. From where we are today there is a good chance that we will be making a new high on SPX within the next 5 days. I will confirm this after the close today.
Overall - for me its back to vacation time on the market. I tried to position myself for a move that I was interpreting from the market moves and it did not occur. A breach of the 20dma will have a very high probability to bring us back to the other end of the bollinger band. If you are hopeful for a reversal - it can occur but it should be used to lighten up on bearish positions - at least that is my feel.
From now on - no more larger positions until we have either made a new high or broken the 870 range on the downside. I have said it before, tried to hold back but started to chase a move successfully in the beginning but with an end result of having a break even month yet again. Whatever gains are being accumliated are given back. Month 3 - check.
Yesterday
What a slow day yesterday. As anticipated we held the 906 range by a few cents - I guess there was a reason why I kept on talking about this number yesterday. I had mentioned that this is my new line to determine short and mid term direction - bullish above and bearish below.
"A close above 904 today will be quite difficult for the bears to manage, a close above 908 will be devastating and may confirm prices to move above 918."
Well unfortunately we kind of got both. Closed at 906 and got a big push after hours into 916 range - probably worst case scenario for the bears at this point. Lets hold off until we trade those numbers during cash hours but the overnight sessions does not show any type of sell off - actually made a new marginal high at 918 around 7:00AM.
Positions
I have opened quite a lot of new short positions yesterday and unfortunately closed my hedge before the close. At this point I have no choice but to unload those new short positions again at the first possible chance. I have closed the majority of my shorts at the open this morning. At this point the market has given me signs that cannot be ignored. Month 3 in this chop zone and I have to admit its getting a bit tiring. While I will probably get a good chance to get out at a better price point on a pull back I am fine taking this loss here on my account. Pretty much given back everything I have gained for the month - same as always.
Today
I had mentioned the importance of 918 yesterday so this will be key today. Now remember what we said about large GAP openings. It is very probable that the open plus/minus 2 points can represent the low of the day and we have a stepping day higher. This will be decided in the first 15 minutes of cash hours so at least we will have some guide for the remainder of the day.
For the bears - unfortunately if you are in a position at the moment you have no choice but to either feel the pain, add a hedge or make a longer term decision by closing out (its dry or it will rain I know). I have decided to exit out of the majority due to the current market environment and will wait for the market to show me a clearer direction.
For the bulls - buy the dips? did someone say that again? At this point the bulls have every advantage in the book. Many bearish EW counts have been thrown out, any type of sign for corrective short term bullish retracements are out the window as well. The first target the bulls are now shooting for is of course the 930 SPX range with a break of 918 already. I had mentioned that yesterday that we have a potential to break 918 for more upside and it has occured.
Special Note
What a week - I am quite speechless but I cannot ignore what the market is showing me here. Of course being a bear you have hopes that we will fail at the 930 and reverse lower but it is my feel that the bears had their chance and did not take it. I am watching the NOOB index very carefully - as some remember I use AAPL as a primary guide to identify retail buying. This specific stock generally leads the way and can be used as a leading indicator for SPX highs. From where we are today there is a good chance that we will be making a new high on SPX within the next 5 days. I will confirm this after the close today.
Overall - for me its back to vacation time on the market. I tried to position myself for a move that I was interpreting from the market moves and it did not occur. A breach of the 20dma will have a very high probability to bring us back to the other end of the bollinger band. If you are hopeful for a reversal - it can occur but it should be used to lighten up on bearish positions - at least that is my feel.
From now on - no more larger positions until we have either made a new high or broken the 870 range on the downside. I have said it before, tried to hold back but started to chase a move successfully in the beginning but with an end result of having a break even month yet again. Whatever gains are being accumliated are given back. Month 3 - check.
Tuesday, July 14, 2009
Decision Made
I just initiated around 50 new short positions. Some of them were previously covered positions at better prices. Additionally I added some new ones that are banging their head against resistance.
I will add a hedge above 900 and will continue to add more positions. I have temporarily removed stops on existing positions that were too close to re-evaluate after the close.
I will add a hedge above 900 and will continue to add more positions. I have temporarily removed stops on existing positions that were too close to re-evaluate after the close.
What door will we open?
Yesterday
Quite a day yesterday. Anyone who got into calls or bullish ETFs on Friday based on our calls made some nice gains - hint hint ES shenanigans - lol. We hit all of our price targets and closed the day with another nice pin at 900 thanks for our friendly neighborhood market makers.
As posted by MrTrader in the comments yesterday Mortie who posts over at bostonwealth had an interesting post about those manipulations. During this rally I have been very hesitant to enter any long positions and only kept them either as a hedge or very short term intraday trades. Friday was my first large long positions I had attempted that ended in failure. Sorry to keep on rehashing this but hey - got to rant somewhere.
Now that one thing that surprised me yesterday is the strength. We had the highest positive volume day on SPY in over 2 weeks primarily driven by XLF who has given us quite a move. Additionally my core positions were hit with the highest number of stops yesterday with almost 10% of positions stopped out. Many broke the peaks they had created 2 weeks ago when SPX hit the 930 mark. While we all expected a rally I did not expect a breach of the important 4th trendline. As a result my primary EW count I was using has been violated and we now have a minor bullish count in play as I had described yesterday and on Friday.
Today
Based on the close yesterday we have probabilities for continuation at least in the morning hours. This has become clear based on the overnight action via futures that are already trading slightly higher. We have to watch 2 important time windows today. 10:20AM and 2:05PM. Both of these point have a high probability for a change of trend today so watch those numbers with care. Either high or low of the day.
For the bears - as some of you remember my old line in the sand is the 912 range. If we are to see a test at this range today we need to reverse below 904 within a 120 minute time window for the bears to keep the upper hand. A close above 904 today will be quite difficult for the bears to manage, a close above 908 will be devastating and may confirm prices to move above 918. I had mentioned last week that I forsee this rally to end today in the afternoon so bears need to watch the above time windows carefully.
For the bulls - bulls have the advantage at the moment and can take it a bit easier. We have broken 3 major price points at 891, 895 and 899 with a very bullish, thought a bit manipulated close. Even a breach of 900 on the downside will give bulls a chance to buy the dip all the way down to 891 without having to worry about selling to step in. Same as the bears the bulls have to watch the above time windows today and make a stand around those points. A close above 904 will ease the bullish case and has a potential to bring us all the way to the other side of the trend lines with a chance to run back to 930.
Special Note:
During OPEX we have quite a bit of volatility and as mentioned by other blogs the open interest in the higher price ranges around 900-918 may be a key range to look for.
I still hold on to all my core shorts with the same stops in place as I had entered them 2 weeks ago. As you can imagine open profits have been cut by a large amount and continue to decline. Depending on how we trade today I may make a longer term decision on those positions. I hate to have to close out anything manually that is not triggered by a stop so I may just add a larger 1:1 hedge but its not looking all that positive.
Also watch the 906 range today very carefully, could be quite an important point today (futures currently trading at this range).
Quite a day yesterday. Anyone who got into calls or bullish ETFs on Friday based on our calls made some nice gains - hint hint ES shenanigans - lol. We hit all of our price targets and closed the day with another nice pin at 900 thanks for our friendly neighborhood market makers.
As posted by MrTrader in the comments yesterday Mortie who posts over at bostonwealth had an interesting post about those manipulations. During this rally I have been very hesitant to enter any long positions and only kept them either as a hedge or very short term intraday trades. Friday was my first large long positions I had attempted that ended in failure. Sorry to keep on rehashing this but hey - got to rant somewhere.
Now that one thing that surprised me yesterday is the strength. We had the highest positive volume day on SPY in over 2 weeks primarily driven by XLF who has given us quite a move. Additionally my core positions were hit with the highest number of stops yesterday with almost 10% of positions stopped out. Many broke the peaks they had created 2 weeks ago when SPX hit the 930 mark. While we all expected a rally I did not expect a breach of the important 4th trendline. As a result my primary EW count I was using has been violated and we now have a minor bullish count in play as I had described yesterday and on Friday.
Today
Based on the close yesterday we have probabilities for continuation at least in the morning hours. This has become clear based on the overnight action via futures that are already trading slightly higher. We have to watch 2 important time windows today. 10:20AM and 2:05PM. Both of these point have a high probability for a change of trend today so watch those numbers with care. Either high or low of the day.
For the bears - as some of you remember my old line in the sand is the 912 range. If we are to see a test at this range today we need to reverse below 904 within a 120 minute time window for the bears to keep the upper hand. A close above 904 today will be quite difficult for the bears to manage, a close above 908 will be devastating and may confirm prices to move above 918. I had mentioned last week that I forsee this rally to end today in the afternoon so bears need to watch the above time windows carefully.
For the bulls - bulls have the advantage at the moment and can take it a bit easier. We have broken 3 major price points at 891, 895 and 899 with a very bullish, thought a bit manipulated close. Even a breach of 900 on the downside will give bulls a chance to buy the dip all the way down to 891 without having to worry about selling to step in. Same as the bears the bulls have to watch the above time windows today and make a stand around those points. A close above 904 will ease the bullish case and has a potential to bring us all the way to the other side of the trend lines with a chance to run back to 930.
Special Note:
During OPEX we have quite a bit of volatility and as mentioned by other blogs the open interest in the higher price ranges around 900-918 may be a key range to look for.
I still hold on to all my core shorts with the same stops in place as I had entered them 2 weeks ago. As you can imagine open profits have been cut by a large amount and continue to decline. Depending on how we trade today I may make a longer term decision on those positions. I hate to have to close out anything manually that is not triggered by a stop so I may just add a larger 1:1 hedge but its not looking all that positive.
Also watch the 906 range today very carefully, could be quite an important point today (futures currently trading at this range).
Monday, July 13, 2009
Trendline Update
The trendlines are holding up very nicely here. Again no changes have been made since we had created them so its good for us to be able to use this as a guide.Technically we have a few things to deal with, a day like today usually closes at its highs as there is a total lack of sellers so I am preparing for a last hour push to break 900.
At the same time this trendline here is the maximum I would expect if our mid term trend is down. A break on this trendline here will change short term to bullish and mid term to bullish as well - so a lot is on the line here.
Positioning
Well I have recovered slightly from an emotional perspective hah. While I do believe the short term trend is still up as mentioned last week, I am going to scale into shorts here regardless of prices. Small chunks over the next few days with new entries every 2 hours. I still have my hedge so my P/L remains fairly flat as we move higher.
At least something good here. Overall I am going to continue first with SRS/SKF chunks, will probably scale into my first puts tomorrow and will be looking for a futures short entry. Lets see where this market will take us but I am looking for a move towards the 891, 895, 899 SPX ranges still.
At least something good here. Overall I am going to continue first with SRS/SKF chunks, will probably scale into my first puts tomorrow and will be looking for a futures short entry. Lets see where this market will take us but I am looking for a move towards the 891, 895, 899 SPX ranges still.
Why market? I have been nice to you ....
My Story for the week .... its a bit long =)
Well, if there is ever a worst possible outcome to a trade - this is it. As mentioned I finally stepped it up and used my futures account for the first time in a while to make a trade with a targeted exit for more then 15 points. So here I went with 2 great entries, long off the bottom on Friday (less then one point off), short off the top on Friday as a hedge with a 3:2 ratio long to short. The reason I went short as well is the entry off the low was the best for the day but not the best for this move higher as we would have retested the lows for the week. Both positions combined at the low of the week would have been break even (hence my short hedge with the proper ratio).
We had held my important support at 876 and closed marginally higher prompting me to close out my short hedge. I was pretty confident going into the weekend long but was prepared to re-enter the hedge if we started to open lower on Sunday night.
Watching the market open sunday night we started to trend higher off the open. I was stocked for a good trade and turned off the computer around 9:00PM with a great gain on the position already. As I was without hedge I decided to put a stop on this position anyways just in case. FYI 9:00PM was the highest tick for this move. So the market must have known that I walked away.
As I got up around 4:00AM today I expected a nice move into my direction - no, that did not occur. I am kicking myself at the moment for having set a stop at 865.75 (25 cents off the low of the day). Of course I got hit at the worst possible time. As we are trading now my position would have been back in the money. Hindsight is 20/20 and I am not sure why I did not use a stop below the weekly low point - I honestly did not expect it to go this low and used a standard measure off my average price (in this case 4 points) to set the stop.
I had many different possible outcomes for this trade. As I had a great starting point every scenario had me coming out either break even or in the money. Consider this, both positions combined would have been break even at 865 without a loss. This was my worst case scenario, break even on this position. Final outcome at this point is a nice sized loss ....
The more and more I think about this position - the more frustrated I get. Great trend analysis, great entries, great trade strategy with proper hedge and sizing. Looking back at how the trade was placed and managed for entries I could not have done it any better. All the things were there for a great trade even if the trade did not move into my direction at the beginning - almost impossible to have a negative outcome.
Ok enough of this rant and sorry to waste 10 min of your time if you read all this. It really does seem at times that the market makes the most improbable moves to inflict the most pain to you.
Ok getting my coffee now and starting my day .... still steaming from this move here.
Well, if there is ever a worst possible outcome to a trade - this is it. As mentioned I finally stepped it up and used my futures account for the first time in a while to make a trade with a targeted exit for more then 15 points. So here I went with 2 great entries, long off the bottom on Friday (less then one point off), short off the top on Friday as a hedge with a 3:2 ratio long to short. The reason I went short as well is the entry off the low was the best for the day but not the best for this move higher as we would have retested the lows for the week. Both positions combined at the low of the week would have been break even (hence my short hedge with the proper ratio).
We had held my important support at 876 and closed marginally higher prompting me to close out my short hedge. I was pretty confident going into the weekend long but was prepared to re-enter the hedge if we started to open lower on Sunday night.
Watching the market open sunday night we started to trend higher off the open. I was stocked for a good trade and turned off the computer around 9:00PM with a great gain on the position already. As I was without hedge I decided to put a stop on this position anyways just in case. FYI 9:00PM was the highest tick for this move. So the market must have known that I walked away.
As I got up around 4:00AM today I expected a nice move into my direction - no, that did not occur. I am kicking myself at the moment for having set a stop at 865.75 (25 cents off the low of the day). Of course I got hit at the worst possible time. As we are trading now my position would have been back in the money. Hindsight is 20/20 and I am not sure why I did not use a stop below the weekly low point - I honestly did not expect it to go this low and used a standard measure off my average price (in this case 4 points) to set the stop.
I had many different possible outcomes for this trade. As I had a great starting point every scenario had me coming out either break even or in the money. Consider this, both positions combined would have been break even at 865 without a loss. This was my worst case scenario, break even on this position. Final outcome at this point is a nice sized loss ....
The more and more I think about this position - the more frustrated I get. Great trend analysis, great entries, great trade strategy with proper hedge and sizing. Looking back at how the trade was placed and managed for entries I could not have done it any better. All the things were there for a great trade even if the trade did not move into my direction at the beginning - almost impossible to have a negative outcome.
Ok enough of this rant and sorry to waste 10 min of your time if you read all this. It really does seem at times that the market makes the most improbable moves to inflict the most pain to you.
Ok getting my coffee now and starting my day .... still steaming from this move here.
Friday, July 10, 2009
Trend Decision
This is what I have been talking about in the previous posts comments. Currently at the edge of trying to decide on a trend until Tuesday next week.
Trendline Update
Our trend lines are holding up quite nicely. I would have expected yesterday to run a bit higher after the break to the upside and as a result had closed out my shorts yesterday.Interesting to see how it bounced right off the RSI 50 line. If the market can breach RSI 50 today we should get ready for more upside. On the other hand I think a retest of yesterdays top may be in order before continuing lower.
I am currently long off the bottom (pre-market) and looking for at least 888 on SPX. Here I will decide if I want to add shorts over the weekend. At this point SPX has made a higher low but not yet a higher high from yesterday. Lets see if this is a reversal to the upside to give us a better chance to scale into shorts or if it was a dead cat bounce that will be sold. Chances are pretty high that we continue to sell to close the week at its lows which makes trading the short side a bit more difficult on the short term but gives us amazing signs for the mid term trades for the rest of the month.
Thursday, July 9, 2009
CNBC Headline
So walking out to get some fresh air I glanced at the TV and saw the news headline ..
"Summer correctional season"
The second I read that I was thinking of this chart ....
I am sure they were thinking about the same exact company ... or did they?
There are a TON of other chart looking just like this one above .... all entering a slight correctional pattern. Yes indeed.
"Summer correctional season"
The second I read that I was thinking of this chart ....
I am sure they were thinking about the same exact company ... or did they?
There are a TON of other chart looking just like this one above .... all entering a slight correctional pattern. Yes indeed.
Day Trade: Shorted
Went short here as described in the comments. A nice looking descending triangle and no follow through from the reversal off the 869 low yesterday.
Market looking extremely weak here. I expect at least a retest of yesterdays low now. Possibly a break to go another 5 points lower.
Market looking extremely weak here. I expect at least a retest of yesterdays low now. Possibly a break to go another 5 points lower.
3 Areas of Resistance
Ok here is what I am seeing at the moment. We have 3 areas of resistance to deal with based on our trendlines. I feel very strong that we will not drop from here and first make an attempt at either one of those. We should not exceed the second yellow circle trend line. Most likely scenario is a slow grind towards Friday to try to close out the week on the upper ranges if possible - of course be ready for anything, I would not be surprised to see a sharp drop in the afternoon and continue lower for the next 2 days.Keep in mind based on my current count we are in W3 (was confirmed on Tuesday). W3 is a strong move down with little retracements and a LONG range to the bottom. From an EW perspective, W3 is the big money maker so I am trying to position myself properly for this move. I have closed out all ETFs and options close to the bottom yesterday and am looking to get back into those positions. Additionally I freed up capital by covering quite a few non-performers so I can add more leverage.
Overall I had an amazing day yesterday, great calls and had the balls to trade them. I am starting to get my confidence back which is quite visible on my P/L. I am still very cautious as you can see from my current exposure but I am starting to allow myself to accept more risk and pain now as it has been paying off quite nicely. Lets hope this continues for all of us.
So on the upper side its quite clear. 891, 895, 899. We should not break 899 on this move or my current EW count may be in jeopardy - if we do break 900 the picture changes significantly. Of course we can get back to max pain for a test at 912 but a break of 900 is quite bullish.
Positions I am looking to add this week if we continue higher:
SRS
SKF
SZC TK / SZC SK
ES (futures)
Be careful on the July option as we have time decay to deal with so minimize your exposure there if at all possible and shift more to the august puts - less gains but also quite a bit of less risk if we do end up going higher.
Lets hope we continue in the month of July as we started.
Wednesday, July 8, 2009
Channel Update
Same trend lines from before (nothing changed except the market). Quite long at the moment 1/4 point off the low via futures. This here should be holding.
Channel Update
Ok looks like the trendlines from yesterday are hodling up. Watch the 10:05 time for a possible low of the day and start of a rally. New Blue box range to add shorts =)
I hate to say it
It could rain, but it could also be dry.
If you are completely out, watch the frenzy here and be glad you have no part of it.
Max Pain for everyone - what will it be today? I will know more after the first 45 minutes of trading so I will keep you all updated.
- Morning rally towards 891 and sell off in the afternoon (remember those good old days)
- Continue sell off in the morning hours until 875 and rally strong there
- Continue sell off without any major stop until 856 and rally from there
- [insert any other type of scenario of your liking)
If you are completely out, watch the frenzy here and be glad you have no part of it.
Max Pain for everyone - what will it be today? I will know more after the first 45 minutes of trading so I will keep you all updated.
Tuesday, July 7, 2009
What a day today ....
I feel exhausted. Really. But I am glad everything is working according to plan. We are currently in Wave 3 for this move and should see quite a range to come on the downside. The question remains of course whether it will give us another chance to get better positioned for the run down. I will post a chart tomorrow for a better guide. Want to see the overnight action first to see where we will be going.
As mentioned I took some profits today. Closed out some of the lagging shorts I was holding, small chunk of spy puts and some ETFs. Percentage wise I locked in around 25% of the open profits from last week Wednesday. However, I freed up quite a bit of capital in my equities account as I closed out many shorts that did not give me the run I was hoping for - in the greens but not by much.
Just so you can understand my setup a little bit better to see how I am still only dipping my toes:
Futures Account - 50% capital - 0% invested
Equities Account - 40% capital - 80% invested short
Options Account - 10% capital - 0% invested
Regardless of whether or not we see a bit of a rally first, my first primary target is around the 856 range. My dream scenario would be some overnight futures ramp up GS-style with another test at 891-892 tomorrow. If that occurs I will be loading up a bit heavier as I do not expect to see 900 again. The market has a way of ensuring none of us get the position we are looking for unless we are ready to feel major pain. This has been the most frustrating thing for many traders here - me included - so we have to see if we get this chance this week.
As mentioned I took some profits today. Closed out some of the lagging shorts I was holding, small chunk of spy puts and some ETFs. Percentage wise I locked in around 25% of the open profits from last week Wednesday. However, I freed up quite a bit of capital in my equities account as I closed out many shorts that did not give me the run I was hoping for - in the greens but not by much.
Just so you can understand my setup a little bit better to see how I am still only dipping my toes:
Futures Account - 50% capital - 0% invested
Equities Account - 40% capital - 80% invested short
Options Account - 10% capital - 0% invested
Regardless of whether or not we see a bit of a rally first, my first primary target is around the 856 range. My dream scenario would be some overnight futures ramp up GS-style with another test at 891-892 tomorrow. If that occurs I will be loading up a bit heavier as I do not expect to see 900 again. The market has a way of ensuring none of us get the position we are looking for unless we are ready to feel major pain. This has been the most frustrating thing for many traders here - me included - so we have to see if we get this chance this week.
Took some profits
Closed SPY puts, lightened up on SRS and SKF. May add more hedges here for the rest of the positions.
Trendline Update
We have been successful trading based on the EW and fib patterns thus far. At this point I drew some trendlines to guide us through the channel here. As always I have the center line, the outside edges and the mid lines to figure help us further. I try to draw the trendlines with similar FIB relationships (50, 61.8,38.20) - at this point I am not quite sure which one provides the most strength but I could see us trading lower a bit and then rally to get back to the center 50% line which will end up perfectly in the rectangle I am currently looking for to add more shorts.
Use this as a guide and let the market tell us where we will head. Yesterday was a bit of an odd day, I had referred the a 899 close screwing everyone up - so they did, it was neither bullish, nor bearish. I for one look at this as a bearish day of course because we did not rally strong off with RSI being heavily oversold.
Monday, July 6, 2009
If I could press this magic button
Based on the low volume here into the 3:00PM time frame. I would try to pin this right at 900, maybe a tad lower to screw everyone up 899.45.
Lets see what they will do here.
Lets see what they will do here.
Slight update to targets
I have updated my targets slightly as per the comments. At this point anything in the small blue rectangle is acceptable. I am holding off on adding higher leverage until we reach at least the lower part of this range. I had circled my main areas of concern which are the heavily oversold conditions here. As we are trading at 893 we cannot go lower quite yet unless we see some distribution take place first. If we go lower now we will yet again be HEAVILY oversold at the 870-880 range giving buyers a chance to step in.
So target wise, looking for RSI to hit 45, MACD to have crossed or moved into the rectangle - whichever occurs first.
Updated Targets
Looking for the small blue rectangle to be touched either today or tomorrow. Will use that as a guide for now to exit hedge and add more shorts with higher leverage.
Thursday, July 2, 2009
Small laugh for everyone before going into the long weekend
Chris, go back to trading school - this is NOT how you set a stop.
898 Level
Ok this is going to be important and quite difficult for me to figure out what to do going into the weekend. Add some hedge or not? that is the question.
I am quite loaded with shorts at the moment (started to add more during the day today). For now I am good till around 912 to get back to break even on all those positions.
Will figure out what to do in the last few minutes here.
I am quite loaded with shorts at the moment (started to add more during the day today). For now I am good till around 912 to get back to break even on all those positions.
Will figure out what to do in the last few minutes here.
UNG Bloodbath
What a drop here. I had made a post about UNG a few days ago and was very concerned about downside below 13.50.
Seems this one is a gonner. I will be watching it carefully at 12.80 for a possible entry with a tight stop. Other then that, more downside. You know what they say about 52 week lows - "it cannot get any lower then this!" - yes it can, look at financials.
Seems this one is a gonner. I will be watching it carefully at 12.80 for a possible entry with a tight stop. Other then that, more downside. You know what they say about 52 week lows - "it cannot get any lower then this!" - yes it can, look at financials.
Darn Holidays
Closed out the shorts yesterday for some lunch money. Went for lunch, went home early and added lots of shorts mid day. All small positions. Here is the list ... its very very very long. =)
RBA
MMP
HXM
TPP
BRC
ORA
WBD
SPH
TLEO
LOGI
CF
GFIG
NVEC
HPQ
MMM
CKH
CNI
RSG
TSN
BNI
CNW
PRGO
TAN
WDC
WDR
ACGL
JNY
ARO
NEM
GEF
MET
EFX
ASH
BGC
ROK
IFN
DIOD
CTV
OI
CVLT
TIN
GLD
AEM
GMT
PL
CCO
BEZ
WMG
XLU
ISLE
DWSN
QZN SP
QZN TP
SRS
SKF
Yeah its long .... all of them short.
RBA
MMP
HXM
TPP
BRC
ORA
WBD
SPH
TLEO
LOGI
CF
GFIG
NVEC
HPQ
MMM
CKH
CNI
RSG
TSN
BNI
CNW
PRGO
TAN
WDC
WDR
ACGL
JNY
ARO
NEM
GEF
MET
EFX
ASH
BGC
ROK
IFN
DIOD
CTV
OI
CVLT
TIN
GLD
AEM
GMT
PL
CCO
BEZ
WMG
XLU
ISLE
DWSN
QZN SP
QZN TP
SRS
SKF
Yeah its long .... all of them short.
Wednesday, July 1, 2009
Shorted
SRS @ 19.07
SKF @ 41.24
SWG SL @ .7625
SWG TL @ 2.1
ESU09 @ 927.25
Tight stops on all of them. Small positions.
SKF @ 41.24
SWG SL @ .7625
SWG TL @ 2.1
ESU09 @ 927.25
Tight stops on all of them. Small positions.
What will come .....
Well we got this month what I was expecting to happen the last month. Now I know I should never ever massage charts and data BUT the first day of May we rallied with a close at 907, the last day of May we closed at 918. IF and ONLY if you take this into consideration - that means we have 2 spinning monthly bars. Lets forget about that for a second and go with the base chart.
I circled the instances when we had a monthly spinner - as you can see we had an amazing range to follow the next month. Now there was one occurrence with 2 monthly spinners - you know what happened next.
I am not saying this will happen here - and quite frankly I CANNOT see the market giving us another STRONG monthly up bar here. Yes all of this is further justification for my bearish views that now have been proven wrong for .... wait for it ... wait for it ... 4 MONTHS !!!!
I am 100% flat at the moment just pondering what I am going to do with the money in my account - I vote for a totally crazy time in Vegas OR get that Porsche I always wanted .... maybe even open up a bar in the Caribbeans ... who knows. All I know is that my money is not very happy with me on the buy/sell trigger =)
More Upside
Negative Jobs report yet we are going higher with a decent size GAP up. Overnight session was quite volatile with a test at 927 SPX. I had said yesterday that the high for the week should be in - wrong again.
My EW count is fairly shattered at the moment as a W5 high VERY rarely gets retested after a break back into W4 range (I had marked it yesterday on the graph with a yellow circle).
At this point, I have no choice but to wait until I can get a clear picture yet again, at this point charts are very difficult to read. I had mentioned in the past that I would not be surprised to see this violate the 61% level and go one step higher to shake out weaker bears.
"Sam, this here is the decision whether or not we make a move to 1014. If we fail by Tuesday next week we are done on the upside. Tuesday next week needs to be above 930 close price with intraday test at 947 either on Monday or Tuesday. Then I am sold on the long side and will go long after pullback to 924."
I had mentioned this yesterday in the comments and at this point, we have to wait and see what the market does from here.
Also, will make a post on the monthly chart later, this is looking amazing for a BIG move to come. I will go into more details in a little bit with an updated chart and justifications. All I can see - from this point here, we will have an amazing range ahead of us for the month of July.
My EW count is fairly shattered at the moment as a W5 high VERY rarely gets retested after a break back into W4 range (I had marked it yesterday on the graph with a yellow circle).
At this point, I have no choice but to wait until I can get a clear picture yet again, at this point charts are very difficult to read. I had mentioned in the past that I would not be surprised to see this violate the 61% level and go one step higher to shake out weaker bears.
"Sam, this here is the decision whether or not we make a move to 1014. If we fail by Tuesday next week we are done on the upside. Tuesday next week needs to be above 930 close price with intraday test at 947 either on Monday or Tuesday. Then I am sold on the long side and will go long after pullback to 924."
I had mentioned this yesterday in the comments and at this point, we have to wait and see what the market does from here.
Also, will make a post on the monthly chart later, this is looking amazing for a BIG move to come. I will go into more details in a little bit with an updated chart and justifications. All I can see - from this point here, we will have an amazing range ahead of us for the month of July.
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