Alpha Talk

Market Recap: 12/22

2011-12-22T21:35:00.000-08:00

Short post today. We did finally touch the upper trendline target my downside target would be the MA(200) for the trend to have better structure and if that fails I'd be looking at a possible reversal. So in wait and watch mode. Also tomorrow is the last trading day before Xmas so trade light

Market Recap: 12/21

2011-12-21T21:53:00.000-08:00

Dislocated equity index moves today with SPX +0.19%, DJ +0.03% and COMPQ -0.99%. Its almost like pairs traders are shorting COMPQ and going long SPX. Algo's or not I remain looking for cycles in a trend. So if yesterday was a break out, today's move isnt as convincing to me as a strong trend up. Overall chart posted yesterday is the same, we haven't yet reached the upper trendline on the daily. Take a look at the 30m SPX chart. The regression line with 1.5 sigma deviations capture the downward channel I posted yesterday sort of statistically. Stochastics are getting overbought and on a 30 minute timeline tend to predict cyclic moves better. So not a lot more higher before we correct a little, although the dip and move up (higher low) is somewhat bullish.

Market Recap: S&P week before Xmas

2011-12-20T16:50:00.000-08:00

So we stabilized a little after the SPX downgrade in August (See ROC), in terms of intraday volatility but are not out of the woods yet. We've been trading sideways ever since and might continue to do that as we stay within the bearish channel. We've had four retests of the upper trendline and are due for another as today we moved above the MA(50) and its santa rally time and the stochastics are slightly over sold. Will we break through the trendline? I have my doubts about it.

Above daily chart, see the rising wedge in a downward channel, thats bearish, and the stochastics have more room to move lower. Next chart is the weekly

Tradings been rough as you can see, from the chart but the Fib target high to low (Pink lines) is much lower.

The same actors persist, Europe and Mr Ben B and US politics. Any resolution for each not in sight. It seems that the Fed has decided to wait on the European roslution, read breakup, before it gets involved with QE3. No point in inflating when a crisis will undo the impact would be the logic. So short term we may move a little higher but longer term I'm still bearish.

Trading in volatile markets

2011-11-06T12:22:00.000-08:00

Take for example YM (DJ mini futures), on the 1 min candlestick the ATR spikes to 6.8 and has been in 4-5 pts range lately. So what does that mean. You enter a trade say 1 contract and odds are you would make say 5 pts or loose 5 the next minute. If its trade good you would be making 2 ATR the next minute or get stopped out at 2*ATR stop loss. Now if you traded 10 contracts that stop loss would cost you $1000.

Now a tight stop loss in this market would almost always get called, so in a high vol market stop losses are say 4*ATR thats putting 2K at risk every 2 minutes assuming 10 contracts. While we tend to look at the positive side, trading discipline requires that we look at the worst case more often.

So why this example? In this environment you should lower your trade size and increase your stop limit.

Next is, try to enter trades where you are more confident about getting it right. Scalping will lead to ruin unless its an automated system. Thats my 2cents .. trade on!

Market Recap: An analogy - Germany to buy Greek houses that pay no rent

2011-09-28T23:28:00.000-07:00

My view on the direction remains the same and we are still working the flag downwards. Tomorrow is an important vote in the German parliament and might give us a more decisive move in either direction. The last weeks have been filled with rumors of a Eurozone fix, I'm not sure what that might be.

At the moment, as an analogy, it seems to me like German taxpayers are being asked to purchase Greek homes that don't pay any rent (read bad bonds). Thats probably an oversimplification but catches the jist of the situation. The chart below is an updated version of the one posted earlier, be careful in case the vote fails that would result in aggressive selling, much stronger than we have seen these last few weeks.

Market Recap, Look at the bear flag now

2011-09-07T00:48:00.000-07:00

Well sometimes technical charts are too accurate, below is an example of how things played out. So am not posting much other than the daily chart.

We know the euro-zone noise is picking up we could easily see the flag post length down move from here.
The stochastics are overbought region and can stay there but its to be watched and the candlestick has a long tail, as we closed much above the lows of the day, which is a sign the bulls might be stepping in here. Lets watch out which move is next.

Market Recap and potential price target

2011-08-31T23:22:00.000-07:00

Some S&P levels from its monthly chart.

6/30/2006 - 1219.29 - low point

4/30/2010 - 1219.80 - high point

Anyway, the monthly was only to look at long run support/resistance and it seems that today's S&P peak of 1230.71 and the close below the level 1219.29 at 1218.89 would indicate the near term high is set.

The inverted flag looks way better than the one on the earlier post, along with the resistance level 1219 (green line) and the fact that the closing was below it seem to suggest a lower move from down here.

For the bulls, look at the low of the 1249.05 3/16/2011 (march) and the SMA(50) seems to be a future confluence region around that level, current SMA is at 1256 and a possible price target. While tomorrow may indeed be a down day but a move higher to bounce or break off is still possible. Also the future level would be withing the flag so the pattern wouldnt be broken.

We shall see how it turns out

Market Recap and S&P target to watch

2011-08-18T20:01:00.000-07:00

Its been a tough trading market lately, unless you got it right. Here is what I'm looking at. The first chart is the daily with an inverted flag/pendant marked on it. It looks like a decent setup but the pole goes really far lower. We would have to see what may confirm such a drastic move lower. I'll try and explain all the lines drawn on the chart next.

First see the monthly chart below. In order of the levels. The two green support/resistance lines are from the peaks of April (1219.8) and Feb (1044.5). The red line was intermediate support at 1131 but was broken easily recently, except today where the sell off held on to it. Now look at the larger Fibonacci lines drawn in yellow and pink from the peaks in in 07 and May 11, It seems that there is confluence at the 50% retrace on the larger fib and the 38% on the recent fib levels, this level is near 1010.3 and is also the near term low of Aug,2010. This might be the level the markets might look for. Below that is 950 which is a longer term support and would also be the pattern completion.

Some commentators have set targets for 8%-10% decline from current levels at or before Labor day which is Sep 5. What can take us there is the Eurozone crisis which would require a separate comment at this point. Also, the economic news and downward revision of the GDP that will be out next week. From the high to low, this year we are down 16%, and it could be that Ben Bernanke starts acting on QE3 if we dip below 20% or more. All this does appear to point to a the chart pattern target of 1040 or near. We shall see.

Some not-so-simple rules to follow while trading

2011-06-06T15:59:00.000-07:00

I found these interesting rules for trading descipline online

DENNIS GARTMAN’S NOT-SO-SIMPLE RULES OF TRADING

1. Never, Ever, Ever, Under Any Circumstance, Add to a Losing Position… not ever, not never! Adding to losing positions is trading’s carcinogen; it is trading’s driving while intoxicated. It will lead to ruin. Count on it!

2. Trade Like a Wizened Mercenary Soldier: We must fight on the winning side, not on the side we may believe to be correct economically.

3. Mental Capital Trumps Real Capital: Capital comes in two types, mental and real, and the former is far more valuable than the latter. Holding losing positions costs measurable real capital, but it costs immeasurable mental capital.

4. This Is Not a Business of Buying Low and Selling High; it is, however, a business of buying high and selling higher. Strength tends to beget strength, and weakness, weakness.

5. In Bull Markets One Can Only Be Long or Neutral, and in bear markets, one can only be short or neutral. This may seem self-evident; few understand it however, and fewer still embrace it.

6. “Markets Can Remain Illogical Far Longer Than You or I Can Remain Solvent.” These are Keynes’ words, and illogic does often reign, despite what the academics would have us believe.

7. Buy Markets That Show the Greatest Strength; Sell Markets That Show the Greatest Weakness: Metaphorically, when bearish we need to throw rocks into the wettest paper sacks, for they break most easily. When bullish we need to sail the strongest winds, for they carry the farthest.

8. Think Like a Fundamentalist; Trade Like a Simple Technician: The fundamentals may drive a market and we need to understand them, but if the chart is not bullish, why be bullish? Be bullish when the technicals and fundamentals, as you understand them, run in tandem.

9. Trading Runs in Cycles, Some Good, Most Bad: Trade large and aggressively when trading well; trade small and ever smaller when trading poorly. In “good times,” even errors turn to profits; in “bad times,” the most well-researched trade will go awry. This is the nature of trading; accept it and move on.

10. Keep Your Technical Systems Simple: Complicated systems breed confusion; simplicity breeds elegance. The great traders we’ve known have the simplest methods of trading. There is a correlation here!

11. In Trading/Investing, An Understanding of Mass Psychology Is Often More Important Than an Understanding of Economics: Simply put, “When they are cryin’, you should be buyin’! And when they are yellin’, you should be sellin’!”

12. Bear Market Corrections Are More Violent and Far Swifter Than Bull Market Corrections: Why they are is still a mystery to us, but they are; we accept it as fact and we move on.

13. There Is Never Just One Cockroach: The lesson of bad news on most stocks is that more shall follow… usually hard upon and always with detrimental effect upon price, until such time as panic prevails and the weakest hands finally exit their positions.

14. Be Patient with Winning Trades; Be Enormously Impatient with Losing Trades: The older we get, the more small losses we take each year… and our profits grow accordingly.

15. Do More of That Which Is Working and Less of That Which Is Not: This works in life as well as trading. Do the things that have been proven of merit. Add to winning trades; cut back or eliminate losing ones. If there is a “secret” to trading (and of life), this is it.

16. All Rules Are Meant To Be Broken…. but only very, very infrequently. Genius comes in knowing how truly infrequently one can do so and still prosper.

QE2 solidly in place until June

2011-04-28T22:47:00.000-07:00

Ben Bernanke spoke to the media recently stating that the Fed sees signs of improvement in the economy and will continue with the QE2 program started last Nov until its completion in June this year. Giving solid reason for the markets to continue with the rally which was beginning to weaken somewhat towards Mid April.

Earnings have come in stronger yet again which on the fundamentals side should get the "investors" into action as the PE multiple of the market is still quite low.

While, geopolitical events have continued to hit the tape the overall stride of the market has been forward brushing off most of the dire events of the first quarter.

As of the moment we have breached the highs of 2008 on SPX, Nasdaq, Dow and RUT, this might be an area of some hesitance but if it moves beyond we might have a decent move upward, with the fib extensions and all that.

Apologies to readers for another gap. I'll be more active going forward.

Jan 10 Market Recap:

2011-01-10T20:45:00.000-08:00

SPX has done well in 2010 surviving scares at the 1040 levels and breaking above the SMA 200d as well as the 61.8% Fib retracement level. While it seems unlikely that SPX retraces a full 100% in the near term, it could definitely reach the 76.4% level at 1361 EOY. Near term traders are looking for it to reach 1325 level a good 56pts higher.

Nasdaq has been leading the major indices since the opening of the new year. Probably involves a sector rotation into technology stocks which may continue to benefit from emerging market demands from a fundamental prespective. Weekly chart below shows room for further continuation target at 2861.51, so about 154pts higher.

The 30min chart shows sharp moves, up and down although the recoveries have been strong just as the selloff has been sharp. So would require some careful trading. Although the golden cross on the above chart should bias us upward in the short run.

2011 - Welcome

2011-01-10T20:39:00.000-08:00

I've been away but in the new year I intend to be more regular.

Themes to watch out for in 2011:
1. Unemployment in the US
2. Housing overhang
3. Euro-zone debt concerns
4. Fed's monetary expansion and Budget deficit, Rate hike
5. Currency wars, and China instability
6. US politics

Aug 30 Market Recap: 1040 again?

2010-08-30T21:01:00.000-07:00

After a posting break of sorts.

The market staring down the cliff edge once again. After the sharp selloff between 11th and 25th, we almost fell over into calamity territory. Once again the SPX 1040 level was supported, miraculously I'd say, retested and then supported again. Four times in all since we started down the bearish path in April. Once again we are poised to retest, and this time we might fall over. Tomorrow comes home price data, consumer confidence and to top it all FOMC minutes. Doesn't look rosy at all.

I would think the retest is imminent, thanks to how close it is. I do get the sense that the market is still unsure about breaching 1040 or going down to 1010. Although the media noise is definitely touting increased concerns about the economy. We'll see the price action tomorrow to find out how the month of Sept (traditionally a bear month) fares.

Aug 13 Market Recap - Week look back

2010-08-15T21:49:00.001-07:00

Some respite sure, but what to expect going forward. Below is the hourly graph of SPX going back to June. Comparing the June 26 with our current dip there are definite parallels and the market view appears to be of a selloff to touch our green line support. We'll find out.

What is different, first we seem to have some support at SPX 1010, which is the higher low from the bottom 2009. We've stayed above the trendline for over a month and are a bit away from it at the moment (would require another big selloff to change that). Next I think the moving averages SMA 50 and 200 are way different this time around. So what I'd careful of is a bounce higher as the markets participants look for a dip. Something like the July 19 bounce. In case of a dip I'd watch for the trendline support for a reversal.

Aug 12 Market Recap

2010-08-13T00:02:00.000-07:00

Not posting much today just a plot of SPX. We may get some respite from the bear action.. but touching lower green support seems likely nearterm

Aug 9 Market Recap - Markets of a thousand cuts

2010-08-09T19:42:00.000-07:00

The markets been trading a bit higher lately since almost Aug 1,2010. Was seeing some weakness as short interest increased as we touched the 50% retracement. The thousand or four :) are marked on the chart below. Look at the weakness last week, the support line has held things together so far and we have crossed the 50% line convincingly this time. How much higher, we've talked about it earlier, 1140 remains the high target. As of the moment I'd be looking to short there abouts.

Aug 3 Market Recap - S&P's 10 month range

2010-08-03T21:26:00.000-07:00

I was looking at my chart (SPX daily) that I've posted many times, and noticed how we've been dissing the bears somewhat and not really rallying. Then I noticed my two lines, the red - resistance and the green - support. I looked at it through 2009 and seems that we could say we've traded in this range since we entered it Sep 2009! That's about 10 months ago!. Anyway so I guess its important and would be interesting to keep an eye on. Breaking above the red then might seem a bit implausible no? Although we've got to go over the 50% line first.

The stochastics were similar right before the flash crash

Aug 2 Market Recap - Breaking all barriers

2010-08-02T19:27:00.000-07:00

Sharp rally today continuing the bounce up, SPX closed up at 1125.86. Markets been overlooking a descent amount of negative news later ref, BP, GDP, initial claims, Beige book etc. It could just be a setup before we take a sharp turn down, but the number of barriers that have been broken so far is definite signal of a sharp local trend upwards. Few resistances nearby, most important is the the 61.8% retracement May high to July low at 1140. Watch it as a short opportunity. If this gets taken out then we have good room for moving higher

Some important Fib levels are in order

1) 1,576 high in October 2007 to the 666 low in March 2009

23.6%: 881
38.2%: 1,014
50.0%: 1,121
61.8%: 1,228

2) 666 low in March 2009 to the 1,219 high in April 2010

23.6%: 1,089
38.2%: 1,008
50.0%: 943
61.8%: 878

3) 1,219 high in April 2010 to the 1,010 low in July 2010. This is the near term Fib we are in right now, near term high is 1140

23.6%: 1,060
38.2%: 1,090
50.0%: 1,115
61.8%: 1,140

July 28 Market Recap - Stocks take a leg down

2010-07-28T22:18:00.000-07:00

The bounce off the 50% retracement theme continued today. We've also bounced off the SPX 1100 level, now support, which is significant as breaking below would be confirmation of the down trend. Below is the 5m chart for SPX. Note that the trading range appears to be 1100 and the 50% fib level of 1120. But near term we've bounced off 1100 with some ammunition left on the stochastics.

We've had some negative news, which could have turned us bearing, beige book, consumer confidence and BP. But on the daily chart it appears that the upward trend is still in place.

July 27 Market Recap - SPX bounce of the 50% Fib level

2010-07-27T15:23:00.001-07:00

SPX rallied yet another day, bouncing off the 50% Fibonnaci retracement level. Chart below shows the 15min bars. I think there is some loss of steam here. If that leads to a selloff is yet to be seen. Today, the market shrugged BP's huge writeoff and a decline in Consumer confidence. The news might overhang tomorrows trading.

July 26 Market Recap - SPX 50% Fib level in play

2010-07-26T15:54:00.000-07:00

We've breached the SPX 1100 and are now resting right on the daily MA(200). At SPX 1120 is the 50% retracement level from the high of 2008 and the lows of 2009. The current levels nearness and the large time-range for the Fib, it seems that we shall definitely rally to it. The big question is whether we shall continue beyond it or sell off from it. The markets have rallied hard the last few days and are overbought, market internals are lagging the current rally. Which hints at better odds of a sell off as we touch SPX 1120.

July 20 Market Recap - Strong rally day

2010-07-21T00:06:00.001-07:00

Strong rebound today from the lows at open (roughly +250pts). Below is the long range chart of SPX (1hr), see how the resistance has played out in the past (since the April highs) It would be critical for the index to break over this line for any hope of a continuation. Beyond it are the daily MA(50) and 1100 (red line) then the MA(200). But we'll see when we get there, although if we cannot then we're back to looking at the abyss. Watch for the resistance tomorrow, it is too near to not be tested, might be a good shorting opportunity.

July 19 Market recap

2010-07-19T14:28:00.000-07:00

The weakness I mentioned in the previous post carried into Friday last week, also options expiration day, with the SPX crashing 3%. Today the markets opened higher, slid into negative territory and made a come back to close in the green for the day. IBM reported earnings after hours and missed consensus, markets have turned negative on the news after hours. On the SPX chart, the reversal from the most prominent resistance level 1100 seems to be gaining momentum and a retest of the recent lows of 1020 seems likely, unless news drives us higher.

Started to slump but news drives markets higher

2010-07-15T21:51:00.000-07:00

Markets got wind from news of BP plugging the leak and GS settling with SEC as it was declining from resistance, only to reverse course and rally to close flat for yet another day. Overhead resistance appears to be a 1090 and intraday weakness continued for a second day with news driving markets higher towards close, see arrows on chart below. A short bias on rallies and caution on news as it comes is warranted.

Earnings surprises lead the market higher

2010-07-13T21:17:00.001-07:00

The market threw a surprise today leaving many bears stopped out and mad! .. The volume picked up a bit after Alcoa reported results. Tonight Intel reported yet another stellar quarter, best in a decade, which could push us higher over a few resistance. Just what the doctors ordered for the bulls. Notice SPX upward resistance level 1100 is back in play. SMA(50) is where the market is resting at close today. Anything above would officially break the bear market. Be cautious