Thursday, July 9, 2009

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:

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.


  1. Can you comment on earnings? Seems Alcoha is making an example for others to follow?

  2. Do not be fooled by earnings here. Overall a recovery is priced into the earnings so we should see improvements everywhere - of course on guidance that was previously lowered - a bit of sandbagging but that's ok.

    The one thing I am really looking forward to is strong ranges coming back. This earnings season should be quite strong in terms of market reaction.

    Overall my view on earnings is as follows (its more a WAG type review) - for every 5 good earnings, we have one bad one and as a result trend lower. Bulls are very concerned and the first signs of negativity will be sold.

    I could be wrong but lets give it a week to see how the market reacts to numbers.

  3. another thing to consider ...

    AA reported yesterday right? And the market is up today right? And CNBC headline states market up on AA news right?

    Well after AA reported yesterday, SPX/ES afterhours did not make a move - why is that? Well, AA earnings is a headline, that's it.

    Thats why I said above - "do not be fooled by earnings here"

  4. Thanks chris. I agree with your assessments here. Hope to add shorts at 899. cashed out all july puts yesterday. moved to August so I can relax.

  5. I can never grasp the market... futures look bright, come 9:30am, cliff dives... Maybe I don't have a clear understanding of what the futures readings before the open really means. Boggles my mind.

  6. bear trap in my opinion. Anyone who missed the train to the down run will want to get in. Back to 880 was a great way to make em think we go lower. I was hesitating after I saw IYR tank ... almost added some shorts here lol

    But went long instead off the bottom.

  7. stopped out of long. Have to admit I am a bit puzzled here on whats going to happen. Could this have been it? 886 SPX as the high? I really doubt it but again the market is not giving ANYONE a chance to get the trade they are looking for ... so it seems.

    Ok have no choice but to stay practically flat here ...

  8. Flat here too. I have seen some orjection -- a big down to at the close and a big rally tomorrow.

  9. I already see neg. divg. here on 5 min chart. not much upside here.

  10. I see a nice descending triangle here. False breakout, retest the previous peak, then drop strong to retest yesterdays low.

    Which could mean another long opportunity. Keep in mind everyone, we have broken 880, yes we reversed but we did not follow through today.

    Lets see what the next hour brings but it should not take out the HOD now. Possibly in the afternoon but not at this point.