Wednesday, December 31, 2008

Close The Door On Your Way Out

Well there she goes. 2008 gone as quickly as she arrived. What a crazy year and one I know I will remember for the rest of my life. Learned a lot of trading lessons this year and hope benefit from them in 09. It was generally a great trading year for us short term guys. So why are you still buying and holding? I assure you that 2009 will be a traders market. So we have plenty to look forward to!

Anyway, the way the market acted today and so far this week really means little to next week. Once we stayed over the pivot point for today the market just seemed to melt up and it was a great trade to buy the 50% retracements that occurred at key points throughout the day.

Oil was up huge but it doesnt matter because the volume was so thin so the boys at the Nymex just pushed it thru the roof to their liking. The curve is still in contango, meaning the back months in oil futures contracts are priced much higher than the front month. Even today the back months rose higher than the front, thus I would expect crude to fail and continue back below 40 next week.

I am keeping my eye on Gold as it looks like the metal wants to breakout of its long consolidation its been in since topping last March over $1000. Gold ran up 20 bucks today to close near 880. This is after an almost perfect technical 50% retracement the last two days of its previous advance last week. If gold holds current levels and gets over 900 on volume I would be a buyer of GLD for sure. Would not surprise me to see gold as one of the early surprises of 09.

Overall the SPX is pretty much right where it was a month ago and we are surely looking for an expansion in volatility come the new year. However direction is still uncertain. But I gotta say that as long as we stay above that 850 level in the SPX then we will continue to grind higher.

Happy New Year.

Monday, December 29, 2008

About Me

I have always been intrigued by the stock market and can remember when I was 11 or 12 years old, flipping channels in the mornings before school and watching the talking heads yell about all these numbers that kept fluctuating on the screen. I remember wondering why people placed such importance on the movement of those numbers. But I knew it must have been worth it to them. So on several occasions I came home from school and checked “the numbers” to see how much they changed during the day, even without knowing their significance. After high school I found myself with some savings from summer jobs and opened a trading account thinking I knew it all. Of course I lost my shirt but took note of my errors and came back later that year with a game plan that I used to stay disciplined and rule based.

I earned a bachelor's degree in Finance from Washington State University, where I developed even more of a passion for following and analyzing the financial markets and economics.

I think that one can never truly master the markets and that is one of the appeals trading has to me. There is never a routine day. There is always something that gets you out of bed each day. The challenge of finding out where that next move will be is a treasure hunt. Above all, in the amount of time I have been involved in trading I have learned that the greatest trait of being a successful trader is humility. After all, we are only as good as our last trade.

Sunday, December 28, 2008

This Week's Trade 12/29

This week will be another slow week with low volume. With the Christmas and New Years falling on Thursday's this year that means weekends are being extending. The key word for the markets this week remains what it was last week. Boring. The daily ranges will be smaller than usual and honestly if you dont have to trade, then dont force it. But I'm sure there will be a few nice setups we can play for as we sit just above the critical 850 support level. To be exact we closed the week at 872 on the cash SPX.

As long as we stay above the 850 area we are looking bullish on the interemediate term. However we really need to get back over the 880 level for me to trade the market from the long side. After we broke 876-880 last week I focused more on the short side, as 880 is a very important level to hold. Until we get over it I would be a seller of rallies intraday.

Economic data is light this week as expected. Just Tuesday's Chicago PMI and Consumer Confidence, Wed's Jobless Claims, and Friday's ISM index.

Overall we are looking for some stale price action going into the last few days of 08 so dont be looking for much. But if the market fails at certain support/resistance levels then go ahead and scalp a few bucks and take those gains. Otherwise enjoy the quietest week of one loud year!

Monday, December 22, 2008

Manic Monday

Today there were a lot of analyst downgrades that sent the market lower all day. We had a hard time getting over the daily pivot up at 888 today and from the early going the market showed weakness. As soon as we broke the 876 support level I started to look for short setups. The best trade of the day came when the 15min chart formed a nice bear flag in the low 870s right before 2pm et time. From there we dropped a quick 15 ES points on the futures and the trade worked well to the downside. The market reversed course in the last half hour as it has been doing alot lately. We closed well off the lows but still a bit below that key 876 area on the futures.

876-880 is a huge level of resistance now that I will be watching the remainder of the week. I think Tuesday gives us some more possible downside if we cannot break higher above this level. To the downside it is probable we can see 850 and below that watch for 838-840 for support.

During this week anything can happen with such low volume but the bias appears to be set for a bit more of a pullback if we cannot get over the 880s and close there.

Odds are that this week will be a slow grind out sort of market week, with plenty of choppiness. So take gains when you get them as I can already tell this market is a bit more erratic than usual.

Sunday, December 21, 2008

This Week's Trade 12/22

This week we have a holiday shortened week and honestly even the days the market will be open will not have impressive volume because traders are going on vacation. With that said, there could definitely still be some good trading. I would like to see this market break out over the 915 SPX level like I have been sayin for a few weeks now. If we do I would look to buy the first pullback and look for first target of 930 with possible upside into the 960s.

Below us this week we have the 876-880 support level which I would like to see hold. If the price action falls beneath this area I think we can see some selling down to the 850s where stronger support resides.

Economic data being released this week is light. Tuesday we have final GDP for Q3, Existing and New Home Sales, Mich. Sentiment. On Wednesday we get Jobless Claims, Durable Orders, Personal Spending and Income.

One thing to remember about holiday shortened weeks is that they tend to do things that shouldnt happen if there was regular volume in the market. So expect the unexpected for this week. Basically anything that occurs for these next two low volume weeks should be taken with a grain of salt because the first week of January will be the one where the markets true direction will take hold. But nevertheless, these next two weeks we could of course see a nice Santa Claus rally, or whatever you wanna call it.

Overall, I am bullish on the SPX if we hold these levels and specifically the 876 support I referenced above. Looking at the daily chart you can see that the price action is contracting tighter and tighter the last several weeks. This is evidenced by the Bollinger Bands (green colored lines) becoming tighter. When this happens it is telling you that the market is coiling up, and like a spring, it will eventually pop. The other thing the bulls have working on their side is the 20 ema curling up and approaching the overhead 50 ema.

Until the SPX breaks below 876 or above 915 I would only be swinging for quick gains because it will likely be choppy till then. But it is coming and when the breakout or down comes then you can let your positions ride a bit longer.

Friday, December 19, 2008

Working For The Weekend


Well as the week comes to a close we should see much less volume next week as many traders are on vacation for the last two weeks of the year. It could still be decent trading but we really are just stuck in the mud right now. Today's action was not very inspiring to the bull case. However it seems like we will hold the pivotal 876 level heading into the weekend (bear with me as I am typing this up with 10 minutes still to go).

It has been an interesting week but sort of unfulfilling to the bulls after Tuesday's rally was sure to break us thru that tough overhead ceiling around 915. It didn't. So we go into the weekend pretty much flat on the week.

The dollar bounced nicely just as the Euro hit 1.47 overnight Thursday morning and reversed sharply lower by today. Friday the Euro fell to 1.379 before coming back to 1.387. I would expect a continued pullback in the Euro.

Oil is interesting here because the Jan contract that expires today went as low as 33 smackers. However the Feb contract which becomes the front month on Sunday is still over 40 dollars. Look for oil to follow the dollar next week perhaps as traders begin to go on vacation.

Enjoy the weekend guys!

Thursday, December 18, 2008

Finally Friday

Well on Thursday the market failed to break thru resistance in the 910-911 region and then cratered back down into the 876 level before rebounding in the last hour to close in the high 880s. Holding the 876-880 support level will be important for this market going forward if it wants to continue rallying.

Point is that the market has basically been stuck in a range for the last two weeks between about 820 and 915. No serious sustainable move will be made until we can break thru either of these levels. I still am clinging to my upside bias into the last two weeks of the year. If the SPX breaks 876 to the downside I will be looking to the short side trades more than likely.

For Friday we have Dec options expiring and it is quadruple witching which is just Wall Street gibberish for four different types of options and futures expiring at the same time on the same day. So just expect turbulence and dont even trade the last hour on Friday.

I am expecting this market to have trouble getting over the mid 890s on the futures and if we fail this level we can definitely see 870 Friday. However, if we somehow get over 910 I will be going long and looking for 930 target. Trade safe.

Wednesday, December 17, 2008

Taking A Breather

The market bumped its head on the 915 resistance we have been talking about and finished a bit lower but still above the pivotal 900 area on the SPX. I would continue to be bullish into Thurs and Friday but if this market loses the 885 level I would become a short seller during the day. Above 918-919 I think we have a quick ramp up to the mid 930s. Friday is options ex and also quadruple witching so it will likely be a turbulent day but remember that moves can be exaggerated on these days so be warned.

The Euro ripped higher on the day to get over 1.44 at one point. I would be surprised to see this currency break much higher than this. There is some pretty tough resistance between here and 1.47. Same goes for gold. It was up all day until it pulled back sharply. So I would think gold needs a pullback here back to the low 800s perhaps even. Oil got clobbered again as I have been saying it would. OPEC cut output big time and crude actually dipped below 40 for a time. Respect that price action. It is telling you that it wants the mid 30s.

Otherwise it was just a slow grind out day in the equity markets. Almost formed an inside day but not quite. Initial claims could get this market moving in the morning. Follow the charts.

Tuesday, December 16, 2008

Cuts Like A Knife


Well there ya go! Markets loved Big Ben getting in there and slicing the interest rate by 75 basis pts! We are now effectively at 0, hooray just in time for the next bubble to start, lol. The dollar got simply massacred even more than I anticipated. Euro was up 500 pips today. That is just unheard of! 1.4115 was the high for the Euro. It was at 1.24 like two weeks ago. Nevertheless, gold got a bounce up to 860 after the cut and oil actually showed relative weakness staying around the 44 level.

Overall the SPX finished just about as bullishly as you could imagine. When it broke 885 it was clear they were gonna push this baby into the close. We closed about 913 on the futures. Thats fantastic in my opinion. I have been saying we need a close above 900. Even better would be 915. Now we need a second day continuation. I think we get it. A gap up in the morning would confirm this rally higher and probably get us into the 930s fast.

You have to respect the price action when it wants to go higher. I am gonna go out and say I think the SPX sees 1000 by Dec 31. It could even come by Christmas if all works out well. I am not saying the bull is back in town but at least for an intermediate term (1-3 months) the panic has reached its peak. So now we will wait and see what the charts say about how high we go. Bottom line is there are plenty of bears still yet to cover and I think that occurs above the 920-930 region. Get ready for a monster short squeeze that could rocket us to the low 1000s in a hurry. Of course there is always a chance the market reverses, and in that case I would add to shorts with a close below 875.

Ultra longs are definitely in play here with the SSO, QLD, and UYG looking best. Also for more individual stocks check out my buddy DayTraderRockstar over at DaytradingRadio.com for excellent live intraday market commentary. He has been hitting it out of the park lately.

And We Wait..

So I've been a bit busy on my end because its final exam week and I'm in college. Nonetheless, its Fed Day and you should expect continued slow action into the "cut". This may be the most boring lead into a Fed meeting because its so priced in. Everyone already knows the Fed is cutting rates by probably 75 basis points which would bring us down to a new rate of 0.25%. Wow. That's why the dollar is rolling over and the euro is at 1.38.

Oil is at 44 even. Gold is holding strong at 839. Internals looks bullish with 73% advancers to 25% decliners on the NYSE and Up volume outpacing down volume 75%-23%.

We are having a nice up day because the market already priced in GS having bad numbers. GS is leading the action higher today. SHould be interesting to see how they close up shop today. Technically I would be a seller if this market lost the 874 level. Above this 882 area is a bullish zone that we could see continuation higher. But you should be out of your positions by 2pm et. The Fed announcement will whip you. And even after the decision I tend not to trade for about 45 mins, if I even see a decent setup.

Sunday, December 14, 2008

This Week's Trade 12/15

As we start mid December I am keeping my eye on two levels on the SPX. 850 and 900. If we close below 850 then more downside should be expected. And we if we close over 900 then I think we are headed higher into year end. My bias is to the upside here in the near term simply because of how bullish of a day Friday was. Futures were down to 828 overnight Thursday and we rallied all day Friday to close at the highs of day. The market could have suffered big time Friday after the bailout news but it didn't. That was a major victory for the bulls and price action that you gotta respect.

In addition to the Fed meeting Tuesday at 2:15 pm et, we have some interesting economic data being released starting on Monday will give us NY Empire St Index, Industrial Production, and Capacity Utilization. Tuesday haas CPI, Housing Starts and Building Permits. Thursday gives us Jobless Claims, Leading Indicators, and Philly Fed.


Overall, I would be expecting the trend of bad news to be followed by positive reaction in the market to continue. You cannot fight the tape. With Fridays close pushing above the critical 20 day ema it should set off a good amount of technical buying this week so be ready. The 50 day ema is still just overhead at 935 so that could create some resistance to the upside.

Thursday, December 11, 2008

How's It Going To Be


So the short setup that I alerted at midday pretty much worked out perfectly. Hope some of you were able to cash in on that move down as the market gave us a great signal right about 1:30 pm ET. Bear flag on 5min formed and we dropped about 30 SPX points in a few hours. Technical analysis works. Period.

Going forward now where are we going to be? Well I was saying we will fill the gap at the 876 level but we have yet to see a bounce of any merit. I tend to think we could bounce anywhere near these levels. Just keep watching 850 in the SPX. That is an important level of support the bulls wanna hold. I think it will hold. But if it doesn't, I am switching my bias to the short side. With that said, I am maintaining my stance that if that area holds we will see 1000 SPX by Christmas.

Commodity market is getting a nice bounce this week and the dollar is getting the shaft. Euro printed 1.3372 earlier. I would think we are in the the 7th inning of this most recent pop in oil. Gonna be hard to break out over 50 imo. The pop is in anticipation of an OPEC production cut. Big deal. I do not think oil has bottomed. It is also in part to the pricing in of a 50 basis interest rate cut next week from the Fed. Thus dollar is getting whacked. I would looked for that to reverse by next week. Trade safe out there.

Midday Update

The market looks tired here at midday. As I speak we are showing signs of breaking beneath 900 SPX. We have held strength all morning long but it looks like the market formed a rising wedge which is now breaking down and we should see a continued move down into the close. Be warned. I can see us getting back to the 876 level perhaps as that is the gap fill zone from Monday. Otherwise a retrace here back to the 900 area is a good short in my opinion going into the last half of the day.

Tuesday, December 9, 2008

Buy The Dip?

SPX tried to retake the highs from Monday early on but got stopped in the mid 910s and pulled back to the 890s quickly. Closing at 888 or so this market is setting up for an interesting move midweek. The SPX actually closed today with an inside day formation. This usually sets us up for a big move in either direction. There are lots of reasons why we could come down and sell off further but the market seems to just be discounting these reasons and rallying in the face of it. I am of the opinion that we rally into year end and squeeze the shorts to up near the 1000 SPX mark.

However, there is an important daily pivot to keep an eye on this week. That 850 level has marked support and resistance since early October and is what I will be looking to act as support once again IF the market comes down that far. I believe we could see a bounce off current levels midweek to rally up thru 915 but there is also a real possibility we come down to test the 850s beforehand. Either way be ready for both scenarios to unfold by Friday. But be ready to buy the dip in the 850s if it comes and don't let CNBC talk you out of it.

Oh and contrary to ppopular belief todays selloff was not a scary event as you may have heard in tv land. Since Friday morning we are up from 820 SPX. We hit 920 Monday...we came back to 888 today. That, my friends, is called profit taking and until a retracement proves to be more than a retracement of the prior move then you should not view it as worrisome.

Monday, December 8, 2008

Hit Me With Your Best Shot

Couldn't resist the Plaxico humor there, lol. So the morning gap up in the markets was never filled and thats a good sign of strength intraday. With the market tagging the high 910s late in the say we saw a selloff in the last hour that had us close right above the 900 area. It seems like the market will need a bit more push to get over that 920 level. But I hear that someone spotted a bunch of bears over 920 shaking in their shorts. So I do think we are headed higher to squeeze those guys much higher. However, we did just run up about 600 points in two days so whats wrong with pulling back a bit Tuesday? Not saying we won't go higher but the odds are a little higher to see a profit taking. Nothing wrong with that. I am still of the opinion this week that we will continue to melt up higher.

I would be a buyer of dips down to the 880s and could possibly see this thing getting to the 950s in the next few days barring any crazy news. The market is set up, that is easy to see if you know how to read the charts. The falling wedge that I have been talking about for a few weeks now has materialized but I believe Tuesday will be a pivotal day to confirm if the market wants to stay above the falling wedge that it broke out of on Monday. Like I said we need to see the 875-880 area hold and then rebound and then I would think we can get a leg higher. Watch those levels for Tuesday.

Sunday, December 7, 2008

This Week's Trade 12/8

This week I am looking for a decisive break of the SPX and close above 900. If we can close on the day over 900 then that would get me much more bullish into the last few weeks of the year. I think with a strong close over 900 we may run clear up to the low 1000s in no time. Sunday night the futures are already printing 895 and if this stands it looks like we will gap up strong in the morning. After the first few hours we should be able to see if the gap gets filled half way or fully. Either way I'll be waiting for a close above 900 to confirm a rally. Underneath us we could revisit support in the 850s. Below that we really must hold the 820 area because if not then you'll start seeing some more ugly action.

Economic data this week to watch for includes Tuesday's Pending Home Sales, Wednesday's Wholesale Inventories. Thursday we get Initial Claims and Trade Balance. Friday brings PPI, Retail Sales, Business Inventories, and Sentiment.


Overall I think it is crucial to wait for a close over 900 on the SPX to confirm the bullishness in this current rally. Lots of shorts are still waiting to cover in this market and a close over 900 could trigger just that. The large falling wedge would also be broken out of above that level. Of course we can still pullback a bit into the current pattern and consolidate a bit longer but I think something is building here that you cannot ignore. Again watch 900-915 to confirm strength this week.

Friday, December 5, 2008

How Are The Bears Feeling Today?


As you can see in the video above, the bears have gotten completely trapped in a short squeeze today and this week for that matter, lol. After Monday's "oh-so-scary-gap-down" the markets rallied on virtually nothing but bad economic data. That is extremely bullish. If the bears cannot push the markets down after the worst jobs report in 34 years then when can they? Tells are out there. The markets are telling you that the bears are drying up and thats all thats need for us to have a grind up higher.

It was pretty much a rocket taking off in the last two hours and we closed near the highs around 875. With last week's highs right overhead I would expect a minor pullback next Monday but if we can hold the 850s thats a great buying opportunity as I believe we will see a few weeks of continuation at the least. Of course its Friday and that means Monday is ages away so enjoy the weekend and we will see how the Asian markets react Sunday.

Oil continued its descent into hell, lol. Hitting lows this morning of $40.80 a barrel. Closing a bit over $41. Truly historic fall from the summer 08 highs of 148. Looks like its headed to $36 in the next month at least imo. I will look at the oil chart a little closer the next few days if I get the time.

I should be able to resume my normal posting next week as school will be less harsh. I am a college student still for the next 5 months and finals are right around the corner after all. See ya Monday.

Jobs? Where We're Goin We Dont Need Jobs

OK sort of kidding there in the title but hey you gotta love when the market shrugs off the worst jobs report since the 70s. It's quite hilarious to watch all these nuts on CNBC questioning how irrational the market is when it reacts so positively to bad news. Hello?! Earth to Bubblevision. You people are a work of art, lol.

To those of us who actually analyze the markets objectively each day it shouldnt have been too surprising that the market has reversed course throughout the session today and raced higher in the face of 533k people losing their jobs in November alone. Yeah its bad news I know, but the fact remains that markets are, and always will be, discounting mechanisms which price in future expectations. They did just that yesterday when they sold off before the bell. Of course the volume could be stronger going into the weekend here but I'm sure the bulls will take it.

As I type we are now making new highs on the ES futures up at 870. I would continue to watch for resistance in the form of the gap fill from Monday up at the 877-882 area. I would expect a pullback from that level whether it comes today or Monday. But it really does appear we are poised for further strength in the coming weeks. Price action tells it all. Respect that.

Wednesday, December 3, 2008

Falling Wedge

The falling wedge that is forming since this drop in the markets began is showing more and more bullish signs in my opinion. We ran up on Wednesday back to nearly test the downtrending resistance line pictured. I would expect the market to retrace a bit Thursday possibly. I would be selling into the 882 level and 895 level if we get there. There is a gap overhead from Monday that could fill if we continue to run up but I tend to think we will see a half attempt at a gap fill and thus I would watch for heavy resistance around the low 880s.

The retracement on Monday was exactly textbook if you the Fibonacci's as this was almost a perfect 50% retrace of last weeks big rally. The area at 820ish on the SPX was retested Tuesday and held and today we closed over 870. That's a textbook retracement that honestly we have not seen in this bear market in a while.


This latest market move to the upside feels a little different to me this time. Lots of positive reaction in the market after bad news and that is bullish action. The price action foretells where the market wants to go. You have to take notice and repsect that when it occurs. I think eventually this market is poised to breakout to the upside out of this falling wedge pattern and thats when you will probably see a hell of a rally. The area to watch to the upside is 900-915. I believe we can move up to 1000 SPX believe it or not when this market pops creating a massive short squeeze. It may happen next week or next month but the odds are coming together and building towards a possible rally coming in the markets. However, we really gotta hold the 820 level and 800 below that to convince me that the sellers have dried up.

Tuesday, December 2, 2008

I'll Follow You Down


It's been a busy day on my end and I probably will be limited in my trading/posting till tomorrow but I wanted to throw out an update. Market pulled back nicely yesterday to a perfect 50% retracement of last weeks move. Today we bounced all the way up to the 846 level. We are rolling over the last two hours as the auto makers release their terrible November sales numbers. Shouldn't this be baked into the cake? Anyway the 15min chart looks bearish but we could see a bounce back to the 830s in the last hour where I would probably be a seller rather than a buyer. If the markets lose the 818-820 support area we are going to 800 and if we lose that level then I would expect to see 770 by weeks end. We are still within a larger range falling wedge and simply ran up too fast last week and bumped our heads on the celing. We should see a continued pullback to test the 800 level at the least. I will try to post by tomorrow.

Sunday, November 30, 2008

This Week's Trade 12/1

Going into the month of December the market is coming off a one week rally where we have went up 21%. Yes, 21% in one week. As the chart to the left shows this brings us right to the 900 resistance level which is just above the 20 day MA. It also brings us to the downtrend line that has been in play since mid Sept. I am starting to see some interesting things forming on the charts and have gotten a little more bullish since last week. The SPX has a nice falling wedge pattern setting up on the daily chart. This pattern will probably take a little longer to play out as it is still forming. However if the SPX gets over the 920s we could be in for a much larger rally than most think. I tend to think between now and Jan-Feb timeframe we could be up in the 1050-1100 range. Remember even if we rally up to the 200 day EMA which sits around 1187, we would still technically be in a bear market downtrend. But nevertheless it is very possible we see an intermediate rally in the coming weeks.

With that said, we just rallied up 21% in one week, on relatively light volume by the holiday shortened week. We will pullback this week. The question is how much of the most recent advance will the market retrace? I would expect us to come down to the 850s at the very least to test support. I tend to think we may have seen the lows for the year but who the hell knows. Just saying that I see a bullish falling wedge on the chart and cannot ignore this. Also the weekly and daily RSI is showing positive divergence on the SPX and this is a very telling signal that we could climb higher from here.


Economic data coming out this week includes Monday's Construction Spending and ISM Index. Tuesday is Auto and Truck Sales. Wednesday we get ADP employment, Productivity, ISM services, and the Fed Beige Book. Thursday is the all important Initial Claims and Factory Orders. Finally on Friday we see November Jobs data.


All in all it will be a interesting week to see how the market reacts to higher volume and more data. The charts are at a decision point. We are at 900ish and could run up to 920 quickly or selloff and retrace some of the recent rally. I'd bet on the latter to begin the week at least. We shall see how the week unfolds.

Thursday, November 27, 2008

Thanksgiving Chart Pattern


Watch Nov. 26.08 :: Turkey Trade using Technical Analysis in Entertainment Videos  |  View More Free Videos Online at Veoh.com
Just wanted to share this interesting pattern I saw in the charts today. Could be very bullish. Let's call it the Thanksgiving day chart pattern and see how it plays out. Happy Thanksgiving traders.

Wednesday, November 26, 2008

Bulls, Bears, and Turkeys, Oh My

So today you did very well if you bought the morning gap down and came back at 3:55 pm ET and sold, lol. But for those of us that were holding some SDS well we got squeezed like a turkey. Anywho, I'm out of the small SDS position I put on earlier in the week. The market internals were very strong all day today. Up volume on the Nasdaq reached 92%. With the market closing strongly just above the 20 day EMA on the daily (albeit low holiday volume) we gotta take notice and adjust our bias accordingly. It is fairly positive that the market rallied this week on terrible econ data (namely the durable orders, initial claims and home sales numbers this morning) as well as the unfortunate terror attacks in India. When a market reacts positively to bad news that is extremely telling.

We could pullback Friday or we could continue the week's bounce as it will only be a half day. Next week should be interesting as the volume and big players come back into the market and decide if we break over 900 finally or stay rangebound. Who knows. I will wait for the charts to tell me that.

Otherwise enjoy the holiday and have a safe Thanksgiving.

Tuesday, November 25, 2008

Still Waiting


Well I am still waiting for this market to show its direction. I am bearishly tilted right now simply because we have ran up 120 SPX points in 3 days and we are having a bit of trouble with the resistance overhead. Namely the 865 area we were turned away from today and for a while it looked like this market was going to fall off a cliff as it hit lows of around 835 before reversing higher in the last hour and closing pretty much unchanged for the day. We actually closed lower than we opened so thats something to take note of. 20 day EMA on the SPX is just overhead at 879 and I think the market will have a hard time breaking over that. With that said it is a holiday week and you should start to see light volume Wed. so we could see a continued dead cat fakeout rally into Thanksgiving.

I am still holding some SDS calls and will cut my losses if the SPX 15min chart closes above the 875 level. If we roll over from here I can convert my long call into a vertical call spread and roll down to lower strikes simultaneously lowering my breakeven without increasing my risk. I am starting to see a large falling wedge pattern develop on the daily chart, evolving from the descending triangle that has been forming for two months now. I will highlight this falling wedge in another post as it is still young in its formation. Even so it looks as if we are coming up to the upper part of the wedge/channel and should have a hard time surpassing the 875-900 area so be warned that probability of a selloff from here is higher than a rally. But like I said, holiday shortened weeks have a tendency to be quirky.

Monday, November 24, 2008

Bull Trap?

The bulls were off to the races this morning after the news of the Citi bailout. Shocking. The dollar took the news just as it should have with just about the biggest hammering of the year. Euro closed up over 400 pips, which is simply insane. Oil popped 5 smackers, and gold shined with a move clear back to 830 before retracing to 820. It seems like this market was going to roll over after about 2pm et but the bulls sent the shorts into cover mode and drove this SPX to 865 before it spiked down fast in the last 15mins. I did not think the last 15min candle was very inspiring to the long thesis so watch that 860 level Tuesday to see if we get a decisive breakout.

We have plenty of reasons for a multi day rally this week as it is deeply oversold and stochastics look bullish on the daily chart after the gap up today. However, resistance at 865, 880 and 900 is going to be very tough to break. Anything can happen of course but keep an eye on those levels. A downside break of 825-830 will be bearish in my opinion. While we are due for a continued rally during this holiday shortened week I would be cautious with all that tough resistance overhead.


I scaled into some SDS calls late today (which is a bearish position on the market) and will hold these until the market shows me I'm wrong. In the meantime how about that interview on CNBC with Prince Alwaleed? Lol, might have been the best interviewee ever on CNBC with the million dollar glasses on and cane while he sat in his gold plated throne. Lol, lookin on Youtube for it now.

Hitting Ceiling

I am looking to short this market here in the 840-850 area. Market still showing some strength but weakness is likely up here. The daily chart here shows the support we broke thru and now are retesting the level but now its resistance. This is a classic sell signal in my opinion and it would be surprising to me if we continue up towards the 900s but of course anything can happen. The risk/reward is good here for a short so I would take a position in SDS here in the low 100s or any other double inverse. Puts on the QQQQ or SPY could work as well. If we break thru the 880s u should cut losses. Only take the trade when we see the charts rollover here.

Sunday, November 23, 2008

This Week's Trade 11/24

Well after another volatile week in the markets I am back from Vegas and ready to get back into action! Friday's late day rally should not be cheered because in my opinion it is an even better sell than it was on Thursday. I think this week we could see one of two things. We could fall thru the floor and end up near Dow 7000 and SPX 700ish. Or we could trade mostly sideways since it is a holiday shortened week and that means that volume will be relatively light by Wed. It is inevitable that we fall at some point and really see some washout selling to the downside but its just a question of whether it happens this week or next. Let's see what the charts say.

After falling Wednesday and closing below the previous lows near 825 SPX the market went down till midday Friday where it bounced from a low of 740. The 825 level is key support on the daily chart and it was broken with heavy selling last week. Friday we saw the SPX come back to close near 800 on the cash. I believe this is nothing more than a dead cat bounce that will fakeout the amateurs into hoping we have bottomed. We will rally up to resistance (which was previous support at the 825ish level) and then sell off massively from there. In my opinion we will be lucky to even test the 825 area but if we do it will be one of the best selling opportunities you will see for a while. When support is broken, that same level is usually retested as resistance, where it subsequently fails and the price action rolls over.


I believe that we could see 700 in the SPX within a week or two and ultimately the Dow could even fall to 6500 by year end perhaps. We are at support levels that go back to 10 years and if broken, the charts are saying we are simply not done with this brutal bear market.


The VIX could easily top the 100 mark if and when the SPX drops so all I will say is please do not try to sell volatility just yet. You will lose your shirt. I spoke to a pro trader from the CME at the Traders Expo this past weekend and he said that he has been tracking the VIX since it was invented and has never seen such consistently high levels in the VIX. This is a sign that we have a new norm in volatility. He also said that he has tried to sell the VIX twice already since Oct. and lost in both cases.


Economic data for this week includes Monday's Existing Home Sales. Tuesday sees Prelim. GDP for the 3rd quarter and Consumer Confidence. Wednesday we get Durable Orders, Initial Claims, Personal Income and Spending, Chicago PMI, Mich Sentiment, and New Home Sales. The Thanksgiving holiday will close markets on Thursday. Friday will be a half day.


I dont have any specific recs this week because I am looking for a major breakdown here and want to see how Monday acts. However, if we fail to break above the 825-845 level with volume then I would be a seller of this market almost instantly. A break below the 770 level would make me even more bearish. With a breakdown the best play out there may be SDS. Trade safe and obey your stops this week.

Las Vegas Traders Expo

Here are a few pics from the 08 Traders Expo I just returned from. It was a great trip and a fun experience where you could network with other traders and attend free workshops and seminars instructed by some of the most knowledgable traders in the world. A few traders I got to meet up with included Robert Hoffman, Tim Sykes, and Greg Weitzman. Also I was able to attend seminars with Jon Najarian, Mike Coval and several other traders from across the country. Back to the pits Monday!











Tim Sykes was nice enough to take a pic and give me a free book and sign it in between trying to short some stocks on his MacBook, lol. I enjoyed talking stocks with Tim and think he is a great guy.
















These babes offered me $1.00 commissions from Solaris Securities and then tried to tell me they were brokers, lol.















Jon "Dr. J" Najarian answering some questions after his great seminar on trading options.
















Myself and some of the crew from http://www.daytradingradio.com/ enjoying a round (or two) of drinks at the Mandalay Bay.

Friday, November 21, 2008

Apologies

I do apologize I have not been able to do any posts the last few days but I hope from my earlier in the week opinions you would have known to not go long on any fakeout pop this week. I had a busy Wed and was not able to post lately because I am in Las Vegas for the Traders Expo till Sunday. Rubbing elbows with traders like Tim Sykes and Robert Hoffman and John Carter. It has been a fun experience so far and as I type I am sitting at Starbucks watching the ES futures bounce off 740 low and race up to 755. I will be short and sweet with this. Do not fall in love with the upside. We have not bottomed and I expect more downside. Maybe not today (although the 760s will be great resistance to sell into) but eventually this market will be going lower. I have never seen a bottom on a Thurs or Friday and surely doubt we get one the week of Thanksgiving as volume will be lighter than avg.



Tuesday, November 18, 2008

Be There Seen That


Today looked awful after the morning's double top high around 865 and prompt sell off that went all the way down to the 825 level. The last hour we saw a crazy short covering rally that brought us right back to the 850s. I don't think this means a damn thing. Forget the hype on CNBC. This market is still making lower highs and in my opinion every rally is made to be sold. The momentum to the downside is simply too strong to ignore.


With that said its definitely possible we get a muted rally attempt into tomorrow because we do have options expiration this week and it looks like they wanna push this baby a bit higher. Options ex is known to whipsaw traders out of positions. This week looks to be no different as the call and put holders try to defend their positions and finish in the money. Expect continued volatility midweek with a chance at retesting that pivotal 880 resistance level on the SPX. We are pretty much still in the triangle I outlined yesterday and are working our way towards the apex. A breakdown is probably inevitable sooner or later here but lets allow the charts to guide us into options ex this week.

Monday, November 17, 2008

Sold to You

Today seemed like every buyer out there was met with two sellers. Every pop was sold into and even the midday rally that seemed like it wanted to just go higher at first and squeeze the shorts ended up getting hit with selling into the last hour as we closed at the lows near 850. Early on the market got stopped cold at 880 resistance, yesterday I said this was a key selling level and it turned out to be true. I would continue to sell into any pop we get. I was feeling a little bullish this morning thinking that perhaps this market would climb the ever growing wall of worry and grind higher. The failure at 880 was huge in my opinion and it says that the selling is not quite done yet.

Until we get over 915 I would not be bullish. The daily chart of the SPX pictured above is showing a very bearish descending triangle forming with support near the 830-840 area. Bottom line is we are very close to breaking this pattern to the downside. I think if we see any attempt at a rally up to the 900 level is a great chance to go short. I do NOT think we have seen max pain yet. Thursdays rally should be thrown out the window as of today and if we cannot bounce with volume these next few days I will begin to anticipate a very big selloff that could drop us a quick 1000 points in the Dow and perhaps as low as 690-700 in the SPX. I am not calling for a crash but only saying the probability of us going lower and making new lows by months end has gone up considerably since last week.


There is simply no leadership and the banks looks terrible. Oil looks like it wants to break 50 and the tech stocks just should not be touched. I like very few sectors to the upside. Looking at the triangle its possible we can see a weak runup to that downward trendline but if we do you should be selling into it because I think new lows are coming. I was hoping these levels would hold and we could begin to form a base but hope is not a strategy and I gotta call it like I see it. The problem is I see too many others "hoping" the same thing. And that has ALWAYS been a great contrarian signal in the markets. Bottom line do not get caught being long in this market and especially without stops in place. Any rally should be sold into this week until we get some more clarity in the charts. Right now I know we are oversold but we may be more oversold by friday so DO NOT FALL IN LOVE WITH THE UPSIDE.

Sunday, November 16, 2008

This Week's Trade 11/17

This week looks to be another active week of trading with the SPX closing Friday at 873 on the cash and a bit lower on the futures. The last hour selloff on Friday caught lots of people off guard, myself included. I think it was just a Friday into the weekend no body wanted to be long ahead of the G20 and match that up with the hedge fund redemption deadline and we saw lots of selling in the last hour after the market raced up to the 915 level earlier. Futures are getting a nice pop as of this writing Sunday night.

For this week I think it is fairly simple technically. To go higher the SnP's need to get over the 880 mark and if we rally further then 915 resistance will become the key level. We most surely would need this market to hold the 845-855 levels to prevent another leg lower. I think we could be setting up for a nice ascending triangle on the 15min chart if we hold current levels. As Johnny from daytradingradio.com says here the 915 level provides tough resistance for this market as it was denied at 915 multiple times last week. But if we break 915 then watch for some serious upside.

Economic data being released this week includes Monday's NY Empire State Index, Capacity Utilization, Industrial Production. Tuesday we have PPI. Wednesday gives us CPI, Building Permits, Housing Starts, and the FOMC minutes. Thursday we get Initial Claims, Leading Indicators and Philly Fed.

Looking at the VIX it closed the week at a 66 handle and is just above its 20 day moving average which sits at 62. This is an important area to keep an eye on and see if the VIX can hold. I think I would be looking for the VIX to come in a bit if it cannot hold its current mid 60s area. The VIX 50 day MA is still rising and is now just over 50. It should be interesting to see if the VIX can hold above this key moving average on its next pullback which we may see this week.

Buy the Dips: APOL, DV, KR, JBLU, PTRY

Sell the Rips: WY, ALL, CMED, GLD, AKAM, BAC, BAM

Overall I am expecting a small rally higher this week but I do not think we have bottomed. At the least we will probably retest the lows in the near future. Who knows when but before that I think we can see a bit more upside in the SPX so lets start the week with that bias and see what Monday brings us. Remember watch the 880s and 915 level for resistance.

Thursday, November 13, 2008

You Ain't Seen Nothin' Yet


What the hell was that? Lol, well just like I said 865 breakout gave the market one of the biggest short squeezes we have ever seen! The ES futures literally had like a 95 point range on the day. Just spectacular. The shorts got hung by the neck today in the last 3 hours as the market hit a low of 816.75 in true capitulatory fashion. Then recovered all the way back to breakeven, and virtually without pause, rocketed higher into the closing bell on huge volume (4.2 mil on ES, and 753 mil on SPY) to close around 910. Absolutely incredible. It was almost like you could feel it mounting as it rose and you knew it was just a melt up that would not end till they rang that bell.

I think this sets us up for at least a few days of continuation. Why dat? Simply because we had a classic textbook example of an outside day pattern today on pretty much everything! Outside day is a very bullish pattern that says a continuation of a few days is very likely. You ain't seen nothin yet!

Ok lets not fall in love with the upside here traders but when I see a rally like this with volume like this, I see several days or even weeks of continuation buying. Until this signal reverses or changes I will be bullish because this was a very important POSSIBLE inflection point. I am not calling an end to the bear market at all! But I am saying we are probably going to rally in the short term and why not make a few bucks to the upside right? If you think you missed the move today, just patiently approach the next few days with a buy the dip mentality and dont get too emotional out there. Basically throw a dart at the board and buy it on the dip. I like AAPL, INTC, AA, DRYS, as high beta plays in the next few days and in order of least risk.

Cliff Diving

I was triggered out of the SBUX this morning and this market saw an extreme dump and flush in the markets at midday. Es futures hit 816.75 before snapping back positive and now printing 860! Unreal. I am gonna make this short and sweet. A breakout over 865 on heavy volume and we rally. We rally big. But if we fail at 865 resistance then we could come all the way back down and GASP!...make new lows? Who knows but I will let the charts tell me where we go from here. Anything can happen guys and as long as you accept that fact then you can take the trade much easier without emotion and opinion interfering. Honestly I think we could see a rally higher but trade safe!

Wednesday, November 12, 2008

Danger Zone!


If you are still in the SBUX trade keep your stops underneath 9. I am holding a very small amount of Jan calls but if this baby doesnt confirm strength Thurs into Friday we cut and run and find the next opportunity.

Anyway, what a terrible tape we have dont we? Like I said yesterday if we break 900 on the SPX then watch for 860. Well we blew right thru that like a hot knife thru butter and finished the day at 852. Now after hours we have INTC coming out and lowering revenue estimates and saying demand is falling off a cliff, lol good timing Intel, thanks. We are in the danger zone here folks. If the market was playing the role of Goose then I'm not so sure Maverick could help him if he tried.

I was expecting a big move in either direction today and wanted to go long an SDS strangle but I was a day late on that play as the SDS just ran away like a scalded dog from the open today and ended higher by about 10%. Unreal action we are seeing lately. Looks ugly out there and we are going to test those October lows imminently it appears. Closing low on the cash SPX was 846 and the intraday low on the cash on Oct 10 was 839. However the ES futures got down to like 825 that morning I believe. Either way you slice it we NEED to hold these lows or else you will some unpresecented selling action that could have us challenge the lows of the end of 2002. Yikes.

Futures are already down in the 840s as I type and Asia should not make things better when it opens up. I fully expect a gap down scenario in the morning but it will be very interesting just to see how much we open down. I kinda wanna see a massive washout tomorrow so we can just flush out who ever is left and plant the flag so to speak. Its like the market has food poisoning and just cant quite puke, lol. Interesting to see the VIX only at 66 today even as we get back to the lows of last month when the VIX of course hit 89. Hmm not quite sure what to make of the divergence just yet. Initial claims out premarket so that could affect the market. Sit tight and watch for relative strength whereever you see it. Otherwise watch out for volatility into the weekend and dont be scared to scalp the futures to the downside perhaps on weak bounces.

Something Brewing in SBUX

I see a possible "W" pattern forming in SBUX and think its a great time to go long some shares or call options at these levels as it presents a very favorable risk/reward. Starbucks announced terrible earnings on Monday after the close and the stock gapped down and opened at 9.50 on Tuesday. It rallied back and was actually positive late in the day getting to 10.27 before closing at 10. The volume was strong at 26 million. Stochastics are also getting towards an oversold level and may start to turn up. Whenever you see a stock react POSITIVELY to bad news, its telling you something. In this case I think SBUX is saying that it wants to go higher.

I would buy a half position in the stock here at 10.00 and add the other half on confirmed strength over 10.3 Wednesday. Keep a tight stop below the 9.40 level or if you wanna risk a bit more keep your stop under 9 which is just underneath the 52 week low made last month. I do not see SBUX breaking that level but we are traders and must obey our stops like I always say. Predetermining your exit strategy is the best recipe for profits. I can see the stock getting to 11 quickly if this market behaves with eventually SBUX seeing 12-13. This is a swing trade and will probably be given no more than a few weeks to playout.

Assuming SBUX stays over 10 and builds strength on Wed. I will be buying some call options. I like the Jan 11 calls for 90 cents or better. Or if you wanna take a bit more risk try the Dec 11 calls for 65 cents or better. Again if SBUX shows weakness by week end or breaks under 9.40 you should cut your losses but this is a decent risk/reward setup I like here.

Tuesday, November 11, 2008

Turbulent Tuesday

Well it was definitely a wild session of trading on Tuesday. Gapping down in the morning and then stabilizing before rocketing higher to almost the breakeven mark by the 220 reversal. However in the last hour the market just could not hold its rally and sold off from the 915 level to close just under the 900 mark. The last hour selloff does not inspire me to be bullish headng into Wed. I am seeing a slanted head and shoulders pattern on the 60min chart of the ES futures which could send us clear down to the 860 level as a conservative measurement. This pattern could be confirmed if we cannot break back over 915 this week. I would not be outright bullish on the market until we can clearly get back over the 930s with volume..and even then I'm only cautiously bullish.

The only bright spot today was the fact that GS actually rallied into the close and ended the day like 8 dollars off its lows. Unfortunately the market as a whole didnt catch on to that fact. I would continue to watch GS and C to see where the market could go. Lot of chatter about Citigroup in deal talks and GS in a heap of trouble. Dont listen to the rumors..just watch the price action and you should see the truth unfold. Stocks dont lie, but people do.

Otherwise, oil hit 58 smackers today and looks like it wants to go even lower Wed. after the inventory report so I would not touch anything oil related unless of course you are shorting :) Overall the volume was sort of light today again as I expected and we are really just stuck in a range here at 900. I think we could get a big move in the next few days, whether its up or down I dont know but I tend to have a bias to the downside at the moment. I'm liking SBUX here for a long trade possibly with a nice tightly defined risk/reward and perhaps a strangle trade on the SDS. I will go over these ideas in another post but those are my thoughts for now.

Monday, November 10, 2008

VIX-ology

So alot has been said about the VIX and where its going lately. To review, the VIX is a statistic that reads 30 day ATM implied volatility in the SPX, or a general market barometer of fear. The higher the VIX goes, the more traders are willing to pay for put options on the SPX. Its pointless to guess what is a buy in the market based on the VIX and what is not. Before last month everybody thought 35-40 was an absolute panic state and was a good sign of a market bottom. Well that did work for the early part of the year but in the past month things have changed and changed big time. We have entered a new period of higher volatility and I think it is here for a while.

Anyway, interesting article out of Schaeffer's on Monday talking about the discount to Historical volatility that the VIX is trading at lately. In other words HV, or volatility of the SPX index itself, is much higher than IV in SPX options and therefore the VIX is trading at a discount to the SPX historical vol even at these lofty levels. The reason this is important is because before a bullish advance in the markets you would want to see the VIX trading at a significant "premium" to historical volatility, and it is not. As the chart to the left shows, during much of this volatility since Sept. the HV of the SPX itself actually traded higher than the actual VIX. This happens only very rarely and is sometimes troublesome as Joe Sunderman, Vice President of Financial Market Analytics, goes on to say:

It is difficult to draw a quantitative conclusion when there are so few historical references to draw upon. I do feel that this discount in the spread is a troublesome development. I remain concerned with the complacency I am seeing among option players. Bulls would want to see the VIX trading at a steep premium to SPX volatility, as a sign that fear is rampant among the investing community.


He makes an interesting case that perhaps we might have not seen the height of fear just yet. Either that or volatility is a screaming sell up here still in the 60s! Lol, but because of the fact that we have just been drifting lower in the VIX and not really seeing any meaningful collapse tells me that he could be on to something and we might just have to watch these markets for a little more turbulence. I mean you can make a case for both sides of the map here but being aware is the best way to make a decision so I will leave it at that and say keep watching that VIX; and be sure to check out Adam's site at Daily Options Report as I think he has some of the best thoughts out there on the VIX, and is a daily read imo.

How Do You Like Your Gaps?

Filled or Runaway? Well, the fact is that on the major averages I think its something like 90% of morning gaps (up or down) are usually filled at some point. Not always in the same day but still the point is that you should always be cautious if you're buying into a gap up or selling into a gap down. The market will usually tell you within the first hour or two what you should do concerning the gap. Today it wasted no time telling us that it was going to be filled and then some. The selling came in fast and furious after the open and every bounce from there was a good selling opportunity. Aside from the last hour bounce this was just an ugly day as we came all the way down to 906. Whenever a market gaps up, reverses down, and closes NEAR the lows it doesnt get me too bullish.

Yesterday I said I would be bullish above 960 and today that was just about the top in the morning so it proved to be tough resistance. I would remain on the short side or bearishly tilted in my trading until the market showed us some sign of strength in the 30 and 60 min charts. If we break the 900 level this week it could quickly lead to selling down to the 880s and further perhaps. I think really anything can happen since we should see some light volume between now and Thursday but I'm leaning a bit more to the downside here. There is simply very little reason to buy and no leadership out of any sector so why go long? Its just as easy to make money on the downside. Just use your stops and trade safe!

Sunday, November 9, 2008

This Week's Trade

Looking forward to another fun week of trading. As of Sunday evening the futures are up 19 ES points which, if it holds, will produce a sizable gap up in the morning. I would guess that we have at least some sort of attempt at a pullback in the morning and from there maybe we can rally higher. We are really at an interesting point on the charts starting out the week. We closed last week just underneath the 20 day MA on the SPX and after the two day selloff we find ourselves right back to about the midpoint of the most recent advance the past two weeks. This is a retracement level that should be watched for a market rally. If last Friday's move holds we can easily this this market rip higher in the short term. I'm still thinking this market will see choppy volatile moves the next few months but for this week I would be bullish above the 960 level.

Very light week on economic data with Thursday seeing Initial Claims and trade balance and treasury budget. Friday we will see Retail Sales, Business Inventories, and Michigan Sentiment. Earnings are winding down but this week the big one to watch for will be WMT on Thursday before the open.

The VIX came up to its 20 day MA last week and failed almost perfectly to make what looks like a lower high. This is a good sign and probably will lead to lower options prices the next few weeks but I do not think we are going below 40 for some time still.

Buy the Dips in these names: AAPL, HBAN, EBS, APOL, KR, NDN, UUP, AMGN, DAL

Sell the Rips in these names: FXE, AEM, LEN, MFC, TS, TM, RKT, USO, MTZ

Other than that I dont really have many more thoughts. It should be easier to see if the market wants to stay above 960 and rally after Mondays session. Whatever happens dont get too excited because we are still in a bear market and rallies are made to be sold, but nonetheless we could see a decent sized pop in the coming days so why not take advantage of the long side while its here.

Friday, November 7, 2008

Waiting Is The Hardest Part


The market was watching and waiting this morning as Oct jobs data was being released and to me it was almost like this market was ready to rally but just wanted to make sure the amount of jobs lost was not a worst case senario (like over 300k jobs lost). We sold off sharply the last two days EXPECTING a bad number to be released today and we got one. The economy lost 240k jobs in Oct, the Sept number was revised up to 284k from 159k, and the Oct unemployment rate moved up to 6.5% (highest since March 1994!). Yikes. So why in the world did we rally 250 pts in the face of this nasty news? I heard of someone still yacking today about how the Obama caused the selloff the last two days. Unreal how people think markets work. This is simply not the case because "the market"--which is simply a collection of all aggregate supply/demand and its behavior that it produces--prices in future expectations way before the Average Joe even thinks of them.

Anyway, it was a productive day overall I would have to say on the major averages. I was expecting at the least a small bounce off the 900 level from yesterday and we actually ripped into the close to finish the day at the highs, roughly 930 on the SPX. Not a bad way to go into a weekend. Honestly cant remember we finished a Friday at the highs of the day. That being said I would not be surprised to see a continuation into early next week, but will go into detail on that more Sunday night.

Barack Obama gave his first public press conference since the election today, during market hours, and actually the markets rallied afterward. Maybe this is a new trend we can look forward to, lol, instead of looking for selling every time Bush and Bernanke come on tv to speak. I gotta say, regardless of your political preference, Mr. Obama does seem to inspire confidence in people and thus the markets when he talks. Even myself I feel encouraged to see this new sort of energy in the air that he has created. It is pretty neat and something we have not seen out of DC in a while. No matter if youre black, white, blue or purple you are firstly an American and we together all are trying to accomplish reasonably similar objectives, just with different paths of getting there. That being said he is our new leader come January 20th, like it or not, and we should be open-minded and support his plans as they are put into action.

Don't want to get too political here but wanted to share what was on my mind. So have a great weekend and we will see what the markets do next week but remember the waiting is part of the game :)

Thursday, November 6, 2008

Take The Money and Run


So this is it we are in a trading range and it has played out well the last several weeks just as I predicted last month. Another big selloff in the market on Thursday which ended near the low 900s. After a 10% down move in two days, on relatively light volume by the way, I gotta start to look for some kind of stabilization in the markets going into Friday or at least next week. Friday is a wild card however because we have the dreaded jobs report due out pre-market. My opinion is that the market has priced a terrible number the last few days so if we get anything reasonably close to the expected 200k jobs lost in Oct then we could actually rally into the weekend. I'm not too sure we see a number like that though. If we get more like 275-300k jobs lost then watch out for a nasty day Friday where we could even get down to the 880 level or lower. But like I said we are down 10% in two days, markets snap back to their averages and we are a bit overextended in the short term so a small bounce or even rally could transpire.

Bottom line is we are stuck in a range for the foreseeable future (850-1000 on SPX). The way to play a range is to buy when we hit the floor (keeping a tight stop underneath) and selling when we hit the ceiling (keeping a tight stop above). When the market gives you the money, take the money and run as Mr. Steve Miller once said. Don't get greedy, don't get fearful; because the market doesn't care about what you want, so you will lose your shirt if you play this market, or any market for that matter, with your emotions. So don't! And of course always obey your stops traders.

Sold SDS

Just wanted to update you on my SDS call options. Market is down sharply again today so I have just taken my Nov SDS 80 calls off the table for a 181% profit in two days. Now thats what I call fast money. I do think the market could fall further and perhaps even as far as the 880 level. But when the market gives you almost a triple of your money in two days, I have learned it is sooo prudent to take something, if not everything, off the table. Other choices I could have made with this trade would be to take half off the table and put a trailing stop on the other half or manually continue to move up a tight stop so I am locking in profits along the way. The SDS is a great way to play the market to the downside and the options are sure a trip. Since Tuesday the SDS is up about 18% and the Nov 80 calls I bought are up 181%. Now tell me this, why are you not trading options yet? Get in the game. Trade safe out there.

Wednesday, November 5, 2008

Hit With Change

I was expecting the SPX to fail near the 1000 level yesterday and start to pullback. It did. The action on Monday and Tuesday was on pathetic volume and not inspiring to me despite what the bobbleheads on tv may have said. I bought some SDS calls Tues before the close, which by definition is a short position on the SnP's, just on a ultra inverse etf. Not quite sold on these ultras in regards to trading options on them. But thats a topic for another day. The end of the day action on Tuesday told me that the market was running out of steam from when it started to rally a week ago. The volume was lacking and so when the big boys are not participating in a gap up rally, neither should you. I will be holding this short position into Thursday even with it being up nicely already as I am expecting a multi day selloff.

This morning the market made a lower high on the 30 min chart and that was confirmation imo that we were heading lower. Today's action was exaccerbated by the bearish ADP employment figures released and it appears that today the market priced in an equally dismal payroll number on Friday. As soon as the downtrend was confirmed on my longer term minute charts, every bounce back to key moving averages was an excellent opportunity to sell with nicely defined risk/rewards.


Contrary to popular belief (Yes I'm talking to you Dennis Kneale), the market did not go down today BECAUSE we have a new Democrat in office come January. The market already knew this would occur and thus priced it in, like markets tend to do. The market was down today because of the fear of massive job losses being reported on Friday and unemployment is by far the most important indicator to gauge the depths of a recession. When people dont have jobs, they dont pay there bills, they dont make discretionary purchases, they dont invest, they do not put money back into the economy, period.


So anyway, just remember the market is up like 15% in a week or so so we are due for a pullback as most short term indicators are overbought. We are in a trading range and simply hit our heads on the ceiling yesterday, lets just hope the floor holds our weight! I would think 900-920 is a reasonable target to expect on the SPX by week end so dont fall in love with any of these bounces we get the next few days.

Tuesday, November 4, 2008

Election Day

Well its election day and the market looks to be gapping up strong this morning as the ES futures are up 25 pts early on at a session high of 995. I'm not too excited about this move, and you better not be buying into it. I think there is a chance of a short term bounce here if we stay above the 980 level. However, I think we are bound to roll over soon as the resistance above at 1000-1020 and 1040ish is just too much for this market to absorb this fast. I could be wrong but I think the probability that you start to watch for downside swing plays are more favorable at this point. If we fail at resistance then the next sign of weakness would be a break beneath 958.

I think the market has priced in a Obama victory and regardless of who does win I do not think it will have much of an effect on the market. I'm sure some of the nuts on CNBC will find a way to argue this allll the live long day today but I don't really care. Also it should be interesting to see who gets Hank Paulsen's job come the new administration. Anywho, I'm kinda excited to stop hearing all the campaigning and slander on the political trail.

Overall, if the market sustains any rally today and closes above its opening level then we may have some follow thru coming but if not then I would be cautious on any new long swing trades. Looks like today I would say our futures trading should be biased to the upside and obey those stops traders!

Sunday, November 2, 2008

This Week's Trade

There should be no shortage of news this week with a Presidential election on tap, the ECB and other world central banks expected to cut interest rates, a crucial jobs report and who knows what else. The market starts off with a rather constructive week just completed. Looking at the chart Friday was the first consecutive daily close above the downtrending 20 day moving average since late August! Not that it means a whole lot since it was on relatively average volume and choppy trade but hey its something. The 20 day ma now sits around 945 and I believe this area will be a key pivot point for the markets in the coming week. If we can hold above this area then we got a decent shot at rallying further. Underneath 945ish and its a different story.



Now it will be interesting to see how the market trades after the election we have on Tuesday. Not saying someone has been propping up this market but it is fascinating how the market seemed to calm down (relatively speaking) during the week before the election. It does look like the VIX has been in a topping pattern since it made its high of 89 six sessions ago. The VIX was finally able to close a week below the 20 day ma and 60 level as well. This is a very good thing for the equity markets as it shows that fear is subsiding. If we can see the VIX come back down a bit further into the 40 area then I would be much more willing to go long volatility and buy options as I still think volatility will remain high, but more subdued, going into year end. The market definitely looks a lot more bullish than it has in awhile imo. This can set us up for a continued little rally here to play with the upside in our trading. The main obstacle technically speaking will be the 1000-1020 resistance area on the SPX.


Economic data coming out this week includes Monday's Construction Spending, and ISM Index. Tuesday features Factory orders in the morning, then Auto Sales being released at random times throughout the day (always hate this release because its mid-day and you really gotta be aware of this if your trading). Wednesday is ADP employment and ISM services. Thursday watch for initial claims. Finally Friday we have the Oct. jobs report which is sure to be horrific, and some Pending Home Sales.


Earnings are again in focus this week with tons of companies reporting. The only one I care about is CSCO on Wed after the bell. Cisco Systems usually is one of the most anticipated names at earnings time just because the demand they see from customers can foretell so much about the strength and growth of the economy. Not expecting anything great out of the numbers but since expectations are crazy low, you could get a surprise pop in the stock after this on Thursday.


Overall I am cautiously bullish on the market this week if we can hold the previously mentioned 945 level. The bottom line is we have resistance galore to fight thru so each up day should be taken with a grain of salt because we still are in a nasty bear market and thus, DO NOT FALL IN LOVE WITH THE UPSIDE. With that said, there's nothing wrong with scalping the upside if thats where the market tells you it wants to explore.


As for individual names, I would have to say AAPL has held up rather well lately and seems to be the first name to move when we rally. After its earnings gap up a few weeks back, it very calmly came back down and filled the gap and made a beautiful higher low at 90 before busting out over 100 last week. If you can get a pullback in AAPL to around that support of 100ish then its a buy imo. I can see AAPL trading to 125 in a hurry if this market allows. Trade safe this week and obey those stops.

Friday, October 31, 2008

Trick or Treat?

Well there has been a lot of choppy trading in the market since Wednesday rate cut. Seems like a tug of war between the bulls and bears as of late. We are definitely caught in a range, although it is rather large. The price action seems to be hitting the top end of the recent range of around the 975 level on the SPX. We are a tad overbought on short term indicators but there are a lot of noisy things out there today. Its Halloween, its friday, its the last day of the month, its the lasst day of the fiscal year and quarter for many funds. What dat mean? Well simply put, it can create irrational price action. We could see window dressing into the last few hours of the day where mutual funds dump their losers and bid up their winners so there final numbers for the fiscal year look "better". Now, since most mutual funds are long biased, then they probably dont have winners, lol, so watch for a quick selloff if we cannot break the 975-980 SPX resistance area.

So will it be a trick or a treat for the market going into the close? Bernanke just came on tv to speak about things we have heard a kajillion times in the last month. Not shockingly, the market responded with a nice pullback and now we are bouncing a bit but the charts look primed for a rollover if we cannot break over the 980 level. Watch for that but also know that if the volume comes in we could easily see a melt up to the 1000 area. Watch the levels and dont get tricked by Mr. Market when you knock on his door. The only other thing I feel confident enough about today is a recommendation to sell the Euro as it looks to be headed for another leg lower into next week against the dollar.

Wednesday, October 29, 2008

Helicopter Ben

Wow what a whipsaw Wednesday if I've ever seen one. The first half of the day was utterly boring as everyone watched and waited to see what the Fed would do. Big Ben came in and dropped rates 50 bps to a new rate of 1.00%. Hard to see them cutting much more than this so watch for a rebound in the dollar soon. Like I was anticipating after the cut (which was priced in after yesterday already) the market spiked down sharply then grinded up back to the low 940s on the ES futures. It was the unbelievably tight narrow consolidation in that area that caught my interest and I called for a long in the markets at precisely 3:14 pm et. The market rallied higher to the 970 level with incredible speed and volume. So much happened in the last hour of the day, lets try to break it down slowly.


First off how the heck did I know the market was ready to rally at the time I went long the futures? Look at the chart below of the SPX and notice the initial selloff after the rate cut, then we ran back up to the 940 level and stabilized. During this time we formed a beautiful bull flag (as I illustrated in the chart for you) while at the same held above those key moving averages. Simply textbook. I called for a rally once we broke out of the flag which was at the 945 level. At the same time we also saw the stochastic indicator stabilize and then curl higher as the arrow points out. When the stochastics start to point higher and spread out at the same time the market breaks out of a range after hitting a key moving average you must take the trade. The market exploded in warp speed from there and I was up huge on my futures trade in just minutes. Thus, I took profits a bit prematurely in the high 950s as I saw resistance coming and walked away smiling. Its these sort of high probability setups that I look for each and every day to pounce on in the futures market.


Flags are consolidation patterns that indicate a continuation of the most recent trend is ready to continue when the current retracement turns. Flags can be bullish or bearish and usually provide some of the best risk/reward entry setups out there. Volume confirms the move on most occasions and this time was no difference. Shortly after breaking out over the 945 level the buy side volume came furiously. Charts don't lie, people do. Listen to the charts and act when they give you a signal as reliable as a flag pattern. Plan the trade, trade the plan. Its as simple as that people. If you think about you will hesitate everytime and miss the move. Do your analysis then trust it and take action on your thesis.


Getting off on a tangent I know, but anywho; the market had that great run-up but it was stopped cold at 970 with a double top and extreme selloff into the last 10 mins. This is why, as short term futures traders, we take profits when we get them, as the futures offer up incredible leverage but you must not be greedy with it. So what happened in the last 10 mins. Well my first instinct was the normal hedge fund and mutual fund selling that has gripped this market lately. But it was then reported that GE ceo Immelt came out with some negative comments on 09 earnings. Nevertheless, it looks like this market has to prove itself once again tomorrow after the selloff. I am a seller underneath 940ish. But there is also so much pessimism out there that it could lift the tides higher into the end of week. Who knows, but as OSCAR points out here; 2 days up in a bear market equals sell more often than not! Obey those stops traders!