Charts

The S&P hit 875 on Friday...where every possible resistance level was converging at. So as expected, we had a nice sell-off today. Market sentiment is still naturally split - it will take more than one down day to change anyone's mind. Almost everyone with a brain believes that this bear market is far from over; however, there is plenty of disagreement as to whether we see 700 or 1000 first, before heading lower. One thing that people can agree on, is that the market ran too far too fast in the last 30 trading days. At the moment, and given what is happening with earnings/guidance, I expect a more serious pullback. Now enjoy some charts.

SPY


QQQQ


VIX


SHORTS
TIE


OIH


WYNN


MMM


X


XOM


LONGS
TXN


USD



UUP

Now What?

First of all, I want to congratulate WFC on $3B in Q1 earnings! On an unrelated note, I stopped marking my house to market, and it also is worth $3B! What a great day. It makes my small loss in GS look like unsalted peanuts.

Speaking of GS, I have analyzed the recent trade below (click chart to enlarge) to hopefully keep me from making similar mistakes in the future. I think it boils down to a poor entry, which equals a non-low-risk entry.
GS


GS (big picture)


Back to the overall market:
SPX



QQQQ

CHARTS you need to know

Today we broke out - as seen on SPY and QQQQ below (click chart to expand).
SPY


QQQQ


This market is wildly overbought, not to sound like a broken record. The market has made it quite clear though that it is in bull mode for the moment and not even 8.5% unemployment can stop it.

The market should not be able to run above 87/88 before a much, much needed pullback, perhaps that will be brought on by earnings season (even though expectations are in the loo). I think the green line is the next likely price target before retracing to 81 or even 77.


Notice in the next two graphs how the 2000-2003 bear market interacted with its 50 & 200 day MAs. Compare that to now. In 2000 the 50/200 MA crossover would have pretty much kept you out of the woods. And notice how many times price climbed all the way to its 200 day MA only to be rejected. In this bear market, we haven't even seen the light from the 200 day MA. More or less the light from any 50/200 MA crossover.
2000-2003 Bear Market

Current Bear Market


This doesn't mean we don't run up to SPX 1070 before seeing new lows. The timing of this, as always, is the hard part. I still have to think that if you are getting long now, the market cannot reward you - you missed the move - you are dumb money. Regardless, upon continued strength, here are a couple of examples of breakout stocks worth looking at, that have low risk entries:
MA

USD


With regards to GS. It did in fact close above its 200 day MA but as long as it is overbought and within its channel, I feel okay holding onto my puts. Plus, I bought OTM puts = small delta, so I'm not risking too much, to let out a little line on this one. The lack of strength in XLF gives me further confidence of a pullback. This will be a day-to-day decision.
GS


XLF


Final thing to watch:
VIX

Interesting Close

The major indexes easily broke out of their range/channel today; however, where they closed was rather interesting. They closed on some much needed profit taking but more importantly, they closed right at, and in most cases beneath the upper bound of their range/channel (click on charts below).
NOTE: if you're using stops by placing them on the other side of resistance, for example, give yourself some breathing room - trendlines were meant to be drawn with a crayon.

It is becoming increasingly difficult to be bearish after the last 18 trading days - it almost reeks of stubbornness. But unfortunately, it's difficult to check my common sense at the door when analyzing this market.
NOTE: my time frame is an intermediate one and I don't trade counter-trend rallies (for no reason other than I haven't found a consistently profitable method of doing so).

We are overbought, resistance in the 830-870 range is going to get worse, and I'm still not convinced that the economy is recovering when unemployment numbers keep blowing estimates out of the water every month. Also, the financials (XLF) sold off ever since their gap up this morning, despite CNBC telling you that they were the ones 'leading the rally'. Dipshits.

Must Reads:
Debt-to-GDP (check out the debt tab!)
Large Traders Sell Into Strength
Best 2 Day Starts to a Quarter

SPY


QQQQ


GS

I'm still holding APR 100 Puts on GS. If it closes above 115, I will likely get out but I'll deal with that later.

Suspicious

Everything on my radar looks like a textbook, perfect shorting opportunity - which, in a contrarian sort of way, makes me a little suspicious. In other words, things almost look too good. Plus, I swear, I need to V-chip (if I may use this as a verb) CNBC. It's fine to be optimistic but not when it interferes with reality. If I didn't know better, I'd swear we were in a normal, mundane bull market retracement instead of a bear market rally. Lunacy.

In either case, if enough people drink the kool-aid we could very easily see more upside even though it defies logic. That said, while it is necessary to have some convictions it is perhaps even more important to be flexible and not fight the market. I am looking for SPY 75.50 for an initial target and will re-evaluate there.

I would have preferred a breach of this level (QQQQ):


But here is the big picture (QQQQ):


Big picture (SPY):

Unstoppable

This rally has been unstoppable. Fortunately, this silliness will come to an end - but remember that the market is operating on its own time frame, not yours.

In the very short-term the bias remains bullish. I am doing my part at least, to put an end to this - via voodoo magic blue lines, drawn for you, on the charts below (click charts to enlarge) - which will undoubtedly act as fiery hellstorms of resistance.

Keep the prevailing trend in mind. I will still be looking to add to my short position, via SSO, if SPY gets to its trendline, as drawn below.

By the way, as the govt is working tirelessly to 'loosen' the credit markets, read this: Bespoke

QQQQ


SPY


SPY - with fibs (drawn from the gap down on 10/03)


GS - resistance at trendline & 200 day MA


X - resistance at trendline & 50 day MA

30 Day RSI - back to 50

The shaded areas in the following charts (click to enlarge) indicate periods when the 30 day RSI has traded above (or at) 50.

Lately, anytime this metric has gotten to 50; however, the underlying index has quickly retreated. Of course, just like every time, this time is different...

After Monday's rally, SPY is now trading above its 50 day MA. I read a good point about this 7% day. To paraphrase: 'even in the strongest of bull markets, you don't see 7% up days. You see these violent short covering rallies in bear market rallies, period.'
That said, realize that this rally may very well continue for a couple months but don't lose sight of the big picture. Selling seemed a little weak today but yesterday's high held as well - I would consider today more bullish than bearish. Where this week finishes will be significant.

SPY


QQQQ

Running Out of Room

IWM, as well as SPY and QQQQ continue to remain perfectly inside of its descending triangle...but not for long. It's running out of room and will resolve itself next week (expiration week). I've been looking at some reasonably prices debit/butterfly spreads and will post, if any present an attractive risk/reward ratio.

Some I'm looking at involve ICE, AAPL, GS, OIH, PFE, BMY, AKS, the list goes on and on and all candidates have a common characteristic: overhead resistance is substantial. Bounces and oversold rallies aside, I will continue to favor the downside until given a reason not to.

IWM

I W M

On Monday I was questioning whether we really saw a breakout in the major indices:  LINK HERE
Until proven otherwise, I will continue to draw my voodoo lines as shown below, where the upper bound of the descending triangle is holding firm.  The same can be seen on QQQQ when drawn from 10/14 and on SPY (see Dec 8th post).  Hopefully the rest of this week will add some clarity/confirmation, one way or another.  With regards to IWM, note immediate support at 46.65 and of course the descending triangle.
IWM

Stay sharp, Big Tuna

Long-term trends and price patterns are always more reliable and significant than those in the short-term, and since I'm not a day trader, I only get to that granularity when pinpointing entry points. In either case, this (below) is something to consider, perhaps for a gamble.

If you don't like the risk (or have the luxury/cojones to day trade at work), then during times of vastly limited trading opportunities - paper trade - and keep your mind/trading skills sharp for when it's time to jump back in... because it will happen quick.
(click chart to enlarge)

Fuck Joe The Plumber

It's refreshing these days to see some of the technicals hold again, in such a news driven market. For example (QQQQ), notice the perfect gap fill on Tuesday before heading lower - happened a little quicker than expected. I was actually expecting the underside of the lower trendline to be touched before heading lower...and for the whole process to take longer than 48 hours.

There's really not much to talk about as long as 700 point trading range days are the norm, as far as my trading style is concerned.



513 stocks made new lows today.

8th worst decline since 1927.

If I hear 'Joe the Plumber' (mentioned 13 times) one more time.....

And finally, it will be a miracle if John McCain wins after that debacle. Accordingly, I think you're supposed to sell defense stocks, or invest in dubs, or something.

You serious, Clark?

QQQQ

DOWNLOAD National Lampoon MP3 HERE


Congress really shit the bed today. It is a fact that many of these shaved congressional apes are too stupid to understand what they're even voting on though so you can't be too surprised. READ THIS

Please remember this come election time!

I can't imagine what the market would have done today had the no-short-sale rule not been in place.

Attached are some stocks to watch.

Everything continues to break down but don't be surprised for a huge move up should congress decide to do something else unexpected later this week. If you must trade, I recommend limiting your strategies to strangles, possibly straddles, and OTM Puts (only on a bounce, not after the market just puked up 8.79%).

Watchist 09-05-08

Watchist 09-05-08

QQQQ
LM
GS
FDX
BIDU
RIMM
MA
CME
AAPL

QQQQ

.
.
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QQQQ - bearish diamond pattern

QQQQ - presenting a low-risk setup

Look for a short-term bounce in oversold stocks... similar to the following:

X

OIH

OXY

Ag stocks are all now comfortably under their 200 day MA but may also be due for a short-term bounce.

And to the immediate downside, I like TIE back down to ten.

OptionSpot