Take a look at our 945 top back towards the turn of the year.
MACD was coming from positive divergence to zero, made another move into positive divergence before the final drop into negative divergence.
Take a look at the bars. One strong up bar, one small down candle, now the next candle is where it gets interesting.
Take a look at today ...
We created a marginal new high (915 today), we should retrace down during the intra day without a retest of the previous bar intraday low and close slightly up.
We had a lot of trouble with the 902 yesterday and only broke it at the end of the day. If we follow the same pattern as in Jan our low of the day would be 902 with a close at 906-907. We know the importance of 906-907 so its a reasonable expectation. This would fit in perfectly as a replica towards the last major top.
Its ok to have hope right?
I thought I share this with you ( freom a blog) :
ReplyDeleteThis morning, zillow.com reported that 28.9% of home owners are under water on their mortgage. That means they can't sell without making up the difference between the current home value and what they owe on the mortgage. If they don't have the money, they can't sell without forcing a foreclosure. They are stuck, and that freezes a lot of property from going into the market. Two things could happen in the next 6 to 12 months ... some of these people may not be able to keep paying the mortgage which would then go into default. The other thing is that some of these people will just "walk away" from their home. Data suggest that when a home owner is 25% to 30%+ under water, they have no future hope and they "walk away" from the house and let the bank have it. The zillow report fits with the Federal Reserve's Report of an expected increase in loan delinquencies. Banks aren't out of trouble yet.
Institutions were in Accumulation with their Buy/Sell SPREAD remaining the same. Buying decreased slightly, with selling increasing slightly. Institutions are still in accumulation ... this is still not a condition to short against. If both Buying and Selling go down (at the same time) like the December 2008 to early January 2009 period, you could see the market struggle up higher. Last July and August, they both went down together but the market went sideways ... not up. The key here is what the strength bias was while this was occurring. In both the above cases, the bias was positive, and that bias is positive now but growing weaker. Note the resistance line on the Institutional Selling ... Institutional Selling is below it now, but if it moves above that short term resistance, we could see the trend change to increased selling. (See today's first chart.)
My position in PST -- a slow moving short etf --is doing nicely and that could also be an indicator why we are at the top. Bond prices will fall as yeild rises.
ReplyDeleteChrsi, on a daily basis, you think we have seen the high? Now a good entry point for short? thanks
ReplyDeleteyeap low risk short here. I just added my last SDS position and am now fully short. However that last bit has a stop on it that will get taken out if we go higher.
ReplyDeleteI really hate micromanaging trades, because you leave so much on the table in terms of intra day trades. All you are focusing on is improving your one sided position without leaving room to "play" around with patterns and day trades.
ReplyDeleteThis has been the same daily thing for me in the past 3 weeks. My day trade account has not moved in terms of p/l but my large account keeps on loosing and loosing as I try to improve on positions.
Quite frustrating. Do not think I can do this for another 2 weeks. Maybe this is my way of capitulating here.
What's your downside target, Chaugner, for this sell-off?
ReplyDeleteGreat reads always. Many thanks.
Sean
902 is a key level here. Once we reach that level I will probably take some off again. A breach on 902 will bring you to the next step of 890. But quite frankly, do not think we will see a lot of action today as everyone is waiting for stress test results (just so we can rally again when they announce that 18 out of the 19 banks will need more capital)
ReplyDeleteYesterday 10 point range, today 10 point range.
ok key point here now. Expect a bounce but not to exceed 911-912. Then we are good to go for 902.
ReplyDeleteIt looks like we will see 900. I dipped my toe again in short. SDS, SRS, FAZ. are you still looking fo a bounce to 920?
ReplyDeleteI m stuck in faz at 22.xx (yikes, i know)... i can go all in and avg down to about 13.xx ... should I do it? or just cut the 7K losses. Mind you, this is big for my little port..... thx in adv.
ReplyDeleteas many readers know I try not to give advise on positions that other people are holding.
ReplyDeleteNow regarding FAS/FAS. Quite difficult to take it from here. For once I do not trade those instruments as its the same as options. you need to be right now only in price but also in time. Two major variables that are very rarely hit together.
Now with the current market conditions. While I do believe we are topping here (queue up broken record) I would not put my hand in the fire for it. During times like this money and risk management is the most important.
Going back to your situation. Lets assume your current position is valued at 20K today. If you came back from a 5 months vacation and today is your first trade in 5 months with 20K capital. Would you buy FAZ today? Or would you buy something less leveraged and wait for better confirmation? The answer to those 2 questions should guide you a bit more to see where you want to go.
I hate to say it (because it may influence your decision), but I am currently 100% short. I have some buying power left on the table but its 100% short. 50% of that is in medium term positions, the other 50% with tight stops to minimize risk.
"It looks like we will see 900. I dipped my toe again in short. SDS, SRS, FAZ. are you still looking fo a bounce to 920?"
ReplyDeleteNope no more bounce above 915. We just hit the 911-912 I was talking about, in the next 15 min we will either see a break below 908 or a break above 912. That will be my final position confirmation to either exit some or keep it running.
Chaugner, I think this puppy wants to rise a tad more before they pull the rug out either late afternoon or first thing in the AM. Anything here is a great short entry though from a risk/reward standpoint.
ReplyDelete-Anonymous: If you've held onto your FAZ this long, don't let go now. Wait for a meaningful sell off and then evaluate. The decay is killing you, so I'll bid farewell after you get a good jump in it and then give yourself a fresh start. I'm scared to death of that animal.
schismatic, while we have a lot of buying pressures here, I do think we have seen the high of the day. This is starting to looking like a typical reversal day thus far. I am not fully convinced until we break 908 but the probability is very high that it will go to low 900's before making another move.
ReplyDeleteNot liking this second test here at the 911 range, got to be careful with shorts here because as you said it could take it higher. Just moved some stops a bit closer here for around 40% of my short positions.
FAZ -- what is the decay cause? is it the leverage position with interest payment the funds have to make? I never realized the ETF having dacay similar to option. But I guess the funds play options too to get leverage.
ReplyDeletetake a look at SDS on the daily. Its lower now then the Jan 2nd peak even though we are still 30 points away from that point.
ReplyDeleteThe decay is cause by negative compounding. When you lose 50% of something you need to make 100% back just to break even. With FAZ, you multiple that nasty fact of math by 3X. Even if we dropped to the lows of march in the finnies, FAZ probably wouldn't see much over $30. (i haven't crunched the numbers yet) But in march it was in the 100's. Therefore it has been permanently impaired from the decay. That's why these are recommended primarily as short trade tools. If the momentum is not in your favor you'd be better off cutting the losses and buying back later.
ReplyDeleteSDS- exactly. And that is only a 2X inverse fund. FAZ can be addictive, but it is the devil child.
ReplyDeleteChaunger- my rationale on one last rise was to flush out the remaining bank shorts into close. Then the drop begins overnight in the futures, and we sell the news on all this "stress test" BS tomorrow (can't wait to get that behind us). This is how the goons operate. Shorts get left out and the longs get burned. Seen this song and dance too many times. I don't have a chart for it, but I'd be happy to draw you a cartoon :)
ReplyDeleteNot to confuse anyone, I'd feel very comfortable holding my shorts into close regardless of what happens. At bare minimum you'll get more than ample opportunity to break even at worst in my opinion. It's all about the risk/reward. We have a great probability setup.
ReplyDeleteGot stopped out of FAZ. Others I raised my stop level for few pennies loss. Hope that works.
ReplyDeletestopped out of all positions. may be a better entry point later. can't afford to miss the next move down
ReplyDeletestopped out 50% as well here. Still short though.
ReplyDeleteschismatic, good call there =)
ReplyDeleteIt seems like this is a gorilla warfare hit and run. and only the broker makes money.
ReplyDeletedo you still see 920 as a top. we are vfery close to it.
ReplyDeleteI just placed some buy order below the LOD anticipating spx may overshoot 920
ReplyDeleteImpossible to call a top Sam, but I'd say anything +- 5 handles would be it (from 920). I'd won't be shocked if we break 920, but I will be very surprised if we close above it.
ReplyDeleteThanks Chris, your guidance has been very good to manage the risk.
ReplyDeleteThis is totally driven by the financials today, which leads me to think we have some more upside according to my RIFIN chart. The RIFIN is currently at 653. Not seeing any major resistance until 665. hold tight but don't let them scare you.
ReplyDeleteNotice RUT is not responding at all compared to financials and SPX. that is the place to be when we move down. TZA and TWM have not given up much.
ReplyDeleteYeah I own some TZA already. I was surprised to see it wasn't getting hammered.
ReplyDeleteat least a swing top in the making it seems
ReplyDeletemore pain for bears. The sad thing is that this is what we were expecting, but maybe emotion and hope got the better of me yet again. While its good to have stops to take out the emotion its still not great having to get stop after stop here.
ReplyDeleteI think we may have seen the top. My order for SRS got filled.
ReplyDelete912 at 50 dma at to that level. who knows next move?
ReplyDeleteslight negative divergence. hang on bears.
ReplyDeleteI added more srs
ReplyDeleteadded my other SDS chunk I got stopped out at as well. No futures yet. Waiting for confirmation on futures trades.
ReplyDeleteThis person is good: I posted yesterday from his blog. it worked. For tomorrow, here it is:
ReplyDeleteThe system will switch back to long side for Wednesday providing the spx closes below 907.69.
Will go to 1x.
An on close market order for FAZ is looking kinda tasty. Looks like they'll ramp this near the HOD for the final finale.
ReplyDeleteBased on this I will close my shorts, if we close around 908 or stay short around 910 close.
ReplyDeleteChris what is your take for today and tomorrow?
ReplyDeleteAny ultimatum like you had one yeaterday?
ReplyDeleteunsure at this point to be quite honest. Bollinger bands have widened quite a bit now, MACD on the daily positive again, of this was a bull market (which many are saying it may just be it) we have room for more upside.
ReplyDeleteThe bollinger bands are a major concern for me at the moment. They have widened a bit too much for me to be happy with a short. Normally you see a widening on the last push (after it narrowed down). However this is the second day for widened ranges here. Something that normally does not occur on bear market rallies.
a close above 912 is quite bullish. We need to close below 912 for this to be considered a topping pattern. A few points here actually make a difference.
ReplyDeletethis is what I mean chris, thsy do listen to you
ReplyDeleteI wish it were that easy =)
ReplyDeleteBy mistake I posted wrong day projection form the blog: here is a Thursday call;
ReplyDeletethe system is calling to be on the short side tomorrow if the spx closes above 915.73.
One might think that could happen (market retracing) as the market participants have been waiting for the bank announcement tomorrow (thinking it will be negative) and we have been on a tear recently..... a lot of traders have been anticipating a pullback for some time, but there is a lot of money on the sidelines trying to pick a spot to re-enter; so lately it has not been good for short term profits to be short. If the system calls for short or long I will go at 1x.
I am staying short without stop loss as it could have blowoff top or just head down. AH futures do not seem to reveal much.
ReplyDeletechris, i know you will be analysis now. Let us know, what do you think next?
Thanks
Samamehta, I was checking out that blog that gives those trading calls but I don't understand what they mean when they go 1x or 1.5x. Can you explain?
ReplyDelete