Friday, November 27, 2009

Quick update

Well as it was my birthday yesterday I went out last night (right after I had closed most of my positions). Quite incredible moves even last night (yes I was glued to my iphone - quite sad).

Overall quite lucky for me to have profited from this move I have to admit. Technically it was a good trade at the top range for a 3rd test but never would I have expected such a move.

EURUSD held right at the previous trendline it broke out of, though it reversed all of the breakout and then some so expect any support to be short term. I had closed out all my EURUSD short yesterday with some amazing gains - will have to monitor this very closely as I really want to get back into a dollar bull position.

ES futures was closed out (just 1 contract). Gold short contract is still there and up nicely as well, this one will be kept a bit longer here. My puts will be 100% breakeven around 106.50-107 if I keep it as is including the hedge. Since this was quite a bad trade on my part I am looking to walk away from this soon so expect me to take profits (and losses) on those puts as well.

What to do next?
Well - I have to admit, I will probably just watch today. We only have a shortened session today and a lot can happen - a lot in either direction. We have a potential for quite a bit of madness today with BIG swings (20+ points in either direction).

Today will be an important test for the market in terms of liquidity. Is there any left or has this really been a HFT based market that will go nuts when real money comes in to get out.

Thursday, November 26, 2009

Currency Market Madness

I hope everyone is having a good time and enjoying their turkeys. After such an extreme session I had to give it some more attention here tonight and boy. Never seen currency markets with such huge swings across the board - not just a single pair but many different currencies. We are seeing moves of 1+% within a matter of 15 minutes - keep in mind that we are talking about a LOT of value being moved here and intervention in those markets are much more difficult then pushing the buy button to provide some liquidity into some equities selling.

It is really difficult to see how this will play out here. Again - moves of this magnitude are very rare and need to be monitored very carefully - the problem with currencies is that the leverage can be so large that big moves such as this one here will cause quite a bit of craziness. We should calm down here by tomorrow morning but I do expect tomorrow to be very interesting once our short day is open. Keep in mind we only have a bit more then 3 hours so ....

Happy Thanksgiving for everyone

Just woke up and wow

Speechless yet again. What an overnight session here lol

Wednesday, November 25, 2009

EURUSD Breakout

Yes we had anticipated this on Friday and it did a perfect breakout above the trendline, retest of the trendline and a STRONG move higher. It seems we are seeing ourselves in a w3 that may complete today which should follow with some sideways action above the previous high (though I expect we break to go a bit lower) and then possibly resolve this around the 1.52 range that many had been calling for.

There was an interesting topic on evil speculator about this as well. One of the arguments presented is that the carry trade is almost over. It now takes a lot more for a drop in the USD currency to move up the markets and the tight co-relation is distancing itself more and more. Looking at the parabolic move in gold and xtrends (sol) calling a top in gold here as well is even more of a sign that whatever correlations the market had are starting to break up.

Take a look at financials (XLF), real estate (IYR) - remember those are the ones that got us into this mess - and where are they today? far away from previous highs without any sign of retesting them in the future.

Based on the disconnect in many sectors and the crazed parabolic moves, breakouts and other we are nearing an important turning point - either melt up higher and go into a parabolic equities move or start of larger retracement that may turn into something more. At this point we have too many important lagging sectors that need to be rotated into or brought back higher to give this up trend more confidence.

Its still a holiday week and I am forcing myself not to take any trades - I am still in wait and see mode as we continue to be range bound and burn off time. If we do make a break for 1120 this week of course expect me to leg into more shorts.

Holiday Spirit

Well the holiday's are preventing me from doing much market related stuff ... but boy oh boy look at EURUSD. Nice breakout there indicating a new high just around the corner for SPX.

Tuesday, November 24, 2009

Not what I expected

I am on a semi-holiday week ... however wanted to comment on price action this morning. Not what I expected especially after the overnight session and the EURUSD strength.

Not sure what to make of it quite yet - give it until 11:00 and I will make a post with direction.

Monday, November 23, 2009

Looks like we know where it will turn

Unless this gap will be reversed within the first 30 minutes of cash hours we can assume it will stick for more then a few days. We had been waiting for the market to make a decision and it seems EURUSD has broken out of the triangle and is ready to march for new highs. Same with SPX as current futures indicate a 1% GAP - we all know that up GAPs like to give us stepping days with low of the day being set within a few points in the first 15 minutes.

Looking at ES we still have some resistance levels to overcome at the 1102 (where we are currently and we may see a GAP above this resistance) and of course 1109-1112 levels. However, it will be quite difficult to overcome those levels as EURUSD will not have much more room on the upside for the day.

On the lower end of course 2 important price levels at the 1094-1095 and the 1090-1091. If we are to see a break here on the downside (which is very unlikly for today) we are back to 1084 which again will provide support. Quite difficult today.

The other thing I wanted to mention is breakouts when looking at equity markets and when looking at FX. We have seen many fakeouts on the SPX in the past, for both bears and bulls alike, however a breakout on FX has a much higher probability of sticking so the action we have seen with EURUSD during this overnight session makes me a believer of higher prices to come this week. Top this off with turkey week and we have lighter volume and statistically bullish price patterns in a holiday week.

For today - it will be wise to not enter any new trades. If the GAP will stick we should not have much more upside, at most 10 points so taking a long even for a scalp will be difficult to justify into short term overbought conditions. Taking a short at the same time carries the same amount of risk as retracements should be limited to the open price at best. Of course if we do not end up resolving into a stepping day its anyones game but even then we may get some strong upside moves.

Friday, November 20, 2009

Online Portfolio tracking

I have to admit keeping track of my trades via HTML is quite cumbersome. You guys know any web based portfolio trackers (one that also works with futures and options) so I can list my trades there instead? It should be able to be linked somehow so I can link it on the blog itself.

Any feedback would be greatly appreciated.

One last one before I leave

I am sure you are all familiar with island patterns. Now looking at spy and adjusting price based on the island reversal look what its forming here? Yes a very long 4th wave, bull flag, lower bullish wedge. Whatever you want to call it. If you forget about what happened before this chart (emm yeah the 9 month crazy rally that many are saying is coming to an end) then all I see here is a corrective move that should be finishing up shortly to come to new highs.

Remember what I said yesterday - too many charts, too much over analyzing will play tricks with your mind.

Which one is it?

Bullish lowering wedge or descending triangle. Keep in mind this descending triangle also has the 50dma ... a break through that 50dma ... and boy we are off moving.

No update today

Sorry - work again. Only thing I can say - another 10 point gap lower wow. 1082 is key today.

Thursday, November 19, 2009

Too many charts

Whenever you see me post too many charts you know I am unsure of the markets and try to look for any reason or pattern to attempt to make sense of direction. One of my main reasons yesterday for minimizing short exposure was just because of that. We have some very compelling bearish patterns developing but at the same time the bullish (whether manipulated or not) side is quite compelling - not for a trade, but for a reason to stay out and remain short term focused.

Either way - blog emotions are running high everywhere, bears capitulating, a million different calls for directions, sentiment change left and right. We are at extremes yet again, though one can argue we have been at extremes since our amazing July rally (the vicious head and shoulders failure).

As I am typing this I see SPY drop 2 spx points on the 1 minute chart on not even a million shares traded in that one minute. Talking about liquidity issues? Just imagine what would happen if the dollar goes nuts here as well. If the dollar is able to break the support I had shown in the other charts - then we really see if there is any real liquidity left in the market or if the last 2-3 months up have been a result of dollar and continuous exposure to more leverage by bulls.

And another one for mental masturbation

This is a bit silly here but some comparisons can be drawn. This one will definitely be filed in the "emm Chris, I think you are over analyzing" category.

Another one for the dollar

Well it seems EVERY blog is now talking about the dollar. Do you remember 3 months back when we were the first to bring this up as a big carry trade. Kind of proud of the fact that we have been talking about the dollar here for many months already during our charting. Now here is an interesting chart of ES futures and EURUSD. I highlighted some areas of importance.

This market is not going anywhere until the dollar makes a turn here ... when looking at the EURUSD daily - check out the 50dma.

Now 2 things can happen here - against all odds the dollar has been at this exact same spot before - take a look at the EURUSD 3 year history can you can see that it can actually do the total opposite and just launch higher like a mad man causing us to have a huge meltup on the markets. Now the obvious thing here is down - and considering how many dollar bears you have, you will see quite a short covering which will make this bad boy plummet.

So important turning point that can go both ways. Take a look at the daily ranges and tight consolidation in the last 2 weeks - this is coiling up for a BIG move. One we need to participate on - up or down - do not care =)

Will post updates mid day

Sorry again work is taking over. But take a look at the post from yesterday in regards to the many scenarios we have for this to play out. I for one am still unsure if we make a move higher first or retrace.

What do you guys think?

Wednesday, November 18, 2009

Another chart of interest

Take a close look at the 61% and the 161%. This is from our previous low spanning accross our 3 peaks. According to this one we have a top building before the day is over.

No Idea

There are too many possible scenarios at this point. As mentioned this morning did we have a failed W5 (yellow) or is this a more complex W3-W4 (blue). Both are valid technically though the more complex W3-4 has a bit higher probability due to the sideways action after we had reached the top.

As you can see there are many different variations with neither one of them having more of an edge - with the exception of the major trend winning - up. So if you take a look at it from the trend perspective up is the only way to go.

One could still say we have a descending triangle from the top on monday which means another possible run up towards 1009 that should fail there. Overall ranges have been extremely narrow since the Monday GAP and we have yet to try to fill that GAP. Markets down while EURUSD is up - another big divergence to notice - of course yesterday an all up day which is quite rare and was a sign of more correction to come.

Position update
Don't you hate when some cries about having entered the at the wrong time and price. You are not coming here to hear my complain and bitch but to find information about markets - but then again I need a place to talk out loud - this is one of those times so ignore this section =)

Well my EURUSD trade yesterday - kicking myself quite a bit. I did not expect a big rally there but boy was I wrong. That would have been a nice move and a great hedge for my positions. My out of the money 106 puts are burning a whole into my account every minute that goes by. I expected to have to carry them out of the money for a bit but they have been out of the money since I entered the position so thats not good either. So at this point I have few options really.

1) close the puts and take the loss - seems the most sensible if I am unsure and as you can see I am.
2) roll those into in the money puts - probably the smarter move here.
3) wait until Tuesday next week as this is opex week and one should not make large adjustments to positions during this MM crazyness
4) hedge by entering a spread - may do this on a break of 1110. Thats one of the main reason I closed some today to free up some capital as I am limited to 15K on options, with a big percentage already as a loss.

Still deciding on where to go

Well the market continues to make it clear - any pull back will be bought and the market seems to only have one goal in mind. Go higher. We had been talking about various resistance levels that provided a short term barrier but ultimately small pull backs of at most 60 SPX points was enough to distribute and take on that same resistance again to break through.

While we had some lagging sectors during the last up run with DOW being the leader, many have caught up. I went through probably 100 different charts yesterday, and I have to admit, while many seem to be touching their respective 52 week highs, I see no strong indication for a pull back to come. Of course there are some great charts of weak players that have broken down but its a smaller percentage of charts showing this type of break down.

Looking back at the charts from last week we should still be in wave 5 and may have completed it as a failed W5 attempt, however, based on price action we could still be within a complex W4. If that is the case we have to be ready to accept 1130 at the minimum.

As mentioned, charts at this point post a 50/50 type of setup. As we are entering a historically bullish month of December many are pointing to breakouts on the upside, while a few are more bearish in nature. I saw an interesting post on slope of hope yesterday. It seems Tim has gone back to pure equities trading as this may provide an easier way to profit from the market. I tend to agree with that view point after seeing all those charts yesterday again. Lets see what the remainder of this opex week has in store for us before we make any more calls for longer term direction.

Tuesday, November 17, 2009

OK some time now

Well we are seeing a nice sideways day today - after having reached a new high some distribution is needed to go even higher. Based on what we can see today, bears are gone and we still have some buyers left. Daily range is pretty much the narrowest we have seen in a while and technically we should not breach the upside for more then we already have. Its 1:15 now and we have had a 7 point SPX range while they are burning off the puts a bit more.

Now lets look very carefully at the below chart.

MACD is on the edge of breaking out on the upside which will invalidate the bearish case. However we need to get 3 daily closes above this range to be 100% confident its not a fake breakout and this being OPEX - well who knows. Also take a close look at the MACD divergence. The only time it has been higher was during our July head/shoulder frenzy - so far it has exceeded our previous two peaks in terms of divergence so there is not a lot of room left on the upside. Being long at this point definitely has more risk.

IF we are do see a repeat here take a look at the sep run and oct run. In september it took a total of 15 days before market finally turned lower (counting from first green day), in October it took 14 days (or 16 if you could the last gap up day close to previous high).

Right now our count is 12 (or 11 depending on how you want to count it). That means we are nearing the possible end here. However if we are able to rally higher which at this point is pretty much assumed by most everyone we will take MACD with us and could have a potential to extend this pattern in a July like run up.

At the same time, the rare three drives topping pattern is the last hope for any bear out there. Bears could have a field day here with bearish patterns left and right, megaphone, bearish rising wedge, divergences left and right, EURUSD not able to make new highs. I could go on - yet it seems we keep on busting higher as more and more bearish divergences build up. Since we have not see any proper bearish resolution for any of those patterns even all of those could get invalidated after the fact.

Yes I think we can all agree that the more likely scenario is a move lower to finally even out those divergences and give another chance to the bulls in a few months time at lower ranges. BUT, as we have seen over the last few months - bears continue to get the shaft. I for one am really looking forward to see how this market will resolve itself towards year end and into the first quarter of 2010.

Quite busy with work today

Sorry guys no pre-market update. Will post in comments.

Monday, November 16, 2009

Important Day - closer to all time high then the bottom

Well, an interesting close today. Just forgot about the markets for a second and let this sink in. We are now closer to the all time high of the DOW - then we are to the bottom that seems oh so recent.

It took 17 months to get from the 2007 October highs to our 2009 march bottoms. And it took 9 months to get back half way. Its kind of amazing just looking at those numbers from a longer term perspective. Its been an astonishing rally thus far and its really something when you think of it in absolute terms - we are now further away from the bottom then we are to the top (yes I am saying it again).

Ok thats it for tonight - just wanted to share this thought =)

Watching the upper range again

Ok for today its quite simple. As always with our 1% GAP scenario we have a good chance of a stepping day. We had been testing the 1098-1100 range a few times now so a clear break is likely. The question remains what upper ranges will provide enough resistance. Of course first our old ranges at 1107-1110. If those fail anything as we had described in the past as the topping range from 1116-1132. It will be difficult to figure out where it will stop and we can only determine that on a proper reversal.

Now this week is OPEX - we all know opex provides quite crazy ranges and moves so we have to be prepared for fakeouts on both the bearish and bullish side. Looking at this market now, it really seems the sky is the limit and there is nothing holding it back anymore. We are about to enter December, historically a bullish month.

The bottom of the Globex session is 1091, which also happened to be fridays close and represents the bullish/bearish short term line, a close below we should see more pull backs, a close above and we are on for 1130 upper ranges.

Amazon has breached my 133 range and my puts are down around 50%, probably more at the open. Will have to figure out how to get myself out of this one =). I am not too concerned about the SPY puts as we can micromanage this position a bit easier. Its always difficult to trade one out of a bad position, so lets see if I can manage to minimize those losses on both puts this week before expiration.

I will most likely not place any new trades today as I want to see the market play out at our key ranges before make a decision.

Sunday, November 15, 2009

Futures going quite nuts again after only 2 hours

Well big move in futures right at the open. I wanted to restate from Friday:

"So today its important to watch the 1082-1085 range. A breach here will put higher probabilities on the failed W5 move, if we manage to stay above this range today and close above 1091-1092 we have to be ready for more upside. The upper side is 1096 that we need to monitor closely."

Quite ironic that we hit the low and high of day right on the head - within cents on the low and exact on the high. Now whats even worse is Fridays close ... well we closed at 1091.50 (yes right in the smack middle) - this again gives a 50/50 chance to either bear or bulls this week. It is quite ironic that we closed right there. I had mentioned on Friday I was looking for a short opportunity tonight but will hold back until probably 4:00-5:00AM tomorrow morning.

Have a good end of Sunday and look for my update post in the morning.

Friday, November 13, 2009

Key Levels to watch today

Its Friday the week before OPEX so we have to be ready for some wild swings next week. You all know me, I love swings especially on short term trading setups. I have been holding back the past few days on day trades as I wanted to see how the top would resolve itself. As mentioned in the post yesterday I am still a bit unsure of direction. You may remember one of my favorite quotes

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

This currently applies to my puts as I am quite concerned with another push up here. It is possible that we have set a possible short term bottom, one that actually qualifies as a valid W4 corrective move at 1085 ES. This was my main reason for my long attempt yesterday though I did not want to risk too much on this possible trade as I was still sure that we had made a failed W5 move. As it turns out we still have a high potential setup for higher ranges into OPEX.

So today its important to watch the 1082-1085 range. A breach here will put higher probabilities on the failed W5 move, if we manage to stay above this range today and close above 1091-1092 we have to be ready for more upside. The upper side is 1096 that we need to monitor closely. It is very possible that we stay within this tight range today but I would not count out a recovery to break above this range.

Below is my updated bullish count - which is currently my main concern. On the other hand remember we still have a possibility of the SPX high being a short term top at least. Take a look at the MACD again on the daily - yes - a HUGE divergence that bears should be happy about and bulls need to overcome. However a rally into the upper ranges as identified below should help bring MACD higher.

Thursday, November 12, 2009

Uneasy Feeling

Something odd happened to me to me today while watching my charts and trying to pick a trade.

For weeks now we have been talking about the DOW 10300 and a new marginal high on SPX - it finally happened. Though keep in mind I am not necessarily saying this was a great call - it seems any resistance number you name will eventually be reached, just like it did for 880 which seemed a great call back then, 930, [insert any other top calling attempt here] - currently we are at marginal new high of 110X - yeah way to go Chris =)

We had described our scenarios to look for yesterday, while I did expect slightly higher prices we were pretty close and it seemed at first we were right on the money. However, the move after having hit the new high for SPX yesterday does not sit very well with me at all. Yes we have light volume due to holiday but todays sell off has even less volume then our peak yesterday - a bit odd and suspicious.

So during the trade day today - if you followed me in the comments you can see I was a bit all over the place, not my normal type of style. So at this point - I think I have fallen for over analyzing this market a bit again - trying to make sense of the moves it makes, and trying to anticipate direction and yet again realizing that anything outside of a 10 point range is still extremely difficult for me to gauge. Maybe its just my german mentality, the need to be in control and having the ability to anticipate what will happen that has driven me a bit mad here today. My overall views are bearish - but today I started to question myself again - and I think rightfully so.

Take a look at how far EURUSD has come down while ES did not make much of a move. EURUSD found support just as we had anticipated but I was very surprised to see that the dollar did not take down the market more then it did. Keep in mind my entire basis for the market trending lower has been the dollar. We have been talking about the dollar for months now and for the past week I have been getting very suspicious of something going on - we seem to be loosing our relationship more and more. To be honest I am not sure what effect this could have - and whether or not this divergence will balance itself out again or give us first signs of things to change. We need to keep our eyes on this one very closely.

So overall - I see myself in no mans land again - not sure what to make of this and whether or not we had a failed W5 (as per the chart from earlier in the week) with an ABC correction?

Yellow indicating a completed 5 wave move, blue indicating a correction which will ultimately mean higher prices. The move off the highs does not look impulsive to me at all - meaning we should not expect much follow through. Next week being OPEX week will even add more madness to this. So I think its time again for me to stop trying to figure out the mid/long term direction. Just play it day by day - that has worked amazing in the past didn't it?

A bit hungover

Had a few too many drinks last night so no update. I had mentioned yesterday after the close that I think the market is not quite done yet. We found support at EURUSD and I am not counting out a retest of yesterdays high and a potential to hit our target of 1107-1110. Once we get there we can figure out if we are heading for the primary targets of 1116-1130 or see the 1080 levels first. We filled the GAP from yesterday during the intraday and also retested it again today making me think that we are not quite ready to head lower.

Wednesday, November 11, 2009

Will not have time to post update tonight

Wife's birthday today so no time ... but wanted to let you know that I do expect prices to move a bit higher still. Yes we did reach our DOW target but the marginal high on SPX especially with the price action today does not qualify as the end of the move.

We expected the spike and sell off in the morning hours - however I did not expect a totally sideways day which means we are not done on the upside. As crazy as it seems when looking at the daily chart, the market may have more left in it.

I did add a small dec 110 put today (at the bottom of the intraday range) so position wise I am around 40% committed on what my final position should be. I am still 100% cash on futures and equities, though keep in mind I am leveraging a bit more then I should via puts - so one could say I am in quite a bit already.

Market has no patience

Its quite interesting seeing the overnight moves here - it seems the market has no patience at all. Generally when looking at corrective moves to absorb sellers and flatten out overbought conditions - the market will spend a minimum of 30% of the advance in terms of time going sideways, generally its even more. Look at the market here? barely even one day as a breather before wanting to continue.

Ok quite important today. USD yet again taking a beating which is helping the futures move higher as we speak. So the question we have to ask ourselves - what kind of move should we expect, how can we profit from it, and how do we protect positions (if you are short you are scared, if you are long you may want to look for a hedge or partial exit).

Initially I had given a high probability scenario to a failed 5th wave, meaning a marginal new high on SPX. I still believe this to be a high probability scenario - however a few things are going against it. One we have light volume and we have to deal with lots of stops just around the 1100 range - once those stops get hit, well you know what happens with all the short covering.

Its 4:15AM now, so we have a bit of time left before cash hours but I do not expect any strong reversals - remember our definition for a stepping day - 1% GAP will set the low within 15 minutes 2-3 points off the open and the first morning high within an hour of the low. This has worked like a charm the past few times so we have to watch this again today.

So what are my scenarios ... start with the lowest probability one.

1) no new high or high at open, sell off at cash hours open - well this to be honest should not be happening today. We have nothing going for this move, limited economic news, forex not indicating any type of reversal

2) failed 5th wave, marginal new high - this move should set the high before 10:00, most likely by around 9:45-9:55 at price levels close to 1107-1110

Now regardless of how high we may go, the close price in comparison to the open will become very important - if the close will be set below the open price. We have a high probability for a reversal - but lets not dream up a bear case here and go for our last, to be honest, most probable scenario.

3) stepping day with a close towards the high of the day on lower volume. For a move like this, we should be expecting a minimum move of 1110 most likely higher. Remember the chart from 2 days ago for our W5 targets.

Will post more updates before cash hours depending on pre-market action, but do not expect much of a change here.

Tuesday, November 10, 2009

Not much to say today

Pretty much what we expected with a corrective move - we made a marginal new high but remained in a tight range most of the day - the close is quite classic for a distribution day -0.01 for SPX.

I stayed out of trading today, tried one scalp but exited within 15 minutes at break even price. I had added a small chunk of puts but waiting on the last position. Those I will most likely add above 1115 SPX only.

As I am typing this I am seeing some big moves after hours (at 7:18 which is a bit odd). Printing 5+ pts above close price around this hour is not all that normal. Going to have to figure out what happened here.

The amazon short I had taken is at the edge of my pain point. 133 price target is my current mental stop from an average of 126.50. Lets see how that one plays out.

Hope you all are doing ok. Say hello every once in a while ... I am feeling lonely =)


guys - I just wanted to say something. You cannot imagine how much I have to hold back going in heavier here on the short side - yes we have the risk of more upside. But if there ever has been a time to risk being short.

Ultimately I agree the probabilities of higher prices are very real - but regardless of whether this is a bull or not. We have a very narrow risk margin now when looking at 4+ week positions. Even if the trade does not work out you are within 1-3% (10-30SPX points) of the key upper ranges.

I am holding back here - the old Chris would have gone in much stronger. Believe it or not I am happy not being the old Chris anymore. Yes we have a great opportunity here but its all about managing risk and preserving capital.

10300 DOW

Could it be that we will reach this level today? It would have enough room to make another marginal SPX high or double top. Only 50 DOW points (5 SPX pts) away.

Lets see .... would not count it out as a possibility.

Monday, November 9, 2009

Some more charts of awesomeness !!!

First one is the most insane 15 min chart I have ever seen. Last week was ranges from heaven - I loved last week and banked some nice coin on all the ranges that we were able to trade. Today - the day after we have hit 10+% unemployment we get the weirdest looking chart ever seen. Got to admit - its been quite rare to see something like this with absolutely no pull back and no intraday move. As you know I scalped 3 times today - total of 4.25 points loss - quite scary that we did not have a single retracement of at least 4 points off the highs.

Next ....

That one is quite pretty as well. EURUSD made a NICE overnight move but as soon as cash hours opened - nothing, nada, nichts - just kept on trending lower for a descending triangle that should initiate W4 on SPX. The yellow circle is where I got stopped out today - darn. I had overlayed this with ES - you can see the crazyness of the rally in comparison to the dollar. Where is the relationship? I cannot spot it here ... I had said last week that I believe we are on the verge of a big move in the dollar - could it be that the dollar will go even lower then it already is? I expected strengthening but lets see - keep in mind we are talking about a major trend that had been developing so a trend change of this nature may take a wee bit longer.

Saved the best for last ...

Chart is self explanatory - 2 more closes outside this upper trendline and well. If you are a bear you are exciting when you see this chart - if you are a bull you are excited when you see this chart. OR the other way around - a bull is scared, a bear is scared. It seems whether you are bullish or bearish - you should be finding yourself on the extreme end of the spectrum at the moment with all those patterns right in front of our face.

Out of 100 technical patterns - I am sure we can find 30+ good ones with high probabilities here that will put in a great bullish and great bearish case. Lets see how this will look once the month is over.

We are on for a new high on SPX

Well what a day - never in a million years did I expect such a move but it goes to show how one sided analysis can be. As you know I have been focusing all last week on the upper range of 1074 and counted out any possibilities for what we just did.

(Below chart is in ES)

W1 1026 towards 1058 = 32 points
W3 1039 towards 1092 = 53 points OR 1.66% of the primary wave. It does not get more perfect then that in terms of ratios as this number would represent a perfect W3 target. I am quite mad at myself for not having seen this as we moved towards 1039 with a possible W2 completing and W3 starting. I was so focused on this being an ABC correction move off the highs that was proven quite wrong today.

So what does that mean for us? We completed W3 today and are going to see ourselves in a W4 formation that is just some general whipsaw in a tight range. Minimum targets of course the 23% levels but its possibly and to be honest more likely to see a move towards the 1069 range - a range you remember being key in last weeks trading. This would be a great spot to unload some shorts or enter hedges by turning puts into spreads to minimize risk.

After completion of wave 4 we have a few targets on the upper side - per proper ratios its anywhere from 1116 towards 1131 as the max - however we have the problem of the DOW - DOW is almost at the target of 10300 - which will make the run for SPX towards those upper ranges very difficult. So we have to assume that we may get a failed W5 attempt with only a marginal new high as I had mentioned previously.

Yes - I know I did not want to talk positions but this is a good example of managing around a position. As you know put holders got killed today - on price and premium. As you can see I entered 2 additional positions today for my spy dec put - why did I choose this size? My original position was priced at 3.00 and I now lowered my average to the open price today - meaning, assuming that VIX will remain unchanged if we reach yesterdays open again which also represents the minimum target of W4 I have a chance to get out of this position without any losses or if I want to keep the position (and I do want to keep it) trade out a bit or convert the put into a spread to bank some of the premium if we do end up moving higher. But as we all know - this market has shown us over and over again that plans do not like to work out the way we always want to.

Not what I expected

Well what an overnight session - definitly not what I expected and I added 2 more loosers to my positions. I know I said I will not justfy trades and hope I am not sounding like I am making an excuse here - but as you can see last night presented a low risk short trade with a tight stop that could have played out. Well it did not - and I stopped out with minimal damage. Looking back at the last few months - this would have definitly been a trade I would have kept running without much of a stop as I "believed" we would see lower prices.

Now last night I was confident of lower prices towards the open and that definitly did not play out. I made the mistake of being too focused on what I considered a pull back for today - that I did not even put much emphasis on a 11 point gap higher before cash open. This confidence of course was coupled with having hit our short targets we had outlined last week but no clear plan of what would happen if we do break those levels.

So from here - after having broken an important FIB level (the 61.8%) our next target is the 76% level at SPY 108.30 or ES 1078.

Now the case towards 1016SPX I was expecting is being questioned quite a bit - from a pure charting perspective - we should see a new high - DOW 10300 is just around the corner and this move here could be setting up for a run there. Also keep in mind that the DOW is currently outperforming SPX so we could be making a new high on the DOW while we create a double top or marginal new high on SPX.

Either way - I am going to have to go back to the drawing board now to figure out our next trades. The chances of the open today being the high of the week - lets be honest - very low probabilities so we have to figure out how we can make some good trades this week.

Sunday, November 8, 2009

Looking for 1071-1073 prices during overnight session

Will initiate shorts around those levels. We are at quite an important turning point here at the moment - while every day is important in the markets - I think the next few days may give us some clues on the longer term direction - I will post up some more details tomorrow.

Will let you know if I take any positions tonight via futures ...

Friday, November 6, 2009

Interesting Pattern

I know I had mentioned I am not always going to justify each trade but this one was too important to pass up. I am going to restate some stuff again (sorry but I need to make this point).

"The largest pull back during our incredible rally was back in june/July for a total of 87 SPX points. Our current pullback comes in at a total of 68 with a low of 1033. You all remember the significance I had mentioned for our 38% retracement level at 1016 SPX - if we do see a sell off towards this level we will be adding a total of 17 points for a grand total of .... wait for it ... wait for it ... yes 85 points pull back - which happens to the same size pull back we have had back in June/July."

Additionally we have been talking about the same short entries all week now.

"Short setups 1061-1062 with stop at 1064.50. If that fails short again at 1068 with stop at 1073."

Both of those targets worked out pretty well in terms of price and stopping at that range for resistance (at least short term). Now I had also added my second range in case the first fails which was very close to the previous resistance. Thus far we have not violated this last range and it is my feel we will not violate at least on the short term. I will be looking for another possible short entry via ES on Sunday night so I will keep you all updated. For now I am quite happy with my few puts (feels so weird only having 10 contracts). Well either way here is some amazing comparisons.

This is a comparison between July this year and now. I have circled the important areas.

Green Circle - we are making a higher low
Blue Circle - we breach the previous swing high by a marginal amount making everyone believe the higher low from green circle is an indication for going back to retest the upper ranges and possibly make a new high
White box - whipsaw heaven with big wide ranges but close prices of the previous days close to one another (though for us a lot happened pre-market today)

Additionally both hit the perfect target of the 61.80% retracement. From here it would be a perfect place to revisit the 1016 SPX range which was just a few points away the last time. This would almost play out exactly as before if we are indeed seeing this type of move.

Waiting for Jobs Data

Well nothing more to say. We did breach 1064.50 during the overnight hours as expected with the close this high. However the market is waiting now for important news.

As described in the comments yesterday - the 10% number may already be priced in as we had been talking about it for many months now. So its up to the market to decide what to do. We did recover the losses from Friday last week - so the market can make a decision here on what to do.

So looking back at the ranges from sunday:

"Short setups 1061-1062 with stop at 1064.50. If that fails short again at 1068 with stop at 1073."

It seems neither one of them will provide a safe short entry. High at the moment us 1066.50 just a few points away - if we do reach the 1068-1073 range I would be heistant to enter a swing position with a minimum of 25 pts spx gains. So as a result I may use this for a scalp but nothing more. Lets see how the market reacts.

Will post updates before cash hours to figure out direction.

Thursday, November 5, 2009

The new Beginning

as I had been talking for a while I have changed back to my old trade system. I have been caught by long term IT trading in February this year and unfortunately have incurred quite severe losses.

There are many ways to come back from such an extended period of draw downs. Looking at xtrends, I am sure you have seen what Sol has accomplished in such a short time frame. Of course he used his own way to get back into the game - by increasing his capital by quite a large amount and averaging down on himself (so to speak). There are other bloggers and traders that have re-evaluated their trade style and made adjustments.

For me its quite simple, I am taking the path of what I consider "detention". What this means is for me is that I will be minimizing my trade capital and go back to a very basic concept. If your system allows you to double 50K, well it will do the same with 500K. There is no rush in the market, the market will be here tomorrow, next year, in 10 years from now and will have opportunities left and right.

To repeat what I had said last week. I am splitting up my accounts as follows:

Futures - Day Trades - $15K
Futures - Swing Trades - $15K
Equities - $15K
Options - $15K
Forex - $5K

Thats for a grand total of $65K, rest of the money gets locked away never to be used. The goal is quite simple for me - there is only one way for me to get out of detention - double the total combined account value. Once that is achieved well I can go nuts again. Until then I will keep my trades small. I will also be keeping a trade log that I will link on the blog as well so you can see monthly performance and positions. Entries and exists will be posted in the comment section and possibly via twitter.

I have to admit, I was hesitant to share this information with all of you, especially the requirement to log every trade. When publicly posting account values and trades one generally attempts to defend their positions and the ego gets in the way of proper objective analysis. So do not expect me to comment on why I take a trade, or why I close out, or not take a trade. Of course I will keep the same format as always posting ideas and views as well as what I am looking for entry wise.

Time wise I am not putting any pressure on myself and my current expectation is that it will take me most of the next 12 months to achieve my goal of 1) doubling the above accounts and 2) prove to myself again that I can actually make money trading.

Trading is a passion of mine, something I really enjoy but this year has taken all of the enjoyment away from it and turned it into something that has caused me emotional unrest during many occasions. The break I have had over the past few weeks has really helped me re-evaluate what I am doing and given me a new outlook yet again. One can say I am refreshed and ready to give it another try. If it does not kill us it only makes us stronger.

EDIT: I added a section on the right hand side for positions that will be tracked on a monthly basis. I will start recording trades starting tomorrow. (Though I would love to put in the winners of this week hah)

Something weird ....

No idea whats going on there. As mentioned in the comments there are some weird fills going on with SPY - bid/ask spread is perfectly normal but some of those orders coming through ... do not think I have ever seen anything like that. Moved my stops to break even - who knows if someone is going to trip a wire somewhere causing some weird spikes.

Market Weakness

Well what a day yesterday. I had left my computer right around 3:30 or so thinking the FED day was just going to be another non-event with the market closing near the highs. Boy was I wrong.

The weakness in the market is become quite clear here however there are quite a few things that have me concerned. I had mentioned yesterday that it was my assumption that the FED comments would have a larger effect on currency markets and the opposite happened. The dollar remained at similar levels while SPX took a big nose dive. One of my charts I had recently added was an overlay of ES and EURUSD - and both of them diverged yesterday towards the closing hours. This is something I will be monitoring much more closely in the coming days. It is my feel that we may be setting up for something larger in the forex world in relation to the dollar. Many had been talking about call buying on the dollar index yesterday - so someone may know something.

Equities wise - we are struggling to maintain a rally and we still have the same bearish divergences that the market has been unable to balance out. It is becoming more apparent that we will be visiting key support at the 1012 ES (1016 SPX) levels. Until we have made a decision at this range its anyones game. I wanted to remind everyone of the time back in Jan/Feb this year when the market came off the 945 highs and had been fighting with key support at 800. Shorts covered at 800 and re-shorted above 840. Bears are getting more active here but are still very cautious and take profits quickly so a visit to 1012 will cause quite a bit of short covering so do not expect this to be broken on the first try.

Overall - still in no mans land. From Monday the same applies (numbers in ES):

Long between 1011-1013 with a stop at 1009. If that fails long at 1006 with stop at 998.
Short setups 1061-1062 with stop at 1064.50. If that fails short again at 1068 with stop at 1073.

We had taken out 1052 ES yesterday right in the morning hours as we had expected but reversed back below. Currently trading below this resistance level but I feel we may get another test again today.

Take a look at the SPX. We went through the 50dma right off the open but went right back below creating a bearish hammer. Take a look at the last time this had happened back in July. You may remember what I had said on Sunday:

"The largest pull back during our incredible rally was back in june/July for a total of 87 SPX points. Our current pullback comes in at a total of 68 with a low of 1033. You all remember the significance I had mentioned for our 38% retracement level at 1016 SPX - if we do see a sell off towards this level we will be adding a total of 17 points for a grand total of .... wait for it ... wait for it ... yes 85 points pull back - which happens to the same size pull back we have had back in June/July."

Lets see if the market will setup another bear trap here or if we are finally heading lower. Now take a very close look at the 50dma - we are about to turn lower on this average. IF we do visit the 1012 ES which at this point has VERY high probabilities this average will have turned down. This will not be ignored by the large players in the market here and you can expect further selling if we are unable to get back above this average. For the first time since this rally began did this moving average flatten out 100% indicating that the market really is at an important turning point. Bulls need to step in here - or bears will take it away from them.

Is it finally happening? Even if we breach this range - I am a bit more optimistic on the market in general. Yes I strongly believe we will be seeing 880 again in the near future, I think we can all agree on that after such a strong run up. However, I fail to see how we can move into what many are calling the dangerous "primary wave 3" leading us to my old targets of 480. Yes I am saying old targets because I have my doubts. I still believe that we will be seeing this number on SPX but I do not think it will happen quite this fast.

I know I have been slacking off and based on my site traffic I reached the lowest point for this year. Well, expect my participation to change again. Get ready for a new beginning =)

Wednesday, November 4, 2009

A rare treat

I am gloating quite a bit at my EURUSD trade here. I always try my best to nail entries and exits. Many times (especially when it comes to FOREX) I try one position many times over and over as the leverage is quite high and things move rather quickly. In the past 8 trade days I have tried 6 long attempts with EURUSD, 2 small loosers, 2 small winners, 1 break even and one winner. Now that winner here is probably one of the best trades I have had in a while when trying to capture the absolute maximum of a trade range.

Great entries at the bottom and well the exit speaks for itself. Yes do not get cocky Chris but its nice to have something work for a change. It seems changing over to my old trade system with trying to capture much smaller trade ranges has done quite well for me thus far.

I have a new post ready that I will be posting up tonight with some more info on what I am doing at the moment. Other then that, this one will get printed out and put up on my wall for how to do things correctly. Maybe this is just the confidence booster I needed to get myself back in the game correctly.

In regards to this position, I still feel there is more room to go on EURUSD but as mentioned in the comments - locking in profits feels nice =)

Fed Day

Well lets see whats going to happen today. The market is still right in the middle of 2 important ranges - key support at 1012 ES and key resistance anywhere from 1064 towards 1069-1072.

Based on how the market is setting up I would dare to say we see the upper resistance ranges before seeing the lower range. We also have 1052 on ES to deal with but it is my feel that this will only provide short term intraday resistance.

As I am writing this futures are up around 5 points (I went short at 1048.75 for a scalp in the early morning hours). My EURUSD position is doing quite nicely and depending on feds today we should see quite a strong move in currencies as the FED decisions will have a direct impact on the USD - I feel the impact on USD will be even stronger then the effect on equity markets.

As we are in nowhere land market wise it is difficult to engage into any position unless its a short term trade between 2 levels. I am looking for a GAP close at least in the morning hours (where I will cover my short).

Tuesday, November 3, 2009

So what can we take from today?

Well on the surface it seemed nothing really happened but I have to admit, being a bear now you want to take a side of caution. We did not get a breach of Mondays low and EURUSD seemed to have found support around the 50dma (hence my long position there). While we can all agree we will eventually resolve to the downside - at the moment, there really is no trade to take. If you have short exposure lighten up or hedge, if you are long - really take a good look at your positions and tighten stops.

Whats interesting to see is that many of the stocks I generally follow have dropped quite significant in the past 2-3 weeks and are very close to key support and previous month low points. Of course we have a chance for a break, ignoring technical oversold/overbought indicators like we had done during the rally when it seemed every overbought indicator did nothing.

Now whats really interesting on many daily charts is that indicators have come to a rather neutral level with many divergences. Here is where it gets interesting. Lets take a look at SPY.

Of course the standard MACD divergence we have been talking about for a while. Take a look at the last bottoms we have had. 2 spinners before the market took off for another leg up. Now whats even more interesting is the same divergence developing starting in May that made us all believe we will finally head lower back in July and what did it do? It powered through resistance and removed that divergence with a strong rally. I do not expect this to happen here because quite frankly the market had a chance towards mid October to take it higher and actually reversed adding more confirmation of a bearish pattern developing. From here the market would have to give us 100+ points on the upside to balance out the MACD again confirming a new high.

So overall - I am not sure what to make from here. All I know that if the last 2 weeks are signs of whats to come we should get ready for a very volatile month of November - up or down.

Overnight session !!!

What a day yesterday. Quite incredible come back off the Friday lows and a new low intraday. The market closed as we had anticipated in "limbo land" - meaning it did not give any clear direction though my assumption was a bullish continuation after we had formed a nice spinner. However, the overnight session really showed us what will be in store and reversed all the way back towards the lows of yesterday. My long that at one point almost had 20 points in gains was stopped out at break even at the bottom - could have managed that a little better but oh well.

I had identified low risk trade targets for either a short or a long yesterday - it seems we may get our chance at the long position anywhere from 1012 ES towards 1018 today. I entered a long on EURUSD based on the below daily chart.

As you can see we are right at the 50dma for the dollar here so if there is a bull left in this market it should happen here. The EURUSD is a bit ahead of SPX here and currently at key support while SPX is a few points away (well a bit more then a few but you get the point).

Of course I believe we will resolve to the downside here but I will not let my belief dictate what is in the charts anymore. From a pure risk reward perspective, the long side is more favorable now then the short side - at least on the short term. From a bearish perspective, this is quite an amazing setup to be honest, a breach of 1016 SPX (1012 ES) will confirm that we are at least making a move towards the 965-930 range and a retest of 1012 should be in order after the breach so there is no rush getting too short too soon yet. As you can see from the above EURUSD chart - it becomes even more obvious what will happen if we do end up breaching this range - LOTS of opportunities on the downside which we all know moves faster and stronger then a drawn out bull cycle (of course with the exception of the amazing last 6 months - I wonder how many times I am going to keep on saying that).

So for today - the market has shown us what it appears to be doing - a potential breach of yesterdays low at 1026 but lets not get ahead of ourselves and wait for cash hours.

Just an FYI - I did get stopped out of my long position during overnight hours, I had created a rule a few months back to not keep stops active overnight but I changed this back to my previous rules as I am trading with my old system again which is much lower risk (but less potential rewards).

Monday, November 2, 2009

So what comes next?

Well we have a few potential setups here.

Long between 1011-1013 with a stop at 1009. If that fails long at 1006 with stop at 998.
Short setups 1061-1062 with stop at 1064.50. If that fails short again at 1068 with stop at 1073.

I will pass on anything in between and use the price levels in between those ranges to determine the longer term direction. I am only going to purse the lowest risk trades at this point. Of course expect me to scalp in between but in terms of swing positions using futures and options will only be done at those levels.

What to do?

I had posted a mid term update yesterday and wanted to restate something again to make it crystal clear. I am not turning bullish - please do not misunderstand my statements yesterday as bullish - rather look at them and realize that I am totally unsure of the markets next move. Many other traders are calling for the "primary wave 3" to begin rather shortly which will lead to the 480 SPX targets I have been talking about for a good 2 years now. Based on my original long term review in 2008 I had called for those levels to be reached towards the turn of 2010 - and lets be honest we are far from it.

Just like many other traders, I am trying to determine how I can profit from this market and what strategies work best. As a result I have changed my trade plan slightly. As some of my long term readers remember I used to be a very short term trader, and switched to a much stronger IT focus in the beginning of the year. This is not worked at all for me and I am going back to change my trade style to what I was doing in the past that has always given me nice profits =)

I am in the process of reorganizing my cash distribution between accounts and will run the following setup going forward:

25% Futures Day Trades
25% Futures Swing Trade
30% Equities
10% options
10% Forex

I will also be limiting my capital to a much smaller amount on all those accounts. I will actually create another account where I will move the remainder of my capital not to be touched.

Trade wise I will focus again on short term scalps and day trades whenever applicable and swing trades with targets of a minimum of 12.5 SPX points and a maximum of 25 SPX points. I have spent a lot of time reviewing my trades in the past 6 months and realized that if I had used my old system more actively that losses would have been much smaller. Hindsight is 20/20 I know, but looking back and reviewing my entries and exits - I wish I had applied more of my old trade style.

So enough of what I am doing - market wise as mentioned we are at a key turning point. We are nearing important fib levels that also co-incide with what I called the previous largest pull back in June/July - we all know what happened after that. The key thing to remember is the distinction of a large ABC correction that started in March OR a full 5 wave pattern. The questions we have to ask ourselves now?

1) Did we finish the C of our ABC correction?
2) did we finish W3 of 5?
3) Did we finish W5 of 5?

Once we have confirmations of either of the above we can attempt to make some longer term projections (1-2 months) of market direction. Considering that we are close to key support we need to wait to see how the 1016 plays out before we can make further calls.

Sunday, November 1, 2009

Pullback for new highs or finally a top?

Well, we are nearing the range where the bulls have to make a decision. The largest pull back during our incredible rally was back in june/July for a total of 87 SPX points. Our current pullback comes in at a total of 68 with a low of 1033. You all remember the significance I had mentioned for our 38% retracement level at 1016 SPX - if we do see a sell off towards this level we will be adding a total of 17 points for a grand total of .... wait for it ... wait for it ... yes 85 points pull back - which happens to the same size pull back we have had back in June/July. This important 1016 support level is not only the important FIB but is also october low point. I had talked about the importance of this important 1016 price level back towards end of august after we had breached it for the first time. And we are getting very close to this level again.

Overall, I am having difficulties trying to identify where the market will head long term. During my trading experience I have always had a long term picture of market direction and used that to be able to trade short and mid term. At this point I want to refrain from guessing - to restate, we have quite a bullish setup with a breach of the 1016 SPX levels. Even if we break this range to the downside we have 880 as extremely strong support. Everything looks bullish long term while my fundamental views are quite bearish still. Since both views do not mix I have no choice but to remain light and stay out of major trades. Yes we may get our push down now that I had been expecting for many months - but in the end, I am struggling to see how the market can resolve to the downside I was expecting after such a strong run. Lets be honest, who would not be a buyer at the 880 levels - even the most committed bear would either enter a large hedge or even throw his long term bearish views out the window to enter a long.

I will post some more short term details after the overnight session - FX markets have done quite a turn around since the open so a lot can happen with SPX.