Achieving Zen in the Trading World

6.8.2010

2010-06-08T09:53:00.000-04:00

Well obviously the correction is not over yet... have to follow the price. I have some market internal charts I will try to post later, but the intraday pattern has changed. Now it is sell the open once it hits the daily pivot - for example, this AM I am in TWM from the pivot price. I am keeping everything as daytrades these days until the volatility subsides.

6.3.2010

2010-06-03T15:43:00.003-04:00

Small updates...

1. I did graduate from my MBA program, so hopefully back soon.
2. There is a good chance this correction is over and the market goes back to new highs similar to the end of 2007
3. There is a false move around 1:30ish every day for the past week or so, fading it proves very lucrative. TNA is my vehicle of choice on this.
4. Writing some software to do faster stock analysis, so I should be getting something going here again soon.

Still trying to get on my feet...

2010-03-24T08:08:00.004-04:00

Attaching two charts, Put/Call and S&P weekly. Looks like we should get at least about another 50 points to the upside to revisit the scene of the crime and "see what happens". The world is not melting down and the OMG bear market news is old hat, it's an old story and the people guessing a top continue to get hurt. No short signals yet. The market is definitely extended, so caution is advised, but I would not short.

The circles on the P/C chart are noting some similarities to the movement of the S&P and the P/C chart.

Still trying to get to where I can post regularly... may not be for a couple months.

The $$ right now is trading individual stocks.

03.13.2010

2010-03-13T20:47:00.002-05:00

No updates per se yet (unless you follow me on Twitter), but I'm still amazed at the amount of people expecting some massive selling to just start up on the markets. Could it happen? Possibly, but then anything could happen. Everyone seems to still be stuck in pre-March 2009.

The objective evidence shows that this is a very strong bull market, and the last recent low has had fantastic gains. On every timeframe the market is in an uptrend... any call to the other direction is just a guess. Of course, fading a trend is not a bad trade... but I see absolutely zero reason to expect some massive bear market to kick into effect. The bears are still trying to find their hides after this massive skinning.

Blast from the past...

2010-02-25T17:50:00.002-05:00

It has been forever since I have updated this blog, but I plan to get back to it and maybe give it a facelift. School will be done this May for good (MBA will be finished, finally).

I'm back to trading and hope to mention stock ideas for each day with an explanation of my trading style.

Hope anyone who still reads this out there is doing well!

Middle of finals, but...

2009-05-11T01:49:00.001-04:00

I suspect things will play out much like last year. A gasp up to the 200 MA in the S&P, flirting around that level through the end of the month, then the seasonality of selling will begin in June.

However, that does not mean that the lows have to be retested. There is nothing that says they must be. We may not even get 50% down from here... anything can happen. I think it is unrealistic to think that any severe selling like last fall will just set in and go simply because that was a historic event. But again, anything can happen. I am basically playing hit and run daytrades with a couple of swings every so often.

4.30.2009 Intraday Update

2009-04-30T12:44:00.001-04:00

Bot:

TZA: $27.39
SRS: $22.53

I will stop these in the green, still countertrend and I am not comfortable being aggressively short yet.

4.30.2009 Update

2009-04-30T07:33:00.002-04:00

We are potentially nearing a short term bull trap. If you look at my intraday SPY chart, you can see we are set to open (at current premarket levels) at a 1.618% extension of this swing

I should just post the chart here... but I'm crazy hectic this AM with other stuff. You can see it by clicking through the link on the right.

I'm not short yet.

4.24.2009

2009-04-24T15:03:00.004-04:00

Today's target for SPY, just a wild hunch here based on my methods... 88.95. We will see!!

UPDATE: well no short squeeze into the close. I did buy leveraged shorts near the close but sold out of them all because I'm not ready to hold leverage short overnight yet. We need more reversal signals first.

4.24.2009 - Quick hits

2009-04-24T11:50:00.002-04:00

Intraday P/C ratio was too high at the open to support selling. The market will continue to move in the direction of stops, which means buy stops to the upside right now. No significant TICK readings and ES holding over VWAP.

XHB at the 200 MA and the QQQQ extension of this swing is $23.89 for 127.2% and roughly the 200 MA for 161.8%. I expect the latter.

No positions here. Did a quick trade and stop at breakeven on TZA this morning when I thought the relative weakness in IWM would hold.

4.22.2009

2009-04-22T16:00:00.001-04:00

Cut RHT at the close, thought SRS was going to get a squeeze down into the close, but when it broke up I bought it.

Closed all my longs, only holding SRS.

UPDATE: Closed SRS A/H, not comfortable without a solid trend to hold the leverage overnight

4.22.2009

2009-04-22T14:42:00.002-04:00

Bot RHT today as it exploded off its trendline, sold half already will hold the rest with a stop on the balance.

Holding EWZ with a stop at 42.50 under the intraday ascending triangle.

4.20.2009 IYR Update

2009-04-20T15:09:00.001-04:00

IYR failed to hold the channel, now looking for a lower support level. Click through to see.

4.20.2009 Intraday update

2009-04-20T15:06:00.001-04:00

Looks like the 875 high was achieved, my tentative swing low target now is around 815 on the S&P (after a bounce). I need to put some deeper analysis into it, but that is what I have so far.

4.29.2009 IYR Fib Channel

2009-04-20T00:12:00.001-04:00

I am trying out the www.bestfreecharts.com embedded charts here... this should stream live. Unfortunately, the labels don't show very well, so you have to click through to see it.

4.19.2009 Wedging Fib Channel

2009-04-19T23:29:00.002-04:00

The 30 minute SPY chart has all the markings of a Fibonacci channel, but the downswings are wedging up. This also could still constitute a Three Drives Pattern.

If 855 or so is broken through tomorrow decisively, then I would expect a deeper retracement of the entire structure (the black lines).

4.17.2009 Update

2009-04-17T10:21:00.001-04:00

Not much time right now (at work), but a friend asked yesterday if my thinking a short term top is forming does that mean I am going short. The answer is no, at least not yet.

4.16.2009 Update

2009-04-16T22:59:00.001-04:00

No time tonight to dig in deep, but I finally think we are ready for that pullback.

4.16.2009 Update

2009-04-16T10:50:00.001-04:00

Out of PCU at breakeven, trailing stop on EWZ will take me out just under the 5 day MA. The market is softening considerably here - not intense selling yet but it could accelerate.

UPDATE: Actually ended up adding to PCU, out of both at the close.

4.16.2009 The Bearish Scenario

2009-04-16T01:47:00.001-04:00

I have been bullish for a while now and eying 870 - 875 as a potential upside target for this run. But what if that doesn't happen and the market is in a retracement?

Below is a picture of a three drives harmonic pattern. It fits pretty well here. Ideally the retracement for C would have been deeper, but it is what it is. Entry is to sell at D with a stop at roughly 875. First profit objective is the red arrow, then any of the green arrows as the second.

I do not mean to insinuate here that I have abandoned my 870 -875 target. In fact, if you look closely at the below chart, March 27th or so was the end of a three drives pattern. So starting a new one at the B point on this chart and going to 870ish for a final 3/D is plausible.

What would invalidate this pattern? A move above 3 or D (same point on the chart).

4.15.2009 Interesting look at the P/C ratio

2009-04-16T00:51:00.002-04:00

Quantifiable Edges has a nice statistical analysis of the P/C ratio... I need to research this more myself:

http://quantifiableedges.blogspot.com/2009/04/implications-of-extremely-low-putcall.html

4.15.2009 Quick Update

2009-04-15T20:50:00.001-04:00

Long EWZ and PCU and still some FEED. Apparently, China announces GDP tonight... 10 PM EST maybe? GDP is a lagging indicator, but I sure hope it gooses emerging markets and copper!!

4.15.2009 SPY

2009-04-15T12:00:00.000-04:00

Check out my SPY projection chart in my stockcharts list... lots of convergence between things right now. This would be a good spot to move up in the market if it is so inclined.

4.14.2009 Update

2009-04-15T00:02:00.001-04:00

Sold EWZ and PCU today as well as half of FEED. Today was a weak pullback, but I do not trust much in this environment and will take profits when I can. At this point I expect we will be moving lower tomorrow, and the intensity of that move should tell us something about how far it will go.

My brain is mush today after a bad day of trying to daytrade (which I am going to swear off and stick to swing trading) and a bunch of work, so no charts.

Just realized I had accidentally turned off my public list. If it is not visible, please let me know.

4.14.2009 Update

2009-04-14T10:33:00.000-04:00

If you look at my StockCharts public list for the S&P 30 Minute Projection chart, watch the RSI lines. There seems to be a pattern with price and momo going on which looks like a rally higher to test the RSI trendline from underneath before moving to a correction low. Rinse and repeat.

4.13.2009 Update

2009-04-14T01:04:00.001-04:00

After exhaustingly going through creating financial statements for an entrepreneurship class, I'm too spent to put together a detailed post. Needless to say, however, the ES futures chart I had below (with a potential target of 875) hit its 127.2% fib extension today. That could be all it gets before a more meaningful pullback. Only price action will tell, but we will soon find out.

Longs: PCU, EWZ, FEED

Shorts: None yet

4.13.2009 Update

2009-04-13T13:48:00.001-04:00

Added to FEED this morning as it started to move, cost basis around $2.50 sitting on a half position currently.

Other longs are EWZ and PCU. I still think the market is headed to 875.

4.12.2009 Sector Glance

2009-04-12T17:26:00.001-04:00

After looking over the major Spyder ETFs and the like that I watch, I would say that the strongest sectors right now are technology, financial, materials, consumer discretionary, and industrials, perhaps in that order. Technology may be getting slightly extended.

Real estate (IYR) is neutral/bearish, healthcare, consumer staples, healthcare, and utilities all look pretty bad.

4.9.2009 Finally, the Financials

2009-04-09T23:18:00.001-04:00

Financials finally put in some umph with volume today. We'll see what happens, but that is encouraging from the long side.

As an update to my ES post last night, here is the result... no 860 yet, but that and 875 are still in the cards. I expect them on Monday or Tuesday, but only the market knows when/if.

I have some work to do but will try to post a more thorough look at the markets later.

4.8.2009 Some late night thoughts on SPY

2009-04-09T02:13:00.003-04:00

Notes on the chart. Tired... so take this with a grain of salt.

Sold some longs today prematurely perhaps.

4.8.2009 Copper Musings

2009-04-09T01:34:00.002-04:00

Playing around with the copper chart and some new ideas. The blue arrows are me trying to figure out Magee's basing points which means (if I'm right on them) that the red lines would be stops.

Why is copper important? It is the one commodity that does not lie about economic factors. It is of itself a leading economic indicator of sorts.

04.08.2009 The Bullish Scenario

2009-04-08T17:09:00.003-04:00

If the market can contain its losses and move higher, here is a bullish picture that could pan out. Under this scenario, I expect things to tire out at or around April 10th.

This is drawn from ES including the overnight sessions (as always, click to enlarge):

The reaction around 830 will be telling. A move above there and I would expect at least 860.

4.7.2009 Intraday Update

2009-04-07T14:06:00.000-04:00

The gap below us is about a point from being filled, so the prognostication by yours truly was off. I blame it on a smudged crystal ball! :)

Close to maybe letting PCU go. I still like EWZ and ICE for the time being.

4.6.2009 - "Overbought" and "I've Been Bearish"

2009-04-06T20:56:00.005-04:00

During this whole rally, I have noticed that a number of technical analysts I stumble upon indicate how things are "overbought" and how their readers surely know that "I've been bearish since late 2007/early 2008." The latter is more of an appeal to authority (a logical fallacy) to justify their opinions that this market should be sold. Of course, it should have "been sold" at about 740, and 775, and 800, and 820, and so on. Past performance is not an indication of future results, but that is the part they leave in the fine print.

Momentum studies (what are usually considered when something is "overbought") are created by price. Reversals are created by price. There is no reason that price must reverse because momentum is extreme or softening (in fact in a strong market momo will wane while the price holds - sound familiar?). Instead, momentum trends (which are not price trends) should be used to validate a price reversal, not vice versa.

That said, I think it is reasonable to look at other indicators like stocks trading over their 50 MAs, etc., to see how price is extended. Even then, however, it only means to exercise caution. It does not mean to sell.

Indeed, there are some measures that show the market gaining strength and is not "overbought".

I am not saying that the markets will continue to rocket higher immediately. We may get a pullback. We may even get a fairly deep pullback (although the latter would really cripple the integrity of this rally at that point). We could even get a retest of the lows or lower. However, at this point, the price is not saying to short. In fact, to me, it is saying quite the opposite. Until the price confirms otherwise and proves me wrong, this looks like consolidation to continue higher. I have previously (today even I think LOL) stated that it is easily possible that the gap immediately below us will not fill until the market achieves 875 or so. Not a certainty, of course, but easily within the realms of possible scenarios.

Thus, we may get a reversal, but let the price do the work, not our preconcieved notions and/or the things that tell us how strong a price move is relative to its recent past.

4.6.2009 Twitter

2009-04-06T15:00:00.002-04:00

If anyone is not already using Twitter, I highly recommend it. Many people use Tweetdeck, but I use twhirl as a client. I follow several intraday updates from great traders and try to deliver my own as well.

Highly recommended!!!

4.6.2009 Intrday Observation

2009-04-06T13:48:00.001-04:00

Markets are under declining VWAPs but above rising 5 day MAs on light selling with soft price action. As of now ES is trying to make a run at VWAP and potentially change direction back up.

Bottom line to me is that this is further consolidation and in terms of probabilities will resolve itself to continue the trend back up. I honestly think 875 may happen before this gap underneath us gets filled - but that is just speculation at this point. Anything can happen. Right now consolidation and sucking in more shorts to fuel the move higher.

4.5.2009 Note on Gold

2009-04-05T22:22:00.005-04:00

I just saw on Bloomberg minutes ago a gentleman (I believe by the name of Bob Takai) from some firm in Tokyo commenting on the price of gold. He said that the ETF market owns 1600 tons of gold. Of that, 450 tons has been bought over the past three months. At this point I would ask - what does a top look like? What does a bubble look like?

Certainly down the line inflation may take hold, but who knows how/when/what that will look like and how it will affect gold. I personally think that, in $USD, gold may go higher but everything else most likely will due to the world moving off the dollar as the world currency.

Interesting. Disclosure: I do not own gold.

Bloomberg also insinuated that the trade is to buy copper. Makes me a little concerned that the retail news is promoting what I am seeing and have bought!! :)

4.4.2009 - Risk Appetite Officially Hungry

2009-04-05T00:30:00.001-04:00

Check out the Yen - a nice measure of risk appetite. Weak Yen should equal better stock market. The Yen broke the 200 MA this week, and I think that marks a significant milestone in investor willingness to assume risk.

As a follow up to some previous market geometry charts, here's the update. I think we should see S&P resistance about 25 - 40 points higher:

Friday was a nice consolidation day in the S&P. This next week is a short week due to Good Friday, so light volume volatility should continue. This is the perfect storm for a run at resistance up higher. Of course, anything can happen. Momentum trends are certainly a little tired:

But that does not mean price has to be. If this rally has taught us anything, it is that price trends and momentum trends are entirely separate (but related, of course). Momentum can tire and rest while the price consolidates or creeps higher. It is a mistake to short simply because momentum has faded slightly (I have learned that lesson well lately).

Lastly, here is one final chart for your viewing pleasure. By "your" I mean "me" because I'm still not sure that I'm my only audience here :)

Good luck this week!! I will try to keep things rolling on the blog. I actually went long issues in my IRA that were not short term leveraged instruments this week. I am currently in PCU, EWZ, ICE, and a starter position for FEED. Speaking of PCU, did anyone notice copper looking more bullish? Maybe coming out of a base/ascending triangle?

And for those who say, "Meh, that's just a copper price, I don't trade futures, where is the volume, etc." well then I can show you vehicle and volume... behold, the unknown copper ETF. Check out that volume. P.S. copper is largely a gauge of global growth expectations.

4.1.2009

2009-04-01T21:28:00.001-04:00

Quick post... try to write more later. The ABC pattern I had is obviously not what happened. I think we are probably consolidating to move higher. I need to look deeper... will try tonight. The market is at a key inflection point.

03.31.2009 Post #2

2009-04-01T01:25:00.001-04:00

Here is a little chart to provide some views into the current correction.

03.31.2009

2009-04-01T00:43:00.003-04:00

Market Rewind had a great tweet today... "VWAP as resistance - Hedge Fund Remptions meet Mutual Fund Window Dressing" Seems like it!

At any rate, quick recap:

Here is the TICK. Really strong all day long until the end. Much like the market. The TICK is a great intraday measure to watch.

Next take a gander at the TRIN:

Here I'm showing two day's worth of data (I also clip out 8:30 - 8:50 AM CST data) - yesterday (where the trend was up on wild bars) and today which traded in a tight range at the low end until a relative pop at the end. With the TRIN, a downtrend or a tight low range is nice and bullish; any kind of uptrend, however, is bearish. The TRIN is basically a measure of downward pressure in terms of volume.

Next let's look at SPY intraday:

What this looks like is a nice easy ABC correction off the top. In this chart, the thick black lines are a few of the fib confluence lines I could discover and then a measure of the first leg down projected from the 5 day MA (the heavy pink line). I've got potential targets at 77.61, just over 77, just under 77, and then down around 75.50 - 70. Notice too the RSI has rolled off the high end of the range and is now floundering around down in the bearish end of things. Same with the CCI. That last volume spike is also larger than any spike in the rally to date on this timeframe. Now I do not think that the rally is dead. Nor do I think it is alive. Nor do I think we are safe from the low-lows, and I also don't think breaking the highs is out of the question. At this point *anything* is possible. At any rate, it sure looks like more downside is coming in the immediate term.

Here we also have a couple of other sell signals I was watching that confirmed at the close (price reversal combined with momo trend reversals denoted as diamonds in this chart):

Also noteworthy is that these same momo indicators registered the first sell indicator on the daily (i.e. the momo trend has reversed at least for now).

So there you have it. The rally has finally pulled a real correction, or at least it appears that way. How far down is anyone's guess. My personal opinion is that this stock market is going to bore a good deal of people away as it grinds out a trading range for a while.

My closing thoughts are the potential head and shoulders on the Q's:

(oddly enough today I followed my charts but thought SRS would be a good bet since IYR has been relatively weak... I ended up out of SRS at breakeven because IYR actually held its 5 day, at least on a closing basis - what was I thinking!?!?!! All this work that panned out and instead I went of in lala land.)

03.25.2009

2009-03-26T07:17:00.002-04:00

Not much time to post today, but the S&P gave back 61.8% of it's latest leg up before bouncing. I would be very surprised if it can take out the highs here, but anything can happen.

03.24.09 Yuck

2009-03-24T23:52:00.002-04:00

Not the market, but me. I way overtraded, broke all my rules, and paid for it dearly today. I have no idea what came over me. At the same time, I did receive The Daily Trading Coach by Dr. S today. I have read a couple of the 101 lessons, and I must say it is a good book. A good trading book is hard to come by these days.

Some thoughts re:the market in general.

1. The market did hold on to its gains from yesterday's enormous rally.
2. The dark cloud cover candle pattern three days ago was demolished by yesterday's candle, and today's candle did not even retrace half of yesterday.
3. The RSI is getting to the upper end of the bearish range and may need to consolidate lower. A move down to the 40s would be good.
4. Pretty good negative divergence on the Composite Index, a momentum gauge based on the RSI that tends not to lie with negative divergences (but there is no holy grail!)
5. At the same time, there is a good inverted head and shoulders on the S&P daily starting back from mid-February.
6. The 50 MA is waiting on a retest

Thus, I think it is reasonable to expect, especially with today's close, that the market will retrace a bit more tomorrow.

That said, it is important to consider all situations. A nice pullback to 790 - 800 is most likely. From there it will be important to watch market reaction. This would be a welcome opportunity for longs.

Alternatively, the market could gap higher and surprise everyone to continue upward to the 830 - 840 area. Quite frankly, I expected that today mid-day before things rolled over. In this situation, I will not chase it.

Lastly, and what I expect, is that the market may open slightly lower, rally back up (but not to today's highs), and then roll over to go to support. An ABC correction is a normal pattern especially for a structure that appears to have five waves to it (shock and horror yes I mentioned EWT!!! :)).

Best of luck tomorrow... hope your trading day was much better than the crap I managed to spew out today. I've been at this for over a year but sometimes my discipline seems to dry up. Today was unfortunately one of those days.

03.24.2009 But I don't live in Japan!

2009-03-24T07:02:00.003-04:00

(In case nobody is awake at five A.M. reading blogs like I am, this is my third post today... please be sure to scroll down to read the other two)

A chart everyone should become familiar with is the Japanese Yen. This is a direct measure of risk-appetite. Look at the spike in October/November, and look how the Yen continued to strengthen even beyond that, suggesting the market lows were not in. A strong Yen is bearish for the stock market, and vice versa.

For some reason very few people discuss this measure of risk sentiment. Not only is it relevant, but it is very easy to track with a variety of TA methods.

Right now the Yen is in a corrective phase that will take it lower. It did find support at the 200 MA, and breaking that could signal a major shift in the direction of the stock market.

This is not a 1:1 measure with the stock market, but the decline in the Yen as of late is reflected in the recent rally. It tends to slightly lead the stock market.

Enjoy!

03.25.2009 TICK?

2009-03-24T06:45:00.002-04:00

(This is my second update today, please see my expanded S&P chart below this post)

Before I start, I am considering using Twitter to fire out intraday thoughts about the market. However, I don't want to talk to myself. So if anyone wants me to tweet, please leave a comment. Otherwise, I will continue to think that this whole blog experience is an act of self-discussion (which is fine with me).

I have had a couple of questions recently about the TICK and its use. Here is my spin (I got this from the book Master the Trade and Brett Steenbarger's TraderFeed blog... p.s. I have Dr. S's new book on order and will report back as to how it is).

To start with, here is the TICK from yesterday's monster rally:

The values on this TICK chart are from one of my data providers, and for some wacky reason they can't do negative numbers for the TICK, so they add 10000 to it. This is not the feed I use during the day, but I just wanted to clarify. Any value you see on that chart... just subtract 10000 and that is the "real" TICK index.

At any rate, notice a few things:

1. Green lines at extreme readings of +/-1000

2. Red lines at significant readings of +/- 800

3. Blue lines at notable readings of +/- 600

4. Green line at zero

The blue line is a 5 period SMA, and the whole chart is a five minute TICK from yesterday.

Rules for the TICK (modified from Master the Trade):

1. No short or long positions until at least one reading of +/- 800 (+800 for longs, -800 for shorts).

2. Readings of +/-400 or in between are meaningless.

3. Tighten long stops significantly on a reading of 1000 and vice versa.

4. Watch the TICK trend (the candles, up all day yesterday) as well as where the blue MA spends most of its time. That is a good key as to which side of the trade you should be on.

Yesterday I traded BGU, my favorite vehicle as of late. I usually give the market about 20 - 30 minutes to open and get over itself in the AM, then read where things are in relation to TICK, VWAP, and the direction of the VWAP and 5 day MA (thanks to Brian Shannon for that one). Those are good pointers as to what kind of day it will be, at least in the immediate moment.

So yesterday I was long BGU with decent success. I did allow myself to try one short position once we hit a TICK of -800 (short BGU) at about 12:30 but quickly got out when the price action down got wobbly. I ended the day riding the wave up and just trailing my stop up to a final exit of $25.32.

Utilizing the TICK kept one from trying to guess the top of an "overbought" (whatever that REALLY means) market until there was a small crack in the rally shell. That crack did quickly heal itself, but this is an invaluable tool. Even swing traders can utilize it on days they want to initiate new positions.

Other things to track:

1. When the market is rallying, the intraday P/C ratio should be rallying as well (like yesterday)

2. Watch the trend of the intraday TRIN - going up is bearish, down is bullish, down and flat is VERY bullish.

Hope this helps somebody out there!

03.25.2009 S&P Zoomed In

2009-03-24T06:30:00.001-04:00

Just as a follow-up from my post last week, below is the updated and "zoomed-in" image of the S&P. I did not save my chart, so if there are price points here that are off by a point or two, that is why. The nature still seems the same.

I am still tracking a market harmonic that could lead up to the 835 - 840 area. In terms of time retracements, that would happen between now and the beginning of April. Since the 38.2% time retracement lines up with the upper channel line, I would think within about 3 - 4 days, but this is just a guess (no one can know until after the fact):

So far this projection (which seemed extreme to me last week) is playing out.

03.19.2009 At the Zoo

2009-03-20T00:22:00.001-04:00

I was at the zoo today with my wife and one of my daughters, so I missed the markets while they were open. Here is my quick recap from a bird's eye view.

First chart:

Here we have three fib ranges. Don't look at how some provided resistance so far over the past two days... instead, focus on where they overlap below the current price. The potential levels of support are 773, 750, 735, and 720. However, if the market retraces as deeply as 720, I will rotate my rally view to a more bearish take and expect a corrective bounce from there that will ultimately continue lower. That said, provided the markets can hold 745 - 750ish, I think a pullback here would be healthy.

On the indicators on the above chart, I am looking at momentum. The adaptive CCI has had a bullish zero line cross a couple days ago (and a pullback here to find support on it would be good), the double stochastic is embedded on the high end (the red line) which is bullish (if it can stay there with the blue dotted line hitting the low end and reversing it would be a perfect pullback setup), and the RSI and composite indices are both over the slower moving averages (red lines) and curling back for a retest. This is a good momentum setup thus far for a pullback. The last indicator is from Miner's book High Probability Trading Strategies (which I HIGHLY recommend) and simply shows that no bearish momentum indication has been given (yet) but that momentum is overbought. So, overall in terms of momentum, this rally has sauce on its side. For the bearish case, at the very least, I would expect a divergence to form somewhere. The RSI is testing the bearish resistance area at 60, and a pullback to 40 - 50 and then a move higher will need to get through 60ish. That would be a strong bullish signal.

Here is a simpler chart just for reference. Much clearer support/resistance:

The candle formation today is a dark cloud cover. However, the extent of the bearish move is not severe, and I don't think the candles look exhausted. Generally speaking, it is the tiny dojis and especially evening stars that one needs to watch out for. One dark cloud cover is not a sign of undoing.

Lastly, here is the chart from my last post done more simply in a StockCharts format. We'll see how things progress from here.

As always, trying to be zen, but I think this rally is still one that can be bought on a pullback.

01.17.2009 - Crazy Possibility?

2009-03-18T00:47:00.001-04:00

One scenario, based on market harmonics, is outlined below. As some may know, I do like Elliot Wave Theory to a degree, although I do not want to know fifteen corrective patterns (or whatever it may be). I like the K.I.S.S. rule, and I try to aim for that (zen and all). Anyway, here is what I have (click to enlarge):

Please note this is a *possibility*, not something I *expect* per se.

Notice first the fibs. The two smaller fib ranges (in red) measure the same distance down. These are basically equal swings lower, an AB=CD harmonic. Next, notice the blue arrow lines. These are corrective moves against the trend, and the smaller arrows are roughly 50% of the larger arrows.

Lastly, there are the time extensions. In the funny pinkish color (coral to be exact), we have the time frame of the latest swing down. In general time retracements, corrective swings usually are 38.2%, 50%, 61.8%, or 100%. In this case, we can see the 38.2% (in black) lining up with the longer trendline. In between these trendlines, we have a potential falling wedge formation that could break out to the upside.

Regardless of what one may think of this chart, I am not particularly bearish here. I do think the market is extended, overbought, and due for a correction, but this has been the best rally we have seen in a while. Stocks are being snatched up like crazy in terms of price, but the volume is still light.

Tomorrow that wedge line is at about 790. If it goes there (and it very likely may do that before FOMC), then it could retrace any amount of this swing down to about 720. An equal move back up would break out of the wedge and hit that downtrend line at roughly that red arrow. Time will be tight for this, so it may not happen exactly in this manner, but, as I said, it is one *potential* scenario.

03.16.2009

2009-03-16T13:30:00.000-04:00

Shorted a little bit of BGU here at 21.30, we'll see what it does. Tight stop on this one.

3.16.2009 - no short signals

2009-03-16T10:02:00.002-04:00

I still see no reason to be short. My thoughts are a 700 - 800 trading range for a while, but I do not have any short signals yet as of this morning. I'm too cautious to get involved on the long side yet, but if this holds the short squeeze that would happen could be monstrous.

I do have some FAS left from 2.67 but that is it.

3.9.2009 Near a bottom?

2009-03-10T00:22:00.001-04:00

There are reasons to be cautious, but the market really feels like it is trying to start the process of hammering out a short to intermediate term bottom. That does not mean we can't go lower, and I still have the 570 area as the S&P as a viable target.

Nonetheless...

I have a long FAS position I bought Friday that I will hold as a call option of sorts without expiration. The size is not large, so I can stand to lose it all, but I do not expect that at all. If the major players in the Dow Financial Index went bankrupt, they would just be replaced (and the index could even rise from that, potentially).

At any rate, that is a speculative play that I am not worried about. I continue to focus on SRS trades (I shorted it Friday for a daytrade and shorted the open this morning for a daytrade as well).

Lastly, I'd like a bottom to form because I would like to start trading individual stocks again. However, I can't complain too much with leveraged ETFs available.

Below is my updated S&P market geometry chart.

03.04.2009

2009-03-04T21:52:00.001-05:00

I thought I would update the weekly Gann/Fib chart I did a few weeks back in order to show how things are progressing in terms of that market geometry. I also added a little fib range between the lower end of the geometric range and the bottom of the fib lines (click to enlarge):

Interesting so far how this market geometry is respected.

As I mentioned below in a post this morning, it is also interesting to lay the bottom of this fib range along the 61.8% line of the Dow dating back to the 1930's (from Brian Shannon's blog at http://alphatrends.blogspot.com - you can see the image I am referring to here).

3.4.2009 Interesting Fib Look

2009-03-04T09:22:00.001-05:00

At Brian Shannon's AlphaTrends blog, he has an image of the Dow fib levels since the 1932 lows. Interestingly enough, the 61.8% retracement coincides with the general area of the geometric range I have on the S&P.

Here is the chart on Brian's blog.

Here is the chart I have for the S&P (also posted below).

Interesting, at least to me.

2.26.2009 Thursday, Ugly Ain't Got No Alibi!

2009-02-27T02:01:00.004-05:00

Today was another bad day for the markets. While no new lows were breached, the markets failed on a second day to follow through after a very strong rally day.

Here is a chart with the three day pivot average (dotted brown line). This is one method of gauging trend - today the market fought hard but could not stay above it. 750 - 780 is the current trading range in the short term that is developing, but the indecision should resolve itself in the direction of the primary trend. The chart has two channel lines that may indicate potential targets to the downside. If the market can put together a rally tomorrow, then 800 should be the first line of resistance. The banded region is the smoothed standard error band, and in a trend the outer line can act as resistance to perpetuate the trend (which is possible here, but not indicative yet).

A clue today early at the open was the failure of the market to achieve the high of the prior day. Here is a 5 minute chart of ES - you can see the market failing to capture the prior high, especially in the first half hour of trading. Also note the large failure at the five day MA:

Also compare the TICK charts. Here is the one from the 24th (the nice rally):

The values started neutral and then shifted up to the higher end of the chart. That is a good sign.

Here was today's:

Obviously uglier. The 5-Min 5 MA could not get above zero and hold.

While it is too early to say with certainty what will happen, today was surely not promising for the bullish case. While the low end of the range did hold, this market feels like frustration is building. When that happens, then we should get some selling. A nice capitulatory washout is a dose of what this market currently needs in order to sustain a good move higher.

The one redeeming quality is that there are some potential divergences showing up on indicators like the RSI. A nice move lower with these divergences could finally provide some fuel for a short term bottom.

02.24.2009 So where are we now?

2009-02-25T01:04:00.002-05:00

And, as Delroy Lindo said in Get Shorty, "The real question is, where's he been?" It has been a long time since I've done an update.

To sum my thoughts: we are in an oversold bounce, and the question is for how long. I do not anticipate a sustained rally but it is not impossible to foresee. I will take it one day at a time.

Anyways, here for a more meaty update. My thoughts are that it looks like we have a bounce here in the works but it needs to follow through tomorrow. If it can succeed, it may see anywhere from 800 on up to 950, although 800 is going to be stiff. We do not have a follow through on today's move yet so it is too soon to tell. However, I am prepping myself to take more intermediate term positions soon. Some of my comments on the charts below will reflect some restraint and perhaps a tone of bearishness. It is simply too soon to call a bottom without some kind of confirmation. However, the prospects of finding a bottom are higher now than perhaps they were. That does not mean a new bull market, but it could mean a tradeable range for a few days, weeks, or maybe even a month or two. It is not out of the realm of possibility to see even a 20 - 30% rally, but I would not jump on board until some indication shows up to the party.

So here we go, a look back in time to 2003. Right now I think this "bottom" (if it is that) has many similarities:

(Note: all charts produced by Gannalyst and NinjaTrader software, and NinjaTrader does do some wonky stuff with text... hope it is legible)

To begin with, however, here is a picture of market geometry on the weekly chart going back to 1990 (click to enlarge).

Once I determined what I feel is the geometric midpoint of this range, then I was able to tease out some internal geometric lines of support and resistance. No rocket science here, just a few Fibonacci tools. This chart is meant to serve as a reason as to why we may expect congestion in our current place.

Next is a tribute to the one person that may be the greatest trader who ever lived, W.D. Gann (a man who called the 1929 top and bottom in advance, including the timing of the events). Gann used angles on charts that he called "moving averages" which are not price moving averages that we are accustomed to today. Instead, these are more akin to geometric moving averages. Think of a moving average that considers price and time instead of just price. A 1:1 Gann angle is the major line of a trend. Breaking that is considered weakness or strength. It is generally expected that when a 1:1 line is broken then the 1:2 line is tested. The 1:1, 1:2, or 2:1, 4:1, etc. are all ratios - i.e. one dollar per time unit moved on a chart would be 1:1.

Anyways, here is a Gann chart with these same fibs as above. Note how we are hitting a long term Gann line dating back to 1990 (click to enlarge).

That is simply meant to explore some other reasons why we have some congestion here.

With a little more fiddling you can see where some Gann lines cross and how those can mark significant market points (a reversal, a support/resistance break, etc. etc.):

One last Gann trick to show, zero lines. These are angled lines drawn from a price of zero at major market points. These are the heavy green and purple lines. Note, I hid some of the lines so it doesn't continue to look like spaghetti:

That and the timing comment are simply meant to give a *possible* conjecture out into the future in terms of timing. W.D. Gann had a whole host of other tools that I am not delving into here, but I may try some others at a future date soon.

However, knowing support resistance can be a bit less than complete. We need to look at some indicators.

Let's clear the air and show why there is no need to rush out to catch a bottom for the next bull market. We are far away from that (Note: this is an indicator created by Constance Brown in her book Technical Analysis for the Trading Professional. Her Composite Index is also used below in other charts):

Let's zoom in with the same indicator on 2003:

Now look at 2009:

Getting close but no confirmation yet on this indicator.

Now for the RSI and the Composite Index. To me, the Composite Index gives a leading edge to the RSI and helps to determine what it may be doing a little in advance. First 2003:

Now 2008:

Looking like something to the upside is brewing. Maybe not yet, but getting close.

Now to turn to some statistical indicators. Here is a smoothed Standard Error band, the Adaptive CCI, and the R-Squared. The Standard Error band helps to identify trend movement (similar to a Bollinger Band), the Adaptive CCI is a CCI indicator that takes cycle information into account, and the R-Squared indicator shows strength of trend (high or increasing is strengthening trend, low or decreasing is weakening trend or just no trend/chop).

Here is what it looked like in 2003:

Here is what it looks like today:

And for my final party trick here is the daily:

RSI/Composite:

And Adaptive CCI/Smoothed Error/R-Squared:

Feel free to judge for yourselves. I personally am not looking to go aggressively short here (which may be common sense), but it is possible that I could be wrong. I just don't want to end up like this:

1/13/2009 Update

2009-01-13T10:57:00.000-05:00

Sold SRS this morning at 63.85. Market shorts still look good, but timing is everything.

01/12/2009 Continued Weakness

2009-01-12T12:02:00.000-05:00

Some serious confirmations are coming in today. I think the next leg lower is starting.

I hope to share more later. Here's a little tidbit: I have a target for oil around $17.

01/08/2009

2009-01-08T11:50:00.003-05:00

Rally done?

I bought SRS a couple days ago at $50. I took a double position and sold half this morning at $55 to eliminate my stop loss.

So what's going on here then? Well, it looks like SPX should go for another test of its main trendline for the rally at 880 - 885. That would be the third test. The fourth is usually the deal breaker. So we should get a test there, a bounce (with IYR breaking down to $34 to bounce I think) and then a short move to retest that will likely fail. I think that should be by Jan. 20th or so at the latest, maybe a couple days later. Could even be sooner, like the 14th. Or maybe it doesn't happen that way at all!

So, if one wants to short according to this plan, wait for the bounce on SPX and short that rally.

Anything can happen, perhaps I am wrong. I have a whole host of TA techniques I'd like to post, but I need to do it later.

Good luck all! Sorry for being so incommunicado.

12/30/2008... Later that day...

2008-12-30T16:05:00.002-05:00

I have a new chart in my StockCharts Chartbook that puts out some price thoughts on where the VIX might go. I do not have the timing confluences worked out... just the prices.

I am also wondering if IYR is trying to put in a head and shoulders bottom. That would target the $50 level. I do not have it in my chartbook, but my Gannalyst IYR weekly chart has just under $50 as a major Fibonacci pivot. Seems far-fetched from here, but anything is possible.

12/30/2008

2008-12-30T14:48:00.002-05:00

I hate that I have not kept this blog up to date. Instead of winging things like many blogs do, I am trying to develop a base of broader market analysis in many sectors including both space and time analysis (i.e. price and how long it might take to get to that price).

Just as a teaser, here are some potential targets. These are quite likely multi-month targets so please do not think I expect them next week or even next month. I will also be adding the corresponding charts to the blog once I get this wrapped up.

S&P 500: $545.75 (you can see the geometry used in my StockCharts list)
Oil: $16.87 (also in the SC list)
IYR: $7.44

It is not necessarily likely, but it is possible that the S&P 500 could move higher before resuming the downtrend. I would give all the way to 1000 or so as a possibility but not a probability.

Oil could maintain its support at 41.20 as it is dramatically oversold. A price like $27 could also hold.

IYR could try to move higher from here but I think time is running out. I did think $42 was a plausible target but it is taking too long now perhaps. The major Fibonacci pivot is up just under $50, and 61.8% from the pivot low is at $40. So perhaps IYR has seen its top before it sees its low in the short term. Time will tell.

At any rate, I have been in cash almost all month. I do not have the luxury to be daytrading at the moment.

Happy holidays everyone!

12/16/2008

2008-12-16T21:08:00.001-05:00

Well the market seems more decided now. It looks like this second leg up in this correction pattern is underway, so I expect higher targets of 945 - 950, 970, or 1000 on SPX. More thoughts to come. I have updated IYR fibs as well as SPX.

12/15/2008 - Small Update

2008-12-15T11:07:00.001-05:00

I am in the process of catching back up on all my charts, but my rally targets are now lower. 950 may be the top.

Actually, I'm starting to think that the rally may be done but that it could take a bit for it to roll over. I am not completely sure yet, however.

12/7/2008

2008-12-07T23:39:00.001-05:00

My last week of the semester! I've got three finals on Friday and one on Saturday (13th).

Regarding the market, this has been one heck of a ride. I can't say I've maintained my discipline enough to keep up with it properly, but this is definitely trial by fire for most traders I read or converse with.

We are at an inflection point of sorts wherein either a broader rally will reveal itself Monday and thus probably carry a larger zigzag pattern off of the lows for its second leg up to 914, 940, 970, or 1000 (I lean towards 970 or 1000) or a downturn in a new leg lower. My SPX 30-Minute chart elucidates the conundrum here. It will be resolved Monday.

That said, the futures are up quite well, so perhaps this rally will continue. I am sidelined at the moment.

11/6/2008 Update

2008-11-06T14:38:00.001-05:00

My $SPX 10-min confluence may have enough data now to have a market pivot to project for the rally. Have a look!

11/2/2008 Update

2008-11-04T00:55:00.001-05:00

Been a bit since a formal update here... swamped with too many hours in my MBA program.

At any rate, things look much more bullish now. I am turning cautiously bullish and am waiting to see the quality of the first pullback. The daily VIX chart I have is potentially breaking down, and it has a similar look as it has in prior peaks during this bear cycle. My red trendline off the top is a projection but is not set in stone.

We also have a couple of solid accumulation days now. I think the markets are probably a bit fragile here, but this looks to be the makings of an intermediate term rally. The upside target could be anywhere from 1050 even up to 1200 (although this is more doubtful perhaps).

At any rate, I am waiting for a real pullback to measure its quality.

10/24/2008 Update

2008-10-24T09:19:00.004-04:00

Did I mentioned I turned bearish yesterday? Whoops! Better late than never I suppose.

I have developed a way to look for distribution patterns on the 30-min, and I bought SPY puts at the false break yesterday. The rally was fueled by energy shares and was all smoke and mirrors.

I don't have time to update today, but the old lows should not hold and prior bear market lows will probably be revisted very soon. The fast the government lets this happen the better, but they will continue to try and intervene and just mount the selling pressure.

UPDATE (10:15 AM EST): This does not look like capitulation. At least not yet.

10/21/2008: Thoughts for Tuesday

2008-10-21T01:11:00.002-04:00

Key notes:

1. Daily VIX: the RSI is challenging bullish support and the line chart is approaching the 20 MA. Further, the stochs are nearing 50 and the MACD is crossing. It certainly appears that this is a reversal consistent with an intermediate rally in the markets.

2. Hourly VIX has the EMAs I have plotted crossing for the first time in a significant way. The 13 EMA actually closed under the 50 EMA. A significant indication that it may be rolling over. The RSI failed at bearish resistance and is now headed into what looks like bearish support. That indicates lower VIX prices - a positive sign for the markets. Stochastics are deep into the oversold territory - consistent with a failing price. Lastly, my CCI stochs did not even make it out of the oversold region before rolling over and flatlining again. Also observe the trendlines on the hourly.

Thus, the most significant factor today to me is the VIX movement. This is consistent with the termination of selling declines and the initiation of intermediate rallies.

3. SPY Hourly: SPY ran right up to its trendline on lightish volume. Its RSI is entering bearish resistance and will either stall here to go lower and consolidate, probably at 40 - 50 (most likely 50 due to its significance in this whole chart), or SPY will muscle up to one of the three black lines I have drawn (the fib clusters). It looks like the most obvious would be nearest to the red downtrend line I have drawn. So far the RSI patterns are not showing any price projections, but they may in the next pullback. That would be another confirmation for fib projections. I have only included a few fib measurements in this chart - a broader study may be needed soon. Hourly stochs found bullish support and are headed into resistance. The fact that they have not crossed leads me to believe that it is possible for the market to "umph" up into resistance before falling back.

The single most important factor in a pullback is to hold the bottom blue line on the hourly chart to keep the uptrend intact. Some would call this an ascending triangle, but I prefer to view ascending and descending triangles as continuation patterns. Instead, this looks like a symmetrical triangle or just a coiled spring ready to pop in either direction (which appears to be up at the current time).

4. SPY 30-min: Another potential target for a move up in the morning would be to the red line.

5. SPY 10-min: The floor pivots for tomorrow have tightened up. A pullback to S1 is not out of the question. The RSI once again pushed above bearish resistance and actually confirmed the bullish move by maintaining bullish areas in the RSI. Stochs have a similar pattern.

So what can we expect tomorrow? My guess, and it is just a guess, is either a gap higher into short-term resistance followed by a pullback, consolidation, and breakout over the next few days. Alternatively, we could see a pullback to S1 or even S2 and then consolidation. The important thing for the current pattern is the trendline along the bottom plus the VIX movement.

10/20/2008 Trendline Thoughts

2008-10-20T14:01:00.000-04:00

I added a SPX hourly chart under 9.0.2 in my chart list that will visit a thought on trendlines. I could be wrong in this case, but it is something to think about in my little opinion.

10/19/2008: Public Chart List Updated

2008-10-19T23:50:00.001-04:00

I culled some charts out of my public list because it was so large. I do have these in reserve, so if anyone out there is reading my blog and wants one of them back (or more), just let me know!

10/17/2008 Commentary

2008-10-17T09:19:00.002-04:00

Options expiration today and max pain is quite a ways up for SPY. However, the chart prices will always come first. Just because it is options expiration does not mean that we can always count on an enormous move, although volatility is more likely than not.

I am watching SPY almost exclusively today. On my 10-minute chart, you can see the floor pivots (the green line is the pivot point, blue lines are resistance levels, and red lines are support levels). Indicator-wise, I think it would be constructive for the RSI to pull back into the area marked as "Bullish Support". A pullback to that level coinciding with an area of support on the price would be good provided it holds. On the stochs, the 14,3 would do something similar (a pullback somewhere between 40 - 60 to find support).

The futures on any normal day in a normal environment would seem significantly down. However, in this trading environment, they are not down in an unusual way. We will see what the day brings.

10/16/2008 More Thoughts

2008-10-16T23:54:00.001-04:00

I updated the harmonic butterfly chart from yesterday. That is not a prediction of price but actually just something to watch in case it forms. If the lower low (X on the pattern) is broken I would look for it, and I would look for it too if C is put in into my target and does not go higher. A move above the A point violates the pattern. I also adjusted the fibs slightly.

Today's market action actually seemed fairly bullish, but OE is tomorrow so all bets are off.

10/16/2008 Maybe some harmony in this mess?

2008-10-16T01:19:00.001-04:00

Well we have max pain coming up this Friday, and it is quite a ways up from here. So I would expect a lower open tomorrow and then a charge up into close of Friday. It will not be a buying opportunity most likely.

However, there is a potential harmonic pattern forming.

You can see this in my Chartlist. It is the one all the way at the end. It is called a Butterfly Buy pattern, and it would help to measure a double-bottom. It is a measure of market psychology as well - a bottom is formed, then a mad rush to "catch the bottom", a retest where some more people come out to "catch the bottom", and then finally another test wherein buyers are either too committed or tired of being burnt.

10/15/2008 Pre-Market Open

2008-10-15T09:28:00.001-04:00

I have the SPY floor pivots drawn today. Each are at pretty critical levels, especially on the S1 and S1. Today will be interesting.

10/13/2008 Some Thoughts

2008-10-13T12:38:00.003-04:00

I had two midterms for graduate school over the weekend plus a homework assignment... I've been slammed with life lately but hope to update more soon.

I have updated my hourly VIX chart. It looks like it could be trying to confirm a rollover. A nice indicator bounce into a resistance failure on a pullback would be the confirmation that a rally should be in play.

UPDATE: SPY may retrace back down at some point to the $91.50 area. Not absolutely, but if there is a pullback it is a sensible area.

UPDATE: The SPY 10-min looks like a bull market move on the indicators. That does not mean a bull market is starting... it is just putting in bull market readings on the indicators. In other words, on the 10-min and only on the 10-min, SPY is finding what looks like bullish support. That means that it appears to be really confirming its uptrend. On the broader charts, I don't think a bull market is forming by any means, but in the short run it means the momentum is stabilizing to the upside.

10/10/2008 We're still breathing

2008-10-10T09:55:00.005-04:00

Amazing, huh? Everyone is still alive and going to their jobs...

Today will be interesting. Seven days of heavy selling should exhaust the sellers at some point. In my opinion it is still way too late to sell. I'm not sure the bear market is over - in fact I think it is not - but selling here is too late. I cashed all my 401K and long term stuff in January. That's a different story though... this is not about my long term strategies (unless someone is interested).

The daily VIX gapped up. That is a positive sign for a reversal. It doesn't mean it will reverse, but bottoms in this bear cycle have started with VIX gaps. Stay tuned...

UPDATE (12:25 PM): Same song, different day. Intraday downtrend line broken. Higher low established. Now watch for a descending triangle to form and a selloff into the close around 3 PM. If it doesn't happen, then we may have seen the short-term bottom for a tradeable rally. *MAYBE*

UPDATE (3:15 PM): Hey, this looks much better. Will it hold?

10/9/2008 Recap

2008-10-09T23:13:00.001-04:00

So what is with all the selling?

I actually was discussing this with a friend today, and I noticed that TK (www.tradingwithtk.com) mentioned the same thing. The markets start to build, today the 10-min intraday downward trendline was broken, a higher high formed, and then it seemed to be gaining some constructive momentum.

But then something peculiar happened... the same thing that has been going on for a number of days. A descending triangle formed.

You can read about descending triangles elsewhere, but generally speaking they are bearish continuation patterns (meaning they form as a pattern during a downtrend and then typically continue the downtrend when through). These patterns represent a price that rallies and then sellers get more aggressive about selling - so much so that they don't wait for it to test a new resistance level. Then, once the lower line of the triangle breaks, it free falls a bit (the pattern gives a target, but that is a different discussion).

Today, a descending triangle formed right before 3 PM EST. We all saw what happened from there.

So what is the cause of this? Mutual fund and hedge fund redemption. People all over the place want their money in cash, and the way mutual funds and hedge funds work (at least lately) is they sell lightly through the day and then just start dumping during the last hour.

I'm not sure what will happen tomorrow, but if we get constructive movement that abruptly turns into more descending triangles, I will buy puts.

10/9/2008 Update

2008-10-09T13:23:00.002-04:00

Not a reason to rush in and buy, but the SPY 10-min broke its intraday downtrend line and is trying to form out a higher low. See my 10-min chart. I will update it during the day.

UPDATE:

Well that failed. Hello Mr. 2001 Oct. S&P 500 low, you've been lonely haven't you?

Update

2008-10-08T09:59:00.002-04:00

I did not get a chance to post last night, but I had a near-term target for SPY at 950 - 960. My hourly VIX monitor is turning giving the green light for a tradeable long position. Went long today and we'll see what happens.

P.S. I know my commentary is scant lately - I've got MBA midterms, a bunch of work, etc. - but I do update my charts throughout the day. I am only watching the SPY charts at the moment.

So what's the frequency Henry? George?

2008-10-06T00:51:00.001-04:00

So we are now poorer as a nation in terms of retirement savings and have an additional $850 billion in debt to boot. Whomever decided our politicians were smart enough to vote on public economic policy needs a head check.

That aside.

My near term target for the S&P 500 is around 1060 - 1070. That may be tomorrow (on Monday). I am still short LEG, GCI, and UPS. I should have (but didn't) take on some leveraged risk with options on Friday. Chalk that up to being a young trader (not young in age, but young in experience).

I also added a chart of IYR (real estate) in my box of goodies a.k.a. my public StockCharts list (the link is in the "About Me" section). How far does real estate have left to go on the downside? Take a look, quite a ways. Roughly $41 - $42 is the target. I am not short IYR but I might be on a bounce unless it can violate the pattern. IYR includes a bunch of MREITS and commercial real estate (I believe).

Best of luck to everyone tomorrow. It is my opinion that some of the folks who seemed like raving lunatics just six months ago may have understated the problem we are facing.

October 2nd Comments

2008-10-03T01:28:00.001-04:00

Short recap, not much to say. Markets fell significantly in price but the indicators are showing positive divergence. In my eye, it has a little room left to go down, but another bounce should probably be soon.

Forget gold. Cleared out. I am short GCI and LEG for small trades, and I am short UPS as well.

October 1st Recap

2008-10-02T01:08:00.001-04:00

Today was somewhat of a pause day as the markets continued to grind out the very weak uptrend they are in. I do think that the market is poised to go down further, probably below the low seen on Monday. To put things in perspective, it has taken two days to recover roughly half of Monday's drop. Typically the market averages have a difficult time maintaining more than two white candles at a time, so I expect tomorrow should probably move lower.

The futures sold off after the Senate vote passed, but I think they would have sold off either way. If you look at my SPY 10-min chart, you will see that the price is moving up into resistance. The red box is the ideal short entry, although I think getting over the 5-day MA (at 117.14 right now) will be extremely difficult. Once up there, this looks like a Gartley sell pattern to me.

The VIX still looks bearish to me until it breaks trend (which it has not yet done).

Another blog I enjoy watching recaps on, www.tradingwithtk.com, recently posted a recommendation to short FINL. I like that play. I also am looking at shorting GCI potentially and LEG (LEG is another TK recommendation). I also am looking to short SPY and may also short IWM and add to gold. I am using the VIX and the SPY chart to determine short entry timing.

10/01/2008: Wednesday's Trading

2008-10-01T09:42:00.002-04:00

Seems that SPY is seeking out its floor pivot and the Q's are resting on theirs. IWM moved below and is now testing it for resistance (you can see these things on my 10-min charts).

Gold is back up into a consolidation channel and GDX is trying to violate a 10-min descending triangle.

I am watching FINL for a short entry perhaps and the indexes mentioned above.

09/30/2008: Brief Recap

2008-10-01T00:21:00.001-04:00

Today I expected one of two things. The more constructive thing (in terms of the markets moving up) did not happen. This scenario would have been a large gap down on high volume that would reverse mid day and close above the open. The VIX would gap up and put in a black reversal candle. That did not happen.

Instead, we got my second scenario. This involved a grinding movement up on light volume to retrace some of the big move from Monday. It basically was a slow motion short squeeze or traders taking advantage of the Jewish holiday to run the price up (and don't even get me started on how Congress can't skip one holiday to face one of the largest financial crises ever known to man).

So what do I expect? I expect more selling, and I expect to short. On SPY, I think that level may come up around the 5 day MA (the pink line on my SPY 10-min chart) which is now around 117.87. This is also near a 61.8% retracement from Friday's high and the bottom of the congestion area that the market traded in last week. It should serve as stiff resistance.

Today I took a long position in gold thinking that GLD would hold above $86. When it did not, I sold half of it. I will sell the rest if it moves under today's low. I use DGP for my gold trades. I looked at GDX as well (miners) but I am not happy with the price action yet. It broke short term resistance on the 10-minute chart but fell back below it and could not make it back up for a retest. If GDX can hold in this area for the MAs to flatten out, then maybe it stands a chance. Otherwise, the 10-min pattern resembles a descending triangle which is short-term bearish.

09/30/2008: Tuesday's Trading

2008-09-30T10:09:00.000-04:00

As bad as yesterday was, I am not seeing signs that it was *the* capitulation. I think the market could rally today, tomorrow, maybe even through the week, but these are sellable rallies, not places to take big or risky long positions.

9/29/2008: Monday's Trading

2008-09-29T07:25:00.001-04:00

The futures have plunged overnight, so obviously my long play at the 5 day will be sliced through. Now I will be watching the trading range that SPY and DIA are currently in. Things are still very mixed with SPY, XLF, and DIA participating in some constructive moves, but the rest of the indexes (QQQQ, IWM, etc.) are not looking that great.

9/28/2008: Thoughts before the market open

2008-09-28T23:10:00.005-04:00

I am seeing quite a bit more bullish outlooks lately, and I must admit there are cases to be made for the bulls.

That said, I am still extremely cautious here. I personally don't find a need to call the bottom, and I do see some signals that can be interpreted as bearish.

Overall, however, things look undecided (just as the soap opera in the news over this bailout is). QQQQ, IWM, materials, oil, and the like appear to be in short term downtrends with lower highs and lower lows. XLF and SPY are stuck within a trading range. Only the Dow (DIA) appears to be making an attempt to break out. The VIX is still high and has not yet reversed. Until it meets my criteria of a new rally, I will not be very optimistic. Caution should rule the day right now. In my book, there is no need to try and think one is smarter than the market. In the battle between one's viewpoint and the market, the market always wins.

So my thought is to play it safe until the market decides what it wants to do. In my small and minority opinion, I think the markets are equally weighted in the bullish and bearish directions right now. Gold looks decent for a trade, but I do not trust it much further.

At this point, I will stick with caution.

I updated the SPY 10-min with floor pivots and made a few comments.

Also watch the shorter time frame charts like the 30-mins for formations of higher lows and higher highs. Right now the S&P futures are trading down near the 5-day (the pink line on the SPY 30-min), and it might be worth trying a long position there if someone were so inclined. I would advise a smaller position with a tight stop. Personally, I would buy call options equal to a stop loss.

Here is a link to a S&P futures chart.

09.23.2008 Tuesday's Trading

2008-09-23T09:56:00.001-04:00

I am omitting the pivot levels lately because the market is so volatile that it makes them almost impossible to use.

I am also planning for a vacation later this week so my time is limited. I have added a SPY 5-minute chart to handle the volatility. It is chart 9.9.9 in my chartbook. I will updated it throughout the day.

Also it looks like the VIX may be rolling over at least for the short term. Look at the hourly chart for the stoch cross.

09.16.2008 Recap

2008-09-17T00:24:00.001-04:00

Today looks like a real reversal. The VIX painted a reversal candle, new lows were off the charts, the SP 500 hit weekly resistance at the 50% fib level, and many other indicators were at tops. This was accompanied by strong price action across the board and very high volume. I managed to buy some SPY calls near the open of the day and expect that a target of 126 is probably reasonable. However, risk management is always priority.

Interestingly enough, on the SPY 10-minute, two harmonic patterns formed (bullish crab and bullish Gartley). You can see them on my StockCharts list.

I also like XLE for a short term trade maybe even up to the 200 MA. It has formed what is called a "2B" pattern from Trader Vic.

09.16.2008 Tuesday's Trading

2008-09-16T11:07:00.001-04:00

I do not think this was necessarily capitulation, but I am long in a call trade on SPY. I am monitoring it closely, however. Risk management remains #1

What a day

2008-09-15T23:11:00.003-04:00

What else is there to say?

I am going to stop posting pivot levels because it takes quite a bit of time to draw them up on a bunch of charts especially when I don't use most of them. I have only annotated SPY today because I have a small trade on it.

At any rate, the harmonic pattern I thought may be developing is still in play but it is an extension at this point. A bullish crab puts a buy level around where the following weekly chart shows support:

This chart is probably fairly blurry, but you will find it in my public StockCharts list.

Bottom line, looking at the VIX and other indicators, I think capitulation is near. Maybe even tomorrow.

09.15.2008 Today's Trading

2008-09-15T10:03:00.002-04:00

Very weak selloff. Will this be an intermediate rally or is it a headfake for people to buy in? I am waiting a little bit but I am seeing nothing that indicates complete meltdown.

That may also mean that the bottom is not in.

History Being Made

2008-09-14T22:52:00.003-04:00

[EDIT: Looks like a capitulation washout will be coming soon, at least from here.]

I am not going to comment on the historic nature of tonight as you can see that everywhere you look. However, it does mean a washout of a capitulation could be near which would mean going long. If you see a high VIX (30 - 35) with the Dow at 500 in the negative, it may be time to go long. There will be indications, however, so I would not recommend trying to get too fancy.

What it probably does mean to me is that my pattern studies will more than likely not play out. I had a few others to add to my SPY below, but I will refrain for now. It will be important to gauge tomorrow's movement to see what new patterns might be emerging.

As always, risk management is priority. Unfortunately, I exited all my short positions on Friday based on stops and the like, and I did not like the risk of a short position going into this weekend. But I am not fretting too much as a great opportunity should come soon to move counter-trend for the intermediate term.

Floor Pivots for tomorrow:

	SPY	QQQQ	IWM	DIA
R2:	127.76	44.16	73.24	116.04
R1:	126.92	43.79	72.75	115.42
PP:	125.38	43.35	71.89	114.21
S1:	124.54	42.98	71.40	113.59
S2:	123.00	42.54	70.54	112.38

	XLB	XLE	XLF
R2:	39.29	70.45	21.89
R1:	38.69	69.69	21.52
PP:	37.70	68.22	21.15
S1:	37.10	67.46	20.78
S2:	36.11	65.99	20.41

Added a SPY Potential Harmonic Pattern

2008-09-14T10:44:00.003-04:00

[EDIT: After the news tonight and the futures movement, it is likely that this pattern will not materialize. A note on patterns - you wait for them to both complete and confirm before initiating a trade. That is the nice thing about harmonic patterns as well as any other pattern study - it provides predictions of potential future movement. Indicators and moving average systems are important, but they generally are lagging to the market.]

I only have had time this weekend to add one harmonic pattern to my list. I will try to do more later today or tonight.

It is under my public StockChart list, but I have added the picture below:

09.12.2008 Today's Trading

2008-09-12T11:00:00.000-04:00

I am very short on time at the moment and will try to post more later, but, bottom line, I think the market is in for a bigger move down but it will move up into options expiry next Friday. SPY may even get up to $129 - $130.

Market Recap

2008-09-11T23:55:00.001-04:00

Rough day for shorts today at the close. With the recent volatility, it's anyone's guess what tomorrow will bring. Managing risk is #1, and I learned that lesson the hard way today.

I'm going to relegate sector analysis to once a week. Too much for me to keep up with!

Floor pivots for tomorrow:

	SPY	QQQQ	IWM	DIA
R2:	128.42	44.67	73.37	117.29
R1:	126.97	44.14	72.65	116.07
PP:	124.28	43.15	71.27	113.65
S1:	122.83	42.62	70.55	112.43
S2:	120.14	41.63	69.17	110.01

	XLB	XLE	XLF
R2:	38.19	69.03	22.38
R1:	37.54	67.85	21.92
PP:	36.59	65.78	21.04
S1:	35.94	64.60	20.58
S2:	34.99	62.53	19.70

09.11.2008 Thursday's Trading

2008-09-11T09:46:00.001-04:00

I would be remiss not to mention the symbolism of this day in the U.S.'s history. My heartfelt feelings go out to all those who experienced tragedy seven years ago.

Today the market took it on the chin in the opening minutes. SPY and XLF are near their lowest daily pivots while DIA is below them. The VIX is making new highs for the cycle.

09.10.2008 Market Recap

2008-09-11T01:31:00.004-04:00

I was at home today tending to a sick family. I did manage to open a couple of short positions on SPY and DIA, but apart from that I was not able to do much else (hence no thoughts posted).

I have been thinking for a bit now that the story in the media, that is, the financials, is not the real story. The real story is the strengthening dollar and its effect on hedge funds. The price of oil has fallen dramatically and energy and materials stocks are the worst performers since the July bottom. Tech is close behind. The rising dollar causes an unwind of the carry trade which boosts the dollar's rise. Oil is not supported by demand due to global slowdown, and the rising dollar is adding to this effect. Hedge funds have systematically dumped commodity related stocks. The rising dollar is killing the economy. Funny enough, a rise in oil is what would be good for the market, but I do not think it would last because it would be sold into. Anyways, just my musings...

Today was really a little push lower and then a breather as is typical following big days. It is possible that there may be a couple of days like this or even a little pop. Such a pop, however, would be something to sell into. Looking at the volume lately (you can see charts in my StockCharts public list), the downward pressure has simply dwarfed the upward pressure. The VIX is off the chain and going straight to the sky. Who knows how long this all can keep up, but I expect that the markets will see below the July lows before this is over.

I still do not want to short financials as they are one of the leading sectors.

Performance Charts

Since the July low:

Roughly last 20 days:

Last two days:

Floor Pivots

	SPY	QQQQ	IWM	DIA
R2:	126.07	43.54	73.11	114.77
R1:	124.90	43.17	72.29	113.89
PP:	123.72	42.81	71.36	113.11
S1:	122.55	42.44	70.54	112.23
S2:	121.37	42.08	69.61	111.45

	XLB	XLE	XLF
R2:	37.51	67.81	22.43
R1:	36.90	66.78	21.70
PP:	36.22	65.24	21.17
S1:	35.61	64.21	20.44
S2:	34.93	62.67	19.91

Charts Updated

2008-09-10T01:24:00.005-04:00

Sector performance over the past two days:

Roughly twenty days:

Roughly since the July low:

	SPY	QQQQ	IWM
R2:	129.02	44.30	75.03
R1:	126.12	43.38	72.92
PP:	124.46	42.86	71.74
S1:	121.56	41.94	69.63
S2:	119.90	41.42	68.45

	XLB	XLE	XLF
R2:	37.85	68.68	23.24
R1:	36.91	65.96	22.23
PP:	36.31	64.61	21.70
S1:	35.37	61.89	20.69
S2:	34.77	60.54	20.16

09.09.2008 Tuesday's Trading

2008-09-09T09:54:00.001-04:00

Five and ten year treasury yields are falling as the market goes up. Things are going to roll over soon.

I am waiting for a signal on the SP 500. The 10-min MACD should break and then retest on divergence as the hourly stochastics move into overbought range. Stay tuned... the short entry is coming.

Here is what I am looking at:

Shorts:
SPY
QQQQ

Longs:
DUG
SMN

Thoughts on the FRE/FNM Bailout Day

2008-09-09T01:15:00.006-04:00

First of all, I executed exactly zero trades today. I am in 100% cash, and I believe the next leg is lower.

I also reorganized my public StockCharts list, and I added some hourly charts. The link is in the "About Me" portion of the blog. Let me know if the one poor soul who reads this blog (i.e. me!) thinks the list should change. I am still short on time these days so I will be brief here.

A man I respect and listen to says that, barring a huge influx of foreign money into the markets like in 2006, things are going to roll over for a couple of weeks to the downside. Based on my own measurements, I agree.

First (and foremost) of all is the VIX. The VIX is moving in a normal way to indicate the first move (or wave) down has completed. We should expect at least two more waves, and so far the VIX is acting very normal to indicate this.

Secondly, during this whole rally five and ten year treasuries yields have declined as the market went up. That means less risky investments were being purchased reflecting a reluctance to assume risk, yet the market rallied on light volume. That is a bearish sign. Today, near the close, the treasury yields fell as the S&P 500 rose. That indicates a move to less risky investments as the market rallied. Again, not a good sign for the longs.

On the plus side, financials have really proved their strength, at least for now. They performed very well today. I do not plan on shorting XLF any longer and may instead go long XLF on a bounce play. This whole rally has now been very lopsided towards financials (see performance charts below).

On the flip side, energy and materials are leading the market lower. These may be good short candidates along with tech (QQQQ).

I am waiting on a VIX short signal or a move on the charts that indicates a top (although both will probably happen about the same time). Until then, I am patient.

So what to expect tomorrow? I personally expect a modestly lower open that will rally up to a high, maybe even today's high. On my SPY 10-minute chart, that would break the MACD trendline and do a retest on negative divergence. That would be the perfect short entry; we will see what happens.

Performance chart since the July low:

Performance chart over roughly the last twenty days:

Performance chart over the past two days:

Floor pivots for tomorrow:

	SPY	QQQQ	IWM
R2:	130.37	44.94	75.53
R1:	128.68	44.13	74.01
PP:	126.55	43.40	72.82
S1:	124.86	42.59	71.30
S2:	122.73	41.86	70.11

	XLB	XLE	XLF
R2:	39.10	71.56	24.33
R1:	38.13	69.75	23.50
PP:	37.46	68.49	22.68
S1:	36.49	66.68	21.85
S2:	35.82	65.42	21.03