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Sunday, October 31, 2010

I am watching camouflage rally!

September had a high probability of going down but the market was up.
October had high probability making a low of the year the market didn't.
Now we are in November which has a very high probability of closing higher I am very doubtful of that.  The whole month of September and October was spent to get the stock prices higher so they can be sold to the money managers for end of year window dressing.  Guess what it never happened.  Worst they were selling their winners such as Aapl.  
Now what?  The inventory has to be liquidated and liquidated quickly.  This leads me to believe there will be a fast and quick rally and then back to natural path which is down. I would personally watch and short the market as soon as I get a signal.  I do not like to pick a bottom and or a top thats why I wait for the signal. The chart on the left is spx hourly and modified Gann angles suggest we have topped.  On up trending channel it is not uncommon to for the SPX to rally to the mid line and fail.  IMO we have done that.  The chart on the right is SPX daily.  It has been 80 days since the low usually a end of the cycle top.  the up trend line is broken and modified Gann angles project a top.  These are all pull back signs.   I am bearish but will have to wait for the signal. 


Wednesday, October 27, 2010

No fireworks on this 180

SPX gapped down slightly at the open today.  It made a LH and LL which by itself is a negative for the mkts tomorrow.  The range from hi to low was less than 10 points and spx closed  1.5 point from the high of the day.  It closed in the positive for the 5th day in a row.  RUT made a LH and LL and  had a 10.2 point range and closed a little less than  4 points from the top. It closed in the negative.  
The Gann 180 which I thought would cause some disturbance in the markets barely produced any effect.  That happens you set a firecracker with all the anticipation and fear and excitement and turns out to be a dud.  Some other forces over came that Gann postulate.
The chart on the left is hourly spx.  It caught my attention It seems spx is traveling in successive channels in a very orderly fashion First in 1-2; 2-3; 3-4; 4-5; 5-6   Ooops not yet. I also noticed once it catches the lower line like 3 it will shortly break it and go on to the next. Each of the channel travel produces a new high.  I know that when the decline comes this whole order will be disarranged and it will be rapid.  IMO  SPX is there.  Quickly it should pierce the line 6 and move downwards .  
This next chart on the right is SPX 1 min for 2 days.  It is worth looking at in the sense  for all the noise we had spx has only recovered 50% of the decline from yesterday's top to today's low. That is quite common.  Gann placed an awful lot of importance on the 50% point be it in a monthly, weekly ,daily or a minute chart.  IMO having stopped here SPX would continue its decline and take out the 1177 low from today.
Lastly I have a Dow chart.  Generally I don't mess with Dow chart.  The black parallel lines sat so exactly I am going to watch it.  A major rally say of 200 points will blow all the down side theories at this point otherwise I will work the points as though the pull back has started.  Needless to say I am bearish and short.  I am also watching the signals for changes.

Monday, October 25, 2010

Yes Dorothy we are about to leave Kansas and 1200 behind.

 SPX gapped up at the open today.  It made a HH and HL which by itself is a positive for the mkts tomorrow.  The range from hi to low was less than 12 points and spx closed barely 1 point from the low of the day.  It closed in the positive.  RUT made a HH and LL and  had a 10.5 point range and closed a little less than  4 points from the bottom. It too closed in the positive.  This was all from G20 meeting during the weekend. 
I went short in the market today using TNA.  Because..
Tomorrow is Gann 180 from April 26th and I expect the markets to start a pull back if it hasn't already started.  They don't come that often Its every ninety days last time was July 27th. and RUT topped out at 672 and started a decline that took us to 588 on 8/24.  To me its an important date and if there is a rally I will short some more may be not immediately but within a day or two as soon as I get other confirmation. 
The chart on the left is SPX weekly it hit that sweet spot on the black line I have been waiting for.  This is a more important resistance line than the red and green because it is drawn from the immediate higher point on the left.  IMO this is would be much stronger resistance to over come.  That was reason 2 
and finally the RUT is exactly on the median line that should be a resistance.  That median line (within a few points of it) proved to be an excellent support for RUT on its  rally up from March 09 low and now it should be resistance.  That was reason 3.  And the odds are favorable for Tuesdays to be  opposite of Mondays. I am bearish and am short.  I will make modification if signals warrant.
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Friday, October 22, 2010

It sure looks like it.


Today was an extremely important day.  SPX made a HH and HL today which by itself is a positive for the mkts for tomorrow.  The range from hi to low was 18 points and spx closed 9 points from the low of the day.  It closed in the positive.  RUT made a HH and LL and closed in the negative. It had a 19 point range and closed a little less than  8 points from the bottom. It had an intraday reversal.  That was to be expected being yesterday was an inside day. For RUT the top was made last Friday and these 4 days it has just been hovering around which is a common occurrence during the formation of a top.  
The chart on the left is SPX Hourly.   Lines 1 and 5 form the primary channel.  Line 3 is the median and 2 and 4 further half sub divisions.  These lines are drawn where I can find maximum order of parallel channels.  For spx to turn negative it has trade below the line 5 and may be come back to it for a back test and fail and have a substantial decline say about 30 points. That is what happens generally to trigger the decline.  We have had some nice disappointments from stocks that street adores.  There is bad news on the mortgage and some banks and lenders are being tossed around in the news as being in trouble.  There is some confusion on the future direction of the dollar.  The treasury hinted that dollar is at par.  SPX reacted today from being very positive to negative and 50% rally for the 18 point decline.  These are signs of trouble.  Contrasting that to SPX action around 8/25 when the bottom was made  I find it to be exactly opposite.  1191.8 if the magic number for this month.  Anything of significance over that like 1201 and the decline theory if out the window. .  
The chart on the right is TNA. It clearly broke down and is back testing the last trend line.  For the decline to continue this should fail Back above the trend line and a new high and the decline theory here is also out.
I am wanting to go bearish but not all the pegs are in place YET. I will trade the points using my signals.  Join me and my buddies at the CIL for a lively discussion and market insights.

Tuesday, October 19, 2010

Is this it?

SPX made a LH and LL today which by itself is a negative for the mkts for tomorrow.  The range from hi to low was 19 points and spx closed only 6 points from the low of the day.  It closed in the negative.  RUT made a LH and LL and closed in the negative. It had a 17 point range and closed only 4 points higher from the bottom. The action today was quite violent. Markets opened down from a not so cozy earnings from Apple and unimpressive one from IBM.  After the housing report stocks made an attempt from little before 7 AM and stayed moderately high until a little after 10 am and then the decline started and accelerated towards the close.  The decline stopped around 12.30 and a meager rally took it to the close
IMO this is the break we have been waiting for.  Some kind of a news that triggers a violent action followed by a good size decline.  SPX and RUT are almost where they were 6 days ago. Several of my signals were turned on. SPX has declined 2% from the top.  The 10/20 sma cross on TNA is to the negative side. TNA crossed the DOMA 77 on the 60 minutes. We were coming off a DKOD. Several upward trend lines have been broken. All in all this spells trouble for the markets.  
For sure the markets will stage small rallies to consolidate unless we have a higher high I  will be bearish from now on and use all rallies to pick and choose shorts.  We are only on the first day of the decline.  Doubts about its validity and sustainability are fair.  All that is needed is a follow thru in next couple of days doesn't have to be tomorrow.   I suspect tomorrow would be an inside day.   
The chart on the left is SPX hourly. After hitting the low to high red line it has broken down and below the blue channel.  A nominal place to stop and rest would be 1125 before resuming the decline to 1070 or slightly above.  
1185 was the high, keeping it round 1080 is not a bad number to shoot for that would be 100 point decline.  If this is the hit I think it is then it shouldn't take the normal 2 weeks.  It should be faster.  The chart on the right is SPX daily and it echos the same readings.  Much depends on how tomorrow shapes up.  

The next two charts are TNA.  I use TNA as a proxy for RUT also because thats what I primarily trade these days. The blue on the right  is a daily chart where the channel that has held for a while has clearly broken down.  How far it goes and what type of a hit it will be is subject to guesstimation and I will be content if the direction is right.  The chart on the left hourly TNA  and that paints a better picture to forecast TNA  to make a low around 44.  
Having said all this I will continue to play the points and am bearish. 
And one more thing Oct 26th is BIG day by Gann calculations.

Sunday, October 17, 2010

Hazy

SPX made a HH and HL today which by itself is a positive for the mkts for tomorrow.  The range from hi to low was 14 points and spx closed 9 points higher from the low.  It closed in the positive.  RUT made a HH and HL but closed in the negative. It had a 12 point range and closed 3.5 points higher from the bottom. The action today was more than what I anticipated. 
The message from the charts is mixed.  Weekly and monthly charts haven't broken down at all and still solidly bullish.  The daily charts are getting flat.  Hourly charts have a bearish forecast from my point of view.  The TNA chart on the left is turning back from the low to high line and a second major parallel line. It has also triggered the 10/20 hourly sma cross to the down side.  This cross has not worked too well since the low on Aug. 24th. TNA has been going up (really..) any contrary signal has met with very little success.  None the less cross is a good signal if not on the down surely it has been great on the upside.  Once the market turns down which it will sooner than later many of of the indicators that or not creating profits will.  
The chart on the right is SPX hourly.  IMO it is clearly hit the low to high line from the low on 1st July.  While it has stepped out of the channel we may have seen the high and should a pull back.  The 1195 has not been satisfied and timing wise if the hit doesn't come very very shortly we will get into a bullish time for the markets historically.  That may be very difficult overcome for the bears.  
With bears and bulls in a tug of war I will just trade the points and not forecast until things are bit more clear. One more thing we did have a DKOD on Friday on the negative side.

Friday, October 15, 2010

In 1987 Oct. option expiration Friday was a big day. Monday was worse.

SPX made a LH and LL today which in itself is a negative for the mkts for tomorrow.  The range from hi to low was 12 points and spx closed 7 points higher from the low.  It closed in the negative.  RUT had an inside day.  It had a 9 point range and closed 5 points higher from the bottom.  Today's action was consistent with option expiration balancing. Today's negative action made the calls cheaper to buy back.   Incidentally over 90% of the open interest in stock option are held by market makers.  Collectively they have enormous influence over the markets in the last days of option expiration.  Tomorrow is Friday usually the action is very boring and everything happens in the first hour rest of the day would be like they say in our CIL "watching the paint dry" day.  An old man I met today told me in 1987 the option expiration Friday in Oct. was very exciting and oex options  went from a 0.25 cents to 11 dollars.  Then the Monday was the 508 point drop.  Wow.  Things are a little different now.  Fed is on the bull side pumping so much money into the mkts it is scary.  Drops of that nature and magnitude  are beyond my forecast. The chart on the left is that of RUT.  It is in an up trending channel.  It is at or very near the median line.  That may be a turn around point.  Then there is the golden cross the 50 day mvg. avg. has just crossed the 200 to the upside.  That is considered bullish.  However RUT should come back to test 200 day mvg. avg. before taking off (If it does.) I have done a study before and found both golden and death crosses were bullish and that is because the last 20 yrs have been bullish so any study always comes back with a bullish answer.  I do not much care about these crosses.  
The chart on the right is SPX daily.  It appears to have hit resistance at the upper line of the channel and could come down.  I have a 1195 top forecast based on weekly and monthly charts sitting out there.  If the markets want to turn around right here without making higher highs it would not hurt my feelers at all. The mvg. avg. line on the chart is 77 day and I find it very effective trend indicator.
Lastly FAS chart is on the left.  Something big happened to the financial sector today.  It lost a lot of ground.  Many big banks were hit JPM, BAC and others.  It has to do with the improper handling of the foreclosures.  Looks like FAS is not going to take off like I was worried yesterday.  Not with moratorium on foreclosures and some are advocating not paying mortgages at all.  Technically that doesn't sound proper but I am not in the real estate business. The chart is hourly and FAS is back testing the 77 day mvg. avg.  When that gives we may see some swift drop.  I am really not wanting to trade on Friday unless I get more than the usual signal.

Thursday, October 14, 2010

Option week games.

SPX opened gap up and after a quick small pull back it went on and on and on finally making high of the day little after 11.00 a.m at 1184 from then on it did a  mild pull back all the way into close.  Low just before close was 1177 and that was at 50% of the day's gain.Yesterday's close was 1170 rounded.    This in itself if negative for the tomorrow.  RUT did a lot better it only gave up 5 points or 1/3 of the gain of 15  points.  The reason for today's rally was JPM's earnings but JPM ended up negative for the day.  
The first chart on the left is that of daily FAS. After being flat and in a wedgie pattern it  finally broke out to the up side.  If the move is not a fake and FAS can keep it up for a few points it could be a game changer.  It would be tough for the markets to come down if the major financial institutions are rallying.  I plan on watching this a little more keenly than in the past.   
The next one is daily TNA.  It is in a very narrow channel.  It is almost at the same rate of ascend as it did from 5th Feb. this year.  It corrects swiftly for one to 3 days to get to the bottom of the channel and then TNA continues the rally.  In the Feb. rally TNA was up continuously and then a flat correction for for 6/7 days.  None the less we are relatively (23 points from low) at the same spot we were before.  We are getting quite close to the top of the channel and a pull back should happen any time.  
The last chart is daily TZA.  It is looking very sorry but there may be light at the end of this drop.  For all I know we may have made a bottom in it today.  The chart says TZA is at a critical point It is right on the median a common spot to reverse and rally to the top of the channel.  Any thing lower of significance would send TZA to the bottom of the channel and the market much higher than where we are currently. 
In my earlier blogs I made a cse for the SPX to make a top around 1195 we are not very far from that.  I plan to intensely watch that.
Almost in every last week of option expiration week there is a day when the markets rally blindly.  Clearly on this day the puts should be covered at very low prices and calls should be sold at very high prices.
Having done that next event is for the markets to drop heavily so the reverse can be initiated.  We have done the big up day and have been going up (TNA) for 4 days in a row.  It wouldn't surprise me to see this market drop quickly and a lot of points.  I will play from my signals but am really waiting to short.

Wednesday, October 13, 2010

QE2 ! Why am I not surprised ?

SPX had intra day reversal with a LL and then a HH.  Often times it happens very close to end of rally or decline and currently it is negative for SPX.  RUT on the other hand only had a LH and LL which in itself is a negative sign.   After opening gap down TNA rallied to close the gap and hung around until 11.00 and then the big news came out. Fed is going to pump more money into the economy.  OK so what else is new. and TNA and stocks rallied a little sharply. Towards the end TNA lost momentum and lost a lot of ground but not enough to close in the negative.  It closed positive for the third day.  The three charts I have are for SPX.  The first is my weekly chart where SPX has crossed the red and the green resistance lines.  The black line is at 1193.  Once that is taken out there is really not much in terms of resistance for SPX.  It is possible that SPX turns around at that point after finishing 2.  The next is a daily chart.  SPX is above the 75% mark of the decline from 1220 to 1010.   One of the things I follow (thanks fellow CILer Sylvanus)  is 88% for a turn back and that is at 1195.  Many times stocks reverse at this point.  The last chart is hourly SPX.  The horizontal line at 1129 is previous high.  There is whole school of TAs who trade on horizontal lines rather than trend line.  K is a low point and L is a HIGH point.  If M is lower than K then one would short at new low. After M a second higher low if SPX  goes  above L then one would go long at new high above L.  It is a simple trading rule and works quite well.  Looking at all these charts to me it appears SPX is in the process of forming a top. Small or  big or intermediary is difficult to say but a pull back is due.  This is options expiration week and anything can happen.  Another important point is end of October portfolio window dressing is important. For many money managers it is end of fiscal year closing.  These can be volatile and opportunistic times.  and then there is big election.  No party wants to give up power so easily.  What better vehicle than a Stock market rally to spread some happy days are here again cheers.  These are a few positives for the coming days ahead.   I will be watching and playing my signals.  My bias for next few days is negative but unless we take out a major low I am not turning bearish. 

Wednesday, October 6, 2010

Not another inside day

SPX and RUT both had yet another inside day.   It was to be expected after a big day yesterday.  It is not that uncommon after a 23 point day in SPX.  What is unusual is that spx is putting in so many inside days one after the other. From obscurity inside days have now become very common occurrence and that is bothersome. Currently the optimism is extremely high. Why? All bull ETFs made higher high and bear ETFs made lower lows even when the underlying indices did not.  These ETFs are slowly substituting themselves as pure speculative play.  They are wild in their movement within a day.  Like a chicken and egg it is difficult know if  ETFs move the indices or vice versa.  From the traders perspective they are the greatest inventions since oex index options.  I trade them with care and very short term only. The charts I have are:
The one on left is SPX daily.  The line joining the bottom was drawn first and then a parallel line was created to create the channel.  The blue line is the middle of the channel.  Often time the first hit on a rally comes when the index meets the middle line. After giving enough time for spx to travel to the middle line my mid term projection ( say in couple of months ) is  between 1230 and 1260.  The chart on the right is weekly SPX.  The trend line is one of importance to me.  It is not drawn from 1576 top to 1220 top rather it is drawn from 1220 to the first high that is higher than 1220 on the left and then extended to the right. .  This is first resistance that needs to be broken to signal a change in trend.  The meeting point is near 1198 close to round number 1200. On the monthly chart on the left the trend line drawn in a similar fashion. It also has a meeting place around 1192.  The RUT chart is on the the right (below) and it is a daily chart.  The trend line is resistance and looks like we may have small trouble next couple days.  It also appears we are about to get a golden cross.  If the reverse of death cross happens when we get a golden cross we could get a spectacular rally. I believe all this resistance is about to be pierced soon. There might be some turbulence in the next 4/5 trading days.  Ewers believe we are close to finishing a 2 (1220 to 1010 being 1) and a decline should start very soon.  Whether that decline turn out to be the big 3 is an unknown.  Should the decline be very strong and quick then I will have to re-evaluate otherwise I will continue to be bullish and be guided by my signals on going long and short. 

Sunday, October 3, 2010

In, Out, In

SPX had an inside day on Friday right after an outside day.  That is actually quite common.  What is not common is,  before the outside day SPX  aso had an inside day.  Thus SPX has done a inside , outside , inside dance.  That is very rare.  Since 1962 there has only been 18 such occurrences in 12,273 days.  the above table gives a pretty good picture of how this IOI folds out between 1st day, 3rd day, and the 10th ,20th and 30th day after 3rd day.  I calculated the plus and minus from the 3rd day,  for only on the 3rd day I would know if it is a IOI or not. More often than not inside days are pauses before continuing the trend from previous day  in the current case it would be negative.  We had a DKOD across the board on the negative side after a very long time.  All bear ETFs opened at the low of the day and all Bull ETFs opened at high of the day.  This is also a negative for the market.  With September turning out to be a positive and becoming the best month in the year people should get brave and jump in the market without fear and that is a negative.   All the previously posted charts are still good and the resistance lines have the market from rallying outside the channels. Without a convincing conclusion a top has been reached I am content to go  in and out of the market at the direction of my signals.
The chart is that of TZA and it could have made a bottom however a new lower low below 24.85 could mean big trouble.  The 10/20 has turned bullish on TZA.  With DKOD and the 10/20 I am not feeling bullish but I don't want to pick a bottom for I am so bad at it.  I will wait and play the signals