Yesterday
As expected we did have a narrow range and held the important 900 range, while the low of the day was slightly below the 900 at 896.81 we can consider this still as part of the 900 support range. I mentioned we need confirmation of a break at 890 and that did not occur.
Regarding the comment of the need to go through distribution. I had mentioned that the 900 range is very important and can provide a short term bottom. Considering the strong down day on Wednesday and the importance of 900 a break here was less likly. The market is still trying to find its direction and the down day on wednesday required either a decision yesterday or another day of holding/distribution. Also take a look at how we arrived here off the 857 low, it took us a bit of time to get into the 945 range and to finally find the top there - the market is not going to give that up so easily. There are many new believers out there that feel the bottom is in.
As you can see the advise not to short again on wednesday turned out to be correct. Yes I know its always easy to state that after the fact, though it seems this time it was correct.
Today
I had mentioned that the retest of the 945 range on the intraday tuesday was quite a bullish sign. To top it off we did not break 900 even with horrible retail results accross the board - to take it even further we broke out of our narrow trade range at the end of the day and closed above the range - while it was only a few points it is still a bullish sign. It is very likly that from here we will reattempt the 945 range.
While it is Friday the market is bracing itself for the Jobs Data today. This will be the key driver in deciding our direction. We are currently still in hold mode, though with a slight bullish tendancy, so this key fundamental indicator will define our trade range. This direction should find its end on Tuesday between 10:30 and 11:30 and change trend there so watch for a top/bottom next week.
How to trade this?
I would try to stay out of the market today even with strong moves we will see. Remember we do not gamble so we want to ensure a tradable trend is established. If you are to dable in the market today stay small even if it appears tempting to be part of the move today and refer to my key support/resistance numbers at 885, 900, 912, 920. A break of 885 is very bearish and will bring is back to the 857 range. A break of the 920 very bullish leading back to the 945.
Its Friday and in this market enviornment I would not feel comfortable to hold over the weekend. We will have a much better chance to enter a position on Monday as the market will reattempt upper/lower ranges giving us a great 2 day position to run it out by Tuesday.
Friday, January 9, 2009
Thursday, January 8, 2009
ok what now?
Yesterday
Ok we gap opened fairly low right at the important 920 range, and continued straight to the next support point in the 911 range with a low of 912.50, from here we got the bounce I was talking about with a re-attempt at the 920. If you had closed out your short at the open you had another chance to get back in on this attempt. I said that if the 920 will be broken we will also break the 911 range which occured. I had mentioned that the afternoon will be important as we had a chance to setup for a rally here but we broke the 911 at 13:45 and never looked back to go straight for the 903-904 range with a low of the day at 902.37 during the afternoon hours.
We all know where the 903 range is coming from but lets make another simple calculation. 857 low to the 943 peak is a total of 86 points, 50% of that is 43 points. 943 - 43 = 900. You can see how important certain retracements become. Also round numbers present fairly sentimental value as well and markets generally trade towards and around those.
Trade Lesson
Many had asked me througout the day if it was a good idea to short again and I advised against it, unless you got in at the 920 in the morning hours the afternoon presented only a high risk short opportunity. Consider this, while we had a strong day our trade range througout the day was less then 20 points - not a lot to gain there.
Maybe I can use this as an opportunity for a quick lesson - do not overtrade - a mistake many make, me included.
When you come off a strong gain you want to get back in instantly to make more - the majority of the time you end up entering high risk positions, with very limited potential for gains and end up closing out in the reds or only with minimal gains. Rationale goes out the window and you do not evaluate positions with proper risk/reward ratios and stop loss protection. When you have a 45 point run and you are able to get 50% out of it you should consider it a very well executed trade, let the market trade itself out until a new trend is established. For short term traders (which are many following here) the entry with the proper protection becomes very important so do not forget that. If you are more mid term (1-2 weeks) then you are not reading my blog daily and you do not care if you have to carry a position in the reds for many days or even a week. Entry here is not as important but the exit is.
The market presents many opportunities for us. In a given week there are probably 2-3 low risk trades that will give you great protection and a nice risk/reward ratio, probably in the area of 1 to 4. There is maybe one big opportunity a month where the trade presents virtually no risk and a large amount of gains with a risk/reward ratio of at least 1 to 6 or even higher.
Be patient, control your emotions and evaluate risk.
Today
Well we went a little faster then I expected. Considering the strong day we had yesterday it becomes clear we have a chance at the 885. I said the 903 should present a short term bottom but I think we can see a break here by tomorrow. I anticipate it will take a bit more effort to break this number with at least another test before the break.
We will need to go through some distribution here first so expect today to be a bit lighter with a narrow trade range of 20 points max. If we are to see a strong day today the 903 may be broken ahead of schedule. This break will lead us back to a great trading opportunity.
How to trade this?
Well, today is time to let the market play itself out a bit and let it find its direction. We have a few trades available on the edges. First one would be a short at the 913 range with a potential of a run towards 920. I would probably try to stay out of the 913 as it carries a bit too much risk. 920 presents a much better short but it may not be reached today. I would try to avoid any other shorts today even if we break the 900 range as we need to wait for the 890 before we can confirm a break - and that is only 5 points away from the bottom, not enough gains to be had there.
On the long side, if we are to get a strong down day we can enter a very safe long position at the 885. You can probably start with the first entry at 890 and then wait for the 885 or even lower 880 if it overshoots a bit. If this is to occur in the morning hours we have very little risk, in the afternoon we have to be a bit careful and it depends on how we setup to get to this number.
A bit longer post today then usual but I wanted to emphasise the importance of overtrading (maybe I just needed it hear it myself again).
Ok we gap opened fairly low right at the important 920 range, and continued straight to the next support point in the 911 range with a low of 912.50, from here we got the bounce I was talking about with a re-attempt at the 920. If you had closed out your short at the open you had another chance to get back in on this attempt. I said that if the 920 will be broken we will also break the 911 range which occured. I had mentioned that the afternoon will be important as we had a chance to setup for a rally here but we broke the 911 at 13:45 and never looked back to go straight for the 903-904 range with a low of the day at 902.37 during the afternoon hours.
We all know where the 903 range is coming from but lets make another simple calculation. 857 low to the 943 peak is a total of 86 points, 50% of that is 43 points. 943 - 43 = 900. You can see how important certain retracements become. Also round numbers present fairly sentimental value as well and markets generally trade towards and around those.
Trade Lesson
Many had asked me througout the day if it was a good idea to short again and I advised against it, unless you got in at the 920 in the morning hours the afternoon presented only a high risk short opportunity. Consider this, while we had a strong day our trade range througout the day was less then 20 points - not a lot to gain there.
Maybe I can use this as an opportunity for a quick lesson - do not overtrade - a mistake many make, me included.
When you come off a strong gain you want to get back in instantly to make more - the majority of the time you end up entering high risk positions, with very limited potential for gains and end up closing out in the reds or only with minimal gains. Rationale goes out the window and you do not evaluate positions with proper risk/reward ratios and stop loss protection. When you have a 45 point run and you are able to get 50% out of it you should consider it a very well executed trade, let the market trade itself out until a new trend is established. For short term traders (which are many following here) the entry with the proper protection becomes very important so do not forget that. If you are more mid term (1-2 weeks) then you are not reading my blog daily and you do not care if you have to carry a position in the reds for many days or even a week. Entry here is not as important but the exit is.
The market presents many opportunities for us. In a given week there are probably 2-3 low risk trades that will give you great protection and a nice risk/reward ratio, probably in the area of 1 to 4. There is maybe one big opportunity a month where the trade presents virtually no risk and a large amount of gains with a risk/reward ratio of at least 1 to 6 or even higher.
Be patient, control your emotions and evaluate risk.
Today
Well we went a little faster then I expected. Considering the strong day we had yesterday it becomes clear we have a chance at the 885. I said the 903 should present a short term bottom but I think we can see a break here by tomorrow. I anticipate it will take a bit more effort to break this number with at least another test before the break.
We will need to go through some distribution here first so expect today to be a bit lighter with a narrow trade range of 20 points max. If we are to see a strong day today the 903 may be broken ahead of schedule. This break will lead us back to a great trading opportunity.
How to trade this?
Well, today is time to let the market play itself out a bit and let it find its direction. We have a few trades available on the edges. First one would be a short at the 913 range with a potential of a run towards 920. I would probably try to stay out of the 913 as it carries a bit too much risk. 920 presents a much better short but it may not be reached today. I would try to avoid any other shorts today even if we break the 900 range as we need to wait for the 890 before we can confirm a break - and that is only 5 points away from the bottom, not enough gains to be had there.
On the long side, if we are to get a strong down day we can enter a very safe long position at the 885. You can probably start with the first entry at 890 and then wait for the 885 or even lower 880 if it overshoots a bit. If this is to occur in the morning hours we have very little risk, in the afternoon we have to be a bit careful and it depends on how we setup to get to this number.
A bit longer post today then usual but I wanted to emphasise the importance of overtrading (maybe I just needed it hear it myself again).
Wednesday, January 7, 2009
Nothing left ....
Yesterday
Well, the morning played out as we all thought it would, break of the 935 in the morning hours with a peak at 943.85. We did get a strong sell off from this point but bounced off the previous close price - I have to admit I was surprised at this action especially with a retest in the afternoon - this showed quite a bit of strength left in the market place.
Today
Time is up for the up move, we did have a retest at the 945, something I did not expect and needs to be included for further analysis as this was quite a bullish sign in the mid term. From here on out we should continue on a counter move to the downside. The trade action towards the afternoon will be key today in deciding where we are moving.
Short Term
We have created a nice trade channel now and in my opinion have reached the upper end of the range. The next few days will show if we can sustain the uptrend with a potential bottom of the range at 903-904. Depending on volume we may have a chance to get back into the 885 range but this is something we need to watch after we have broken current support. Here are some of the numbers again in summary that we need to break on the downside.
918-919 - there is a lot of support in this area as this has been the upper edge of the months ascending triangle off the lows.
909-911 - next step down that should be broken if we break the previous point but expect a bounce.
903-904 - again a strong support point that requires some work to get broken. This could potentially be the short term bottom leading us back to a retest of the 945
885 - breaking this could be considering a violation of the up trend and may lead us back to retest the lows.
How to trade this?
If you have no position in the market I would try to remain on the sidelines, I do not believe we will be able to re-attempt any of the highs today. The existing shorts of course have a great way to play out the position and lock in gains. 945 represents a perfect short position with maximum protection - something we always look for. Depending on your trade activity and risk management the 918-922 range may present a way to take off some of the short to lock in profits and protect the gains. You can either re-enter once support is broken or if we get a bounce.
If we are to get a strong down day look for the above support ranges to enter some short term long positions, those should give a 10-15 point gain but carry a lot of risk.
Again as mentioned the afternoon will play an important role today.
Well, the morning played out as we all thought it would, break of the 935 in the morning hours with a peak at 943.85. We did get a strong sell off from this point but bounced off the previous close price - I have to admit I was surprised at this action especially with a retest in the afternoon - this showed quite a bit of strength left in the market place.
Today
Time is up for the up move, we did have a retest at the 945, something I did not expect and needs to be included for further analysis as this was quite a bullish sign in the mid term. From here on out we should continue on a counter move to the downside. The trade action towards the afternoon will be key today in deciding where we are moving.
Short Term
We have created a nice trade channel now and in my opinion have reached the upper end of the range. The next few days will show if we can sustain the uptrend with a potential bottom of the range at 903-904. Depending on volume we may have a chance to get back into the 885 range but this is something we need to watch after we have broken current support. Here are some of the numbers again in summary that we need to break on the downside.
918-919 - there is a lot of support in this area as this has been the upper edge of the months ascending triangle off the lows.
909-911 - next step down that should be broken if we break the previous point but expect a bounce.
903-904 - again a strong support point that requires some work to get broken. This could potentially be the short term bottom leading us back to a retest of the 945
885 - breaking this could be considering a violation of the up trend and may lead us back to retest the lows.
How to trade this?
If you have no position in the market I would try to remain on the sidelines, I do not believe we will be able to re-attempt any of the highs today. The existing shorts of course have a great way to play out the position and lock in gains. 945 represents a perfect short position with maximum protection - something we always look for. Depending on your trade activity and risk management the 918-922 range may present a way to take off some of the short to lock in profits and protect the gains. You can either re-enter once support is broken or if we get a bounce.
If we are to get a strong down day look for the above support ranges to enter some short term long positions, those should give a 10-15 point gain but carry a lot of risk.
Again as mentioned the afternoon will play an important role today.
Tuesday, January 6, 2009
Still pushing ...
Yesterday
Surprisingly yesterday turned out as expected. I had hinted at the 918 now being support with the low of the day at 919.53. Many of us went short yesterday with the anticipation of a breakdown - something I advised against but I did not listen to my own words either. We now had quite a few tests at the new high at the 935 range, this makes this trade a little easier however there is still room at the upside with a 945 final test.
While we closed in the reds we were able to hold on to gains, close above the 50dma and close above the important 918. All those signs make me blieve we have one last run left in this rally before breaking down.
Today
We have one last chance at a break of the 935 which should occur in the morning hours. We are right on the edge of a break to the downside as momentum is making lower peaks while we are creating new highs. If we are to only get a test out of the morning action we should see ourselves further in the reds today.
How to trade this?
Well, as mentioned I could not resist the temptation and entered a short position at the 927 - considering we have a chance at the 945 its not a great entry but will pay out over the next 2-3 days - however gains now are limited as we could have a better entry for the down run.
Anyone who is still waiting on the sidelines has a great short opportunity today with half position at the 935 and leaving some on the table for a potential 945 run. Of course the long play carries way too much risk with very limited potential so stay out of any long attempts.
Mid Term
Going back to my posts at the end of november I am glad the overall market did exactly what we thought it would - even as far as calling an ascending triangle with a final break of the upper range. I admit I was a bit hasty to call the rally over when the first GM bailout failed but it shows even more the markets committment to rally besides the bad news. We have broken 9000 on the DOW which is a fairly sentimental number - you can see the appetite for bargains coming back in - many have asked me "Should I buy this? or this?" and I refer them back to my previous posts - people are believing this is over and looking for opportunities to not miss out on this up run - be careful as this is a short term rally that will come to and end soon. My calls at the bottom were for this rally to last towards the end of the year and possibly into January with a potential peak in the 1000's of the S&P. We can now clearly see how this is possible. Use this as a mechanism to minimize your exposure to stocks and other riskier long term investments and try to preserve capital as much as possible.
Surprisingly yesterday turned out as expected. I had hinted at the 918 now being support with the low of the day at 919.53. Many of us went short yesterday with the anticipation of a breakdown - something I advised against but I did not listen to my own words either. We now had quite a few tests at the new high at the 935 range, this makes this trade a little easier however there is still room at the upside with a 945 final test.
While we closed in the reds we were able to hold on to gains, close above the 50dma and close above the important 918. All those signs make me blieve we have one last run left in this rally before breaking down.
Today
We have one last chance at a break of the 935 which should occur in the morning hours. We are right on the edge of a break to the downside as momentum is making lower peaks while we are creating new highs. If we are to only get a test out of the morning action we should see ourselves further in the reds today.
How to trade this?
Well, as mentioned I could not resist the temptation and entered a short position at the 927 - considering we have a chance at the 945 its not a great entry but will pay out over the next 2-3 days - however gains now are limited as we could have a better entry for the down run.
Anyone who is still waiting on the sidelines has a great short opportunity today with half position at the 935 and leaving some on the table for a potential 945 run. Of course the long play carries way too much risk with very limited potential so stay out of any long attempts.
Mid Term
Going back to my posts at the end of november I am glad the overall market did exactly what we thought it would - even as far as calling an ascending triangle with a final break of the upper range. I admit I was a bit hasty to call the rally over when the first GM bailout failed but it shows even more the markets committment to rally besides the bad news. We have broken 9000 on the DOW which is a fairly sentimental number - you can see the appetite for bargains coming back in - many have asked me "Should I buy this? or this?" and I refer them back to my previous posts - people are believing this is over and looking for opportunities to not miss out on this up run - be careful as this is a short term rally that will come to and end soon. My calls at the bottom were for this rally to last towards the end of the year and possibly into January with a potential peak in the 1000's of the S&P. We can now clearly see how this is possible. Use this as a mechanism to minimize your exposure to stocks and other riskier long term investments and try to preserve capital as much as possible.
Monday, January 5, 2009
Happy New Year Everyone
Past Review
Well what happened here. After hitting the 857 range again I was confident of a break lower and instead we had a straight line to the top. This up rally had occured on very low volume on as volume stepped in I was sure of a break down on every peak - as you can imagine I kept on trying to short without luck - thats a perfect example of why waiting for a confirmation is a better trade many times. Friday was topped off on much stronger volume and a final break of the 918-920 range. I have to admit I was quite shocked to see this occuring, we had no retracements of any kind on the run up - something I had not see this drastic before, considering we moved almost 100 points up without a single break down.
Today
We have run too fast too soon, all indicators are heavily overbought however this did not prevent hte market from rallying on Friday. We have broken the 918 range now which should represent a bit of support now on the way down. I would expect a small retracement now that many traders have returned.
How to trade this?
Well this is going to be a bit more difficult, one would say the short is the best bet here but I would be cautious. We are heavily overbought so I would expect a pull back however waiting for confirmation is the best option. If we break down below 910 we should reattempt the 885 range, on the other hand we have a chance to continue on the upside from here and remain in a more sideways condition.
Considering its the "first" day back at the markets for many I would wait it out today to see what is going to happen and what traders will do with the extra 100 points they got.
Well what happened here. After hitting the 857 range again I was confident of a break lower and instead we had a straight line to the top. This up rally had occured on very low volume on as volume stepped in I was sure of a break down on every peak - as you can imagine I kept on trying to short without luck - thats a perfect example of why waiting for a confirmation is a better trade many times. Friday was topped off on much stronger volume and a final break of the 918-920 range. I have to admit I was quite shocked to see this occuring, we had no retracements of any kind on the run up - something I had not see this drastic before, considering we moved almost 100 points up without a single break down.
Today
We have run too fast too soon, all indicators are heavily overbought however this did not prevent hte market from rallying on Friday. We have broken the 918 range now which should represent a bit of support now on the way down. I would expect a small retracement now that many traders have returned.
How to trade this?
Well this is going to be a bit more difficult, one would say the short is the best bet here but I would be cautious. We are heavily overbought so I would expect a pull back however waiting for confirmation is the best option. If we break down below 910 we should reattempt the 885 range, on the other hand we have a chance to continue on the upside from here and remain in a more sideways condition.
Considering its the "first" day back at the markets for many I would wait it out today to see what is going to happen and what traders will do with the extra 100 points they got.
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