Thursday, November 12, 2009

ES EOD Wrapup

First chart above shows 60 min trading in the ES for the last week and a half off the 1026 low, the White dotted line you see is the Pivot for each day. We have finally tested and closed below the daily pivot for the first time during this move up. The pivot can be calculated by taking the high/low/close divided by three. Looks like a minor correction is underway, or might have been completed.

The bottom chart shows the last measured move up and the retracement levels currently in place, as you see we were holding the 23% retrace @ 1091.50's for awhile, but on an overextended move like this without a meaningful retracement, the 23% retrace's chances of holding are low. Later today we bounced off the 38% and are currently holding. It may look like we need to test the half way back 50% retrace though on this one to hit the -23% target @1115's.

I have a limit order now placed @ 1078.50's looking to get long for 1115 target and a 38pt gain in the Intermediate term.

On the short term I would wait until the open tommorow to see the strength/ weakness in the internals, as long as we don't have up trend like market internals it would be relatively safe to short into the rallies looking for the 1078.50's.

Dow hits its 50% retracement, Russell 2k fills its crash gap!

First chart above shows the Dow futures hitting its 50% retracement or half way back of the entire move off the all time highs to March lows.

The bottom chart shows the breakaway or crash gap that was filled on the TF or Russell 2k futures.

These 2 factors and the fact that the US Dollar appears to be trying to break its short setup leads me to be a little gunshy in jumping back in on the long side. If the bears have anything left this is the time to come back out in full force, if not capitulation will occur, although this time it will be capitulation by the bears and not the other way around. I keep talking about a potential "Blow Off Top" and strength on all the major indexes above these levels may make that a reality.

Right now trading on shorter tme frames is extremely dangerous, these are the times when you should be looking at your 60 min chart and leave the minute charts to those who feel crazy or lucky, or both?

Right now we have a VST range of 1089 to 1103, you can trade off the ends of those ranges for whatever your bias may be, anything in between those ranges and you better be looking to take your profits and run or you will be dissapointed.

Here's the deal for today

Ok well we had -502,000 jobs instead of -512,000 WOW! Here's whats shaping up for today, we bounced off the 78.6% retracement of the last swing low to high @ 1089. I am basing that that will hold for today and will look to take a long position as close to that number with stop just below. On the flip side the short setup has up until 1100's to still be valid, if at any time we trade above 1100 the reaction is over and we will begin our next move to 1115.

If we break 1089 then, again, next short term targets are as follows 1084-85, 1078, and 1072-73, the reaction should NOT break much lower than that.

Also a quick note the US dollar appears to be in another short setup on the Very Short Term time frame, another reason I am for now thinking we have seen our low for the day in overnight action @ 1089.

So that's the gameplan, we have the plan A and a plan B, remember money/risk management is the key and best of luck to all!

Wednesday, November 11, 2009

Dow closes Post Lehman collapse breakaway Gap, SPX LT downtrend line

Well on a national bank holiday some important events transpired today, first being the Dow Cash Index (Not Futures) closed its breakaway gap from the post Lehman Bros. collapse last fall as seen in this chart above. This is the equivalent of the 1096 ES gap that started the whole crash sequence. Mind you that we close the ES at exactly 1096 today, these guys never cease to amaze me!

Next series of charts shows the downtrend line from all time highs from 2007 on the SPX cash index in both linear and log chart formats. Right now the log format is coming in at 1150's as the linear was hit today. Could be a minor reaction here, but from my research on longer time frames log scale is the way to go. And what I am expecting by years end to see us trade in the 1150's. So pretty exicting day giving the Holiday!

My trade is still very much on, new profit target has been moved to 1106, so I plan to make over 20 pts on this trade. Holding my ground and keeping emotions out of it, Observe and Act!

Monday, November 9, 2009

Video Recap EOD

**Click on box in lower right corner for full screen

Bears last line of Defense

Chart above shows the sequence of events that transpired during the profit taking sell offs we had over the last week or so. I have drawn a fib retracement of the entire move from high to low on the hourly chart.
Key lines now left for the bears to defend are: 1083's (78.6% retrace) to the 1087's where as you can see on the chart the sequence really picked up steam to the down side, as supply become increasing and demand decreases the only place for the market to go is down.

ES Important Numbers for Today

Gap Fill or 4pm Close @ 1066.25

Point of Control: 1064.00


Pivot 1063.08

Sunday, November 8, 2009

ES and -23% targets

Above you have a 60 minute chart of the ES, the last and final wave down or sell off we had first retraced back up into it's 50% or half way back, where it found heavy resistance and immediately the sell off continues. What I want to point out is where the sell off stopped? Take a close look, the -23% target not only becomes the profit target spot but also acts as support and begins this move we have had the last week.

When I initially started using targets for all my setups, I started using the -50%, seemed right, you buy/short the 50% into the -50%, easy enough? Well the problem was I continued to find the -50% was just too far away and the chances of it being hit in a timely manner were not as good as I would have liked. I tried a few others, but for me the -23% gave the best risk/reward ratio. I find very often it if where profit taking starts and a conter trend into the next 50% begins a lot of times.

So in a bull market like this we are in, a great time to take a counter trend trade anticipating breaking the bearish setups would have reaped tremendous results in a short amount of time. Remember these Fibbonnacci Retracements are available on most charting packages, you may have to take some time to set it up as I have but trust me it is well worth it.

Sunday, November 1, 2009

Sept 28th - Oct 2nd Week in Review

**Click on the little box in the lower right corner of the video to get to full screen.

Thursday, September 3, 2009

Gold Update

I had posted months ago about this inverted head and shoulders forming on Gold that would eventually break out to new all time highs. Well here we are again with a close @ 992.40 on spot we are now closing in on the neckline of this pattern (horizontal line) with the 3/10 MACD confirming by making higher lows, if/when we break this just watch how fast Gold starts shooting to the moon.

My best guess for what will happen is a break of the neckline attracting many many buyers pushing prices up and fast. Next I believe we should sell off again though to shake out the weak longs and to retest the neck line before sky rocketing once again. So expect some serious volatility not just straight up moves, but should be some good opportunities coming soon.

Wednesday, September 2, 2009

US Dollar forming a bottom?

I believe looking at the dollar we are in a bottom forming process, the question though is will there be a breakout? Why would there be a breakout? Both good question, and I believe there is really no reason for the dollar to rally other than since it has been hit so hard it may be time for the bears to give this thing a break.

From the daily chart you see above, the 3/10 MACD, has been consistently making higher lows while the dollar is making lower lows. That to me is a bullish divergence. I think 77's will hold and may actually be a good play to take a chance on.

If for some reason the dollar does start to move up, that would not be good for stocks. I know Gold had a good day today as well, my EOD charts on Gold haven't updated yet when they do I may do a quick post on that and Oil, as it is an important thing to keep an eye on.

Tuesday, September 1, 2009

WOW!!! Summer Trading days are over!!!!!

  • What an amazing market we have today, here is the 5 min chart of the entire day. I went long early in premarket with a target of a full gap fill for today, I was a little nervous of the trade as yesterday's gap was not filled and the first trading day of the month the gap fade play's percentage is less. Boy I am glad that I did it though, I waited for a 50% retracement as seen on the chart to hold to go long, we had continuous buying blowing through the gap fill and the daily pivot. Obviously I wasn't going to sell with such momentum behind me, the next logical target was yesterday's gap fill at 1027.50 that failed yesterday. Look at the chart 1027.50's traded and was the high of the day. I immediately sold my long at that point and waited to see the reaction.
  • I began to see selling pressure immediately hit after the gap fill the bears confidence came out in full. So I immediately looked for my place to jump in on the short side. As on the chart I waited for the bounce to the 50% retrace of the previous move where I got filled, you could have also sold the pivot once it broke below that would have been a great trade as well. We continued to sell off fast and furious to the gap fill at 1007.50's level where I sold my short.
  • However, as I type we continued to sell off into the 1003's level. Oh well, I can't complain 13 points up and 17 points down for a 30 point day so far in only 2 trades was AMAZING!!!!
  • I could get used to this, very fast technical market back on!!!!!!!! Now I need to go back to my 15 min chart and re asses the market and see what is setting up next.

Monday, August 31, 2009

Morning Gameplan

Currently the futures are down a good 7 points on the SPX or 70 points on the Dow, however what I am looking at this morning is to put on a counter trend trade. I am going to try to fade this gap back up into it's daily pivot, there I will assess price action and see whether I should hold my long position for more upside action or sell my longs for profit and reverse to the short trade.

Here is my thinking, above the 15 minute chart from Friday into overnight and current. If you draw a fib retracement from the High from Friday to the low, you get a 50% retracement at 1030.25. Look where we hit and sold off, that very same area. These percentage moves are powerful, I can not stress this enough. After studying in this subject I no longer use a single indicator, just the TICK. Anyway the target for this short trade is the -23.60 line at around 1018. I will look to cover my short around that area. There I will look for the long to play the gap fill, more often than not this will be filled in the first hour at least half way, if it doesn't you know a trend day is developing and to place your next trade in the position of the trend.

Daily Pivot = 1029.50
Gap fill = 1027.50

Watch these numbers carefully, and good luck!

Thursday, August 27, 2009


Well we did have that explosive move predicted, unfortunantly it came after a good 12 point sell off, so for those who didn't watch the whole day unfold it doesn't seem nearly as big as it was!

Looking back I think that was a brilliant first move by the market makers since CPCI was so high, I am sure it shook out a lot of weak longs as well as shorts just eager to cover for profits nowadays before the move up and eventually to new highs more than likely this week. Pivot points worked extremely well today, if you just sold pivot in the morning and bought the breakout in the afternoon, you would have made out very well as I did:)

The shakeout!

First off I know a lot may not want to hear this, but personally I can not wait until summer is over, just for trading purposes only. These summer doldrums have been painful at best, combine that with the consolidation patterns we have been having and you have chop that can chop chop your trading account if your not careful.

Anyway here's the 5 minute chart of the day session, I said early on to take profits early as possible. We sold off pretty well off the bell, however the volume was light, meaning not a lot of participation. Chances are it was a shakeout of weak longs before making new highs. We rallied off of support 2 at the 1015's, but we are still in a valid short setup around the 50% retrace of this whole move. I would be extremely careful opening any positions right here until we get a clean break either way. If this short setup becomes valid a target of around 1010 would be a legitimate target.

Wednesday, August 26, 2009

Serious Bull flag formed on the ES

Above is a 15 minute chart of todays ES session, notice the consolidating bull flag pattern formed. The break and ending of this move whether up or down should be explosive. At this point I would have to lean to the positive side.

It has been tough trading last few days, can not wait for the the fall, for the fact that our trading especially during the doldrums (11:30 - 2pm) should produce cleaner percentage moves and not the MESS we have been having lately.

I made my money on the long side in the morning session as noted in the previous post, I saw and pointed out the bear trap forming and went long until I was eventually stopped out with 8 points profit on the day. Then I let the others fight it out as I sat back and watched.

Tuesday, August 25, 2009

SPX update: 1039 becomes solid resistance

  • Here is the weekly chart of the SPX for the last 2 years, I have drawn a retracement from the highs in September '08 to the lows of March. As you can see we bounced off the 61.8% retracement level in the am and sold off the rest of the day.
  • We have one more retracement resistance level, if you draw from the highs in May to the lows of March (not shown) we have a retracement level at 1050's which should provide some resistance as well. These two levels are the bears last chance to hold this market down. Once we break above the 1050's we should have a run up into the 1150's area at least before any major correction may take place.
  • I ended up taking the day off, I may take the whole week off. Simply because with key resistance levels and consolidation, it becomes a tough back and forth battle that I try to stay out of if I can do so. Let them fight it out and just jump on the side of the winner, riding the band wagon all the way!

Tuesday, August 18, 2009

A note on trend days

Here's a tick chart of yesterday's action on the ES, now in terms of trend days you look at the NYSE tick, advance decline, sector movement etc. One thing to notice as well is gap retracement - especially the first hour. Other than a brief buying period in premarket we had no attempt to retrace even to the 50% line which is coming in at around 991 (which is why I am looking to sell @ 991 if we get that high). Meaning program selling, distribution whatever you want to call it. The problem with yesterday that ALL of the movement came before 5 am from overseas pressure and most retail traders where left in the dust wondering whether to go long with such overextended levels or jump in on the short side as well, me being one of them, luckily I was able to bag a couple of points that where left to the downside. Boy these market makers are good!

Monday, August 17, 2009

Shanghai Index Breakdown

It is no secret the suspected recovery in China, and the collapse of the dollar have mostly been the catalyst for this entire market rally. And conversely why bad economic news from china could have the impact on markets worldwide like it has today.

Here's the chart for the Shanghai Stock Exchange Composite Index, in my humble opinion comparable to the S + P 500 of the Asian markets. In the last 8 trading sessions they have not only broken the up trend line, it closed below its 20 sma and last night closed below its 50 sma.

Ouch! That is a sign of weakness if I know it. Keep a close eye on this Index in the coming days/weeks because it could call a possible trend change reversal if unable to find support.

Sunday, August 16, 2009

NYMO, McClellan Oscillator

Thursday we had a very bullish close which I noted, so on Friday am my bias was on the bulls side. With the thought of breaking off into new highs Friday, I was looking to buy the dips, looking for a reversal. Well the market sold off Friday AM with good volume, a lot more than I had expected. As posted friday, I was stopped out of two long trades before reversing short just to recoup the points I had lost. Now I hate losing anything, whether its $1 to $1000, I am way to competitive in nature to let 2 bad trades in a row go unnoticed.

Therefore I spent some time this weekend looking into what may have caused such a sell off. I did not find any real conclusive evidence, but I did notice a chart that I posted above that SHOULD have warned me that things were not right internally and that any kind of a breakout if any would have been short lived at least in the short term.

Here it is the NYMO, won't go into detail about what this is, I will point out some observations I have found in studying this chart. First obsever the blue horizontal line which is the zero line, a close below that usually creates a sell signal next day as noted, or at least short term market weakness. Also look at the extreme readings and how they can sometimes call short term shifts in market trends.

Last month as noted on the chart, when all looked lost for the markets breaking the head and shoulders pattern, the NYMO tipped us off by giving higher highs (bullish divergence) that price was in fact gearing up for a sharp rally. In contrast we have seen a series of lower highs forming on the NYMO (bearish divergence) which should have tipped off that some short term market weakness could be on its way.

Any good tool to keep handy, this reading along side the NYSI, or Summation Index (not shown) is extremely helpful in pointing out buying and selling activity. From studying my charts and internals closely I do expect an upday tommorrow though, but would not be surprised to see weakness for most of the week after.

Thursday, August 13, 2009

ES current range, topping process or consolidation?

Here's the breakdown of the last week or so's action on the ES, check out the channel ES has formed here, question is, is it a topping process or is it a consolidation for the next move up? Well my bias is on the bull side, but I would not be surprised to see a reaction take down ES to the 965 level to gain momentum for a stronger move higher. Now if we break 965 then we may have something more going on here, but I don't see that happening any time soon.
Basic range has been between 1015 and 990 on the ES, we hit the upper channel this morning and look how the market reacted to that, futures we up over 100 points on the Dow, but by the time we opened it turned negative. Now that's a powerful channel!
Also, take a look at the pre-fed craziness as the Market makers drop the es slightly below the range, probably suckering in a lot of bears before taking off first thing in the morning to the upside. However the bullish divergences that formed on the MACD, STOCHS, and RSI would have kept you out of this trade or even gave you a much better opportunity to get long.
Also post fed days are known to be weird days anyway, that is why I didn't go long on the tick extreme like I usually would, I waited for it to break a resistance level before jumping in on the long side just in case it was a sucker move, even still I took my profits and ran this morning. I know a lot of really great traders that just shut down and take the entire Fed week off because of action like this. So if you got stuck in some bad trades this morning, don't be hard on yourself, I can guarantee you that more people lost money today than made money.
I'll post the chart of today's action with Tick later on.

Wednesday, August 12, 2009

Simple Volume Analysis

First off I wanted to answer a question I received as far as why I set such tight stops, yes it was frustrating to get stop out for small/loss+profit today only to see the market move in my favor immediately after, I set tight stops for the simple fact that it's FED day, weird things happen, I have seen it drop off my chart in a couple of minutes. I play things most of the time super safe, however I did notice in reviewing my trades I overtraded today, didn't realize it for some reason until after the bell. But that's why I started this blog, to track my every move and thought so I can go back and analyze and see where I went wrong and make sure I don't trip over the same rock so to speak.

Anyways, to the charts, as I am studying the characteristics of volume to price movements, one of the simple things I track is primary market total volume as seen in this chart. I look for extreme readings and divergences, first take a look at the extreme low readings we have had, most have produced a market top for the VST (very short term)

We had a bullish divergence before the March lows before the rally signaling a possible market bottom, same with July another bullish divergence formed, that could have signaled that some strength was going to carry this market back up to new highs.

Now this is just a simple chart, their is much more complex charts, like up/down volume among many others that give you a little clearer picture. But this is a good entry point to start in volume analysis, as I am seeing volume is a HUGE key to picking market direction and a powerful tool once you begin to use it correctly.

Tuesday, August 11, 2009

SPX sights set on 1200? US dollar update

Quick update on the US dollar (bottom chart), we got a bounce off the $77.50 level, today the DXY is down about 0.15%. The RSI is trying to break the 50 line on the daily, last time it tried that it failed, a typical bear market in anything should not see a reading over 50 for too long. If we do, that may be a signal that a bottom is forming, but for now to soon to tell. We have 2 more support levels @ 76, then 74 if it continues to fall. Again the reason I point this out and follow its direction is its relationship with the market I trade, which is the S+P 500 futures. A continuation of the drop in the USD, will only add more fuel to the fire for the bulls to take this thing higher.
Now, once again, long term price projections. I don't neccessarily trade off these projections, but for me it is interesting to try to formulate an educated guess, backed up by facts. This top chart is actually a weekly chart of the S + P. The large green and red bars are Volume by price, helps to show where the majority of volume has come at. It can also tell, how strong or weak support or resistance levels may be. Now as noted on the chart, if indeed this was a breakout of the inverted head and shoulders pattern, which I believe it was, a reasonable price target measured by measuring the distance from the neckline to the head, would come in at the mid 1200's level.
Now look at the volume we have had above us, little to none. Which could mean the path to be relatively clear to the upside, and resistance levels will be weak. However, the steepness of the drop we had last fall could be the reason why volume was light, it simply fell too fast to build up a volume base. Either way though, it is worth noting. So, in summary, this intermarket relationship may very well have the dollar continuing it drop, catapulting the SPX up into the 1200 area by years end even. I don't think that would be too far fetched. Remember though as traders, take one day at a time, there is still a whole heap of bad news and "bubbles" that could burst and throw a complete monkey wrench into this theory. Just food for thought, and speculation for the time being.

Monday, August 10, 2009

ES Update, possible Inverted Head and Shoulders

Here it is, the day in a nutshell. We hit our pivot point and sold off, should have stuck to my guns but played it too safe, I just noticed now we have an inverted Head and Shoulders pattern forming on the 5 min. Looks like 998 will hold and we may be off to another rally tommorrow. Let's see how this will play out.

Monday, August 3, 2009

SPX Breaks and closes above 1000

End of Day wrapup, we had a break and close above 1000 on the SPX, here's a daily chart of the index showing how powerful the uptrend has been. I made a few side notes as seen, higher highs on the RSI, means no bearish divergences all clear there. MACD shows no signs of slowing down, wait for a cross of the two ema's before considering short trade. Unless only for a VST (Very short term). The only thing I see is volume slowing down a little bit, however I don't know if that is just because August is usually a slow month with everyone on vacation, (which I should be come to think of it!) until we get more confirmation stay on the long side, you will thank me.

Studying patterns I can clearly see the biggest reaction sell off in this whole rally off 865 last month has been approximately 10 - 15 points. So I estimate if people start taking profits and bringing this market down, we should not breach the 985 level approximately, if we do 965 should hold and would be a great opportunity to jump in.

I went long today @ 992 on the ES, expecting a test of the 1000 area today, I was right! Sold everything @ 4:15 what a way to start the week!

Sunday, August 2, 2009

Bullish Percentage Index

Another great tool for spotting trends and tops and bottoms is right here in the bullish percentage index of the SPX. Here is a daily chart, I throw a 5 day EMA as well as part of a crossover system. Also the top of the chart is the daily of SPX alongside, take a look and see how good this reading is at spotting trend changes and tops and bottoms. If we traded this as a crossover system on its own we could have made money (However I would advise against using this by itself!) But even if you did you would have caught the majority of the move to the upside and the selloff as well.

Take this along with our Summation Index and McClellan Oscillator that I showed in a previous post and you have a great way to spot and follow trends. As you can see first off we are close to making new highs in this index and second look at the previous times it has failed at this high of a level. Aagin something to keep in mind while trading, for me I will limit my exposure on the short side, if any unless/until we get a bearish cross on this index, then it may signal a short term reversal. But again, SPX > 970ish = Bull Market, it's as easy as that. Until that number gets taken out to the downside the trend is UP!

Good luck trading this week everyone, I will probably be staying up real late tonight to catch the action and maybe get some good positions opened for the day session tomorrow, we will see.

Friday, July 31, 2009

GDP - Gross Domestic Product

Well I was a little surprised off the reaction we got after the GDP numbers this morning, the numbers were a little better than expected but still the first reaction was a sharp sell reaction. Whereas yesterday we had a jobless claims number that was worse than expected but the market shot up. So I decided to look into this a little further, above you will see the quarterly chart of GDP readings, counting this quarter we have 4 quarters of negative growth. According to economists 2 quarters is a recession, but 4 quarters is a depression. However, there are those that argue that that is not the case. I am not an economist, but I do not think you need to be one to read the above chart and see that drop off we have had and tell that it is not good. In fact we have to go back to 1982 to get any kind of numbers as close as the ones we have right now. And I think that is what the initial reaction of the market was for.

On the positive side the retraction seems to be in decline, the last down bar we had we significantly less than the previous. There is definently a lot of obstacles in our path, there's no doubt about it. Again I stress though as traders, follow the trend until it is broken. If I as I analyze my volume data, see heavy accumulation from institutional buyers, I could care less how bad the news is I am taking my first buy signal!

Wednesday, July 29, 2009

US Dollar update possible Triangle Formation

Here is a daily chart of the US dollar over the last six months or so, as you can see the dollar is taking a beating on inflation fears among other things. Remember the market is working inverse to the dollar right now so we need to pay extra close attention to how this pattern will play out because it may tell us the next move the stock market will go in.

Just in case you missed it previous post of intermarket relationships:

One of the main driving factors of this whole rally off the March lows has been the devaluation
of the US dollar. Key areas to watch: Horizontal Support coming in @ approximately 78.50 and the upper edge resistance line which it is closing in on. If we get a break to the upside a possible move to 85 would not be out of the question and the stock market would probably correct as well. If we go back down and break support, well oh boy more downside would be inevitable. Which however would more than likely cause the market to continue to rally.

I do want to say this rally still has plenty of more room to the upside, I hear people say so many up days in a row market so overextended. Well in a way their right but do not forget we dropped over 50% over the fall/winter alone so this is an unusual time and that a rally over the 1000's on the SPX would not be out of the question. Each and every chart I look at still shows more upside that is possible. Again though keep an eye on the dollar (DXY) intraday for clues on which way this may turn.

Tuesday, July 28, 2009

Oil trade update

Here's a quick update on Oil today with the markets being in a whipsaw tug of war battle, I decided to stay out of this fight unless a decisive victor comes out today. I wanted to point this out also because I wanted to say that TA is good in its place, but because it follows price primairly it sometimes doesn't get the whole picture. I hope everyone saw the post about a month ago where we broke down the oil trade and what TA was telling us about the direction Oil prices where going to go in the future, now this is TA at its best, in case you missed it here's is the post.

We said the pattern at that time was a reversal pattern and that Oil should come back down to test the lower trendline and ma support, and that are target after the breakdown was around $58. Well what did we get $58.72 to be exact and we bounced back up for a close yesterday of $68 and change! I hope someone out there took that trade:)

So even though TA patterns fail, like our head and shoulders on the SPX, overall it is a tool every trader should be well schooled in. We should be studying price movements and where they potentially should reverse. But TA alone is not sufficient, it would of had you shorting this entire rally, and without proper risk management some damage would have been done. No I am saying look for the potential movements and study volume and supply and demand patterns and order flow to see if they confirm the TA analysis, if volume analysis is telling you that a stock is getting accumulated heavily by large institutional players I don't care what TA tells you, do not go short or you will be sorry. Let's think outside the box and not look for those things that everyone else is looking at and create our own plan of attack!

EDIT: TA = Technical Analysis:)

Monday, July 27, 2009

ES midpoint support update

Here's a two day chart of the ES, midpoint support is drawn as horizontal support line, shaded box represents today's trading sesson. Look how the ES hits and bounces off of support coming in @ 969. I was lucky enough to get in right at 969. Market struggling to keep prices at these levels however NYSE Tick remains positive so I am holding my position. As soon as I see a lower low on a five minute bar I may sell at market.
Now, even with this info if you saw the market sell off to that horizontal line would you go long? Well if you were listening to the news or perma bears out there probably not. Market is overextended yes so the risk reward may not be worth it to most. However as traders I believe we shouldn't be trading while thinking what may or may not happen 3 to six months from now, that's not a traders mentality that's an investors mentality. Again just my opinion.

Sunday, July 26, 2009

Sector Performance Update

Here is a quick sector performance update for the last 10 trading days, as you can see every sector performed well in this uptrend which doesn't surprise me at all. Things to note for this week XLF - the financials underperformed the overall market as well as defensive sectors like Health care and Consumer staples also underperformed the overall market. Generally the financials lead the overall market so it should be noted in case of a short term pullback.

Of course in my opinion the overall trend on all timeframes is up and every pullback reaction should be bought until signaled otherwise. Since we have broken long term trendlines to the upside I believe a lot of institutions will continue to throw money in this market so they will not be left behind. Again I will say let the trend be your friend, does it make sense for us to be at these price levels, NO. But if you follow the volume transactions of the large players (institutions) you can stay on the right side of the trade moreso than not. After all isn't our goal as traders to make money, shouldn't matter to us if it is by shorting or on the long side.

One thing I want to say, lately I have been realizing that Technical Analysis although good in its place, by itself is insufficent to consistantly make money in this market. Since the Decimilazation began in 2001 I believe, with the introduction of small spreads, large traders can in fact mainpulate the price of a stock in order to Accumulate/Distribute there positions before the move. I will not get into details but I will tell anyone listening is to study Supply / Demand and effective Volume intensly. That should be the core, the charts should be second because they are lagging indicators, they follow price and price only there is not enough on volume analysis in Technical Analysis to see what is going on behind the scenes.

I am working on a couple of projects that break each trading minute down, dissect it by volume and price movement (open, high, low, close) as well as supply and demand signals. So far the results are outstanding, but I still have more work involved to complete the system. I will keep everyone posted of the progress along the way.

Thursday, July 23, 2009

New Bull Market? Just Maybe!

We broke a long term trendline today, I had a feeling a sharp pop was coming but honestly I had no idea and am very impressed in the strength of this market. Although I do feel this is too soon to call the bear market over, I will say if we can hold the 965 level the bear market is OVER.

All three time frames are CONFIRMED in an uptrend now, even after 8 days of closing positive we are still having an uptrend day today. Now that is strength people, whether manipulated or not, we have to respect the internals.

A selling reaction would only be normal at these levels, but that should only be a springboard for higher prices. One reason I do not pay much attention at all to news anymore, the writing was on the way at 685 to go long but I was too scared and missed a huge amount of this rally looking for short positions.

Tuesday, July 21, 2009

The Importance of Pivot Points

Here is a 5 minute chart of the ES, I got stopped out at 944.50 even though I said from the beginning today this market wants to hit 965 at least. However I jumped the gun a bit on the long call as the reaction of the sellers had not yet been complete.

If you look at this whole rally up from 865 last week the biggest reaction to the downside was about 10 points or so. Well when I got in we had gotten a 10 point reaction from the mornings high, so I felt that odds where in my favor to pinpoint a precise target. Well I was off a couple of points, and this bothered me so I looked more into the data and found something simple yet very effective. Pivot Points:

Pivot points are calculated by taking the high + low + the close of the day and dividing by 3. A close above is bullish, below is bearish. With futures it is a little more complictaed because they trade 24 hours round the clock it is hard to get a close. I use the midnight close as my number but another way to come up with a round number is to find the midpoint of the high and low of the previous day and that can be used as a pivot point. I have all this data in an excel spreadsheet so I am always prepared.

So take a look at the chart again, my pivot point from yesterday calculates approximately 939 (horizontal line) the low of the day was 939.50 excellent entry opportunity in hindsight. Another valuable lesson learned and another tool to add in our trader's toolbelt.

I expect if this market breaks the highs of the head in our pattern to see some serious short covering which in turn will shoot this market up rather quickly possibly by weeks end, until then I will daytrade and take what the market gives, I do have working order to short ES @ 965 though, and I will elaborate why in a later post.

NYSE Tick, great trading tool!

Hey guys, here's a great trading example that I hope will help everyone reading!

Here is a 5 minute chart of the trading session yesterday, on top is the S+P 500, on the bottom is an indicator called the NYSE Tick, this reading for those who are unfamiliar with tells how many stocks are trading at ask, to those that are trading at bid. Here as you can see the sellers came out in the mornings and got a negative tick reading, but look what happens after we get higher lows and higher highs, meaning selling pressure decreased, and gave the bulls more confidence to take this market up higher.

I had gotten in on my long trade at the 2ND low, unfortunately because I wasn't going to be at my computer for a little bit, I moved my stop to break even, the market sold off and took my out before shooting higher:(

Monday, July 20, 2009

Intermarket Relationships, US dollar and equity markets

Here is an interesting chart showing how different markets react to one another. This chart is a daily on the US dollar, the top is the line chart daily on the S + P 500. The first thing you should notice is how these markets are almost inverted to one another, as one goes up the other goes down and vice versa.

Check out the top in the USD around the March 9th equity markets bottoming, and the following steep decline in the Dollar over inflation fears among other things. This has been one of the major reasons we have seen such a steep incline in the market and why it is becoming increasingly more complex to chart and trade this market. But one thing I will tell you is to keep the ticker up for the USD dollar and keep close tabs on it intraday as it could save you from making some serious mistakes. The ticker I use intraday is the DXY - US dollar index spot price.

Right now signals are too mixed to take any positions, we had a decent rejection of prices at the ES 945 area, but no follow up as of yet. Tick and A/D Line favor the bulls but not by much. Remember to respect stops right now until the market finally tips its hand.

Sunday, July 19, 2009

SPXA50 Chart, Stochastics current condition

Hey guys, looks like it will be another late night tonight to see if I can get any good positions for tomorrow. Here's some quick charts to think about.
First is a chart on SPX, daily, look at the stochastics area. Last week I made a reference to it being oversold state, with a bullish cross and look at what happened last week! Now with the rally if you look at the indicator currently you will see it is in an overbought state and looking for at least a pullback. Now we need to see a cross for it to be bearish but it is something to keep in the back of your mind.
Last chart is a reading of how many stocks in the S+P 500 that are trading above their 50 day moving average. Another reading that a pullback could be on the way, but keeping an open mind regardless!

Friday, July 17, 2009

Has anything really changed here?

Take a look at the charts, has anything really changed to you? No, if anything this pattern appears to be more convincing with the symmetrical double shoulders on each side. As I said yesterday I believe the fuel to the fire of this last 4 day rally has come from short covering. I hear even on CNBC people talking about the head and shoulders pattern and the critical neckline price level around SPX 875. The problem is they never said anything about the double shoulders so the potential to rally was there to form the second right shoulder, I believe a lot of shorts entered the market Friday and/or Monday and they all have paid the price for it.

For those of you looking for a good time to go short now is a good time, let me tell you why. See there is no sure thing in the markets you need to look for the highest risk/reward ratio utilize proper risk management and go for it. Whatever your trading vehicle of choice whether it be SPY, SDS, ES, SRS and so on. Put a stop just above the head price level at approx 956 SPX.

The probabilities of this pattern working itself out shortly are high, not 100% but high. Your price target if we calculate the breaking of the neckline using TA would be about 800 SPX and we also have a 61.8 Fib retracement at around 780 SPX. So if you short with a stop at 956 -960 SPX, worse come to worse you get stopped out, your risk would be 20 points or so, your reward however could be 100 - 150 points if this pattern plays itself out!

Remember though trade your portfolio only, do not trade with money that you can not afford to lose, I can not stress that enough!!! If you can't take that type of drawback, do not trade futures wait for more confirmation signals or try a less risky vehicle like SPY puts. Also if you want to try to pinpoint a possible more precise entry point watch for the bearish cross on the 60 min MACD on SPX. That may give you a better shot at an entry point without having to average down and take the dreaded drawback heat!

Again good luck to all!

Thursday, July 16, 2009

Updated VIX chart

Well I went back late last night looking through all of my charts, I have to say the more I look at the charts the more I agree with my analysis all along which is it is a lot safer to be a bear right now than a bull.
Look at these VIX charts the weekly chart bounced off long term trend line, the daily VIX chart as you can see is at the bottom of the channell and respecting that trendline as well. The volume on this whole rally this week has been moderate at best. My conclusion is this has been a short covering rally for the most part. Just last week the outlook on the news was very bearish, couple that with us being at the lower end of that head and shoulders neckline we have been discussing, I think a lot of people went short at that point and have been covering for losses all the way up bringing the market up with it. Remember the market does the expected but in unexpected ways. Unless I see a high volume break out to new highs and the VIX drop well below these trendlines I believe all of this will just give us a better opportunity to go short.
Another reason I believe short covering is the basis of this rally is this, if you look at the charts this week you will see NO real pullback at all. Which is a sign of short covering killing all of the bears in the process and giving them no pullback to even average down to at least break even.
Respect your stops everyone, this market has no conscience and will not feel bad wiping out your account if you let it. Be careful right now, watch the MACD like I said yesterday, a cross on the 60 min chart may be a great short sell signal, but again be careful.

Tuesday, July 14, 2009

Oil Update, Technical Analysis at its best!

We talked about the short term direction of oil and gold a couple of weeks ago in a previous post, let's take a look at what is going on.

As you can see from our chart we had the breakdown of the head and shoulders pattern, at that point our price target calculation came out at $58 and some change, right at trendline support and 200 sma support. Well our low came in Friday at $58.71!

For anyone that got in at that level, congrats to you. We said that was a great opportunity to go long for a short term to intermediate term trade, put your stop slightly above the $59 mark and let it ride! This energy sector may be the catalyst with the financials overinflated earnings to form our second right shoulder.

I am still very bearish, look at the vix charts I posted awhile ago. I will repost the updated charts sometime this week. it is hitting support on many timeframes and I believe a spike in the Vix should be coming in the very near future. Till then trade very carefully, I still have my NQ short but am only trying to break even and wait for a setup at higher prices to short and make up for yesterday and then some!

Monday, July 13, 2009

Possible triangle back test on SPX

Here is a chart of the SPX, 60 MIN. looks like we had a triangle pattern develop and broke down out on July 6th, I think what is happening right now is we are in back test mode and will hit the bottom of the triangle. This is what I am counting on at least, there is a lot of resistance overhead, MACD did cross the 0 mark which is bullish but the stochastics is oversold and looks like a bearish cross is coming.

We have resistance at 904, 20 sma, 907, 61.8 fib retracement from the last high. So we have those in our favor. I am looking for a pullback to resume over the next few days.

Sunday, July 12, 2009

KISS: Keep it Simple Stupid!

The title of my post and one of my favorite sayings will explain a simple yet effective strategy that you can add to any trading system. Here it is run a 5 day Exponential Moving Average (EMA) and a 20 day simple moving average on your chart. Now this method can ideally work on anything whether it is a stock, etf, index. Here is the daily chart on SPX, now ready for this because it is very complicated, ok, go long when the 5ema crosses over the 20 sma, go short when the 20 sma crosses over the 5 day ema. Yes it can be that simple, that's see how we would have done over the last 6 months. We had our bullish cross around March 16th at 740 and proceeded to climb to as high as 956. A possible 200 point move we could have captured. Then we had the bearish cross in Mid June prices fell moved back up to test the 20 sma then plunged 920 to 880 for a 40 point move so far.

Now this strategy works well in trending markets, not as well in rangebound markets and of course there are other factors to figure in. For example I use support / resistance and trend lines along with extreme readings in the NYSE TICK indictaor to time and exit my positions. Of course there are many other factors to consider but the core of my system is what I just explained. It takes time like anything to get better at trading, but my whole point in this post is to show those that are over doing it with indicators and percentage movements and all that, that sometimes more is less and less is more. However to each is own, I hope this info is helpful and I would love if anyone else wants to share some simple startegies for all to see as well so we can all learn together. Let's make this our motto when we trade!

SPX Head and Shoulders, Kiss of Death, Trader's Paradise?

Hey Guys, still having some issues posts will be limited for a week or two until I get set back up again. Anyway I have a lot of info to show you in so little time. Overall not much has changed we got our last top at 930 right were we expected, head and shoulders pattern is still very much in play, we are right on the edge of breaking that neck line but nothing desicive yet. Remember we need a CLOSE below this 878 level to confirm this pattern. If we get a decisive break then look out below.

Here's the deal, see how we had 2 left shoulders form before we made the ultimate top(head) around 956. Now as of right now it is unclear if we may get one more bounce off the neckline to form a symmetrical head and shoulders with 2 left and right shoulders before the possible break down.

As you can see my annotation the "kiss of death", when the 20 day moving average crosses below the 50 day moving average. This is very bearish for the market and might be a telling sign, however check out my annotation at the bottom as the full stochastics has gotten a bullish cross signaling a possible short term bounce however should be short lived.

To trade this, any long position is very risky I don't see to much upside so the risk reward ratio would be poor. If you want to try to play the bounce should be only a day trade ONLY. Otherwise wait for higher prices to establish some nice short position. Down trend has been confirmed on all three time frames (short, intermediate, and long) so let's let the trend be our friend.

I have so much info I want to show you, hopefully I will be able to post some of it over the week. I have some simple strategy suggestions that can keep you on the right side of the market. Also some market internal charts that show some inside information.

Till then good luck trading!

Monday, July 6, 2009

ES Intraday Update

Here is the deal, ES has found support right at the 882 level (blue horizontal line) I am long @ 885, as of right now I do not have a target I will keep moving my stop up and try to just milk this one for all it is worth.

Next important support which I believe will be tested this week is around the 875 line (pink horizontal line) A break below that and much lower prices will occur. For now watch these levels and see what happens.

Sunday, July 5, 2009

S + P 500: The bigger picture

Well first off I hope everyone had a great holiday! Here is a daily chart of the S + P 500 (SPX) for the last 8 months. I think this is good for us to see as we discussed the short term picture with our head and shoulders topping pattern, well now lets take a look at what we can expect over an intermediate time level as we look at a bigger picture. Now I post this as a warning for those already invested, because with the VIX hitting long term support and a possible breakdown of a topping price pattern. We could very well see some volatility and selling pressure over the coming month(s). We can already see the tone change in the news with the jobs number that came out and talk of another stimulus (please don't get me started!)

Now as we look at this chart we see what is called an inverted head and shoulders pattern, the circled area is the smaller move we have been focusing on but the bigger picture is what you see here. I do however apologize the chart is a little messy I didn't have much time to put it together, but you should be able to get the picture. I believe we should sell off and come back down to form that right shoulder over the coming months at first glance I would say the 740 area could be the target. Now if we can hold there and push back higher this sell off which we are now experiencing is not a bad thing for it will give us enough momentum to break the neckline (horizontal line) around the 950 area and push much higher.

However if we cannot hold that 740 area we could be retesting the March lows, and if that doesn't hold then who knows where we will end up? However at this moment I don't think this will happen, unless God forbid something catastrophic happens I believe the low of this Bear market is in place. That is just my personal opinion though as many way more skilled analysts do believe that we will see lower prices. At this point though it is purely speculation and as you know I do not like to get into speculating. Hope this gives a little clearer picture of what the market may have in store for the near future.

Saturday, July 4, 2009

Looks can be decieving!

Here is a very interesting and also serious post, for those of you that have been on the sidelines for this "rally" and are looking to get back in I say now is not the time. Let's look more into this "rally" off of our March lows with charts from each of the 3 major indices.

Even with this non stop rally off those lows, look at where we have gotten. The SPX and the Dow has ONLY hit their 38.2% retracement level. In other words we have retraced only 38% off the last major high. The Nasdaq was able to hit its 50% retracement before getting rejected.

On an intraday short term basis, until the break is above the 61.8% the move is suspect. The 50% is respected but 61.8% is key. I say that to say, on 2 out of the 3 major indexes we have yet to break the 38% level. Don't be fooled this bear market is still alive and well, I would be careful getting in at these levels and advise against it. There is still a lot of uncertainty out there, look at the jobs report Thursday, stagflation is very much in the cards for the next couple of years.

Again if you read one of my first posts you know my stance, is this the apocalypse or the end of the world, of course not. But with all these looming issues and massive debt, expect to see other countries show growth before us and for us to be stagnant for awhile.

Thus the title of my post, looks can be decieving, do not fall for the hype!