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 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.