Monday, December 13, 2010

Still here - and short now

While I have been busy working hard and not spending much time on the markets I just took a decent size short position here with stop just at high of day. Never thought we would get to the 1245 but here we are and here I am trying a position with what seems a good risk/reward ratio trade.

Wednesday, November 3, 2010

Tuesday, October 12, 2010

Short again @ 1172 SPX

I am sure you expected me to short here =)

Monday, October 4, 2010

Daily Chart Musings


Ok here is a more detailed update. We have a lot going on at the moment and the market is poised for a directional change. At this point I am considering three distinct scenarios.

1) Breakout to the upside - during this scenario we will overcome the MACD bearish cross and may remain at a "close-to-zero" MACD divergence. The market has done this before and considering that everything is bullish it can do so again. A break on the upside would be a challenging technical endeavor as we have to overcome the Jan 2010 resistance.

2) Pull back to MA cluster - we have a HUGE extremely tight cluster of key moving averages. Ranging from 20/50/200 dailies and 34 exp. All of those are extremely bullish at the moment and are clustered in a 25 pt range. Its extremely rare for all of those averages to converge in such a tight range.

3) Bearish ABCD for a larger AB with C to come - the light blue lines could indicate a quite bearish gartley pattern and at the same time setting up for our B leg having completed last week thursday and now entering Leg C towards new lows below 1K.

This week will be crucial to let us know what pattern will play out. The highest probabilities lie within scenario 2, scenario 1 and 2 are considered the lowest probable scenarios but depending on price action below 1130SPX we can identify what the market holds for us.

Friday, October 1, 2010

Adding to Shorts

Added to shorts here again at 1145 with stop at 1159 SPX.

1:22PM: A bit concerned at this sideways action here around the 1145. I took a small bit off the position here just to minimize some of the risk. Improved my avg price slightly compared to yesterday so thats great, but overall getting a bit concerned by not seeing enough follow through. I am still confident that we may see more selling into the last 1.5 hours but rather be safe especially with the upcoming weekend and the standard sunday night bear scare.

Thursday, September 30, 2010

Possible High

It is very possible that we just made a short to mid term top in this range here. I was expecting us to get a few points higher but I believe we topped on the short term. I currently hold no position but am looking to go short again for the next 5 days at the minimum.

We have 2 scenarios that can unfold here, a standard pull back towards the bullish daily moving averages which is step 1, and a potential for a much more bearish formation that at this point I will give little credibility.

The afternoon and tomorrow morning will be a deciding factor for the next 1-2 weeks. I will post a more detailed update tonight or tomorrow morning with a few more technical justifications.

Monday, September 20, 2010

Short ES again

Trying my luck again as per twitter. Bulls are in control hence a tight stop on this position.

Monday, September 13, 2010

Long time no talk - short ES here

Been quite busy with work but following the market every day. Been a very patient bear in hiding but came out today and just opened a new short position via ESZ10 @ 1118 with a stop of 6pts.

Wish us luck =)

EDIT: stops will likely be adjusted within the next 2 hours.

11:11AM: stops moved to a tick above HOD

11:18AM: we will likely see a retest of the highs today with a potential for a marginal 2 pt higher high. Will keep stops a bit flexible on part of the position.

12:25PM: stops at breakeven now and "walking away" - this should be setting up for a move towards 1102SPX and possibly into the 108X next.

Monday, August 23, 2010

Long ES @ close

Took a long position into the close today. Tight stop 2 pts below LOD.

Sorry for having been MIA but between travel and being a bit sick have not had much time to post but following every day. We are setting up for a nice divergence again on the decl/adv ratio on the daily, so we have a high chance that todays LOD will not be broken.

However, on the bearish side, this is a perfect close for a nice GAP down below support and strong follow through lower for tomorrow. So I am playing it a bit on the cautious side here as I do not want to get caught holding a looser.

Thursday, August 5, 2010

Expanding Triangle with Time Fibs


This is something I have been playing with the past few days. A very unlikely scenario but one that could be used for a trade with a limited amount of risk. Why limited?

So take a short at those levels (anywhere from 1140-1150) with a stop around 1180. If market keeps on trucking towards 1170, double down on position there and get out on retracement (you dont need much of a retracement to exit position at break even or with small loss).

If the market retraces back towards 1100, then it gets a bit tricky. Depending on how it bounces (likely back to retest 1130) and how the coming rally will resolve technically one can make some great calls on whether this pattern will come true. On break you can double down on your position likely around 1080 with a stop at the recent rally high (the rally off 1100).

This could turn out to be an extremely low risk trade with a potential for some really nice gains. As this is a longer term trade you can start position sizes quite small without too much pain if we are wrong.

In terms of giving this pattern credit here, I would say maybe 3 out of 10, so its not something I feel quite strong about but the risk/reward makes this a bit more interesting.


Also take a look at the time relationships here - from top to bottom, 38% hit the first top, 61% could be inline with our upside targets towards next week right between 1140-1150.

Tuesday, August 3, 2010

USDJPY - really?

Well, my third try yet again ended without much gains. We did test a key area in the 85.6X range today which is quite significant. At this point, I am going to hold out before another attempt to see how today develops on this pair. Three tries, no profits, but no losses either which is great.

Based on the intra day chart we may be forming a continuation pattern here that will lead prices to possibly below 85 where I will give it a try again. We have been making new lows but very marginal on each new push lower. Advances are getting smaller, much smaller, and declines are getting a lot smaller as well. Its coiling here nicely and could still go either way. Many things are pointing up but the hesitation to breakout of the very tight channel towards the upside has me a bit concerned that we may have a big washout coming before finally making a move higher - whether this will be a retracement on the daily chart to continue lower or of course a bigger leg towards the upside.

Sorry for having been so focused on FX markets recently. I will be posting more SPX updates soon as well.

Friday, July 30, 2010

Third try on USDJPY


As per twitter I did two more attempts today at USDJPY. The original one from 2 weeks back was closed out with minor gains. Unfortunately today I got caught again by having my stop a tad too close (yeah yeah but currencies I am afraid for a wide stop). After seeing the reversal I jumped right back in (this time with a much larger position) and hopefully this was it. We have some nice bullish divergences on this pair in addition to the bollinger support and of course the big bullish descending wedge. So three signs of a good long trade here and we are getting close to completing the wedge. Either a breakdown lower or of course a breakout of the pattern to move towards higher targets.

Of course this could be a technical bounce due to quite a run down in the past 3 days. We have to determine how this unfolds during the day today. If we can recapture the 86.45 range before noon we should have more room on the upside, If we stop there and are not able to get above it by mid afternoon it may make new lows below 86 and move towards the big 85 (round and middle).

Two more attempts left after this one. I'll be sure to take some partials this time though to try to balance out the stop from today.

9:55AM: talking about swift reversals lol - recaptured the 86.45 range here and hopefully moving higher. This here could be the breakout of the steep 3 day down channel if we can get to 86.9 next.

3:50PM: well it looks like 86.45 is proving to be quite difficult to overcome. I still think this position is good (well of course I am long) but need to see a strong close above 86.45 on Monday with a test at the 87 range at least (and exceeding todays rally high around 86.7).

Have a good weekend all.

Friday, July 23, 2010

I guess it was blue !!!


Well, much to my dismay we broke out on the upside. Why dismay? Because I was not able to put on my long position again. I had been looking to re-enter my longs that were closed out around the 108X SPX range. Now you know how much I love double FIBs and I totally missed that one. Take a look at the blue circle there - double fibs are areas of big importance and it slipped through my fingers.

Now we have a big band of resistence ahead as you can see from the wide blue rectangle but this is supported by a nice cup/handle, double FIBs and the proper pull backs to break on the upside now. Now we pulled back 50% off our highs before bouncing in the last few days - I hate 50% retracement because you never know what it really is until the move has resolved, now we know.

At this point, I have no choice but to wait for this to unfold towards its upside targets. I strongly believe that going into the weekend and of course our big sunday night many shorts will not want to put a position on here so the only sellers are bulls to take profits, but those are no-where to be found as many are expecting a break here. And yes I know, if everyone expects it - well it wont break. That of course is always a possibility but this market has made a point here - and looks ready to go to the moon even if we have some last hour weakness.

Wednesday, July 21, 2010

Blue or Blue?

Tuesday, July 20, 2010

Am I alone here?

Well, I have been a lot more active in the past weeks and months. I primarily use this blog to share my personal views and positions.

Is anyone still reading here? Is this information helpful? Would you like to see something different?

Feedback would be appreciated. Have a great day all =)

So I was wrong - maybe?

Well, price action since Friday has painted a very clear picture. While I did take a long yesterday I was very concerned with the lack of follow through and as a result closed out all longs again with some decent short term gains. Lucky me ....

While USDJPY is still above my entry price (and what a nice/lucky entry that was) but its forming what I believe may be a bear flag (or bull flag depending on how you look at it). This pair really needs to make a move above 87.2 here in the next 8 hours or we will see lower prices.

SPX wise, we just hit the 50% retracement on ES and hit our magic round number of 600 on TF (russell) twice yesterday and overnight. ES making new lows while Russell is able to bounce of yesterdays low. If we are to break our overnight low we have a good 10 pts to go on the downside before any bounce can develop. Key support on ES is in the 1039-1041 range and this should come with STRONG buying and will also correspond to a 61% retracement so regardless of morning price action I will have big limit orders waiting in the range for futures and etfs.

For today, we are looking for continued weakness, first at our overnight lows in the 1050 range (are we here already again?) and of course 1041 on break of the low.

Another thing I wanted to talk about is the "tripple" channel patterns. Many times when looking at any chart by the time a price channel is hit for the third time either on the upside or downside the trend has an extremely high probability of changing. My longer term readers may remember - 4th time does not happen and generally will lead to a break or continuation to develop into something new.


The dark blue was a retest of the previous low so it could be ruled out. As you can see we had three tests on the upside and 3 (or 4 if you count the re-test of the important low). From here on out - the next test on that trendline WILL result in a break. The market is about probabilities and scenarios that can unfold and its extremely rare for me to use statements such as "will, is going to" - this is one of those times.

IF we are to get back to the lower part of the trendline (which also means a new low) we will see selling accelerate by a HUGE amount - trust me, it will be quite strong and fast but I give this the lowest chance of happening.

Overall I am still looking for a bullish continuation and "hopefully" (here I go again with choice of words) a strong bounce followed of the targets identified above in the 1039-1041 ES range. We may never get there and reverse before but that would also give us a great sign allowing us to get back into longs on fall back to 1075 after the 1085 re-test.

Longer term, the month of July is still extremely important from a weekly and monthly chart perspective. By the end of the year we will be looking back at those specific weekly and monthly charts and know why the market turned the way it will turn this month.

Monday, July 19, 2010

Long and Out

As per twitter I took a nice long position at 1057.75 this morning (after one failed attempt) and closed out at 1065/1068 (50% each). While it is looking rather bullish here I am a bit concerned with many sectors having broken the lows by a bit too much today.

We had mentioned this morning that any break lower needs to get reversed very fast - it did but I am not seeing the follow through I would like and as a result rather go into tomorrow all cash. I still have my FX position - this will be kept for a while but out of everything now.

Want to see how the market reacts between 1080 and 1065 over the coming days to try to plan a new entry either on the short or long side.

Where do we go?

Well Friday was an incredible day in terms of price power. Its been a long time since we have seen such a relentless selling day without any attempts to buy the dip. I have to admit, while I was assuming a shakeout was occurring such price action is extremely bearish.

On a SPX cash basis we retraced a full 38% which can be considered bullish as a W4 retracement. On the other hand when major bottoms are made the second wave retracement of a new bull leg generally retraces a lot less and many times does not even hit the 50% or the "valid" 61% level - again bullish. When looking at specific sectors many have seen healthy pull backs but remain above key support that was broken out of sharply the week before last.

From here its quite simple - a break of Fridays cash hours low and any upside this week should be sold, if however we can remain above Fridays cash low and are able to recapture 1080SPX on a close basis by wednesday we are likely going to see a break of our recent highs around 1099SPX.

The market still has to overcome the bearish weekly and monthly charts - however, both of them will turn extremely bullish if the weekly can manage to take out last weeks high and the monthly can see a close above 1114SPX. We have 2 trade weeks left and a break of those levels will pave the road for new highs to come.

So - believe it or not - a LOT is riding on Fridays low.

USDJPY seems to be working in my favor now, on the first counter trend attempt - could it be? Its likely we may see a retest of the current lows on that pair but it could just keep on running from here. As posted last week, this pair has done quite sharp and strong reversals in the past and if you are able to catch one of them you have a chance for some great gains. Ultimately I am looking for this pair to break out of the 1.5 year down trending channel and continue on the upside. First target is 92 and after that re-capture the 98 levels.

EDIT: If we are to see a retest of 1058 it can only be "allowed" today and needs to reverse above 1064 within 120 minutes of cash hours.

Friday, July 16, 2010

Knife catching

as per twitter just took a long ES @ 1059.75 with one point stop ... been watching this relentless selling here and was waiting for the final push lower to enter a long scalp. Lets see if this has any legs into the close - doubt it and probably wont get more then a few points if I am lucky.

Shakeout in progress

I believe we are currently in progress of a bullish pattern by shaking out weak longs that had entered positions after the 1085 break as well as trapping bears that went short in the 109X range. The internals of the market are not supporting a drop of the size we had seen today. Anyone who follows me on disqus may have read my comments this morning on TTW as liquidity had been removed carefully to create the 10 point drop in 30 minutes. After the drop was done liquidity had been re-added. Another supporting element is the weak negative tick for such a selling event which further supports a drain in liquidity to push the market lower.

As you know me I generally do not talk about "devilish market maker" scenarios but this here seems quite fishy. Get rid of weak longs, trap the bears, break into 110X and make the weak longs rebuy as well as force bears to cover which will ultimately lead the way towards 1130 SPX.

Targets on ES today could be anywhere in the 1062-1066 range as a valid 4th wave to propel the market higher. From a time perspective this looks now much more solid for a proper 4th wave compared to yesterday.

I am also considering re-adding my longs that I had closed last week as we are currently under my exit prices which is great.

12:24PM: this could be it.

USDJPY - counter trend attempts

As per twitter I just took a long in USDJPY with tight stops. I am allowing myself a total of 5 attempts here over the next 3 trade days to get a first part of a long position build there. I know we broke important support @ 87 here but this pair has provided great sharp reversals in the past, if one is nimble and can absorb a few attempts of being stopped out there is some nice gains to be had. Ultimately I am looking for a retest of at least 90 from the eventual bottom/reversal point.

Thursday, July 15, 2010

Excuse me !!!

Well, highest tick since 2001 ... not much more to say there ...

Tick confirmation in

"On the other hand, if the LOD is in we will see ourselves back at VWAP by 1:30PM or a bit earlier even."

"11:18AM: Look for tick confirmation here. Considering that we had a -1200+ tick today, we need to get at the minimum an equally strong tick on the upside (1100+) as another confirmation for LOD."

Well we hit price, time and confirmation targets again. Really wish I had tried another long this morning after my 2 failed attempts. A bit frustrating but we can say with great confidence now that we are opening up the price range towards 1100+ SPX. Maybe not right away but price action here is very indicative of higher prices and less selling pressures.

Updated Channels


I have to admit, this channel chart we have been using for many weeks now is working perfectly. I have added a new channel on the right hand side as we are close to breaching the down trend line here. This of course would fit very nicely with the chart from earlier with the W5 targets and of course will bring prices nicely above all key averages. Its interesting to see how prices have reversed so strongly from the lowest uptrend channel step that was broken as we breached 1060 a few weeks back. You can see how prices reversed very strong and got themselves back into the previous up channel. Its key now to remain above this trendline on a 3-day close basis.

Bad trade for the month

Lets hope this was my bad trade for the month lol. Tried catching the falling knife this morning without much luck (as per twitter).

You may ask why was I so reckless? Well, I really expected that we keep this GAP open for a bit longer and run into the 110X SPX range first especially after breaking 1095 on a cash basis consistently without strong reversals. I know it sounds like an excuse and hindsight a break of yesterdays low of course made it obvious that the GAP would likely be filled. Sometimes, being glued to the screen and trading on "impulse" can burn you. While it was just a few points (due to tight stops) its still frustrating having giving up money when there was clearly no long trade until the GAP was filled.

Back to charts, we just hit the perfect 23% retracement with our low today which makes this a W4 and opens up the price range towards much higher prices.


Now on the long side it is very possible that we shake out some of the weak longs first here and make a marginal new low around 2 pts lower early afternoon. This should come with lower sell volume and should be followed with a strong reversal. On the other hand, if the LOD is in we will see ourselves back at VWAP by 1:30PM or a bit earlier even. Getting back to VWAP would be quite bullish and validate that our LOD is in, at least for the day.

11:18AM: Look for tick confirmation here. Considering that we had a -1200+ tick today, we need to get at the minimum an equally strong tick on the upside (1100+) as another confirmation for LOD. Market is being helped by EURUSD here so any weakness there could spell more trouble and further downside. Considering EURUSD is up substantially already its a bit difficult seeing how upside can develop without FX support.

Wednesday, July 14, 2010

Covered positions

Covered my remaining shorts from yesterday. As per twitter I had cut positions size before the close quite a bit and covered the rest now at 1085. No loss and small gain - thats all that matters =)

Playing it a bit safe here.

Tuesday, July 13, 2010

New Positions

As mentioned via twitter went quite short here via ES, ETFs, puts. Avg price around 1096-1097 SPX (except one small batch of puts I got earlier) - stops on all at SPX 1099.

Minimum is a retrace back towards 1085 from here, could develop into more depending on how we approach that price range. Just so you know, its very likely that this position will get closed and reversed back into a long. Price action today has been quite bullish but we are "smacking" against strong resistance so some pull back is to be expected.

Channel Magic

Really not much more to say. Good enough for me to leg into a small short here (not futures).

Monday, July 12, 2010

Low Volume chop zone coming


The last time we rallied off major lows we had a very similar price pattern. Take a look at price advances over the Moving averages and the formations we are seeing on MACD (got our cross today).

From here on out, we should continue to chop and as mentioned previously test our final target of 1085 (we got close today but got denied). I do believe we are going to break through the 1085 this week but I am not sure and rather be proved wrong with profits locked in.

Took Full Profits

Been stuck in meetings since this morning but wanted to give an update. I took full profits this morning on the spike up between 9:45AM and 10:15AM. Sorry for not giving real time updates but did not have a lot of time today to post.

I believe we have a very high chance to see higher prices into OPEX here but due to work I rather lock in profits now. Had a great run off the lows at 101X with a nice sized position. At this point going to sit tight until we see a retracement (which may never come and the market may just run on to make a new high). The past few weeks have shown us surprises on both sides so I am not counting out a bearish scenario here but am looking to get positioned on the long side.

You may ask why am I taking full profits now instead of a hedge or more partials? Well to be quite honest I am not trusting this upmove from last week - it came too fast and looks more like a big short covering bear raid - could be wrong but there will be other chances for us to get positioned.

Will probably not post an update until mid week with more charts.

Friday, July 9, 2010

Partial Profits

Took some partial profits on my big long positions from last week.

Too fast - what to do?


I have to admit I am quite surprised at the price action over the last few days - yes we all expected a rally but not like this. Making money in bear markets is fun since you see profits fast while bullish moves take very long to unfold but being patient pays off.

I am not complaining since I am quite long still but I would much rather see a red close today, and even spent more time below 1074 - heck spend a week there and I am happy. The problem with steep low volume advances is the coming retracement - many times those steep almost vertical price moves get retraced very soon and very strong.

We are nearing some key areas of resistance - of course the channel chart, moving averages not only on the daily but also on shorter term time frames (60 min chart has 200ma right here). With the weekend ahead I am actually a bit concerned and may enter another larger trade towards the downside today, nothing crazy but with a delta negative position (meaning P/L goes up as price goes down). Waiting to see what we do towards the close today but this is too fast too soon. We could easily gap down on Monday and bring a lot of selling with it - and if selling is strong and 1058 taken out bulls need to be extremely concerned.

Price Target reached

We got to my 1074 SPX price target this morning on a very slow grind. Considering the bearish action on EURUSD and the slow grind higher here I hedged myself again @ ES 1070 a few minutes ago as mentioned via my twitter feed.

Keep in mind that I will not take profits on hedges and only let them stop out break even (read more on my trade lessons on hedges on the right hand side).

10:56AM: we should be making a new LOD in the next 2 hours. Should only be marginal but could develop as a retest of yesterdays LOD. Wedges have a tendency to break down quite fast so watch out here.

Thursday, July 8, 2010

Contrarian View

Been browsing through the blogsphere this morning and it seems almost everyone is going short here and closing longs. I am not so sure that is the right move quite yet and I think a short below 1040SPX would be a lot wiser. I am currently hedged (almost 100%) against my longs but I am not ready to close out quite yet.

We are quite overbought here on the short term and we need to give the market time to absorb those "sellers" hence my play to get back towards the SPX1050-1055 levels as the first stop. Depending on how we get there it will tell us a lot more on whats coming but I do believe that we will see 1085 at the minimum before seeing below 1040.

Also take a close look at our updated channels. MACD is showing us more upside after getting back to zero. Channel wise we are currently in the middle so its a bit more likely to pause slightly before re-attempting to upper ranges. Just imagine the next low volume rally based on the many new shorts that are entering the market - we have seen yesterday what happens when people are forced to cover.


10:27AM: it should turn lower right here or very high chance of a new HOD by noon.

Continuation

Well pre-market showed us the market is looking for continuation this morning. This should halt either at 9:55 or around 10:20 in terms of time. Target could be 1074 SPX.

9:44AM: top came in early. Went short ES as a hedge (in other account). Looking for 1050SPX next.

Ratio Analysis

One pattern that has only been seen at bottoms in the past 18 months is a 4 point pattern move when looking at Advance/Decline Ratios.

1) breach of the 2.5 ratio where the bottom occurs
2) retrace on the ratio by the first "buy the dip"
3) followed thereafter, another attempt to break lower in price but making a lower high on the ratio
4) and lastly followed by a strong move below the 1.0 ratio

This pattern has only ever occurred at previous bottoms, I marked each occurrence with vertical lines and each time in the past it has held up as a bottom with a decent size rally to follow.

Jul-08 12:30PM: just went over to evilspeculator and realized he had done the same exact analysis in one of his protected posts yesterday. I had been waiting to post this chart since Sunday (as I had indicated the day before) to wait for the pattern to confirm - quite funny that two Germans spent their weekend looking at this same chart lol

Wednesday, July 7, 2010

S&P 3.13% Up and Germany lost

Well, good news and bad news. Germany lost today vs Spain and market (and my longs) are up a considerable amount. I guess I should not be too upset.

Breakout

Well, we broke yesterdays high and are finding ourselves distributing now above the 1040 range. As bullish as it gets. From here I see more sideways consolidation with a possible bear fake towards the 1031-1033 range during the afternoon.

I will be watching the Germany game this afternoon so I will be gone after lunch. There is another very interesting chart coming tonight that has thus far confirmed major bottoms in the past 18 months, a chart that is also confirming this as a bottom. But it needs to be taken with a grain of salt as its highly likely that we have changed our major trend and if its pointing down for the remainder of the year, those signals will likely not support our 1010 lows as a bottom.

Will the real W4 please stand up?


Question remains if we completed a 5th wave on our lows last week or we are yet to complete W5. Both of the blue circles are valid W4 - question is - did we complete the impulsive move down or are we just getting ready for another 50 pts of downside?

Tuesday, July 6, 2010

Some charts

Double FIBs

I had posted this one earlier on TTW:

This here is one that struck me as quite important, whenever you have double FIB price levels we have to respect them quite a bit more compared to single FIB levels. One of them is the big all time high to 666 and of course our last rally off the lows.

As we are looking at a longer term chart we have to assume that the resolution (if at all) on any upside will be a bit stronger. One of my biggest challenges in 09 was the understanding of the break of 38% fib levels as we kept on rallying in 09. This break paved the way for more upside and broke my views of SPX480

Dont worry - got lots of bearish charts too but this is what currently supports my positions so I wanted to share it with everyone.

ABC Time

This is another bullish beauty. This is a time study from top to B top (if this is a correction) to final C low.

2009 Jun-Jul: 15 days top to top, 5 days to bottom
2010 Jan-Feb: 11 days top to top, 4 days to bottom
Now: 40 days top to top, 9 days to bottom

We are fairly close time wise however our correction has been a lot stronger in terms of price and overall duration. One argument for this length of the duration of course is hitting an important price point of 61% of the entire bear in addition to our crash lows that have severely damaged supply and demand in the 1040-1180 price range. We can also do other studies on those previous ABCs for more accurate time relationships but this one stuck with me a bit more.

More coming this week.

What the bulls need !!

(or should I say what I need for my longs lol).

Close needs to be above 1033SPX today or we will have some quite severe consequences for building a bull case here for the short/mid term.

EDIT: will be posting lots of charts in the coming days, many bullish but also some really juicy bearish patterns.

4:01PM: We did close green but not a victory day today and feeling quite uneasy about being exposed on the long side. Today can be justified as a great trapping day for both sides of the trade. Overnight action with a new low on ES, bull gap up with big retrace, bear fake with the gap and run higher and the tease on breaking the 61% intraday retrace by a marginal new low just to rally slightly into the close leaving bulls and bears without any real trade to put on for a swing. 50+ point intraday range is not what a "healthy" market should be doing but on the other hand its the much needed quest for finding the right balance of buyers and sellers. Remember bull markets do not need the volume, bears do need volume to confirm lower prices. At the end, I am a bit shaken again and not quite sure of what the market wants to do.


Friday, July 2, 2010

Inside Day

Well a nice inside day today, even with a negative close this still has a lot of bullish potential. Inside days after prolonged down trends generally resolve to the upside on the next candle (as a GAP higher the majority of the time).

We have a lot of bullish signals at the moment, key support, extended oversold conditions so even if we just get some consolidation we should make it back to 1060-1065 at the minimum. Of course there is always the potential of a big down move and GAP below major support which would require us to open below 1000SPX on tuesday. This could be very news driven and we have to be careful and watch the markets on Sunday/Monday via futures and FX.

Again, enjoy the weekend and see you all next week (or Sunday night).

Back again

Looks like the LOD was just made. A break here and we go down strong but very low probabilities. I added a tiny bit on the long side here just now at ES @ 1011.50 but stops at break even for this chunk.

1:14PM: need to take out 1016 in the next 8 minutes. Look for TICK to get confirmations

1:35PM: market struggling here to confirm the LOD. Lower volume on selling now so thats positive but need to get above 1016 to keep this protected.

1:48PM: next target now ES1020.50

3:27PM: off by half a point lol. Closed the longs from earlier here. Keeping everything entered yesterday.

Happy 4th !!!!

Will be away from trading all day today (world cup). Keeping longs in place with stop at break even. Job numbers in 5 minutes and its very unlikely I will change anything on positions even if the number disappoints.

Have a great long weekend everyone. Happy 4th !!!!

Thursday, July 1, 2010

Special Event: The big one

Well, as my longer term readers remember I capped my trading capital back in Nov 09 due to "stupidity of my views". So far have only used funds once half a year ago with a failed attempt. I am dipping into this account today and will place some bigger long orders likely at the close. I have a decent enough buffer from my other accounts that went long at the bottom today but will be committing a large amount of my funds to a long position using various instruments (primarily ETFs).

Trigger for me to buy is a positive close so if we see green today - I will be buying.

3:41PM: will hold back on big positions. Not as clear anymore as it was earlier, I know we could rally big from here in the last 15 minutes but I am not convinced.

Whats next?

Ok received the confirmation a bit late, market wanted to trick some of the players but 1008 held for now - Low is 1010.91 - close enough for me.

The channel picture from before got a perfect touch on the lower trend line with nice bullish MACD divergence. I am a bit hesitant to add more longs but depending on the afternoon session I may add to existing long positions. We are not out of the woods yet as volume on this advance here is quite low - meaning we are not seeing much short covering of buying in comparison to our selling pressure. What I am looking for next for the day is a TICK in the +1100 range with the SPY 1-min chart showing a minimum of 2+ million shares traded (per minute) as part of a 5-8 pt buying "spree". This would be the final confirmation for me to add to longs.

In the mean time, playing it very careful still. EURUSD saved the market from collapsing today, and USDJPY hit an important support range in the 87-88 range. I have to admit I did not expect 88 to break there, nor did I expect us to reach 1010 this soon. As a result of this accelerated time frame it is still very possible that price targets on the downside are not yet done. As you remember I trade time quite a bit, so we still have 2 weeks left before we are supposed to be at our first bottom - could this be the "crash like" bearish scenario we had identified two weeks ago? Still very possible but at this point I am looking for upside in the markets at least for the remainder of the week.

As I am typing this I see TICK making new highs but no volume confirmation quite yet. Overall the low should be in and only capitulation like volume (check SPY 1-min chart again with 5 bars above 3 million on the downside) can bring it lower.

12:12PM: ES 1009.50-1010.50 needs to hold here, this would be a nice retrace to indicate a new wave structure if our low today was a short term bottom. IF we do break 1009 ES today we should drop below SPX 1000 briefly (but with a close above 1000) as we will get forced selling. That means a potential of another 15 points today again (intraday low of at least 30 pts down). Probabilities are very low at the moment for this BUT a break of key price levels will bring this as a 70% scenario. So be careful if you knife catching like me.

12:39PM: +1151 tick as expected. We should now see our volume confirmation soon with some big buyers stepping in.

12:43PM: there it goes again, we got our "8 pt" buying spree, strong volume in 2+ million shares on SPY in one minute and of course our TICK. Could not have worked out better here =)

12:52PM: I am going out on a limb here, IF and thats a big IF this is a real bottom, we will close above 1040 today, if we close between 1033-1040 we should have a GAP up tomorrow to open above 1042SPX. I would almost dare to say we are getting to 1040 today.

Updated Chart


As always same trendlines. I added the 1029/1006 trendline that goes back for various support ranges.

10:48AM: waiting for confirmation with TICK above 550. Confirmation needs to come within 8-12 minutes from now. Confident it will hit.

11:00AM: no confirmation so keeping stops extremely tight for a retry later on.

This should be it ....

went long again here .... 4th time is a charm right? We will have to see.

Almost there ...

Getting very close to a short term bottom here. Within the next 15-30 minutes.

Wednesday, June 30, 2010

Tuesday, June 29, 2010

Trying again

Long ES @ 1033.50, stop 1032.75 (lol yeah)

Long ES @ 1041

Tight stop on this one. Could be a nice 8 pt bounce developing here.

12:05PM: we did get our 8 pt bounce but are now back to the lows, not sure to be honest what will happen the remainder of the day, IF we are to make a new low it should be marginal and we should not exceed 1035SPX today. After everything has calmed down a bit more we should see a relief by thursday and if we are lucky maybe even get back to 1065-1075 but that depends on the close today.

Have to leave now so will not be able to post more updates until late afternoon. Good luck all and be careful.

Update: Price target

This should be the first low here, need to determine if more is coming but price targets have been satisfied for now. Still have time target of 11:35-11:45 so we could have one more push coming.

Remember the GAPs

As you remember GAP based trend days are very easy to idenfity on a strong GAP down/up. In this case, high of the day should be made within the first 5-10 minutes off the open by about 3-5 pts above open price. After reaching this price point it "should" drop to make new lows.

There is a potential for the GAP fill to extend in the first 30 minutes but that will decrease chances for a trend/stepping day. So watch the first 15 minutes very carefully, today has a potential to drop another 15 points (making it a total of -30 SPX pts) towards 11:35-11:45 (should be a low).

Bulls lost it

Well, as described yesterday we saw our consolidation but the market waited until the overnight session to complete the scenario I had described yesterday. Many others are calling for a rally of the 1050 and below range without making a new low and that is still possible but daily and weekly chart are showing us the way for a new low.

MACD needs to turn negative first before we can re-attempt any upside and at the moment that means a minimum of 30-40 pts off the 1080 range. Tripple bottoms are very rare and we would need to see a V shape rally off the 1040-1050 range with at least two strong 60-min up bars. However, in absence of such a price pattern we shall continue to consolidate now between 1080 and 1040/1050 until next week to setup for a break of the lows.

Target had been identified for a while now in the 1008SPX range, plus minus a few points of course but I am sticking my neck out for 1008 =) Reaching this price level by July 8th-13th would setup nice for a bullish divergence on MACD as previously mentioned.

I will keep updates coming throughout the morning session.

Monday, June 28, 2010

Holding on


This is the same chart from last week just with updated price levels. As you can see bulls are trying their best to protect the channel, we are RIGHT SMACK at the bottom of this so important triangle here. If you close up on the last 3 days you can see how important the current price levels have become and how the market MUST make a decision - are we going to give up this price vector or do we have protection from the previous uptrend still. As you can see the parallel lines are supporting the market in the same advance price structure as the past year BUT it needs to happen here and now.

Take a look at MACD divergence here - what are the chances of going positive again after having come down to zero from a positive range. Very low. And you all know how MACD is my most important indicator for longer term charts. MACD will almost never stay at zero, combine that with the monthly spinner we are about to form you all know what that means. A STRONG price range going into next month.

61.8% FIB


Potential long entry here, backtest of the broken downtrend channel from Friday which also coincides with 61.8% retracement. Need a strong move higher from here.

10:48AM: slight advantage for bulls at the moment with positive tick and recapture of VWAP intraday. However, price structure still looking very weak and bulls need to take out 1079ES if they want to build an advantage. Till now, we are just consolidating and considering the previous strength in price off our move @ 1130 SPX bulls need a miracle.

FX: USDJPY

Watch this very carefully in the next 2-3 hours. A break of the lows here @ 89.2 will put a LOT of pressure on SPX and could support a strong move lower today.

Extremely important day today !!!!

Strong Push lower?

Overnight activity was quite telling last night - the fact that we stopped at Fridays high and are now moving lower again should give us more visibility for today.

Scenario 1) rally out of the gate breaking 1079 ES by 10:45-10:55AM. This is for a short term bullish scenario towards the 1088 ES range with a potential to move a bit higher. This could be a nice setup to close the monthly chart for July for a BIG move into august.

Scenario 2) Sideways consolidation until early afternoon between 1070ES and 1079ES. This is the setup for a break of Fridays low today with strength and ready for a move lower towards our previous lows. If this occurs today we should see some consolidation after the sell off for 4-5 trade days with a 30pt range and a fast move towards 1008 either late this week or early next week. This would be the setup for our two bearish scenarios posted from last week. A break of Fridays low and we are almost guaranteed to visit 1008SPX.

Friday, June 25, 2010

Have a good weekend (whoever is left reading)


One chart before I head off for the weekend.

My Vote: Not good enough bulls

Bulls had a chance today but did not come through. Yes I am sure we will see some type of short term rally early next week but bullish scenario is off the table. Next stop is 1008 SPX into early/mid june. While we closed above 1075 this is not a victory.

I really do not know for sure how this will unfold into the 1008 - we now have to determine if we are dealing with the tame bearish scenario or the strong one. Sunday night will lead the way for either a bullish Monday (could it be?) or follow through.

Oh Snap - could it be?

http://www.youtube.com/watch?v=LuC6jeKjTdg

This is a very fitting video for the "oh snap" moment. Being German and driving 3 VW's I always have to laugh at this one.

Bullish Scenario

Just a quick side note, only way the bullish scenario will stay active is a close above 1080 SPX today. Thats a bit over 10 pts from here. Even if we get a close some time next week above that price level it will be too late as the weekly candle will paint the damaged picture.

So bulls have one chance left, though I would not consider it a chance as probabilities are highly weighted against a bull case now.

Thursday, June 24, 2010

And again ....

"I mean really" - how many times have I said that in the past? not many, so its a special moment for me. So what did I say we need for the bullish case? holding above 1072 and no close below 1075. Market sure did want to throw us all a curve ball making us wonder where we going to turn.

I took another small long into the close, but only a fraction of the position I was stopped out earlier in the day (break even so I am happy). Will be watching the overnight session tonight to get some guidance from the other markets.

Added Long

Turning long into a full position here at 1073.50 with stop at ES @ 1070.

EDIT: partial profits @ 1081ES to turn this into a free trade, same stop at 1070

Some thoughts

Ok its been a while since I have made a bigger post in regards to my outlook. There are quite a few possibilities, both bullish and bearish that can develop here. First of course the bearish formation, as you can clearly see we have setup a nice set of channels on the downside that could provide guidance for us going forward towards our 880 levels.

1) Bearish (tame) - the tame bearish could would reside inside the current channel we have formed with the upper range defined by our 1220 peak and the lower range by our flash crash and 1040. In this scenario we are ready to make a lower low in the 1008 range that would then setup nicely for a bullish divergence on the MACD (lower low SPX, higher low on MACD). Time target for this would be July 8th-13th. This could return is all the way back to 1075-1080 before another leg down could start or continuation towards the upside.

2) bearish (strong) - this scenario would overlap into the third channel that we have not yet breached on a close basis with a target of 880. Time target would be a break of 1100 by August 4th-6th and then a strong 2 week move into the 900 range.

3) bullish - now this believe it or not is still a possibility. During this scenario we will not have a MACD cross and holding above 1072 within the next 3 days (to be able to remain in the last sector we are currently in. Many times uptrending markets are not able to hold their trendlines and are required to reset longer term indicators in order to continue and balance supply/demand. This has happened during our 18 months of our lows many times, however, the key difference is that at the moment we have stepped down 2 additional levels giving this the lowest chance out of the 3 scenarios. The great thing here is that we have a clear signal and our lows of today MUST HOLD - we can breach them intraday but a close below 1075SPX in the next 3 days will invalidate this scenario.

Scenario number 1 is the most likely as I am not anticipating another crash here (scenario 2). I am currently not positioned for either of those moves. I did take a long today close enough to the low of the day but this position has a tight stop and is not all that big. I am playing of course for the low probability scenario 3 but a lot of damage has been done on the charts in the past 3 days that will not easily be repaired.

Long ES @ 1072

Trying a long here at 61% FIB levels.

Tuesday, June 8, 2010

Knife catching time again.

Trying another long here. Stop below LOD. Its barely 5 pts of risk. Using futures, some calls, and some ETFs.

Thursday, May 20, 2010

Long ES

Sorry for having been MIA. Been hanging out at trading-to-win blog. I took a fairly large ES long position just now with a tight stop.

Position: Long ES 1064 with a stop at 1061.75

Its quite a tight stop on this one, so not gonna be upset if this gets hit but this is quite an important area of support. I expected it to get hit today during cash hours and held back as we fell short by a few points. While I generally wait for cash hours to reach important support targets, I decided to try it here anyways.

Its a fairly large long position here, largest long position I have taken in a while. So lets see how it plays out. I will be staying up to watch this one closely tonight. Technically it should hold here and not get retested during cash hours tomorrow. If I do not get 10+ pts on this position before open tomorrow I will close out or move stops to break even.

Friday, May 7, 2010

The "could have - should have - would have" game


As you know I have been "trying" with little success to short above the 1200 range and was afraid for more upside (eventhough we got close to my jan targets for this move up). I want to make sure everyone understands I am not being myself up, I did profit trading short in that range but we are talking about a few profits when trading options from 2.5 to maybe 3.5 or so. Now take a look at my attempts and what could have been.

I am just doing this for fun ... I do not like crash like environments since I do not gamble, if I had been lucky enough to have kept my positions, well, I probably would have closed them out anyways at 1140 or higher. Either way this chart says it all of how fortunes are made for a very few lucky ones, and accounts are blown up for the unfortunate ones - just imagine an options seller in this scenario - traders who have been shorting puts for the past 14 months having made LOTs of money - well now it backfired. As you all know yesterday rapid downturn was a crisis of liquidity and not some "citi induced mistake lol". Currencies gave an hour warning before it all came tumbling down and liquidity was drained from the system to cover FX losses/gains by using equities as a hedge or counter trade.

I use tradestation and lucky for me it was active during the entire event yesterday, when looking at my order matrix on ES futures after we dropped below 1130 - I have never seen such a thin market ... NEVER. Orders of minimal sizes were able to move the market substantially where in normal days it could barely make em move a quarter point. Any type of big order such as 2000-3000 ES contracts yesterday were moving the market 5+ points or more. Something that during cash hours would move the market by 0.25.

Amazing ... honestly. Well I am going to continue gazing at this chart lol. Maybe the lesson learned is that if you are bearish or bullish, never be 100% cash lol (ok I am not going to add that to my trade book just so you know - but I do wish I would have been able to capture some money off this down turn).

At this point - I am sitting and waiting, will not commit any capital to the market until we have found some boundaries. Where those are I do not know. On the short term I do think that we are partially done and the markets will calm down over the next 2 weeks, I do believe the feb low will hold if we do attempt it on the short term but after that, I do not know.

Thursday, May 6, 2010

Someone broke the market lol

Long ES @ 1148

Started some long positions here. Its small yet but will keep those with a 12 point hard stop in place.

Tuesday, May 4, 2010

EURUSD - really?

Well, my previous post had some ponderings about this specific currency pair. As hard as it may be to stomach for my bearish fundamental views, I just took a long position here. This position is a bit larger compared to my usual FX based trades. Multiple stops with furthest below 1.30 which will be protected quite a bit. On breakout/reversal I will add more to the position but lets see first how it develops.

Friday, April 30, 2010

Contrarian - Bear Nightmare


As always lets try to put another very bullish picture in here - one that is not fundamentally supported (well we all know whats going on in europe) but technically any bear needs to be very concerned.

This is a 200dma bollinger. Take a look at the outer bands, first the upside, 3 tests with bands widening after previous contraction and a failed 4th test - Kaboom - now on the flip side we are seeing some trouble for the bear case.

Bands widening, 3 tests thus far, if we go higher here and fail to make a 4th test on the band with a break, this combo could go back towards 200dma area which spells TROUBLE for bears.

Though keep in mind SPX and USD do not have to work together, but it seems it has always worked in favor of the bulls, so this here could be more support for a bullish case for price levels MUCH higher then I am anticipating even in my dreams. If this were to play out in a bullish form over the next 6 months which technically is very possible, I would be very concerned being short.

Ok enough for now ... lets see if we can close bearish today.

EDIT: forgot to mention, price distance from 200dma - almost the same before the breakdown, now again before the breakout higher? You tell me.

Short Term Bullish?


Well short term everything looks bullish. I probably should not post up such a one sided chart but everything is looking like a nice 5 wave impulsive move (violet) to complete an megaphone pattern (yet again). Now this pattern can play out bullish (following green to consolidate and move higher) OR complete as a megaphone pattern which is bearish - blue (3 marginal new highs with 3 marginal lower lows but each low followed by a higher high.

I will be watching this pattern very carefully as it fits with my price targets from January and my overall stance of resistance ahead. But as for all bears, there is always resistance 20 pts above us - ever since 740 SPX (yeap hah) and look where we are now - getting closer and closer to retest pre-2008-crash price points - incredible.

10:12AM Key short term support here. Bear fake out? Bull shake out? We will know in 30 minutes.

Thursday, April 29, 2010

Looking for 1204 around 10:25-10:35

Looking for this price range today. Anywhere from 1201 to 1206 to initiate short positions with a stop above 1212. Most likely scenario is for this price to be reached within the first hour of cash hours trading today. If we sell off right from the open I have to rethink but at the moment its looking like a good target.

SPX currently around 1200 so I would expect prices to go a bit higher first. Remember the stepping day scenarios based off the first 10 minutes of cash hours trading. In this case low would be made 2-3 pts below the open within 10 minutes and then we rally towards the above mentioned targets.

If we rally right off the gate and get to 1204 before 9:45 I may hold off first until noon to see how price/volume/time unfolds.

This is looking very much like an ABC formation or a 5 wave move (both counts can be applied) to complete W2 of the larger down move IF this is the start of a larger pull back.

Tuesday, April 27, 2010

First things first

3:21PM: Crazy day .... to be honest crazy 2 weeks we have had. Just a very quick chart to visualize a bit better what we are trying to do here. I will post up a bit more this week as I am starting to get a bit more active again. But its great news for us bears seeing such price action here, not just today but the combination of overhead supply and the combination of aggressive buying (because that has worked for 14+ months) is finally coming to a real battle.

Important to see the daily close prices, you can see the market trying its best to close above the top line of the rectangle, however even a close below in the rectangle itself could be tricky for either bear or bull. Are we seeing a corrective w4? or are we seeing the onset of a move lower. I have to admit its not looking corrective up here in the sky, but I am cautious to label this a start of a move lower.

Price action like we have seen in the past 2 weeks really makes it a lot easier to try to get my short bear feet wet. Of course, when looking at best possible entries ... break through the rectangle, retest the rectangle area (lower mid or upper range) and then boom down. However, as we all know, it never happens like that so trade carefully.

In the good old days I would have used this price range here to scale in and add as we move higher or add on break - but I am still being very cautious and will hold back - did I say I remain cautious?

More to come ....


3:55PM: Thats the monthly chart I was talking about. Such a beauty.

Monday, April 19, 2010

Need follow through

Watching the market with care here ... considering how much selling we saw on Friday, we need follow through today with at least a retest of the Friday lows during cash hours. We did the overnight test on futures but that needs to be confirmed first.

Market is still hesitating here to go higher - we had the gap fill that was almost assumed but a break of the current high here will likely bring us back to 1197 SPX. So watch price action very carefully at the previous close and 1197. A break through those ranges will bring us back to 1204 SPX. Next 30 minutes are very important for anyone - bear or bull.

Friday, April 16, 2010

Mid day snapshot

Wednesday, April 14, 2010

Went short

Just took a short position via ES and SPY puts. Tight stop as always but 1204 is an important barrier and we should have made a higher high here.

This should not resolve in a stepping day even with the GAP higher.

Thursday, April 1, 2010

Be careful


needless to say I got stopped out yet again. As I am watching this initially my feeling was that this was a failed breakout higher but take a look at this triangle.

While today looks like an amazing reversal day, especially with NQ, I am still concerned for more upside. I have been asking myself all week whether the price action we were seeing was corrective or if the market was tired to move lower and retrace.

Friday, March 26, 2010

Long time no update

Well we finally hit 1180. Been taking some time off from the market and only been dipping my toes. Additionally getting ready to finally head back home to Miami.

Now today - I will watch the first hour very carefully. What I am looking for is a strong move higher on ES towards 1169-1171 and then a reversal below 1165 within 15 minutes. If that will occur I will be adding shorts, on a break of yesterdays low will be adding even more. We need to close today below yesterdays low of the day for this to develop into a sell off - sideways move after a strong first 45 minutes will likely result in forced covering from 2:30PM and more buying to bring us back towards the highs on Monday.

So today is quite important. I will be giving updates on position entries in the comments. Its very likely that I may go cash again towards the end regardless of profit/loss.

Friday, March 12, 2010

Vacation

Well, first time now in over a year that I am taking time off, a total of 2 days wow. Maybe 2011 I will take 3 days.

Good luck during OPEX next week, will be back on Wednesday. Have a good weekend all.

Tuesday, March 9, 2010

Simple Question: who else is tired of this market?

Important Day

Yesterday was quite an odd day. When talking about standard deviations yesterday was way outside of the norm in terms of volume. During the month of January we have seen the highest volume in quite a while during our sell off, of course on the flip side the reversal day at 1040 was quite bullish with extremely high volume stepping in recovering from the lows.

Considering that we are moving back to our previous highs of this amazing rally but reach this point with extremely low volume one has to be careful. We have a few bullish factors such as the break above the 50% retracement (1121) but no real follow through. If the market is moving back below this range by wednesday we have a very high potential for a failed break and more selling should step in. On the other hand if we remain sideways with another attempt at our previous high that are just inches away it opens the door to put 1150+ back on the table.

So it is very important to watch price action around 1130 SPX, we have enough of a buffer to absorb selling all the way to 1118 and manage a reversal there or a recovery the next day. Closing prices this week are very important. Additionally many key sectors are forming finishing patterns either as part of wedges or pennants. Looking at VIX daily, we are at the previous bottom and ready for a bounce, at the same time a break here will open up a new range on the downside yet again making more room for SPX.

The good old analogy that always seems to work for bears, looking at where we are now, we are seeing extreme weakness, even more then our previous high back in January. However, being broken and hurt like many it is very difficult to try to commit here.

Just one quick chart of EURUSD - on the edge of completing a continuation pattern or the first step to a break out. Why do I put my money on continuation? Bottoms are events while tops are processes - the support we are seeing in EURUSD is not an event and appears corrective and not impulsive - meaning, more downside - as unlikely as it may seem from a technical oversold perspective, charts do not lie and it points lower.


Monday, March 8, 2010

SPY Volume

Wow just wow, the last time we had such a low volume day was towards the high of the year thus far on Jan 11th. Excluding the holiday trade schedule, this belongs to one of the lowest volume days in over 2 years - when I say one of the few, talking about being able to count those on one hand.

When looking at standard deviations, this is very far away from the norm. Will be doing some charts tonight as this is not normal after such a strong day on Friday. Will have more answers tomorrow ....

EDIT: ok bottom 3 lowest volume days in over 2 years. I'll count out the exact dates some time later and what happened thereafter. Either way, still going through charts to figure out what may be in store for us next.

Back to Square one so it seems

Well my first real short attempt ended yet again with failure. The market gave us a clear picture so it seems based on Fridays price action. There was no profit taking, no reversal after hitting a key resistance level.

As a result, higher prices are likely again, with minimal or shallow corrections that will get bought. The market really had its chance to start a bigger correction or what I consider a resumption of the bear market - it is clear now that we have to wait a bit longer. Does not mean we cannot see lower prices, but the market needs to play itself out on the upside first, before we can make a new call, yes we have the double top as a potential turning point but I only see this as a shorter term correction to go to new highs. The final target now seems obvious of anything from 1180 towards our 1217 target that we had been talking about a few weeks back.

There is a chance for more downside this week but I would expect 1118 to hold and give a chance for many to scale out of shorts, hedge or minimize risk overall.

EURUSD is trying to create an uptrend but every attempt higher is being pressured by the declining trendlines so this still appears corrective in nature for new lows to come, however, we do need to work off some of those oversold conditions here on the longer term charts so I would not be surprised seeing another week or so of sideways moves. This should help SPX move higher. Regardless, both the FX and equities side have interesting charts and patterns that make it difficult to make any longer term calls with great confidence.

Stay nimble and stay small still seems the way to go. At least for me =)

Thursday, March 4, 2010

Short - Biggest Trade Since Nov 09

As some of you remember I had minimized my trading capital by a large amount and been using a much smaller amount for my trades since November 2009 due to my 2009 losses.

Well today I made a slight adjustment, I went short at the close with a fairly large amount via ES futures and SPY puts. This is the largest trade for me since November 2009. I am treating this as a special case here due to charts, patterns and probabilities. Risk/reward was very favorable at this range and I could not resist so to speak.

A bit of a decision now

Well market has a bit of a decision to make at the moment. Head and shoulder over head, triple bottom below. What will it be? I am still positioned short with stop moved above todays high. Even if we go lower here and break the tripple top range, look what happened the last time at 1092 ES, broke lower after some narrow back and forth just to give us an amazing reversal higher.

We have quite a few divergences, especially with some sectors making new annual highs or getting extremely close to qualify for a retest. EURUSD going lower after testing the upper trendline peaks from Feb 9th and 17th. So both could go lower here.

On the other hand, tick only got a -831 in today and that second LOD was made on lower volume. The bounce here was obvious - the question now becomes if its a bounce based on tripple bottom support to go higher? Or if we head lower. We have spent enough time to work off overbought conditions to give us room for a run towards 1130+ without pull back. Just on the flip side we can now absorb a strong sell off and still manage to keep 1110 as key support as we have enough buffer.

The more and more I say the more we can all see that it is extremely difficult to try to get a position for 20-30 points ....

Tuesday, March 2, 2010

Frustrations are high everywhere

It seems no matter what blog I am visiting now - everyone seems frustrated or in revenge mode. Seeing statements "I am not going to let them get me", "I am all in and not closing out" - just goes to show what traders are feeling of this market.

Thus far we had one of the tamest overnight session on ES in a while, but we have a few more hours to screw both sides bulls and bears. A market like we have now is almost impossible to get positioned in. Big moves happen either overnight or in very short time frames during cash hours around news events. By the time cash hours hit 11:30 all major moves have been made and traders get the shaft. Unless you pick a side, gamble and assume a wide loss you are not getting a piece - and even then you will get shaken out the majority of the time. Some are able to make some profits in this difficult markets but I dare to say those traders can be counted with one hand.

For me its quite simple, stay small, with tight stops around positions, and get out as soon as I see the market not moving in my direction. I have not made any money in February and it feels like a victory - just because I did not loose anything either besides some commissions - is this my new market relationship?

From a directional perspective, I have to admit, this is looking very bullish, double bottom at the EURUSD (tripple bottom now). Even if EURUSD remains sideways for the next 4-8 weeks it means higher prices in SPX. The FX to SPX relationship works in the markets favor when dollar is weak, but detaches when dollar is strong - amazing hands in this market to be honest. I am not talking about manipulation, just the fact that we see strong divergences on the currency side that generally has some type of effect on the markets - but not in these times it seems.

Regardless of where we will be, I had mentioned a few weeks ago it would not surprise me to remain in this range bound uneventful state until summer. Now the one thing we have to keep in mind, the market is working off long term overbought conditions (weekly and monthly) by trending rather sideways - if this is to continue a few more weeks and months we could be ready for another stage of upside.

I am not really saying anything about direction here - just general statements about sentiment and what I am seeing in the blog world.

Monday, March 1, 2010

X - Short

Also took a short in X - filled the GAP here @ 54.50. This is just a short term position, with a fairly tight stop, it had quite a run up today so rather not stand in front of that except at serious resistance.

Entry is 54.47 =)

Trying another short here @ 1114 ES

Thursday, February 25, 2010

I mean really ....

This market is impossible to trade unless you take your profits after a 10 point (mainly overnight move). Some may get lucky getting some of this run on either side - I am not one of them.

This truly is insane. In the past 2 weeks I finally got my confidence back because I had some great entries on both the long and short side - positions ended up with nice profits but I was not willing to let it go after 10 points - not greed but trying to trade a proper swing. Its ironic but my P/L over the past weeks is pretty much zero (besides the commissions) since everything ended up stopping out at break even - lol

Regardless of those frustrations - I am quite confident again and feel a lot easier taking positions then before. Patience is a virtue. As I am slowing down with work starting next week I will finally have time to dedicate towards this blog again - I hope you all are still around.

Tuesday, February 23, 2010

Long @ 1093 ES

Friday, February 19, 2010

Just went short

Full position. No stops yet but mental of course above 1118 SPX

Thursday, February 18, 2010

Wow

Did not expect that one ... especially after hours. Thats the first time in a while that we get something like this especially after hours. Generally its before the open but now for asia and europe to absorb this news overnight - a lot can happen on either side - another 15+ pts lower? or back to break even at the open as the recession is truly over now that the feds are tightening.

I took short positions at 3:00 expecting some type of selling, and the fact that we had a 2 point range in the last hour the day before opex made me cover the position at break even anticipating a run towards 1118 as the worst case bear scenario to re-short.


Friday, February 12, 2010

Frustrating Market (at least for me)

Emotions + trading = bad combination

I am not sure about you guys but I am quite frustrated at the moment. Of course the biggest issue was missing the drop after being bearish for most of the run up due to work. Drop finally comes and this bear is not on the bus (yeah it almost sounds like its from a book).

"It appears the market is waiting for cash hours to try to induce a rally and then possibly run some stops (maybe mine) on the upper range. We are still close enough to jump to 1076 by 10:00AM. This would put a lot of shorts under a lot of pressure - primarily talking about more longer term committed positions that may need hedges above those range or potential partial covering."

I had commented on this yesterday on the post and voila - looks like that scenario unfolded but in a different time pattern. So market breaks out, does NOT sell off after reaching the new range and closes at the highs. This of course lead to a new range expansion bringing us back into the 1076 to 1102 SPX. Well, looking at the futures now and EURUSD - we may be going for the move that I had been positioned for since wednesday - of course only after giving us a false breakout above and running said stops lol.

Now of course this is not guaranteed, but looking at ES at the moment we should see more downside before cash hours giving us a potential stepping day down due to an open 1% outside of previous close.

On the other hand, we made a higher high and if we remain above yesterdays low we would also be putting in a higher low. I am giving this scenario less then 30% chance at this point due to the pressures we are seeing on currencies. End result again, this bear not on the bus.

Price action purely on ES dictates a move towards 1095-1102, my personal opinion based on charts and other components I am seeing indicates failure - but too late to chase it now as you have to assume a stop above yesterdays high. Not willing to take this risk at the moment even though I am giving it less then 30% chance (so maybe those chances are a bit better then I want to make myself think).

To throw another scenario on the table, we have seen a lot of sideways action here absorbing selling pressures, so IF we are to end up at last week lows again volume will be a key indicator. It is very possible that we end up testing it on lower volume brining in more buyers to then re-attack the 1102 range. While this is possible, it is unlikely and revisiting the lows should bring more selling. The main reason for additional selling is the past 5-6 months of buyers that got sucked in looking for a way out. We have seen the first wave of emotional selling but have not gone into panic mode - a retest of the lows will put more pressure on bulls.

Ok enough for now ... 100% cash and frustrated !!!!

Thursday, February 11, 2010

So many important trendlines


ES is hugging this important line here. I had made some comments yesterday but not real decision was made. We are currently in such a congested zone in terms of price AND time that we should see quite a bit of action today. I had added to my shorts overnight but still relatively small.

Lets see what the US premarket does by 8:45AM.

Wednesday, February 10, 2010

Decision Time

Market has had enough time to absorb selling pressure and has held up pretty well. We are at a key trendline at the moment and a decision is pretty close. I dare to say that if we push through those levels here on the upside we will likely see the 1100 SPX levels again very soon.

If we cannot stay above 1068 SPX by 2:15PM we will likely revist the lows of the day. Though call. I just took a small short position with a tight stop at high of day ES. Chances are 50/50.

Thursday, February 4, 2010

EURUSD Rare double fib


A chart speaks a thousand words. As mentioned in previous post I took some long positions today. EURUSD made a significant low earlier in the day that was not broken even as the rest of the markets moved lower. Double fib targets are quite rare and once those hit at least one of them should provide a boundary. So we have hit the 50% retracement of our lows in the past 18 some months and also the 38% level in our 2 year chart.

Now what does this mean for the market. In my last larger post I was putting up the scenario for 1065 (http://chaugner.blogspot.com/2010/01/work-work.html) which was hit today even with a DOW test at 10K. This is significant. We also hit our previous maximum pull back range of 85 points (http://chaugner.blogspot.com/2010/01/targets.html). Today we hit a total of 88 points pull back of our highs - right at the edge.

So we have a great low risk entry here on the long side. This is either the last chance for this market to finish a cyclical bull cycle into summer or the top is in. Looking at the daily charts - they are all pointing down. Weekly is about to give our final confirmation that things have changed. On the monthly chart we have to be a bit more patient but even a move towards 1118 this month confirms a top. So either way, we are in good shape.

So in summary - we are on the verge of deciding the direction for the next few months. EURUSD points to a move higher - SPX is 51% on a move lower. Currencies and markets can decouple for extended time frames so do not expect the dollar to lead this move. We have been talking about the dollar frequently now for the past year and I have always been saying - "dollar does, so follows SPX" - for the next few weeks, possibly even months that relationship will show more and more disconnects and will most likely not be useful as any type of indicator.

Will try to post update tonight

Actually just took a small long position. Been out of the market for a while now due to work but been checking charts and volume at night. This area here looks very well protected and more importantly EURUSD hit a KEY support point that should provide quite a large amount of support.

IF this support holds here for EURUSD - we should see quite a lot more upside on SPX in general. As mentioned many times when shorting EURUSD in the past, it just does not feel its time to be an all out dollar bull. So I am taking my stance here that the low for EURUSD is quite possibly in for the next 4-6 weeks. Does not necessarily mean SPX low is in here but carry traders could use this as an excuse to induce a rally.

Monday, January 25, 2010

Work Work

As some of you know I work in technology and am in the process of finishing up a very large project. As you may know the last few weeks of any technology project require LOTs of late nights and weekends.

Now I have been quite active during the year attempting to find a good spot to short, I kept on trying without much luck but lucky for me with only little damage. Last week was probably my worst week work wise and as a result got NOTHING of that move. Sigh - very frustrating to be honest and to make matters worse I was caught in the buy the dip train on Friday. Frustrated that I had to sit out on all week I decided that I wanted to make some money back =) You all can imagine how that turned out. Lucky for me we had our sunday night push-up so it was not quite as damaging but still a bit frustrating.

Ok so what next. Let me talk about a few things first. We have had an extremely strong down move, there was a great post about deviations on slope over the weekend - but even without that you can see that such a move last week is very rare in terms of sell off. Now we have seen quite a few strong sell offs, the dubai mess that seems now such a distant memory and now this. To be honest, without a position at the moment it is best to not do anything, going into wednesday afternoon I do not expect big moves. If we make a new low it should be marginal around the 1085 at most, on the up side I do not expect more then 1115 (though 1110 more likely).

So how do we know what is going to happen? Was this a trend changer? I do not know but we have a few scenarios that we can watch to figure out what this move last week was and how we can profit from it.

Scenario 1 - the trend changer
Me personally I want this one to happen, however, wanting and actually happening is not the case so lets draw some ranges. IF this was a trend changer we should not get much of a retracement on the upside. We should see 1065 this week, then back to 1095 in the coming weeks and bye bye.

Scenario 2 - undecided short term bullish
I favor this one here, a close above the open today will be short term bullish and bring us slightly higher into mid week. This is quite a dangerous place for the bears. As a bear, I would not want to be short into wed afternoon at higher prices. So this could force short covering. At the same time we have to watch for selling into strength as bulls try to minimize risk.

Scenario 3 - standard pull back to go higher
You may remember my post from a while back, 85 spx points were the largest pull backs so the move of last week is still inline with previous pull backs. However we had enough volume to scare any longs out there so if you are a bull, you WILL want to minimize risk, de-leverage and bring your delta a bit more neutral. So if this was a standard pull back we should at least see 1120 by thursday, from there we can determine if this will continue or morph into something different.

So at the moment I have no choice but to watch and wait for the signs. 1085 on the downside is important and 1115 on the upside. Whichever comes first this week will guide us going forward.

Saturday, January 16, 2010

Thoughts in my head ...

Back in the UK which means I have lots of spare time on the weekends. So I wanted to share some general market thoughts while I had been away.

Volume Study

I keep on hearing everywhere that volume is disappearing and this market is about to fall over as a result on top of the bearish divergences. Anyone who is following me on disqus may have read some of my comments in regards to those topics.

Let me start with volume first. First of all volume is an indication of shares traded and NOT actual value. A stock trading at $20 will trade more shares for the same dollar amount then if that same stock were at $50. So looking at SPY the disappearing volume can be very deceiving as we had a huge move in terms of price. Generally a market or equity does not move 60+% in such a short time frame so you have to be very careful when applying volume studies in your trading.

So in order to show this graphically I have taken the daily price and volume levels for spy since Feb 2009 towards December 2009 and calculated the actual dollar value moved and then averaged out on a daily basis and taken against a base unit for comparison purposes so you can show volume and adjusted dollar value side by side. As I had mentioned the results may surprise many and actually shows that for the past 6 months we actually had volume that can sustain this rally. Yes of course one can take this further and apply the loss in value for the dollar which will be another exercise – but ultimately it matters what dollar is doing on the US markets while the global comparison to dollar may be another interesting aspect.


I wanted to wait till January is over to show the jan data but based on the current numbers, it should exceed the last 6 months in terms of dollar value moved while volume may be lower. That is quite substantial. Also when looking at December one can see while volume appears very low we actually had quite a lot of dollar value moved even with the holidays.

MACD

You all know that MACD is my favorite indicator and I have been playing around with it quite a lot on various time frames and wanted to show you some other interesting studies.


Now this is a beauty at first – it looks ready to fall over but you have to be very careful. It is very rare for the MACD divergence to stay so close to zero for such a long time frame on any scale. Considering this is a weekly chart this is substantial and can setup for a strong move into negative divergence. But take a look at what our buddy Nasdaq did instead.


As you can see it went into slight negatives making me believe it will turn just to reverse back above into what appears to be building more positive divergence. As you can see we moved another 10% higher after it went negative. So the same could happen with SPX as its playing catch up with nasdaq.

Now lets have another close look at MACD on the daily over a much longer time frame. We want to play close attention this time to the daily divergence. So what we are looking for is …. “The montly range of the daily macd divergence” – sounds a bit confusing but take a look at the chart.


You can see a narrow monthly range in our bullish cycle before the recession started (blue box), right after you saw the range expanding as we entered the first leg of the recession (yellow), then of course the crash with a very wide range (red box). As we moved on from the crash we continued trading in wide monthly ranges similar to before the crash (yellow) but as you can see we are now entering a phase of smaller monthly daily ranges.

Before I finish on the MACD I have one last treat to share. It appears many indicators are showing bearish divergences on the daily. This has always been something that I used quite heavily in the past but one has to differentiate between short term bearish divergences and long term bearish divergences. If a divergence appears on a chart it will generally resolve to the bearish side within a specific time frame – if that does not occur it is not a reliable bearish divergence anymore. When looking at daily MACD the break point is generally 3 months (you can look at many charts and see that after 3 months this becomes unreliable). So what does that mean? Are our divergences bearish? Yes in a way but since reliability declines the longer they exist we have to be a bit more on our toes and combine other indicators. So lets do an MACD study but also include RSI.


I maximized the MACD and the RSI here for better visibility. Also I changed the RSI indicator to level at 50. Why? On the daily an RSI over 50 is bullish while an RSI below 50 is bearish. As as you can see while the MACD continued giving us bearish divergences the RSI conflicted with that message and showed that while we have a bearish divergence there – we have a bullish signal on RSI. So its important to make sure that you do not just rely on one single indicator.

So what does all this mean? (yeah lol)
Of course I am trying to prepare the data and charts to come up with a conclusion and as you may have expected – it can rain or it can stay dry.

It almost appears that we have received our last signals that would confirm a longer term bullish cycle to follow. Looking at the decent numbers for adjusted dollar to volume that support a bull market as well as the macd monthly daily ranges, it almost appears that we are moving forward in a bull. At the same time we still have other charts such as the weekly that support a bearish case.

Generally I try to give you my opinion and how it will affect my trading but at this point all I wanted to do was share my findings and analysis. You all know I am a bearish trader from a longer term perspective but one cannot ignore the facts that money is put to work in the market and that bearish patterns have not played out. We continued breaching one resistance level at a time and my theory of overhead supply to bring down the market seems to be dead.

Now what does that mean for 2010? To be honest it’s very possible that 2010 is going to be a snooze fest, at least the next 6 months and that we may move +- 10%. On the other hand we have moved up so strong in terms of price – nothing like ever seen before. Can we rally another 10%? Sure, but what about another 20 or maybe even 30 or 40? I say “no way jose!!”. I will continue to look for signs of a break down ready to pile in on the short side. I do not believe the “recession is over in 18 month” story – not this time. But why would it be different? I hate hearing that statement because you can also say “this is a never before seen event” – both can be right. Our recession is over and we will slowly re-attempt higher prices, or this recession is much more severe then anyone could imagine (yeap I am a believer of the second).

So if indeed we are moving in a bullish longer term cycle ones trade style has to change as it will be more difficult to play purely SPX. As a result I will be focusing a lot more on FX and trading specific stocks. I will also be a lot more active during OPEX with short term trades - in the past I have always avoided OPEX and tried to minimize my positions during that week.

I will try to post more in the next few months as I have more free time on the weekends. This was just some build up thoughts in my head that I wanted to share with all of you.

EDIT: for anyone thinking that I am turning bullish and giving up my view of SPX 480. I am still a strong believer in this. While you might ridicule me for such a statement this is still a strong possibility and I will continue being cautious whether I am short or long. However, I am not going to sit around waiting for it to happen. The other thing one has to consider is that the past 9 months is not the norm of what happens in markets - yet many consider what has happened since the march lows as the new mean. Maybe I am falling for this as well but the point is that I am looking to make money on the markets. In 2008 my primary focus was SPX and I did well, in 2009 of course it did not turn out as good but we are here to make money - whether its trading SPX or trading equities - money can be made with proper analysis.