Thursday, April 29, 2010
Today's market opened with a bang and stayed there most of the day. My observation with cloud walk in FAS is it opens up with a gap and progressively gets better until about 11.30 then there is a sharp sell of usually temporary and FAS closes near the high of the day. There was a small window of opportunity at 7.10 and I jumped on it and got in at 104.5 and sold it at 109.5. Having lost some very good chances yesterday I wanted to lock in some profits. I am looking for a follow thru tomorrow. Many instances I have noticed this process can continue anywhere between 2- 11 days before a top is made. SPX did go above 1206 to 1209.36. Giving a plus sign. FAS closed at or above the DOMA 77 in 60, 30, 15 min charts but not very convincingly.
It is bullish but iffy. The problem was DOMA was not near the bottom but near the top. It took quite bit of move just to get to DOMA and after that there wasn't much steam left. I have drawn channels as an overlay on to the envelope to give a better picture of the turns. The midpoint of the channel is quite important level both in declines and advances. There are two immediate resistances one at top line of the channel and next at the top line of the envelope. They should give an indication of the follow thru. FAS did close positive and that is always bullish.
The second chart is FAS five minutes. I put it up to illustrate the violence that is followed by a calming top or a bottom. Mostly they are not a V formation. Both steep and flat take more than a day finish their jobs. The end of the month window dressing has one more day and if buyers show up to pretty up their portfolios we may get a new high. I will be watching DOMA and DMRM to look for follow thru. I will stay bullish as SPX is above the DMRM 1206. I have very little interest in looking at EW at this point may be a little later if the process of decline matures. .
Wednesday, April 28, 2010
It was worth looking at yesterday's close as we started trading today. FAS closed at 98.15 from a low of 97.53 that is less than 1% from the bottom. It is one of my observation that When FAS closes at the low or near low ( within 1%) next day morning is reflex up move. Which we got today as FAS moved to 103.95 and that is $5.75. On the downgrading of Spain debt FAS moved to 99.42 and I went short precisely at 100.62. The FED releasing of the minutes did not bring anything to the Market up or down. There are three trades that one can potentially make. (1) First move usually up (2) counter to 1 and down (3) back up and higher than 1). The second and third moves are much more realistic to play. These are very fast moves. I am talking less than 10 minutes long and I have done them quite correctly many times. I ignore first and do the second and third. Today nothing much happened that was buzz kill. Flat O Flat all day. Near close FAS came back down to 100.1 and I bailed out at 100.28 not much money. Just didn't feel good enough to carry the short home. The big news to me was today was an inside day. On Almost all ETFs and SPx we got a LH and HL. Inside days are pauses before continuing the trend. There is an excellent chance tomorrow would be an outside day. Because the range was very small today and can easily expand. My DMRM is giving very small profits or small loss. This happens when the trend is not clear.
I plan to switch to giving more attention to DOMA and trade based on that. 60 min DOMA 77 is what I will be using. That will reduce the number of trades and put me on a better hitting average. The chart on the right is TNA. Its Doma is 103. As with any decline the perma bears will come out of hibernation to claim that it is the end of the world and show parallels to as far back as 1930 or as recent as 2007. I take these with a grain of salt as they have been calling for the end of P2 and start of disastrous P3 for quite sometime now. Grand is one of our unbiased EW analyst on CIL and you can get his superb expertise in our chat room. I am bearish will stay that way until I see a 1206 or better on SPX.
Tuesday, April 27, 2010
Monday, April 26, 2010
April 15th tax day it made a high of 119.22 and made a low of 100.04. I see that as (a) and a rally to 114.88 as (b) and FAS is coming down in a (c). FAS made a lower high and a lower low and that is negative. FAS also has a negative Dino's KOD today and that is a negative. FAS closed close to low and that is a negative.Had it closed at the low then it would have been a positive on FAS. We finished 286th trading day and are waiting to see what happens on day 288, a Gann date. FAS closed below the DOMA 77 on 60, 30 and 15 min chart and they are negative. FAS gave a sell short signal at 111.2. I have marked on the graph the Long points (green arrow) and Short point (red arrow) to show its relation to Doma 77 on a 5 min chart. Looking at the chart I would surmise we should go lower and take out the 100 low and go lower. How far I wouldn't know. I highly respect Columbia1 in our chat room and he put it this way something big going to happen. Everything is getting very compressed. The link to his blog is on the right under **** EW trends and charts ****. He has some very good analysis I am bearish and looking to see if the market can come down a bit. GS is on the hot seat tomorrow There could be some fireworks and Fed minutes are due in a day or two that also makes the market more active. I will be watching the DOMA for a backtest.
Sunday, April 25, 2010
The second aspect in Gann's studies is time. The Gann emblem on the left is from March 06th 2009. The dates in the middle are Gann turn date. I have marked those on the right daily chart in the form of squares.
Thursday, April 22, 2010
Obama's speech should be put in perspective. This is the first time the markets have gone up after his speech. On many previous occasions it had only gone down. SPX made a lower high and lower low that is negative. Not a trend changer but a negative. AMZN and MSFT were down sharply after the close on unmet earnings that is a negative. Finally I have a new laptop that is all loaded up. I will have some Dino's octavia and Dino's modified Gann over the weekend. My trading techniques are simple It mainly involves DOMA, DMRM, Envelope, Dino's KOD and today's highs and lows compared to previous days highs and lows. I do look at my modified Gann, Octavia, cycles, channels, Elliot waves and market indicators (RSI getting the highest rank) but very seldom make my buy and sell based purely on one of these. I am bullish and will stay that way until we take 1083 out on SPX. I will not be trading tomorrow.
Wednesday, April 21, 2010
The drop in SPX from 1213.92 to 1183.62 was 30.3 points and its equivalence in FAS was from 119.22 to 100.04 a drop of 19.18. And the subsequent rally to 1210.99 was 27.37 points on the SPX and in FAS it was to 114.50 and was worth 14.44 points. SPX has rallied 27.37/30.3 or 90% of the drop and FAS has come in at 75% (14.44/19.18). Generally FAS is faster than SPX except in this instance it is running behind. This morning FAS in a hurry to get to the top line of the 15 min envelope and playing from the commodity traders book I sold FAS at 113.80 and waited and bought FAZ at 11.29 when FAS came back in the envelope and later sold it at 11.77.
I am not going to play FAZ. It moves in pennies and I have to buy large quantities to make any money. I did get a short signal on FAS at 110.84 and bottomed at 106.81. Full $4. This is same as the move in FAZ from 11.29 to 11.84. I got a signal to go long at 110.23
very close to end of the day. I went long in after hours at 109.63 but not very comfortable with it for FAS dropped to 108.37. It was an outside day in SPX and FAS with Higher High coming in the morning and Lower Low coming late in the day and that is negative for FAS and market. Both closed in the negative not a positive sign. FAS closed higher above the DOMA 77 both in 60 min and 15 min charts that is positive. It is possible that this 27 point rally we had is a counter to the mini correction of 30 points. That seems so oblique a statement. 90% is a lot. Unless we get a severe hit and take out the 1183 low I am going to continue to depend on DMRM and play along. I have had a very good streak with envelope and DMRM I wouldn't be surprised if one of my near term trades goes sour. I will be on my bullish toes.
Tuesday, April 20, 2010
Monday, April 19, 2010
Sunday, April 18, 2010
Friday was one of the most active tradings days in a long time. Particularly for a options expiration Friday. I went short at 114.68. DMRM signal to go short was at 115.44. I sold all my longs at 108.44 as FAS went thru the 60 min DOMA 77 at 106.82 and gave a tiny bounce to 108.85. Covered my shorts at 101.91 went long at 103.2 (DMRM 3.2% of 100.04) sold long at 106.2 Went short at 105.92 and covered at 105.11 to close shop. I left before the market closed. That is 3 trades in a day. When news breaks like it did on GS and market reacts most will just freeze and watch the news. I will trade when there is big news because my DMRM gives a number of signals on such days. They are high probability trades. Now I am 100% cash.
The severity of the hit makes me very suspicious that this down move is for real. Generally the top is a process and there is a cluster of days 5-7 where the spx just trades and doesn't go any where. This kind of drop happens near the bottom. None the less we have a lot of negatives. FAS is clearly thru the 60 min DOMA 77 The 15 min envelope is useless now and DMRM's signal is to go short. And after a long time FAS gave a negative KOD signal. All in all the picture is not good.
I also used to look at DOMA 172 on the 60 min chart. I hadn't looked at it in a few days. The bottom 100.04 was on the 172 DOMA. Oh! Well..I will climb back on the short side the first chance I get meaning a 50 or so point dow rally and follow DMRM. The trend for now is down.
Thursday, April 15, 2010
Fas went out of the envelope and back into it closed very negatively. Our DMRM is at 115.40. I didn't short at the envelope having been just burnt yesterday. Google's report wasn't spectacular but BofA may make up some and leave the indices flat. I will unload some more of my longs but not all of it. That only comes at 1191 on spx.
This is the envelope chart that I was following today and I interpreted it wrong and paid a small price. As soon as FAS hit 105.48 the top channel of the envelope I couldn't wait, I shorted FAS and was thinking this is it I caught the exact top. Nah! It wasn't. FAS kept going higher and higher and I had to bail at 116.48. I lost a full dollar. It is never a good idea to pick a top and never a good idea to short when the drums were beating loud and clear (JPM earnings are great) attracting buyers. The top is a flat formation even near the end and close to the top of the envelope. V type tops are rare and when they happen they are quick in piercing the top line. Nonetheless we are getting closer. I do not honestly know when. Everything points to soon very soon. I am just going to wait to short. At least a DMRM has to happen.
The chart on the right FAZ 60 minutes from Feb 5th. The RSI was a low 15.65 meaning FAZ is way over sold. I have marked low RSI's and FAZ lows on the chart. ETFs can continue to drift lower even with very low RSI. Meaning a capitulation hasn't happened and panic selling can quite often follow when RSI is already very low. Another interesting thing that has been happening in FAZ is that it rallies a small bit just enough to release the oversold conditions. Then the bigger trend takes over and FAZ continues lower.
I am still bullish and will unload very small amount of longs but am not going to short without a signal.
Tuesday, April 13, 2010
The chart on the left is daily spx from March 09 2009 till today. I have drawn channels in the best fit I could. 1207 - 1125 number is being thrown around a lot as a possible top. I am seeing resistance from the top line of the channel. Some EW analysis also points to the same range for a top. I do not subscribe to the art of picking a top even though it may be of utmost fun if you hit it. I am not very good at it. I put this chart up because a lot of people watch channels so it might be worthwhile to take a look.
It is from Feb 5th 2010 low at 1044.5. Here it looks like spx has already broken the support trend line once 4 days ago. Today the bottom was exactly on the trendline. On the longer channel spx is hitting against resistance and the short term one we are about to break the support. I do not trade channels. But I want to keep it in the peripheral vision. Bull ETFs did not make a new high and spx did not either, instead we got a lower low. One day doesn't make a trend change. But this is negative for the market. Cycle watchers are calling for a cycle top in a day or two. Ewers are calling for a top very shortly. The range has been very narrow and this is OPEX week. Any time there could be a explosion either to the upside ( I favor this) or downside. It is time to pay attention and watch our parameters DOMA, KOD, RSI and PPO.
I am still bullish and I will wait for the DMRM or a DOMA cross to short.
Monday, April 12, 2010
Sunday, April 11, 2010
I do not trade all these simultaneously all the time. (1) is on its own track and Only one of 2,3,4 is active at any given time. (5) is my pet so I trade it almost always. I gave a matrix for DMRM a few days ago. I have mentioned KOD a number of times and shown you the results. The 60 min chart shows we have only traded 3 times this year. System that is presented without showing exact results is just an theoretical exercise. After all I am not here to get a Phd or win a fictitious money contest. I am still bullish. The market is showing some signs of weakness. The moving avg line needs to get very close to actual price. BUT I will wait. I short nothing before its time. .
Friday, April 9, 2010
Wednesday, April 7, 2010
the mean. Uptrend is little shaky here I didn't short at the top. My computer broke and I didn't have a chart to watch. I shorted at 105.94 when the rally failed. I shorted again at 104.21 when FAS went thru the DOMA. My stop is at 3.2% progressive from the bottom. There is a big difference between the 103 top when FAS bounced at the mean at 96.9 and went to 100.9 and then came back and went down thru the mean again to make a bottom at the lower end of envelope at 94.43. This time FAS went right thru the mean and is bouncing up to the mean line. The internals RSI, PPO recovered quite a bit. The one big bothersome number is call to put ratio at 275+ and that is very high and negative. Eliiot wave counts are inches away from finishing the 12345 ( or corrective ) rally from 1044 bottom on spx. All in all it is time to take money off the table. I have a sense we might go lower than the lower line of the envelope. But my opinion probably reflects my position. On the right is FAS 60 mins with DOMA 77 which is at 99.19. That is an important chart for me. It has a high probability of success on price crossing DOMA. My current view is "not bullish".
Monday, April 5, 2010
Nope You are not looking at a flags of some countries these are our everyday trading vehicles FAZ/FAS. On left is FAS. It is getting closer to the top line of the upper band of the envelope which is approx at 105.5 The way to play this is to take a short when it touches the upper band with tight stop of $1. Sometimes one can hit these exactly. That is very high risk. The traditional method is to go long above the channel and sell when it enters the envelope back in. Both the methods are equally good. I will also be keeping the DMRM 3.2% in the corner of the page to go short. As of now there is no change in position of long. On the right is FAZ which honestly is falling apart. We backtested the DOMA 77 on the hourly and failed. That is negative. Add to that today was a negative KOD ( middle chart). I don't short FAZ instead I go long on FAS. There is no compelling reason to go long on FAZ. All bull ETFs and SPX made higher high a postive for longs and none of the indicators PPO, RSI and STO turned negative. The position is still the boring one staying long and cha ching on every tick.
Saturday, April 3, 2010
I hear this a lot “I have a new system” and then a elaborate details of how the system would work. I read about systems on the blogs that consistently make profits. In my books there are 2 types of systems
System I - This is the mother of all systems. It is called buy and hold for ever. Up, down or sideways we just buy and hold it forever. We put all our efforts in determining the “right” thing to buy. JNJ, AAPL, GE etc.
System type II - All other systems. They try to catch the price moments over time. 1) buy low sell high 2) buy lower than the previous high and sell high 3) short high and buy low 4) short higher than previous high and buy low. Some just do 1 and 2. Most try to do 1,2,3 and 4. and IMHO that is greedy. It is cool. The risk is high and rewards are satisfying. Now I leave it to ones own imagination about the odds of being correct 4 times as compared to once in the buy and hold system. Yet it is the alchemy that drives us all. Gann, Elliot, Adi, you, me and all of us. That’s the fun part of it.
These are two charts of FAS and FAZ. The evil twins. Extremely dangerous but boy does the fruit taste good. These look very simple and indeed they are very simple. Most pundits and statistical experts will probably find hundreds of imperfections in it. The biggest test they fail is that they are not complicated enough. A system that doesn’t have a huge set of equations and lines flying everywhere in the graphs and large number of rules for when to buy and sell somehow is not considered impressive. I am not in a competition to win the most money. I have a simple test Does this make you money. Yes. Then it is a good system. That is all there is to it. These are 60 minute charts with DOMA 77. To me if FAS/FAZ breaks the DOMA I will buy some FAZ for situation trade. MOST bull ETFs made new highs for the week and with no change in any of the indicators I will stay bullish.
This is an excel I created to show how DMRM works. I start with low of 59.82 (Row3 Col 7). The buy points are 3.2% above the low and shorting points are 3.2% below the high. The max profit is selling at the high and minimum profits is selling at the other side at the shorting signal. I found you get a series negative or very minute profits at bottoms and at tops as if to take away the profits one made in the middle. At this point if FAS were to fall below 96.36 I would buy FAZ. This complements my DOMA trading real well. This is an example of a slightly complicated system. I would require that all systems provide this kind of data for proper evaluation.