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.


  1. Just so you know - what I would REALLY love is a monthly close anywhere from 1110-1130. Can you figure out why?

  2. Globex printed 1081. Hope it stays that way so i can cash my option sds calls.

    went long at 1082.5 to night.
    think we see 1103 bounce. and down quickly to 1020 by next week.

  3. nice move on the long =) .. just woke up and we at 1084.75. May try to get an entry below 1084 if we get there again tonight.

  4. Thanks Chris as always.

    I bought a bunch of SPXU based on your larger price targets you gave and held it through the up/down last week and it has paid off big time. Thanks so much for your advice as always.

    I'm much more disciplined this year and it is paying off. I should have gotten out this morning ( I had a cash in price of $38), but got distracted, don't want to get too greedy and the market it at too pivotal of a point right now.


  5. Congrats Kat - glad it paid off. I wish I could have been trading last week - still a bit frustrated that I missed this big run. Now for tomorrow - we have lots of fireworks - either we make a run for 1130 and in my opinion continue higher or drop right from where we are after the news.

    Difficult call still - at least we are hitting our target ranges and we know what to look for.