Wednesday, December 31, 2008

Wow its been choppy...

Jobless claims better than expected...but who fires people Christmas week?
Any way expect the number to be pretty bad the first week or second week of Jan when all those people that got let go at year end report.

Short term...looks like a rising wedge (bearish) to me...The Bear Pennant from sunday looked like it failed...but we have another chance here.

Sunday, December 28, 2008

Saturday, December 27, 2008

The Spiral down is just beginning...

We are seeing consumers spend less and the possibility of a major retail collapse. You can see it here, here, and here. Consumer spending is the major driving force of the US economy. We are a consuming culture. This is going to force a lot of retailers in to bankruptcy. This will add to the growing unemployment as retail is the one of the last bastions for unskilled labor. Where else in the economy are you going to absorb this labor?
And you know what? This will be the headlines through out the beginning of 2009. This will add to the fear and cause those who still have jobs to spend less. The effect will even cause relatively healthy retailers to suffer as well as restaurants and move theaters. Which in turn causes further cut backs. This will ripple through what manufacturing we still have. The automakers (at least GM and Chrysler) are 100% guaranteed to fail (unless we spend 100-150 billion or so to keep them around). We are in a vicious cycle.
The stimulus package cannot be big enough to save the US economy without itself collapsing the US economy. We need to spend at the rate we did in the last 10 years, whereby we had a negative savings rate. We need the consumer to SPEND SPEND SPEND, tap credit cards, tap home equity, File for bankruptcy, and start again! Its simply not going to limits are being lowered, home values are dropping, and its harder to file for bankruptcy.
Sure we can create new jobs to lessen the impact somewhat. But the cycle has started...and its accelerating.
If you don't believe in shorting...don't think of it as hoping for the US economy to collapse. Think of it as insurance against a US economy collapse. You don't want your house to burn down, so you get insurance. In case it does burn down you will be ok. That's how I see shorting the market.

Well I guess I should post a chart :-P
The orange lines represent the previous ascending triangle, which is a bullish continuation pattern. Well that failed. The red trendline represents another possible ascending triangle. My guess is that one will fail also. The light green channel is a possible bull channel (yes redrawn because the original failed). I believe this channel will fail also.
The gray bar I have marked as hitting the bottom looks too soon. With the holidays and end of year, trading has been extremely light. I do expect the collapse of the market to accelerate in the beginning of the new year.

Friday, December 26, 2008

Nothing to see here...move on...

I don't expect much to happen today. Its a shortened trading day and volume has been extremely light. I am surprised that we are up pre-market even after Mastercard released numbers saying this month's retail sales through 12/24 were lower than last year.
I got up early to go after Christmas decoration shopping. I can tell you...there weren't that many people out compared to previous years.
Any short here would be good.

Tuesday, December 23, 2008

Nice break down...but tomorrow is probably up...before down...

We have come off the highs in what look like double tops and are comfortably in the bear channel. Today we bounced off the 38.2% fib for the retrace. Unfortunately we formed a small descending wedge today, which means more than likely we will get some rise tomorrow. I would look at the neighborhood of 88.16 as a good short entry. Either SDS or FEB puts or later. I still think we will test the bottom trend line by the grey bar I have marked.

Friday, December 19, 2008

I think we are officially out...

Tommy T. complained about me moving that lower dark green line. Come on, I was giving the bulls a chance :)
Anyway I moved it back for him and we can see we have officially broken out of the wedge as well as the bull channel that had been formed in early November. If you go back to previous posts you will see the bear channel has never been moved...but was sure tested recently :)
SRS has been performing strangely and has been down even when the markets have been down. Although some major REITS are having problems. I wonder if its the calm before the storm.

Anyway back to the trade...I think you can take a short position at any point while we are in the upper portion of the bear channel.

Thursday, December 18, 2008

Now back in...

Ok we finally confirmed the breakdown of the bull channel (light green). SPY was not able to recover the channel and closed comfortably lower. It also broke through the rising wedge which was recently adjusted because of a prior breakout. What do you know it broke out again!
The grey bar represents when I think the next low will be made. I believe it should be at the lower part of the trend line which would correspond to about 60 on SPY or 600 on the SPX. Now that is just an estimate, it could be pushed out further with the FEDS huge injections of liquidity as well as Obama's 700+ billion stimulus package. This would just cause the low to be lower potentially in the 500's.

Tomorrow and Monday will be interesting. The markets look weaker as the bulls have given up their trend. I will post an e-wave chart this weekend.

I really expect the commercial re market to implode after the New Year. Many retailers will close up shop, consumers will spend less causing more retailers/small business to close up shop which in turn will lead to less consumer a vicious cycle...

Tuesday, December 16, 2008

And of course we broke the other way now...

Today we broke back into the bullish channel at the beginning of the day and after the amazing fed announcement we peaked up out of the bear channel for the first time months. We should watch carefully if its able to stay out of the channel and maintain the bull trend. If it falls back within the bear channel, it should be a good time to short. Otherwise it looks like a long play until the new year.

Monday, December 15, 2008

Well...we finally broke out!

We finally broke out of the bull trading channel (light green lines) as well as the rising wedge. Trading was not heavy but we did break the lower line and retested it at the end of the day. Tomorrow we will have the rate cut and an announcement of potentially more Fed action. How much more can they do??
I also expect to hear about the auto bale out soon, though I suspect there will be strings that will not make it a net positive for the market.

A look at the 60 day chart shows that we bounced off the 75% line on the bear trend line (blue lines). Today is the Bradley turn does this mean we are turning down now? I think so. Feb puts and SDS probably good buys right now, or just outright shorting SPY. I also expect SRS to make all time highs in the Feb time frame as more retailers file for bankruptcy.

Friday, December 12, 2008

So...We did rally on bad news.

The fear last night was palpable...but with the rise of a new day...all those fears drifted away as if it were a bad dream. The big picture above shows that we opened up outside the wedge and the lower trend line of the bull channel. But alas the bulls managed to save the day and kept the trading hugging the lower trendline. But the drop, the previous night in the futures showed that there is still fear out there.

A closer look at todays action shows that we effectively formed a bear flag today. Also noted that on the larger scale we are inside a rising wedge which is a bearish formation.

So how much longer can we rally? Madoff has cheated billions and will cause the collapse of other hedge funds. GMAC is close to bankruptcy. GM and Chrysler are about to go under without immediate government intervention. Unemployment is at a record level. Credit markets are tightening again. Ecuador has defaulted.

We must need good news for this market to drop. So I expect us to tank when the government announces the Auto Bale out (well just enough to get them to next year) and a rate cut. Any additional good news and we could even make a new low!

Thursday, December 11, 2008

More Bad News Rallys?

I think not. Auto Bale out died in the Senate. JPM's Dimon says they are having a terrible quarter, BoA cutting 35k jobs, US Bancorp seeing $1 billion write down in its future, Madoff cheated 50billion and we have retail sales numbers tomorrow...(not to mention 500k+ jobless claims)

I am suspicious about the retail numbers that will be coming out tomorrow. Many companies are seeking to monetize their inventory in prepartion for filing for bankruptcy in the new year. I suspect that a number of retailers will have good sales but aweful profits when those get reported next year.

With large numbers of small business and big/small retailers going under, there is going to be a ton of non-performing commercial real estate out there. Anyone following GGP? Did they get an extension on their extension for debt payment?

SRS is the place to be. And if you are a big time gambler...SRS options! (ok those even scare me :)

Wedge breaking time...

New baby...not much sleep...and also not much has been happening in the market this week till today. Just a lot of consolidation and churning. Today the market picked a direction. With the BoA job cuts, Madoff's ponzi scheme, and a potential failed bale out vote tomorrow could be interesting as we approach the bottom of the rising wedge. Note the bottom line on the wedge is the bottom trend line of the bull channel. If we break that and stay below, the bulls have lost this round and we should continue down.
A great shorting opportunity is coming up. If we pierce that trendline we will still be in 75% trendline for the bear channel...and my guess is we test the lows.

Monday, December 8, 2008

Lets look at the big graph again...

The trend is decidedly still bearish. We are nearing the top of the channel, which always means two things...its a GREAT TIME to short and it could be time for the BREAK OUT to the upside. Things are never easy. Daily Stochs are overbought, we could tag the top line tomorrow and then turn down. Though at this point with Fedex and TI cutting outlook we should open decidedly down. Looks like we are entering "warnings" season.

The light green lines are the bull market trends. The blue lines are the trend channel for the bear. The dark green line is the bearish rising wedge that formed today.

The little grey boxes on the 15th are little grey boxes :-P Actually they are just there to remind me when the Bradley turn date is. If we stay in the wedge till then, its possible we turn down on that date and the market crashes down to new lows in the subsequent weeks. Or we could break the wedge sooner and hit a low by the 15th and turn higher in subsequent weeks. This is only if the Bradley date is meaningful to any of you out there.

Sunday, December 7, 2008

We need a leader to lead us down...

I propose JPM be the one...after all its the banks that have been leading us down this bear market. JPM has a clear rising wedge...which will probably break down on Monday.

Saturday, December 6, 2008

Getting Tricky...but we are still in a down trend.

So the bulls had whipped out a chart earlier to say they are still in an uptrend. Well here is mine that clearly shows we are still in a down trend. We are not even close to the upper trend line yet. The dark blue shows what I believe to be the current down trend. The green channels are the bull trends. Note the earlier one didn't quite make it :-P
Anyway we spent all last week between the 50% band and the 75% band on the trend.

Thursday, December 4, 2008

All sorts of bad things for Friday!

Ok...not only did the rising wedge come through for us earlier in the day, but we formed an actual valid head and shoulders pattern that was successful (I say valid in that H&S patterns are only valid when they are formed in a rising trend.)
We also formed a very classical bear flag at the end of the day near resistance. This bear flag showed hints of a rising wedge towards its edges.
On top of that we formed a much larger H&S pattern with our intraday H&S acting as the head.
Aroon oscillator went had bearish crossover on al time frames below 30 minutes. McClellan is currently neutral though. Demark Indicator is over sold.

All and all I would think tomorrow is going to be a tad bit down, no matter what the jobs number says.

Break soon...rising wedge right now

Going to break hard any minute now....

Wednesday, December 3, 2008

Similarities never end...

Many similarities to the pattern that formed prior to the election. I guess some people would call it a fractal. I am still bear because the rising consolidation is similar to a rising wedge in that they are both bearish no matter how you entered the pattern. Both are fight between the bulls and bears before further direction is determine, the majority of the time it will be bearish. It is not guaranteed.
But along with that, we are currently over bought on the stochs in multiple time frames. If you consider we might trace out a similar pattern, we will hit a bottom around 12/14 (Bradley turn date...go go gadget Tea leaves!)...then we Christmas rally, perhaps something similar to 11/13 -11/14...but more stretched out. Then a slide into new lows in mid Jan...(which might be close to the 1/20 Bradley Turn date).

Ok I don't believe in Bradley turn dates...but what the heck they seem to line up :)

Tuesday, December 2, 2008

How about an E-wave chart?

A couple of e-wave scenerios. The dark line is the most conservative, if this count plays out. The red line is a less conservative possibility. Wave 2 may not have ended today and can take us up a bit higher. Of course, wave 3 down will be made up of 5 waves in itself.

Intraday post

At the what I might as well post a chart. I think at most we get up to 84.50-85 range. Then a bounce back down to 80 by Wednesday.

Monday, December 1, 2008

Thats more like it...

60% of my put position for a healthy profit today. Looking at 80.3 tomorrow as the target. Will sell 50% there and play the rest by ear.
SRS also posted a healthy return. I expect the next two days of trading to be a bit choppy, with a potential drop on Thursday. Will post a new chart later tonight.

Friday, November 28, 2008

Expecting a pullback...

Expecting a pullback sometime monday or even starting today. Does not mean SPY may not make a final push upwards, perhaps a gap up monday to 90.73 (61.8% FIB from the 11/04 high). The rising wedge (low volume, ok so what its a holiday :-P) suggests that SPY is definitely running out of steam on this bear market rally.

Looking at a minimum pull back to around 81, depends on where we make our high. I expect to exit the majority of my options at that point and hold a small percentage in case we retest the lows.

Did not increase my put position today, but will buy more if we reach 90. Today I added in SRS. I recommend the JAN or FEB 09 SPY puts at the moment.

This could be the next catalyst

The second largest mall owner in the US collapsing could help ignite the next drop (commercial real estate).

Still still holding...actually bought more

Loaded more puts in the 87-88 area. Also added SDS and QID. Will add more if we get to 90 today.

Tuesday, November 25, 2008

Still holding...

Scalped a few trades with SPY DEC 75's today. Still holding. I will most likely exit 50-75% of my position as we near 80. The rest I will scale out as we go lower or higher.

After that I will start building a call position, most likely starting in the middle of next week, but really depends on how the market plays out.

Any call position I build now will be using Jan 09 calls. After I exit my current position, I will only use Dec options for day trades.

Monday, November 24, 2008

Extremely over bought

I layered out of my call position between 82.5 and 83.5. I accumulated a put position between 83.5 and 86.4. Target #1 is the open gap left at 80. Target #2 is 74-75. Target #3 is a break down to 70 or below.

A move past 87.6 will force me to start layering out of the position.

Saturday, November 22, 2008

SPY update

The light green areas represent some good strong resistance in the 83.74 area. Its going to be tough getting through there in the near term. Add to the fact that SPY reversed right at the 80.8 resistance area (blue). Also the Stochs are showing over bought in the 30 minute chart (red), but a turn here would produce a stoch on the 60 that is trending down.
News that will effect this coming week:
Obama did announce a 2 year stimulus plan to create jobs (could be good, or bad).
Existing home sales - Monday
preliminary GDP, consumer confidence, chain store sales - Tuesday
jobless claims, new home sales, consumer sentiment - Wednesday
Thanksgiving - Thursday
Half session - Friday

Trading should be light next week with the holiday. Technical indicators mostly pointing down, the market should drift down. But watchout...the drift down might accelerate into a waterfall.

I myself am looking at 70 during the first week of December.

Off Topic: Duke Energy

Been a bit busy of late, I will provide a SPY update later this weekend. But here is a little DUK goodness:

Above is the 10 year chart on DUK with the fibonacci retracements from 03 lows to the 08 high. We see there is extremely strong resistance over the 16.71 area as well as resistance at the 15.74 area. $14.33 provides support with the next support at about $12.66.

Now a closer look at the 20 day chart:

We see that there is strong resistance above the $15.23 level. Between 11/4 and 11/19 the $15.74 area did indeed act as strong resisance. For the near term, 14.83 will offer some support, as well as 14.17. Below that is 13.30 (from 10/06/08 low).

To sum it up, the new trading range is likely to be between 14.17 and 15.23 (with bumps at 14.83, and 14.33). If 14.17 breaks, then 13.30 is the next stop and after that its 12.66.

So, you want to buy near 14.17, and sell close to 15.23. Do not be surprised that 14.17 may break.
Also remember these are not exact numbers these areas in which the stock is likely to turn in price. It may turn prior to achieving the level or slightly shooting past the level.

Thursday, November 20, 2008

Fall or Rally?...BOTH

A whole host of indicators has turned bullish, but there is still a bit of room to run. I expect the market to crash to the 2002-2003 lows (around 780), and then start a massive rally back up. Its going to kiss it ever so lightly as everybody jumps in.

Monday, November 17, 2008

Bear Flag in a Bear Flag in a Bear Flag...

A closer look at the inner most bear flag:

Sunday, November 16, 2008

Repost of my chart from Stocktock

Note: the counts along the trendlines are NOT e-wave counts. I will provide an updated e-wave count later in the week. Though at junctures like this e-waves tend to forecast possibilities in either direction with equal likelihood.

1. The day ended EXACTLY on my green trend line. That line was draw with the help from a posting on either traders-talk or atilla's blog the night before (11/13). I didn't even see it until I was showing a friend something on the 60 day and he asked about that line. It is roughly the negative slope from the high point at C to the low point near D. It was drawn in order to get an estimate of where it would cross the upper trendline for help locating where a potential E would occur. You know what? E was right there at Option expiration.

2. We went vertical too fast on 11/13. We needed correcting in a big way and to follow the rise and fall at similar rates to over waves in the trading range.

3. This overall count was one proposed by Craig much earlier, before the recent events. You can see it here:
and that was from just 11/13!

4. The wild ride has effected everyone's emotions. Everyone and their brother is expecting the market to crash on Monday and are preparing to try to short any rise. Wouldn't it be interesting if the big boys send it up on a wild ride, so high that the bears become bulls, and then ripping the floor out from underneath them?

ps. Or it could just go to hell in a handbasket on monday :)

Bull Flag

There is a bull flag that has developed on SPY. Looking for a short term top around 100.5. While that is the target, I am scaling the trade back starting at 92, and expect to be fully out by 97. This is still a bear market and countertrend rallies are extremely dangerous. Watchout for any type of break down and support at 84, 82, and 80.