Monday, September 21, 2009

Doubts in my mind ...

As you could tell from my post on Friday I continue to question my beliefs and try to improve myself after having evaluated my performance. While this can be positive at times, too much evaluation or self criticism can often times lead to wrong conclusions and wrong changes in my trading. However, at the moment, I am questioning my key belief of where we will head over the long term - this rally has reached levels that are too strong to ignore and I am almost at the point of accepting that my longer term targets for S&P500 will be on the bullish side and not bearish side.

I keep on hearing "its different this time" and then of course the responses "its not different this time". However, what angle are you looking at it from? I know I had said it before but I wanted to restate it again.

"Its not different this time, its just a bear market rally and we will continue to drop"
"Its not different this time, we had an 18 months recessions and we are entering a new bullish cycle that will be here with us over the long term, just like at every other previous recession"

Both of the above statements are correct and are solely based on the context of the person evaluating the markets. What is more probable at this point? I have to be honest, regardless of whatever pull back we are going to get, or whatever sell off will come. Our key moving averages are sloping upwards, we have broken key resistance levels, the market has not had a single pull back that did not get bought. Many long term bears have covered. This is looking more and more like a new start to a bull market or at least a bullish cycle. Even all the way down to 870-880 this is still mid to long term be-long market. If for some magic reason we will get back to 880, which is quite a way from here - who would not be a buyer at this level?

So at this point, my BEST case scenario is a pull back to this level as the "double dip recession" scenario I had described last Friday.

The other thing I wanted to mention is perception. The current perception in the market place is buy any dip, pullbacks are shallow and can be bought without much risk. So the past 6 months have totally changed many traders attitudes. I think it will take a lot of changes to be able to make traders change this again. I have played around this weekend with some "proprietary indicators" - what I mean by that is an algorithm that helps me identify how I should position myself - while those are lagging indicators I will share some of my basis some time this week so you can see where I am coming from. A lot of this "research" is based on the above perception I was describing and should help me going forward to play the market more effectively.

Ok back to the markets - futures are down a bit and we broke a key support range overnight. Lets see how it behaves by the time we open for cash hours. Many are looking at 1049 ES for a low risk long position. Lets see what we can do there. Will post more analysis in the comments before the open.

20 comments:

  1. Hi Chris; getting ready for bed on the other side of the planet, but watching a few indicators showing some weakness....funny though, I looked at it and just shrugged, thinking, OK down now, it'll be green in a couple hours ...maybe 4 at the most....so why not jump in on the long side.....because with the majority thinking the same...then now is the time for a correction. Good luck to all.

    Steve

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  2. Uh, Chris...did you just make a big purchase in Forex.....?

    Steve

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  3. Steve, yeah it seems to be the name of the game. Red for a few hours or minutes and then buy the dip. And nice drop on EURUSD - did not even see that =) I promise it wasn't me lol

    I would not be surprised to open low and recover it all within the first 30 minutes - again. However, as you know, if we open here we will qualify for a stepping day if the high of the day gets made within the first 10 minutes about 2-3 points off the open price. We need a minimum of 8 pt gap down - currently 8.25

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  4. GO GO !!!!!!!!!!!!!! biggest pull back we have had in weeks yay (licking my deep wounds)

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  5. Where's the buyers...?

    Steve

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  6. they are selling lol - keep it up guys =)

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  7. have to admit, this is looking rather bullish. At this point we are looking for bulls to take profits and "hold" on buying the dips. Bears make up too little volume on shorting anything at this point.

    Unfortunately bulls are rather confident in their existing position and may just "hold without adding more" at this point which will lead to very slow corrections.

    This here is looking more and more like corrective and not impulsive - meaning we are burning off short term overbought conditions with time and not a drop in price.

    Unfortunately, unless we see some negative earnings surprises (which I think we will not) this market will continue higher with small shallow pull backs.

    We have not been able to make a new daily low off the open here and if this were a trend/stepping day it should have already occured as we continue to retest the lower ranges. Of course this could setup like a descending triangle here with a nice 6 point drop below the LOD but it has to happen within the next 25-30 minutes - if we did not see a new intraday low by 11:30, we should expect higher prices towards the afternoon.

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  8. well looks like I was right on that call here ... sigh. Now time to fill the GAP before we do anything else.

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  9. closed some puts (yeah before that last drop here). Just too afraid of this bull flag again here. Rather not risk it.

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  10. I got in on short side at friday's close and did not cash out this am. still holding short with a stop above friday's close. I thknk this week is down week.

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  11. very similar here. Still short via ES @ 1068. Still holding enough longer term puts (6 months). Closed out the oct puts at todays high though at break even. Wish I had closed them this morning lol

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  12. or at least put a stop at HOD hah - but I saw a chance to minimize risk and took it. Market has me scared left and right being short. A position in the green is easy to protect. A position that was in the green about to go back into reds - not something I like seeing.

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  13. we should close within the days range, however, I think we need to be prepared for a retest of the 1071 range possibly tomorrow early morning.

    Though call from here, 1062 SPX is key to be broken, if we close above more upside tomorrow.

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  14. don't you hate stop running lol, broke out just to reverse back below.

    They did not take any of mine this time though, got mine at last weeks high for the remaining positions so still got some room.

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  15. just so you know, this move here is actually quite bearish and I do not expect any further upside tomorrow - at least based on charts it is very possible that we just put in the high of the week - no reason to go short yet, I want to see one more confirmation but its very possible that we retrace a bit lower first.

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  16. if we can manage a close below 1062 I will feel much more confident for a down week here.

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  17. has to close below though, 1062.01 is not good enough lol

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  18. well that did not work out, market hates to give us clear signs it seems. So no easy read with this close, really a 50/50 chance, the fact that we reversed back below after the breakout is bearish, however closing in this narrow range above 1062 and below 1067 could be considered bullish as its a corrective pattern ....

    Just have to wait and see ...

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