Take a look at the bollinger band. I am using a deviation of 2.5 (instead of 2.0 default). A fellow reader had brought this to my attention back in January and has been proven to be more successful of a sign then using the 2.0 deviation. In the past 2 years there have only ever seen 3 breaches of this upper range. All 3 of them came with a strong reversal that followed. Also the last time this occured it marked the end of the bear market rally back in May 08.
Also, some may be referring to this being a breakout to the upside - look at volume. Volume failed to confirm this as a breakout move eventhough we were able to remove quite a few of the overbought conditions in the last weeks when we had created a base to take out the high.
This is just re-updating the current patterns we had indentified. One thing that concerns me a bit is the breakout of the MACD, while this can be explained due to a frenzy buying event yesterday its still something that we need to monitor closely. Also a horizontal line at the 912 range I had referred to as a potential top. As you can see in the green the narrow trade channel is still valid and we have tested the closure point of the bearish rising wedge. Both upper and lower line came together yesterday and were touched as the high of the day into the close.
Today is going to be quite difficult to make a call. Of course I am looking for a reversal here but to be quite honest we will have to worry about dip buyers stepping in. If the bears can step in with volume here and make a stand we should be starting a move to test the 880 and 860 respectivly. The past weeks I have been rather cautious on my trades and strategies, however, currently short fairly heavily without any hedges. Can I be wrong again? Yes very likly as we do not have a confirmation yet but I am trading what I am seeing. And I am seeing exhaustion and frenzied buying that cannot be sustained long term.
Hi Chris, Sorry been away for a while. Thanks for the charts. Have stayed out for past week or so. Looking to find an entry to go short this week.
ReplyDeleteBest of luck.
Long time with no comment from me as well... mainly because I haven't been trading the SPX, just holding a small short as a hedge. I'm currently only trading individual cheap stocks, sectors, and oil.
ReplyDeleteThanks as always for your insight Chris. Your blog is still a must read for me, even though I'm not trading the indexes. I'm happy to see you like the BB at 2.5. It works well for most anything imo: stocks, sectors, and indexes.
Turnaround Tuesday!?!?
yeap 2.5 works out a lot better and gives much better signs especially on upside breakouts in bear markets.
ReplyDeleteI refrain from stating whether or not this is the top or we will see a reversal today. Every one of the rallies we had in the past had 2-3 days of pure buying insanity. Is it possible that this it? Not sure to be honest, many signs are pointing in that direction but I feel we will have one last big push left on the upside.
still have to be careful. Bullish lowering wedge here so we could still see a big move to the upside from here on out.
ReplyDeleteI just got out of my short positions with a small loss but at ease now. You are right emotions work trick on you. Before, when I did not trade, I never had concerns when market dropped more than 50% as I did not need the money and thought it will come back up. But as an active trader your thinking changes.
ReplyDeleteI think I may have sold too early 880 is still a possibility before it goes to 940. But would raather get in either at 840 or 940 at lleast the direction is certain.
another bullish pattern forming. 2 day triangle. At 10% closure point now. Breakout probabilities are highest to the upside.
ReplyDeleteas per twitter added a large short 5 min ago via futures. Looking for 890 target. Very tight stop.
ReplyDeleteI think you are right. X-trend people just covered shorts. Hoping for better entry.
ReplyDeleteAt the same time, it leads you consider the opposite. But I will wait.
I did pretty much the same yesterday. I moved some money around on accounts to get better buying power for the final move.
ReplyDeleteThis short here is just a quick 10 point run I am seeing here. Market had a chance to go higher and got denied. Its a 60% probability move hence I have a tight stop placed on that position.
again, for clarification 890 SPX or ES?
ReplyDelete890 on S&P.
ReplyDeleteIt looks like it is creating a channel one can swing trade this on tight stops. so far I have dribbled a little bit and been sucessfull.
ReplyDeletewould you hedge around 890 on long side? or cover and go long?
ReplyDeletebeen asking myself that same question. I will probably take some off but no hedge quite yet.
ReplyDeleteIt looks like market is reading your blog
ReplyDeletelets hope so. I have something called entry position probability. For short term trades (intraday mostly) this is the first 15-30 minutes after the position has been opened I evaluate probabilties and direction.
ReplyDeleteAt this point the position has gone against me 100% and I am looking for a quick exit and I am on the last part in terms of time. If it does not turn down in the next 5 min I will exit regardless of what my gains are.
Like I said they are afraid of you
ReplyDeletePlease give another ultimatum so i can recover my losses
ReplyDeleteyes please =) I have lots of losses to recover from.
ReplyDeletedo you think we are done with down move? Or just the sart towards 890? man this is slow.
ReplyDeletejust moved stop one point above last peak there. I think we see a 3:00 rally to make a new high from here. Not looking like I had anticipated at the beginning of the day.
ReplyDeleteAt this point, its a guess, not an analysis.
I just got long after covering shorts for a miniscual gain. Let us hope I recover the loss on long side.
ReplyDeleteIf i am an indicator may be we are at the top
closed out 25% of SDS. Too much distribution today, probability of more pain for bears is fairly high at this point.
ReplyDeleteLooks like spx broke the channel to upside.
ReplyDeleteFYI from the other blog I mentioned yesterday;
ReplyDeleteThe system will switch back to long side for Wednesday providing the spx closes below 907.69.
Will go to 1x.
If we close touch 912 today --although not likely, would you short big time?
ReplyDeleteToday played out a bit different from my "perfect playbook" type of scenario. One of the main reasons I closed out a small (25%) part of my SDS is due to the potential of the 912 tomorrow.
ReplyDeleteKeep in mind when looking at tops or topping patterns you get some "non technical" final topping move. 912 is important, but it could go another 10 points above that.
While in the big picture of things it does not really matter in terms of average price, I do take some pride in trying to get the best price out of the position =)
And yes that statement is a bit crazy to be quite honest, if I had to calculate my average price on this SDS position, well, it would not be very good at all and I need to make up quite a bit to break even for the past 8 weeks. Bad bear !!!