Tuesday, March 31, 2009

Window Dressing?

Tuesday the market rallied hard into the last hour and then fell off a cliff. I was expecting the market to be lower after yesterdays drubbing but it looks like window dressing by fund managers at the end of the quarter pushed up the market early on. It was a low volume day for the most part so I would still be looking for more downside into midweek. I think it is likely we see a test of the 765 mark if not 741 but the weekend. Assuming we hold it then we can look to get more long biased into April. But for now expect a pullback.

For Wednesday I want to have a downside bias. The pivot on the ES is 795 and price is a good deal below that this evening so I would think any move into that low to mid 790s area is a decent short setup as resistance is heavy there. They could push this market lower pretty swiftly so dont be surprised. There should be some decent support in the high 760s but below that and I would be looking for 741.

Monday, March 30, 2009


After gapping down Monday the market made no attempt at a gap fill and just grinded lower all day. It was a pretty ugly day but most of the selling was done overnight and the intraday action was quite dull and boring. We bounced in the last hour to close off the lows but still down around 785. Going forward now with 800 broken to the downside I think any move into 800 should be sold into and we will at least come down to test 765 gap fill from last Monday's big up day. If that level holds then ok but odds are that they will try to test 741 imo.

As for Tuesday, the pivot sits at 785 and the futures are bouncing above that tonight so I think if we get a morning rally then don't fall in love with it but expect some weakness as the market approaches the 800 area. We are now back in the 741-800 trading range that the market has spent so much time in lately so until we break either side of that range then expect a trading range to ensue.

Sunday, March 29, 2009

The Weekly Trade 3/30

Last week ended with a bit of profit taking after a fierce rally. I was looking for the market to hold 800 last week. It did. So that is going to be key support going into this week. The futures are selling off into that area Sunday evening and look to be pointing towards a lower open in the morning. I think this latest bull bounce can be resumed but we could see a pullback into the 770 area first. Last week the market had a hard time getting over the 820 level and until we closed above there again then we will probably retrace a bit more.

Looking at the chart to the left you can see that the 800 level has been very important support/resistance going back to October and at the same tiem we got up to it last week the indicators below seem to be running out of steam and rolling back over. However, the reason I think we will not see fresh lows and just a retracement is because we are now ABOVE the 20 and 50 day ema's. I think last week was the first weekly close above both averages in the chart. This will provide support for the coming pullback. The 20 day ema stands at 781.

Tuesday- Consumer Confidence, Case Shiller Home Price Index, Chicago PMI

Wednesday- ADP Employment, Construction Spending, ISM Index, Pending Home Sales, Auto and Truck Sales

Thursday- Jobless Claims, Factory Orders

Friday- Jobs Report, ISM Services

Overall, I want to start out the week neutral and see where this market wants to go. The jobs data this week should be important but remember its all about expectations. As for Monday the pivot is at 814.50 and I would look for a half gap fill in the morning followed by a primary downtrend intraday to short into. Trade safe.

Thursday, March 26, 2009

Raging Bulls

Thursday the market chopped around and seemed to be losing steam midday until the last hour rally again had us close at the highs. Really amazing how this market lately has just been able to rip higher when a few months ago would have just rolled over at the first sign of weakness. Now the weakness is being bought. Something different we have not seen in a while and if you do not watch the action intraday you dont realize this. I continue to like this price action and think that they could really push this thing Friday if we get any momo behind us. The 60 min chart is bullish, the 30min, and the 15min chart all point to more upside.

Friday's pivot on the ES trading hours is 822.75. Like always the pivot is the line in the sand and should dictate the day's bias. I think if we stay above the pivot we could see some nice upside going into the weekend, perhaps up to the 850 area would not be out of the question. If we fail to get over the pivot and break 816 of so then I think they could push it down to 800 at the least quickly. Either way it should be an interesting day but my bias is higher.

MA Bull Call Spread

Mastercard (MA) has been in a ascending triangle pattern in 2009 and looks to be wanting to breakout over 170 resistance. It is right at the 200 day ema so it could still take a few days but there is real strength here. I think the option trade to take here is a bull call spread.

Buy the April 170/180 call spread.

In this trade you are buying the 170 call and selling the 180 call.

Net debit right now is $4.20 and that is your max loss if MA is below 170 at expiration.

Breakeven is at 174.20 and max gain occurs over 180 when the spread is worth $10.

Wednesday, March 25, 2009

Whipsaw Wednesday

Sort of a roller coaster day in the markets today as we started off strong and hit 823 then fell off a cliff down to 787 before a last hour rally closed up around 810. Pretty incredible action today imo. A positive sign that we held 800 and closed higher on the day, even if it was the shorts caught in the last hour that had to cover. Quite a range intraday nevertheless.

Some positive home sales and durable goods data this morning is a good sign that the economy could be turning. Also, lumber futures had a big up day off that data on Wed. and look to be putting in a solid basing pattern lately along with other growth oriented commodities as well. Lumber is a key commodity that needs to bottom before the housing market does and I think the first steps of that process are being seen.

Going into Thursday I am bullish and think you gotta buy the 805 area if you get a chance. A nicely defined risk trade as this area seems to be a good pivot to work off of lately. As long as we hold over 800 then I think we go higher. The pivot for Thursday is at 806.75 and I can see this market resuming the rally if that pivot holds as support. The 840s are not too far away if we can get some momentum.

Tuesday, March 24, 2009

Buy The Dip?

Tuesday the markets pulled back after testing 820 and failing. We ended up down around 802 after a last hour selloff that was mostly due to the treasuries rallying big. I think the pullback could continue a bit longer but if this 805 area of support (previous resistance) holds up then we could resume the recent rally and make a charge at 850. The daily chart now has an uptrending 20 day ema at 770 giving us more support if we somehow fall to that level.

For Wednesday the pivot sits at 808 and we are bouncing a bit after hours but still a few points below the pivot. We should have a continued pullback if we stay below that pivot intraday. Below the 790s and I think we could retest that 770 area where their is a gap. However, in the grand scheme of things I think this current dip is a buy as I am bullish for the intermediate term.

Monday, March 23, 2009

Just What I Needed?

Monday the SPX got just what it needed. A powerful rally thru 800 resistance and a close at the highs around 820. This rally was quite impressive from my perspective as I was looking for a bit more of a pullback into the 740 support level but that did not happen and now looks like you got to be a buyer of dips. Of course the market did just rip up 500 pts so a few days of consolidation wouldn't surprise me.

The rally was broad based and tech and the banks led the way. The internals were strong again as I believe this was the 5th day in the past few weeks that the up volume hit 90%. That is simply telling you that when you look "under the hood" of the market, the internals are saying you that there is real buying and real strength being showcased. It doesn't really matter whether the bear is gone or not, the point is that we are in a strong rally and you should be bullish until the charts tell you to stop being bullish. Trading is really that simple, its when emotions become involved that we get into trouble.

For Tuesday, the pivot point is at 806.50 and it really is amazing to be back in the 8 handle. I think you gotta be bullish here above 800 but that doesn't mean chase strength. As always above the pivot and I am bullish intraday. I think we could get a pause day or even some profit taking. However, I do think this rally is real and has legs perhaps into May or beyond. Next few resistance areas to watch are 840 and 876 with obvious support down at 800 and 770.

The Weekly Trade 3/23

Last week ended with a modest pullback back into the 760s on the SPX. After going up 20% in two weeks we were due for that anyway and as soon as we hit the 800 resistance level the sellers showed their faces. Going into this week I am looking for a test of that the 741 area and then perhaps a bounce higher to see if we can challenge 800 again. It should be an interesting week nonetheless, as we are inbetween two key moving averages, the 20 day ema sits at 757 and the 50 day ema sits up at 792. I think 741 is the most important area to watch going forward. If we hold it I am bullish, period.
Like I said the 800 area is pivotal as well and if this market is as strong as it shows signs of being then we need to see a close back over 805 and then start seeing more up 5, down 3 type of weeks instead of the reverse. We could spend some time even consolidating in this range as the 50 day ema is now flat and not showing much direction.

Economic data this week is fairly light and includes:
Monday- Existing Home Sales

Wednesday- Durable Goods Orders, New Home Sales

Thursday- Jobless Claims, Q4 GDP

Friday- Personal Income and Spending, Michigan Sentiment

As for Monday, we are gapping up Sunday evening and look to open higher in the morning. If the gap is less than a 100 Dow points then we will probably attempt a gap fill. If we stay over the pivot point then they could push this thing higher and surprise some bears. But I will start neutral and watch the 15min chart to gage the directionally bias of this market to start the week. The pivot is the line in the sand and it is at 770. Trade safe.

Thursday, March 19, 2009

Quadruple Witching

Well Thursday unfolded just about as expected. Ran up at the open to retest the prior days highs and rolled over to get all the way back to almost where we were before the Fed's big announcement. Closing up around the mid 770s sets us up for a bit more of a pullback imo. However, Friday is options ex and quadruple witching day. This happens 4 times a year and provides an additional dose of market volatility and choppiness. I tend to not even trade on these days as the risk of getting whipsawed is too great. So even though we are technically setup to pullback further they may do whatever they want with it on Friday. But if you choose to trade it here's what to look for.

The pivot for Friday is 785.75 and we are well below that level tonight so I think if we even get up there its an outstanding short entry and this ES market could very well drop into the 760s. There should be some good support around 770 but below that and it could get ugly. Again, this market is free to chop around and do what it wants Friday but my bias is bearish.

Wednesday, March 18, 2009

Bernanke Rally

The market was in pullback mode on Wed. up until Bernanke came in and announced the Fed will buy over a trillion dollars worth of mortgages, debt and US treasuries. Yeah the stock market went up but the real bid was caught in the gold market, foreign currencies, and bonds.
Gold, after being down on the day near the 885 mark reversed and closed higher up around 950! The Euro went from 1.31 bid to 1.35 in minutes. These are moves that usually take weeks or more happening in minutes today. The treasuries had the biggest move up since October 1987! This tells you that it was an important day and people think that inflation will be a factor in the coming years, but are more willing to participate in risk, namely equities.

As for the ES futures, they hit a high of 800.50 and then retraced back to the 780 mark before closing up at 790. This is very bullish as I heard that trading desks saw more than just short covering in today's move and thats something new. I have been saying for the last week that this rally feels different and may be the real deal. But we just moved up 20% in less than 2 weeks. Expect a retracement coming. It may not, but you should expect one and I would actually prefer to see one maybe down to that crucial 741 mark once again. I do believe we can build on this rally but after some profit taking.

For Thursday, the pivot is at 784 and price is right about there tonight so the pivot is the line in the sand. If we open above then watch for that pivot to be support with obvious resistance back around today's highs of 800. If we lose 784 early then we may retrace more of today's move. But I tend to think Thursday could be a pause day more than likely.

Monday, March 16, 2009

Every Rally Has Its Thorn

After a euphoric gap up in the morning we hit a high of 771 on the ES, which was roughly 105 ES points up in the course of a week. The market is due for a pullback and did so in the last half of the day. Now the focus turns to seeing whether this is a small retracement of the prior advance or the next leg down. I honestly have no idea, lol, but I will let the charts tell me. I'd like to be a bull and say we blow thru 800 this week, but of course that would be hope talking.

So now I am looking at that important 741 support level and seeing if we hold it. If so, then we could really gain some steam as its expiration week and those have historically been somewhat bullish.

For Tuesday, the pivot point is 757.25 and will be the line in the sand. With price closing in the low 750s today that means it might be a difficult to get over the pivot and the first attempt at it should be faded. If we do not get over that pivot then I fully expect this market to retest 741. If it holds is another question.

Sunday, March 15, 2009

The Weekly Trade 3/16

Going into options expiration week we have a bit of momentum to the upside off of last weeks strong rally. I think we could continue higher this week as the next big resistance out there doesn't seem to be until 800-805. It would be nice to see the market stay over the 20 day ema this week and not retrace much of last week's gains. With the 20 ema flattening out and the 50 ema just under that 800 mark we could see some consolidation this week before the next move.

The indicators are not yet overbought and still look positive imo. I think the next test for this market will be at that 800 level and if we get over that 50 ema and start to see that 20 ema curl up then we could be looking quite bullish. We will see what happens but I think starting the week off with a bullish bias is appropriate.

Monday- Empire Manufacturing, Net Long Term TIC flows, Capacity Utilization, Industrial Production

Tuesday- Building Permits, Housing Starts, PPI

Wednesday- CPI, Current Acct. Balance, FOMC rate decision

Thursday- Jobless Claims, Leading Indicators, Philly Fed

As for Monday, like I said, I want to be a buyer of pullbacks as long as the 20ema on the 15min is uptrending and we are trading above the daily pivot. That pivot is at 749.25 and should dictate the trend of the day from the get go. Trade safe.

Ride The Elliott Wave

Elliott Wave Theory is a technical analysis concept going back to the 1930s developed by Ralph Elliott that proposes that market prices unfold in specific patterns, or Elliott Waves. The overall pattern consists of a 5 wave dominant trend and a 3 wave corrective trend. Within the dominant trend waves 1, 3, and 5 go in the direction of the trend, while waves 2 and 4 correct waves 1 and 3. For a more detailed explanation of this concept please click on the links provided.

I wanted to take a look at the current wave structure to see where we are in the bear market. Corey Rosenberg had an excellent article regarding this topic over at The Disciplined Investor last week and it really caught my eye.

A Large-Scale Wave Count on the S&P 500 Monthly Chart places us in Wave C of a very large three-wave correction that began in 2000. The Peak in 2000 represented a final 5th Wave most likely of a larger 3rd Wave, which puts the whole Bear Market from 2000-2009 into context as an ABC Three-Wave Correction of a larger 4th Wave.

Wave A formed at the 2000 peak down to the 2002/2003 lows, while Wave B was a rally back up to retrace just over 100% of Wave A which lasted from 2003 until 2007, and we are currently in the third corrective Wave “C”.

The market peak occurred in October 2007 which began the C-Wave Correction Down which has just broken to new lows beneath the A-Wave (2002 Bear Market) lows as expected. Reference the “Ideal” Elliott Wave Count diagram - C Waves almost always break to new lows beneath Wave A in a correction.

Noting the Wave Structure from 2007, we see that a 5-wave formation is very near completion, and as of this writing, it would seem that a fractal fourth (4) wave up followed by a fractal fifth (5) wave down would complete the 5-Wave major decline from the 2007 peak and suggest that a large-scale Three Wave Correction to the Upside - which could last months or longer - is expected next according to Elliott Wave Theory.

So this can make the claim that the worst is over as we are in the final stages of the 5th wave down in the bear market that began almost 18 months ago now. Of course the other side to this argument is that we are only in a very extended wave 3 down in the bear market and still have a retracement higher to come before the final wave of selling makes new lows.

So which one is it? I honestly am not an expert in Elliott Wave Theory, and only a student. But I would think at the very least what began last week was the 4th minor wave within the primary 5th wave down in the bear market. Assuming this, that would mean we retrace a bit more this week before eventually falling back to retest the 666 lows on the SPX and completing the 5th minor wave within the 5th overall primary wave.

Whatever it may be, it is worth paying attention to, and like everything regarding technical analysis, not one single tool or method is always right.

Thursday, March 12, 2009

Blast Off

Thursday was a very bullish day that started strong and ended strong. I was quite impressed with the way the market blew thru 741 like a hot knife thru butter. The volume could have been better but still it was bullish. I think we could see some profit taking here soon between 740-760 but if we close Friday above this area then I am very bullish going forward. The rest of the month and quarter for that matter. This rally feels different and I think it could be the start of something.

As for Friday, the pivot is at 735.75 and we are well above that after hours so I think the trade is to buy a pullback to that mid to high 730s level as it will even coincide with a rising 20ema on the 15min chart. We have come straight up to the 200ema on the 60min chart with this big rally so we may get some resistance in this 750 zone but above that and you gotta be bullish going into next week. The bias is long if we are above that pivot Friday.

ARO Short Straddle

Aeropostale (ARO) is reporting earnings Thursday after the bell and has been uptrending nicely the last several weeks. The stock is right around that 25 mark. The implied volatility is int he mid 70s while the stock volatility is much lower around the 40 area. Looking at previous earnings reactions it has moved less than 10% 4 out of the last 5 times. Usually when I play earnings I sell option premium. For example, selling credit spreads or straddles/strangles. With the stock around 25 I think this is a nice time to sell a straddle in March. You do not need to hold into expiration if you get a nice gain overnight on this trade.

Sell the March 25 straddle for 2.45.

In this trade you selling short both the 25 put and call in hopes that that stock stays as close to 25 as possible.

Your max loss is umlimited beyond your breakeven at expiration which is 27.45 on the upside and 22.55 on the downside.

Max gain is the credit you take in initially if ARO finishes next week at 25.

Wednesday, March 11, 2009

Pause Day

When a runner runs a marathon, usually they have to take a breather before running another one the next day. Well the markets are no different. Today was a nice breather day as the action started out strong outta the gate with a gap higher then a pullback into the close. This was not bad price action if you ask me. I believe we can still head higher to tag that 741 resistance Thursday or Friday.

Thursday will be interesting because of the jobless claims in the AM and the pending mark to market news. I would expect a big move either way. If I was a betting man, which I am, I would say we go higher to hit 741, or at least attempt to. But keep an eye on Thursday's pivot on the ES which stands at 722.25. If we slip below that in the morning then it might be difficult to avoid a down day.

Tuesday, March 10, 2009

Bulls on Parade

Well it was definitely a day to be a bull. The shorts got squeezed and totally hammered. It really wasn't surprising to me to see this rally and I had been expecting it to come very soon since we have just been so oversold. You really gotta be a bit greedy to be initiating new short positions down here below 700 the last week or so. So have we bottomed?

We may have but who cares. That's not how you should approach it. I just realize that the odds are better over the next few months to start being more delta positive and long biased. I think Tuesday was more bullish than most rallies we have seen in the past 6 months strictly looking at internals and volume based indicators. We will probably gap up and have at least a 2 day continuation to retest the pivotal 741 SPX mark by week end. I think that will be your pivot point for the next several weeks to trade off of.

My guess is that we hit that resistance and sell off. How much? Again, who knows and who cares. Just be expecting selling pressure up there. I believe it is likely we haven't seen the last flush of the selling and will come back down to retest the lows around 666 (funny huh? lol) in the next few weeks. After this, I strongly believe we are in for a sharp and surprising intermediate term rally that could last months or longer and possibly send us clear back up to 900-1000 on the SPX. This is from looking at a longer term Elliot Wave theory structure and it points that we are nearing the end of the last wave of the bear market that began in Oct. 07. I will do a post this week regarding this theory to expand further.

For Wednesday, pivot stands at 708 and I fully expect a gap higher. I would simply try to go long on pullbacks to the 20 ema on the 15min throughout the day if you get the chance. Otherwise, don't chase. Trade safe.

Monday, March 9, 2009

Inside Day

Monday the market got off to a decent start but that was reversed by midday to finish new the lows around 675. Even though we did close near the lows we managed to form an inside day pattern on the SPX. This is when price stays within the range of the previous day's boundaries. Usually it precedes some sort of big move or reversal in some cases. With the range contracting tighter than the prior day, it is like a spring being coiled that may be signaling the exhaustion of the previous trend in price.

So on that note I would not be surprised to see some strength on Tuesday with of course the assumption that we can hold above the pivot.

For Tuesday the pivot on the ES futures is 680.75. We are trading a bit higher after hours so it could be a interesting day if we can get some momo above that pivot and even more so if we get over Monday's highs in the 695 area. If we cannot breakout of the range we had today then it may a choppy sort of flat day so don't overtrade it. Trade the trend.

SKF Put Spread

I've had some traders ask about a potential option trade on the SKF as it seems we are near a snapback rally of some sort and if thats the case then this SKF will collapse. The tricky thing with these leveraged beasts is timing, timing, timing. One catalyst that might get the banks jumping this week is the mark to market accounting regulations. So if you think we are in for a major bounce in the banks in the next two weeks then some puts on SKF could really work out well. I'm not saying it will happen but the odds are good that we see some sort of recovery rally so here is the play.

Implied volatility on SKF is north of 190% so I would prefer using a spread strategy to hedge some volatility risk because once the SKF sells off hard then the implied volatility will get crushed too.

Buy the 200/150 March put spread.
In this trade you are buying the 200 put and selling the 150 put for a net debit of around $10.
Max loss is that original $10 if SKF closes above 200 by March expiration.
Your breakeven point at expiration is at 190
Max gain is a possible $40 if SKF gets under 150 by expiration.

Again this is a somewhat risky play since SKF is insane. But if you think we are near a short term bounce in the banks then this is a good way to play the options imo.

FCX Bull Call Spread

Freeport McMoran (FCX) has been rallying lately even as the market sells off. It has formed a very nice ascending triangle pattern and broke out last week. It has pulled back a smidge today and I think it is just resting on its way to 35 this week. This pup has one of the nicer charts out there currently. With the stock at about 32 right now I think it offers a nice entry into a bullish call spread.

Buy the March 30/35 FCX call spread. In this trade you buy the 30 call and sell the 35 call for a net debit. You finance a portion of the 30 call with the sale of the 35 call to lower your cost but you also cap your upside once the stock gets over 35.

You can buy the spread for a net debit of 2.45.
Max loss is that original 2.45 if FCX is below 30 at expiration in two weeks.
Your breakeven on this trade at expiration is 32.45.
Max gain is roughly a 100% gain if FCX gets over 35.

Sunday, March 8, 2009

The Weekly Trade 3/9

After Friday's late day comeback I would not be that bullish but its also hard to be that bearish down at these levels because it just feels like we are getting close to a meaningful bounce. I believe we could get a rebound this week but its anyone's guess as to when it starts. We are so overextended to the downside that it would take a 50% rally to get us back to the 200 day EMA on the SPX. That's unreal.

There has been some talk of mark to market accounting being suspended and that an announcement is due this week. If this happens I think it would be very bullish for the financials and the market as a whole. Perhaps its the catalyst the market is waiting for.

Whatever happens remember the levels to watch for. Looking at the chart you can see we are well below the downtrending 20 and 50 day EMA's. Also if we do get any bounce to the 741 area then look for resistance to show its head as that was our previous big floor we broke down from.

Economic data this week is light and includes:

Tuesday- Wholesale Inventories

Thursday- Jobless Claims, Retail Sales, Business Inventories

Friday- Trade Balance, Mich. Sentiment

For Monday I wanna start neutral and look for a trend to establish itself either above or below the pivot to determine the day's bias. The pivot is at 682.75 and we are trading a bit above that overnight. If we get going above that area then we could even attempt a gap fill from last week up to 710 or so. Trade safe.

Thursday, March 5, 2009

Thursday Thump

Any hope of follow thru from Wed was totally dashed at the open Thursday as we gapped down and never filled the gap. It was another slow grind lower all day and we tagged some new lows in the ES around 676 before closing a tad above that in the low 680s. It was a pretty bearish day looking at the internals. Every attempt at a bounce was met with sellers and so now we go into a Friday with sentiment this bad and comedy shows such as The Daily Show talking about how bad things are. When I start seeing this sort of attention paid to the market by "outsiders" then I know we are setting up for a mean short squeeze of a rally. It may not happen Friday but I think we are getting pretty close to seeing something surprise the bears.

As for Friday, we definitely could get a rally if the jobs number isnt half way bad. We are set up for it after we held the 680 level somewhat and are rallying after hours up to 688. Also the Euro is getting a boost overnight as I type and that should help the SPX as they tightly correlated lately.

Friday's pivot on the ES is 687.50. I would not be surprised to see this thing rally into the weekend if it opens above that pivot. We have that gap from Thursday up to 712 that could act as a magnet and be filled if we get any momo. Below the pivot and I think you gotta be only expecting more pain into the weekend. We'll see what happens but I think odds are decent we bounce.

Wednesday, March 4, 2009

Market Ready to Jump?

Wednesday was an up day that seemed to get everyone pretty darn bullish. I don't really think it was that impressive of a day with the last hour sell program and lack of financial sector participation but call me crazy. Nonetheless we did finish above some key levels, like the daily pivot for tomorrow so can this market be ready to jump on Thursday?

I think there is a decent chance at seeing a short covering rally into the weekend from here. Of course dont fall in love with the upside but dont be surprised to see it. I would definitely think that the banks need to rally in order for any bounce to sustain itself for more than a day in this environment. Wednesdays rebound was mainly due to the new Chinese stimulus that got all the commodity bulls jumping.

For Thursday, the pivot on the ES sits at 711.75. We have sold off after hours and are trading a bit below there. I think you gotta expecting a continuation rally off todays move as long as we stay above the pivot. The end of day selloff was not great but I think it was just a sharp pullback after that midday run up. Until it proves otherwise, with something like more selling below the pivot, then I think we could actually run into the 730s at a minimum with an eventual retest of that big 741 ceiling.

Tuesday, March 3, 2009

Turbulent Tuesday

Tuesday was a choppy day that ended pretty bearish as the last hour reversal made the SPX close under 700. After hours we even sold off hard to 681.50 but have since rebounded clear up to the high 690s. It doesn't seem like anything is going to lift this market but I still think this bleed lower can continue because we just haven't seen any real fear out there. I keep hearing some apathy and disbelief that the market is breaking levels not seen since the Clinton administration but no real panic. This might be because most investors have already bailed on their stocks in October. Or that we have become so accustomed to this bear market that a down day seems commonplace.

Whatever it is, we are really oversold so I would think we are within a week of seeing a nice snapback in the markets that could take us back to the 740s where I bet we fail and continue lower. Eventually I think the likely target on the downside is the low 600s. Which is sad but at this point probably inevitable. Overall in the grand scheme of things I think we are in the process of forming a large inverted head and shoulders pattern that could take all of 2009 to complete. Right now I think we are carving out the left side of the head. I will look at this closer in the coming weeks.

For Wednesday, the pivot point on the ES is 699.50. It should be even more of an important level to watch because it being so close to that mental 700 number. My bias is down but if we do somehow get above that 699-700 area and hold it then I think you gotta expect a surprise rally that could have legs. It seemed like the market wanted to start bouncing midday today but then retreated back down. It was a stabilization of some sort. Let's see if 700 wins or loses Wednesday.

Monday, March 2, 2009

Do Your Part


Make sure this ridiculous proposal gets shot down because it is complete BS. It is the most pointless answer to a serious problem. We need to hold on to capitalism, so do your part by signing the petition.



Dow 7000, We Hardly Knew Ya

Well that was a ugly day for the bulls wasn't it? Good thing we know to be short in a bear market, lol go figure. We had a runaway gap on Monday and trended lower all day. The ES tagged a 6 handle with a low of 698.75. We have now had 10 days in the red out of the last 11. That definitely means we are due for a snapback rally of some sort. And just perhaps it might come Tuesday.

For Tuesday, the pivot point is at 708 on the ES and we are trading up after hours clear up to mid 710s. I think we could have a bounce at least in the morning if we can stay above that 708 mark. I really don't think any rally sends us any higher than the 740 level that was broken to the downside and now becomes resistance. It looks like we are headed lower in the intermediate term but a short term rebound here could surprise some traders so keep a watch for that.

Sunday, March 1, 2009

The Weekly Trade 3/2

As we go into a new week and month the SPX closed last week at new multi year lows of 735. As of Sunday evening the futures are down in the low 720s. It does not look like a bullish start to the week, but that should go without saying. My bias is bearish to start off the week. There is very little reason to anticipate a reversal. Although it may occur, I wouldn't be betting on it. While the panic selling from last fall will probably be avoided, I think it will continue to be a more slower bleed lower. There is simply a lack of buyers and that forces prices lower the same way that aggressive sellers do.

Looking at the SPX chart to the left we are breaking below November lows but are quite oversold. But oversold means nothing at this point. Keep and eye on that volume Monday because Friday's volume appeared to be the strongest in 3 months, so maybe it shows that selling could be climaxing. Either way, there is no reason to be all that bullish just yet on this market.

With exception I think it will be a good time to get into the metals, specifically gold. It does like the gold market is days away from stabilizing and continuing its uptrend. At the same time, the dollar looks strong and the Euro seems like it wants to break under 1.25.

Economic data this week is heavy and includes:

Monday- Personal Income and Spending, Core PCE, Construction Spending, ISM Index

Tuesday- Pending Home Sales, Auto and Truck Sales

Wednesday- ISM Services, ADP Employment, Fed Beige Book

Thursday- Productivity, Unit Labor Costs, Jobless Claims, Factory Orders

Friday- Feb. Jobs Report, Consumer Credit

For Monday, I want to short into weak rallies. The pivot point is up at 739.50. Not too confident we get back up there, but if we fill the gap down and then roll over then I want be selling it. There could be some major pain early this week if we cannot get any momentum back above our daily pivots as they will provide plenty of resistance.

Lower prices might seem unreal, but they can and probably will happen. Trade what you see, and not what you hope for. Stocks don't lie. People do. Trade safe.