Yesterday
Ok, let me try to look at yesterday and figure out what happened there. First off let me say this, one of the main goals we set ourselves in our analysis here is removing surprises. We want to be ready for any move the market is making, determine what signs we need and wait for them to show themselves. We have had quite a downturn since we last saw 860 over 2 weeks ago - are we surprised to be at the lows of november now? No we are not, while others are running for the hills trying to figure out what happened we are sitting here knowing that those moves are normal and were expected.
Yesterday however I was very surprised, the way we had traded is something I would not have expected. On Friday I said we had a potential to turn very negative towards the 741 low, we did not break, yesterday my anticipation was a upward bias and we broke hard to the downside. Not rallying off the key support ranges of 741 is a very negative sign. As you remember I had said that my feel is we will break our November lows before we see any bounce - unfortunately we are right at the door steps of this important low and the market is not looking like it will rally. While yesterdays break was occuring on relativly low volume I am still concerned for a break here.
Today
"Be greedy when others are fearful, be fearful when others are greedy"
Our trade channel as wideneded quite a bit, and we experienced quite a significant drop. Looking at our bolinger bands we continue to widen our range and are getting into areas we have only seen a few times in the past 2 years. On the daily our RSI is below the 30 line, while I do not use RSI on the daily as trade signals it is still an indicator to use for reference. MACD divergence is quite high on the negative side - you remember when I referred to our MACD as zero as an important trend change sign - the same can be applied here as we are on the edge of the channel here.
What do I expect today? Well it is quite difficult, but we should see a wide range today, none of this narrow range we had seen so many times this year. The first scenario here is a break of the 741 in the early morning hours with a rally followed right when we hit 735-736 - if we are not to rally here we will hit my next target I had posted last week of 724-726, this range will hold and we should see at least 30 points off this range.
The other less likly scenario is a rally of course with the upward bias I was hinting at yesterday but being so close to key support the market needs to reattempt this range to make a real decision, we arrived at the 741 range yesterday late afternoon after being heavily oversold - now that we had a night to sleep over it we need to reattempt this range.
Of course my wednesday change of trend call is out the window now as we have changed the way I assumed we would trade.
How to trade this?
STAY OUT - trust me. I had mentioned yesterday I went long and still hold this position, I definitly did not follow my trade book on this one and unfortunately have to say I am hopeful of this position - hopeful should be a word never associated with any existing position you hold, because more then 50% of the time it will end up being a looser, a big one.
Tuesday, February 24, 2009
Monday, February 23, 2009
Retracement
Shorter post today guys.
Previous Trade Day
Friday setup as a strong day towards the downside, we gap opened down and held the 764 in the morning, as you can see in the comments I had posted this is not the bottom for the day with a top out at the 772 - we topped at 774 before we turned down to create new lows.
I have to admit I expected further downturns into hte 740 range and we found our low in the 754 range before we rallied and filled the gap. Looking at the GAP open and the close we were fairly sideways for the day which is to be expected for options expirations.
Today
We should continue on retracing as we have had quite a few down days the past week, with a top that should occur in the 799-802 range by Wednesday this week. Here we will make a decision to either reattempt the 820 range or break to revisit the 741 range with a break into the 720's.
How to trade this?
Remaining on the sidelines is the best thing to do until we determine if this is a simple retracement or a possible setup with strength to break out - it seems pretty obvious that new highs or rallies will be sold into, wednesday will let us know if we have a chance at further highs or continue on the down side. You keep on hearing me on the 800 range, once we break it on the downside it is very unlikly that we will get back above this number again so this presents a great trade for us.
Of course if we can get back into the 770 range I feel we can take this chance and go long with a decent 768 protection. Other then that I would try to stay out to see what the market is going to do.
Previous Trade Day
Friday setup as a strong day towards the downside, we gap opened down and held the 764 in the morning, as you can see in the comments I had posted this is not the bottom for the day with a top out at the 772 - we topped at 774 before we turned down to create new lows.
I have to admit I expected further downturns into hte 740 range and we found our low in the 754 range before we rallied and filled the gap. Looking at the GAP open and the close we were fairly sideways for the day which is to be expected for options expirations.
Today
We should continue on retracing as we have had quite a few down days the past week, with a top that should occur in the 799-802 range by Wednesday this week. Here we will make a decision to either reattempt the 820 range or break to revisit the 741 range with a break into the 720's.
How to trade this?
Remaining on the sidelines is the best thing to do until we determine if this is a simple retracement or a possible setup with strength to break out - it seems pretty obvious that new highs or rallies will be sold into, wednesday will let us know if we have a chance at further highs or continue on the down side. You keep on hearing me on the 800 range, once we break it on the downside it is very unlikly that we will get back above this number again so this presents a great trade for us.
Of course if we can get back into the 770 range I feel we can take this chance and go long with a decent 768 protection. Other then that I would try to stay out to see what the market is going to do.
Thursday, February 19, 2009
Continuation ...
Yesterday
Well, lets first address what we have been waiting for this week and lets go back to previous days comments.
[tuesday] I see a change of trend on Thursday around 2:45-3:15 so watch it there for a possible short term bottom - if this call holds true you can see that we have quite a few days of down moves.
[wednesday] 764/774 = now this is something we have to watch with care here, many are saying its the retest of our previous lows to form our double bottom. You know I do not believe this to be the case and we should blow right through it to create new lows but we need to be mindful of support. This could provide a bit of a stronger bottom. It is possible that this will be the final target for my change of trend call on Thursday afternoon.
We created a new 52 week low on the DOW at 15:42, while this is off by almost half hour I still feel it was an important enough point to consider, not a trend change but a significant enough low, especially considering we had made this call well ahead of time. On the S&P we reached 777.03 at 15:42 as well, off by 3 points from my target range.
What support did we see of this important range? Especially when combining with a new 52-week low on the DOW? - none, even the 5 point jump was sold off right away. This is not how a double bottom would behave.
[tuesday] Keep in mind probability of longer term change of trend calls are not accurate enough to use trade signals by itself so don't go short blindly with an exit order on thursday afternoon
Well it seems I should not have listened to myself here and just gone short to stick it out to my target. Just kidding guys, trade wise we have had quite a difficult few days. We have know the entire week what we are setting up for, however, every day we are presented with almost impossible trade ranges. Even if you had a perfect entry either on Tuesday or Wednesday you were able to gain only a small point range that could easily be eaten up if held overnight with a big GAP open the next day - so its hard to take this big risk and keep a position into the close.
I have to admit I am very surprised at the moves the past 3 days, this is something I will have to come back to in a few weeks with a different mindset to determine why this was occuring. We have had a HUGE GAP open on tuesday, that GAP range alone had more points then our entire trade range we have had this week. Considering we are at the major lows of the market place, broken down trend, lowest DOW close - all we saw was calm and collected moves. As we discussed in the comments yesterday this could be the market waiting for some sign of outside intervention, but it still does not justify the moves towards new lows. Remember the strength and moves around the 800-840 range in our Jan 19th week - we saw none of that this week.
Now, there is a slight chance that this sideways trend is a setup for quite a big drop to come on the very short term, meaning most likly today - I do not believe this to be the case but we have to take into account why this is occuring right here.
Today
Well, here we are again on a Friday with a weekend ahead and just having closed as bearish as we can the day before. Now being short I would not feel comfortable keeping it over the weekend so expect some short covering, and on the long side there could be some bargain hunters playing the double bottom play.
If we do end up with a day on the stronger side we have a chance at the 800 range I was hinting at Wednesday, on the downside of course we have the next levels at 764 and 741, I do not feel we will go lower even if we have a massive sell off.
I apologize for not giving more direction today, this is one of those days where I need to watch the open and the first hour of trading before I can make a call at what should be occuring.
Well, lets first address what we have been waiting for this week and lets go back to previous days comments.
[tuesday] I see a change of trend on Thursday around 2:45-3:15 so watch it there for a possible short term bottom - if this call holds true you can see that we have quite a few days of down moves.
[wednesday] 764/774 = now this is something we have to watch with care here, many are saying its the retest of our previous lows to form our double bottom. You know I do not believe this to be the case and we should blow right through it to create new lows but we need to be mindful of support. This could provide a bit of a stronger bottom. It is possible that this will be the final target for my change of trend call on Thursday afternoon.
We created a new 52 week low on the DOW at 15:42, while this is off by almost half hour I still feel it was an important enough point to consider, not a trend change but a significant enough low, especially considering we had made this call well ahead of time. On the S&P we reached 777.03 at 15:42 as well, off by 3 points from my target range.
What support did we see of this important range? Especially when combining with a new 52-week low on the DOW? - none, even the 5 point jump was sold off right away. This is not how a double bottom would behave.
[tuesday] Keep in mind probability of longer term change of trend calls are not accurate enough to use trade signals by itself so don't go short blindly with an exit order on thursday afternoon
Well it seems I should not have listened to myself here and just gone short to stick it out to my target. Just kidding guys, trade wise we have had quite a difficult few days. We have know the entire week what we are setting up for, however, every day we are presented with almost impossible trade ranges. Even if you had a perfect entry either on Tuesday or Wednesday you were able to gain only a small point range that could easily be eaten up if held overnight with a big GAP open the next day - so its hard to take this big risk and keep a position into the close.
I have to admit I am very surprised at the moves the past 3 days, this is something I will have to come back to in a few weeks with a different mindset to determine why this was occuring. We have had a HUGE GAP open on tuesday, that GAP range alone had more points then our entire trade range we have had this week. Considering we are at the major lows of the market place, broken down trend, lowest DOW close - all we saw was calm and collected moves. As we discussed in the comments yesterday this could be the market waiting for some sign of outside intervention, but it still does not justify the moves towards new lows. Remember the strength and moves around the 800-840 range in our Jan 19th week - we saw none of that this week.
Now, there is a slight chance that this sideways trend is a setup for quite a big drop to come on the very short term, meaning most likly today - I do not believe this to be the case but we have to take into account why this is occuring right here.
Today
Well, here we are again on a Friday with a weekend ahead and just having closed as bearish as we can the day before. Now being short I would not feel comfortable keeping it over the weekend so expect some short covering, and on the long side there could be some bargain hunters playing the double bottom play.
If we do end up with a day on the stronger side we have a chance at the 800 range I was hinting at Wednesday, on the downside of course we have the next levels at 764 and 741, I do not feel we will go lower even if we have a massive sell off.
I apologize for not giving more direction today, this is one of those days where I need to watch the open and the first hour of trading before I can make a call at what should be occuring.
Another one
Yesterday
Yet another day that had me quite surprised. Considering where we are market wise seeing a sideways day (though with decent volume) is quite odd. Now on the other hand, as you can see when we dropped to 790 on tuesday after the gap we were heavily oversold, we are now at 790 still but were able to distribute properly. We know sideways day generally mean continuation of the previous trend which in this case is down.
Today
Well as mentioned on Tuesday before the open I forsee a change of trend today. My most likly point is still in the 2:45-3:15 range. We also have the potential to have a change much earlier in the day around 11:45. This time around its much harder to identify the time window so watch the comments for updates.
Now you ask which way will we turn? - believe it or not its hard to say, as you remember from previous change of trend calls price does not always matter, here its one of those were its regardless of price or direction. There is a chance we will see a rally in the morning hours, if that is the case my top would be around the 800 or 809 range, if we are to decline further my bottom this afternoon would be around our previous low points. So its hard to make this call now but it will materialize.
How to trade?
Well it has been a bit frustrating I am sure. I promised new ranges, new trade opportunities and we had our break, yet no trade chances. Narrow trade ranges and really untradable patterns. Look at yesterday afternoon (comments from previous day), I had called the change right before it happened, then all we get is 3 bars and more sideways, we normally trade after confirmations if we are unsure of direction, this was one of those that left us without any trade yet again.
So for today, we will have a great trade chance unfortunately we do not know the exact time yet or direction but we will see a change of trend today. Get ready, watch comments and go into today knowing that this trend will give you a few days of gains.
Yet another day that had me quite surprised. Considering where we are market wise seeing a sideways day (though with decent volume) is quite odd. Now on the other hand, as you can see when we dropped to 790 on tuesday after the gap we were heavily oversold, we are now at 790 still but were able to distribute properly. We know sideways day generally mean continuation of the previous trend which in this case is down.
Today
Well as mentioned on Tuesday before the open I forsee a change of trend today. My most likly point is still in the 2:45-3:15 range. We also have the potential to have a change much earlier in the day around 11:45. This time around its much harder to identify the time window so watch the comments for updates.
Now you ask which way will we turn? - believe it or not its hard to say, as you remember from previous change of trend calls price does not always matter, here its one of those were its regardless of price or direction. There is a chance we will see a rally in the morning hours, if that is the case my top would be around the 800 or 809 range, if we are to decline further my bottom this afternoon would be around our previous low points. So its hard to make this call now but it will materialize.
How to trade?
Well it has been a bit frustrating I am sure. I promised new ranges, new trade opportunities and we had our break, yet no trade chances. Narrow trade ranges and really untradable patterns. Look at yesterday afternoon (comments from previous day), I had called the change right before it happened, then all we get is 3 bars and more sideways, we normally trade after confirmations if we are unsure of direction, this was one of those that left us without any trade yet again.
So for today, we will have a great trade chance unfortunately we do not know the exact time yet or direction but we will see a change of trend today. Get ready, watch comments and go into today knowing that this trend will give you a few days of gains.
Wednesday, February 18, 2009
Call me crazy?
Yesterday
No need to say more. We broke major resistance (EDIT: I meant support, sorry about confusion) with a huge gap open on extremely high volume yet again - there was no looking back. I had mentioned the 790 number in the past a few times and considering where we were I anticipated it being a short term bottom but would have assumed a break considering the large gap we had on the open. I had mentioned that once we break the 800 on the downside we should not see it again with the only exception of seeing it as resistance - this occured yesterday and gave you some great signs of where the market will head. The morning played out again as I expected but the afternoon - had me puzzled.
Now if you would have told me 3 weeks ago that our breakout day would look like it did yesterday I would have called you crazy - but you would have been correct - a 30+ point gap open with a trade range of 10 points on extremely high break out volume. Something I have not seen ever. On decision days normally you see gaps and strong moves, and if you do not see strong moves you see a sideways type action but on much lower volume. Gap to trade range ratio of 4:1 on this volume - quite surprised and something for me to consider and look back too once we play this out till thursday.
Today
Well we got our break - but for the readers that have been following me for a while we have seen something similar before, we broke a major market point in afterhours and did not give it a decisive break/test during normal trade hours. You know how I like to see this type of trade action especially around our 804 range during open market hours. What does this mean for us? There is a slight chance, and I mean very minor that we could revisit the 811 and possibly 820 range - this would go against what I have been stressing over and over again that we will not see the 800 again but the market must follow rules and it may have skipped an important step here. I do not feel this will occur because I believe that once the first 7XX is in, it will be very difficult to get back above this range. Only way for us to attempt this is before a break of 785, a break here and this chance should be gone.
So how will we continue today? Not an easy call I have to admit, but a very likly scenario yet again is another 3+% down day. With a potential for more. On the bullish side we could be setting up for an intraday test in the 809-822 range but sell off quite a bit after reaching those peaks. If we are to see a break of 800 on the upside watch my comments for price and time targets.
I just wanted to reiterate what I had said yesterday, in my long term update and many times before - once we break this number the market will behave very different, not like you have seen the past few months when we traded in this 800-900 range. Be careful please and do not take hope into what occured the past few months when you hold your positions. Risk management now becomes more important then ever.
Support and Resistance
We are entering new ranges so let me recap what our numbers could look like.
820-822 = will not exceed this top
809-811 = if we are to get a rally before we break the 785 range we could potentially come back here
799-803 = pretty much the border line of border lines.
790 = bottom yesterday which should only provide short term support as it will be broken
764/774 = now this is something we have to watch with care here, many are saying its the retest of our previous lows to form our double bottom. You know I do not believe this to be the case and we should blow right through it to create new lows but we need to be mindful of support. This could provide a bit of a stronger bottom. It is possible that this will be the final target for my change of trend call on Thursday afternoon.
741 = our previous low point. if we are to reach it expect it to overshoot by a few points and bounce of the 837-838 range
724-726 = this in my opinion will be the first real stop for us and I do not feel we will break this number in the next 2 weeks. So lets see if that holds up.
How to trade this?
Yesterday setup to be a great day for traders, ended up being a wash due to this narrow trade range. While I am confident of the lows knowing our administration I am not going to hold overnight. I entered a short during the morning hours and ended up closing out break even for the day. At 3:00 I turned off the system as it only gave me a short time window with big risk, we did not make a move during the day after this gap so I was not going to risk chasing it in the last hour. While this turned out to be a great short it was barely even 10 points worth of gains with quite a bit of risk. Maybe I am trying to justify my non-trading here a little because I was a bit frustrated with yesterday. (sorry for the rant)
Considering this narrow range I feel we have a chance to get back to the 800 one last time. This again could give shorts a great entry but keep in mind what I said today about the 800 break, we have to assume a bit more risk now.
Am I going to say it again? "I would remain on the sidelines?" - well I am tempted to advise to stay out today, we do not have clear enough signals and while we are in new ranges, the market is not going to run away from us. So be careful and good luck.
No need to say more. We broke major resistance (EDIT: I meant support, sorry about confusion) with a huge gap open on extremely high volume yet again - there was no looking back. I had mentioned the 790 number in the past a few times and considering where we were I anticipated it being a short term bottom but would have assumed a break considering the large gap we had on the open. I had mentioned that once we break the 800 on the downside we should not see it again with the only exception of seeing it as resistance - this occured yesterday and gave you some great signs of where the market will head. The morning played out again as I expected but the afternoon - had me puzzled.
Now if you would have told me 3 weeks ago that our breakout day would look like it did yesterday I would have called you crazy - but you would have been correct - a 30+ point gap open with a trade range of 10 points on extremely high break out volume. Something I have not seen ever. On decision days normally you see gaps and strong moves, and if you do not see strong moves you see a sideways type action but on much lower volume. Gap to trade range ratio of 4:1 on this volume - quite surprised and something for me to consider and look back too once we play this out till thursday.
Today
Well we got our break - but for the readers that have been following me for a while we have seen something similar before, we broke a major market point in afterhours and did not give it a decisive break/test during normal trade hours. You know how I like to see this type of trade action especially around our 804 range during open market hours. What does this mean for us? There is a slight chance, and I mean very minor that we could revisit the 811 and possibly 820 range - this would go against what I have been stressing over and over again that we will not see the 800 again but the market must follow rules and it may have skipped an important step here. I do not feel this will occur because I believe that once the first 7XX is in, it will be very difficult to get back above this range. Only way for us to attempt this is before a break of 785, a break here and this chance should be gone.
So how will we continue today? Not an easy call I have to admit, but a very likly scenario yet again is another 3+% down day. With a potential for more. On the bullish side we could be setting up for an intraday test in the 809-822 range but sell off quite a bit after reaching those peaks. If we are to see a break of 800 on the upside watch my comments for price and time targets.
I just wanted to reiterate what I had said yesterday, in my long term update and many times before - once we break this number the market will behave very different, not like you have seen the past few months when we traded in this 800-900 range. Be careful please and do not take hope into what occured the past few months when you hold your positions. Risk management now becomes more important then ever.
Support and Resistance
We are entering new ranges so let me recap what our numbers could look like.
820-822 = will not exceed this top
809-811 = if we are to get a rally before we break the 785 range we could potentially come back here
799-803 = pretty much the border line of border lines.
790 = bottom yesterday which should only provide short term support as it will be broken
764/774 = now this is something we have to watch with care here, many are saying its the retest of our previous lows to form our double bottom. You know I do not believe this to be the case and we should blow right through it to create new lows but we need to be mindful of support. This could provide a bit of a stronger bottom. It is possible that this will be the final target for my change of trend call on Thursday afternoon.
741 = our previous low point. if we are to reach it expect it to overshoot by a few points and bounce of the 837-838 range
724-726 = this in my opinion will be the first real stop for us and I do not feel we will break this number in the next 2 weeks. So lets see if that holds up.
How to trade this?
Yesterday setup to be a great day for traders, ended up being a wash due to this narrow trade range. While I am confident of the lows knowing our administration I am not going to hold overnight. I entered a short during the morning hours and ended up closing out break even for the day. At 3:00 I turned off the system as it only gave me a short time window with big risk, we did not make a move during the day after this gap so I was not going to risk chasing it in the last hour. While this turned out to be a great short it was barely even 10 points worth of gains with quite a bit of risk. Maybe I am trying to justify my non-trading here a little because I was a bit frustrated with yesterday. (sorry for the rant)
Considering this narrow range I feel we have a chance to get back to the 800 one last time. This again could give shorts a great entry but keep in mind what I said today about the 800 break, we have to assume a bit more risk now.
Am I going to say it again? "I would remain on the sidelines?" - well I am tempted to advise to stay out today, we do not have clear enough signals and while we are in new ranges, the market is not going to run away from us. So be careful and good luck.
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