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

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

IWM and the VIX

60 day chart of IWM and VIX

IWM



VIX

Hindsight trade of the week

Best hindsight trade of the week goes to SKF.


















VIX (click to view) has never reached an intraday high of almost 65!

GM (click to view) has never dropped 31% in a day!

XOM has never dropped $9 in a day!


The market is poised for its worst week in history!
This fiasco will present one of the best opportunities in history but plan on some more downside first.
Late day selling has been popular as people are nervous to hold overnight; therefore, holding over the weekend likely won't be too popular either - so don't be shocked to see another down day. Not to mention (as per Homer Simpson) Officer Coo-Coo Bananas will be talking tomorrow at 10am and anytime he, Paulson, or Bernanke, have opened their mouth lately, the market drops.

That BIG BOUNCE might have to wait till next week.


Some Other Thoughts...

CVD

JPM



















AMZN



















GOOG

Taking it

A lot of stocks rolled over and broke support today...and from sectors you might not expect (ag, steel, coal, energy, etc). Hopefully none of these moves ruined your weekend plans and you'll be able to find a way to profit from them. I will likely sit tomorrow out in protest of this obnoxiously choppy market but I am seeing a lot of nice setups for next week.


Steel and Coal stocks all took in on the chin while breaking through significant levels of support
--> X, AKS, ACI, BTU


Possible longs (as always use tight stops)
--> RIG (yes, this is the whole list)


Possible shorts (same)
--> ICE, GNK, AA, POT, MON, MOS, UNP (...finally UNP)


Watchlist (these may yet require a bounce or a pullback before taking action)
--> MA, VIX, CME, NMX


Have a great July 4th weekend! With this year's undisclosed destination, I will see if I can snap another award winning photograph - just like the one I took last year: Click HERE to see it.

If I ever get tired of raping and pillaging the options market maybe I can just fall back on my photography skillz.

.
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OptionSpot

Patience

Fortunately I have the luxury of not having to be in the market every day...because most of the charts I'm coming across look like shit.

Remember, Chuck Norris doesn't sleep..... he waits.

Here are a few thoughts that should be self explanatory:

AKS

CELG

COF

FTK

GNK

GOOG

NMX

RIG

SMH

USO

VIX

X

SPY



Trading for a Living
A trendline is not a glass floor under the market - one crack and it is
gone. It is more like a fence that bulls or bears can lean on. They can even
violate it a bit without toppling it, the way animals shake a fence. A trendline
break is valid only if prices close on the other side of a trendline.

SPY | VIX | OXY | SMH

As a follow-up to yesterday, we certainly didn't fill any gaps - which was somewhat predictable since the gap was above and beyond yesterday's trading range. Follow this link if you don't remember: http://blog.afraidtotrade.com/three-types-of-morning-openings/
That of course isn't real helpful to those who were holding positions overnight and got burned from the gap up - but unless you liquidate all of your positions every night there's not much that you can do about it. About the only thing you can do is play the odds that, after you've analyzed the gap, realize it's not likely to fill and adjust/repair your position accordingly.


<---- SPY










Here's a chart of the VIX. I'm not convinced that technical analysis can in anyway be applied to the VIX, for the fact that it has no underlying security that can be bought/sold but I still find the chart intriguing. Enough people follow it that there may be at least some sort of self-fulfilling prophecy thing going on.





I pointed OXY out a few days ago. I hope I wasn't the only one who completely missed the boat on this. Maybe I'll get another chance on a pullback toward 80.








I still like SMH as a longer-term play on a slight pullback - I'm especially fond of its angle of ascent. Securities that ascend at around a 30-45 degree angle won't make you rich over night but generally provide nice predictable directionality. Consider buying long-term calls (use tight stops under the trendline) or sell OTM put credit spreads below 27/28. Use caution around 32 - as last year's support will, at least temporarily, provide resistance.