Tuesday, July 14, 2009

What door will we open?

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.

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).


  1. Anyone watching the futures? As soon as GS released the numbers, it's dropped back down? Is this a joke or what? Buy the rumor sell the news?

  2. I had covered my short from end of day yesterday right at the low tick. Made half a point on that move =)

    Did not hit my second limit short at 905 otherwise I may have kept the position. Also closed out SRS and SKF that I had entered at the close yesterday - unfortunately close those out a bit too soon before the drop. Cost me a bit but not willing to risk it.

    This here could be a dump before taking it higher, or a pump and dump to sell off at the open. Who knows - I am torn between closing out short positions or adding more. Quite an eerie feeling to want to press the GS invented "close all open positions" button OR press the "sell short" on many new bearish opportunities that have built.

  3. I wanted to re-emphasize the 906 today. This is a number that we have not seen much action around in the past as we had 902-904 and 908-912 before.

    It is my feel that 906 is the new line. From a mid term perspective - Bullish above, bearish below. So watch out.

  4. If you do have the VWAP indicator add this today and watch as the VWAP gets closer to 906 (SPY 90.60-90.70). If the VWAP is above that range after 11:30 we have to be ready for more upside.

    Again sorry for all this information to digest today but I am trying to prepare myself for my positions.

  5. Any other data being released today?

  6. new post =)

    went on a frenzy again.