Lawrence's Market Blog

CNBC Poll: When Will the Dow Cross 10,000?

2009-10-12T18:56:00.003-04:00

Link to Poll at cnbc.com

Fully 85% of people think Dow will cross 10,000 within 3 months. They don't even offer the option of voting "Never", but just "Not sure". We'll see if such bullishness will get us there.

sp500 in 2001 V-rally

2009-10-09T18:35:00.003-04:00

My prediction

Market at 1070 right now implies 4% GDP growth. 700 means zero to 1% GDP growth. Therefore, not much upside left. We are not going to new 2007 highs here. Guaranteed because in 2007 everyone bought houses on no down payment and use houses as ATM to pay for cars, vacations, and plasma TV's. Hell will open up if we get negative GDP growth. Remember $12 trillion already spent so don't expect another government stimulus plan. Democrats may lose seats in 2010 because Americans are very angry about how government is wasting so much money. Republicans opposed to further stimulus.

If I am wrong, I don't expect to lose much. After missing out a 70% rally, I am not about to go long. I anticipate a turn down. If I am wrong, I don't expect to lose more than another 10%. As opposed to a major recovery if I am right. You see, risk reward favors shorting here. Fundamentals favor shorting here. Good luck.

Fundamental Picture: Article at Mish's blog

Supply of stocks hitting records

2009-10-09T18:16:00.001-04:00

Graph from smallinvestors.com

Very sharp almost parabolic increase in shares outstanding since March!!

Some thoughts

2009-10-09T17:41:00.002-04:00

*=== FACTS ===*
October 18, 1999 S&P500 was at 1301.65.
Today is 1071.49.
Furthermore, US dollar has dropped 53% in 23 years.

People who buy and hold for the long term have accomplished nothing.

What is bonds sniffing out here? Maybe trouble ahead

2009-10-09T17:35:00.001-04:00

SPY keeps going higher on lower and lower volume while LQD (bond) buyers are dumping in a hurry. As you may know, bond market is much smarter at predicting trouble ahead than stock buyers because bond market is more risk adverse and less speculative. They correctly predicted the subprime debacle months ahead of equity markets.

Support broken?

2009-10-01T22:36:00.006-04:00

Above is S&P500. Depends on whether you use Log charts or not. Only a break below 1010 will be definitive.

Below is the S&P100 which is the "big boys" playground. We are right at the support of the rising trendline. It has been said that one must pay attention to $OEX rather than $SPX. Should be an interesting day tomorrow.

Here is a look at the fear factor VIX. Log chart works best here.

California sells $8.8 bln in notes to record retail demand

2009-09-24T05:48:00.004-04:00

Article at Marketwatch

Aided by a record $6.64 billion in orders from retail investors, which amounted to 75.4% of the total, California sold the revenue anticipation notes at yields of 1.25% to 1.5%. They mature in May and June of next year.
...
A recent, smaller offering by another state yielded far less than California's deal, however. Last week, Massachusetts sold $1.5 billion in short-term notes with a yield around 0.3%.
...

=== END QUOTE ===

Mind-boggling to me. Why? Consider this:

1. California's budget deficit is expected to hit $41.8 billion by 2010. Link
2. They borrowed nearly $9 billion, over 75% was from their own residents.
3. These people are the same people who has to pay back the debt (via taxes and in turn receive cutbacks in government spending).
4. Paying 5 times more interest than Massachusetts.
5. This loan is for 1 year. What happens next year if the recession gets worse?
6. It's like parents feeding an obsese kid more cake. Why aren't residents saying enough is enough?

Meanwhile...

"UC Regents consider 30 percent student fee hike to plug deficit"
Link

Website worth reading: dshort.com

2009-09-24T00:30:00.002-04:00

I like reading their analytical approach to markets. For example, this one:

http://dshort.com/articles/2009/SP-Composite-pe-ratios.html

A more cautionary observation is that every time the P/E10 has fallen from the first to the fourth quintile, it has ultimately declined to the fifth quintile and bottomed in single digits. Based on the latest 10-year earnings average, to reach a P/E10 in the high single digits would require an S&P 500 price decline below 600. Of course, a happier alternative would be for corporate earnings to make a strong and prolonged surge. When might we see the P/E10 bottom? These secular declines have ranged in length from over 19 years to as few as three. The current decline is now in its ninth year.

Fed Said to Start Talks With Dealers on Using Reverse Repos

2009-09-23T00:26:00.004-04:00

Article at Bloomberg

The Federal Reserve has started talks with bond dealers about withdrawing the unprecedented amount of cash injected into the financial system the last two years, according to people with knowledge of the discussions.

Central bank officials are discussing plans to use so- called reverse repurchase agreements to drain some of the $1 trillion they pumped into the economy, said the people, who declined to be identified because the talks are private. That’s where the Fed sells securities to its 18 primary dealers for a specific period, temporarily decreasing the amount of money available in the banking system.

=== END QUOTE ===

It has been said that the Fed's injection of cash into the financial system through their repo programs (primary open market operations or POMO) have been partly responsible for the market's strength. Part of this strength comes from the drop in the value of the US dollar.

Now, we see the Fed's consideration of plans to drain liquidity. This will likely boost the US dollar, by removing dollars from the financial system. Equities which have been rising on the back of a weak dollar will likely see a pullback.

2387 pips in 7 months! An insane move.

Link to a very good Forex chart website:
http://www.dailyfx.com/charts/Chart.html?symbol=EUR/JPY

Article: Hong Kong goes into speculative overdrive

2009-09-21T13:52:00.004-04:00

Article at Marketwatch

"Despite all the warnings, some are betting their savings on IPOs"
"city dives headlong into another speculative frenzy"
"Initial public offerings are receiving record subscriptions"
"fundamentals get removed from the investor lexicon"
"Fear has been replaced by that more painful emotion: missing out."
"the new Sinopharm IPO that has taken in $113 billion in orders, including a 600-times subscription for the retail portion of the issue."
"the increased risk tolerance in his household after finding his wife had put the sale proceeds of their home -- the deposit for a new apartment -- into Sinopharm shares. She'd also topped up on margin financing."

And that's why I sold my longs on China and Hong Kong last Friday. Link Everything is in place for a blow-off top.

Commitment of Traders 09/15/2009

2009-09-19T11:08:00.004-04:00

I stopped posting updates on Commitment of Traders because quite frankly, the Commercials have been wrong wrong wrong. They stayed short all of 2009. In the middle of June, they sharply reduced their short positions (it went from -81k SP contracts on 06/16/2009 to -45k a week later). But wrong is still wrong.

Anyway, treat this as "news" rather than a trading tool. I think pros are as surprised by this rally as everyone else.

Open interest peaked in December 2008 and is down nearly 50%.

Long-term selling

2009-09-18T12:39:00.001-04:00

Chart from business insider: Link

Note: September is just an estimate (calculated by first two weeks x 2).

Selling China

2009-09-18T11:24:00.005-04:00

From the archives: Update on Long China / short SPY post

Sold CAF at 32.87 (paid 20.60) +60%
Sold FXI at 43.46 (paid 22.30) +95%
Keeping my SPY short at 80.13 (now 106.74) (-33%)

My CAF/FXI gains exceed my SPY losses.

Investor Intelligence: Sentiment Readings

2009-09-17T12:35:00.003-04:00

Very bullish sentiment among investors in the survey

http://www.market-harmonics.com/free-charts/sentiment/investors_intelligence.htm

%Bulls outnumber %Bears more than two-to-one. If people tell you, we are too bearish, there is overload of bears, tell them to watch CNBC and ask them where are the bears.

Recovery without shippers?

2009-09-17T00:37:00.004-04:00

Stocks are rallying like a recovery is a foregone conclusion but the drybulk shipping index recently broke downward from its triangle formation and appears to be heading lower, as the chart shows.

Commercial shipping in crisis as thousands of ships wait, anchored off the coast of Singapore

Singapore (AsiaNews) – Thousands of “ghost” ships are anchored a few miles east of the port of Singapore. They have neither cargo nor crew, rolling idly, proof that exports are down and the worldwide recession is not yet over, ready to sail when trade does start up again as many hope.

Only a few men are on board for the upkeep of the vessels and prevent accidents or stop pirates from seizing them. They are container ships, bulk carriers, oil tanker, a fleet the size of the entire British and American navies combined but with far greater tonnage and horizons. Used to go back and forth between China, Europe and the United States, these ships are now idle.

Link with pictures

Bonds trading at all time highs

2009-09-16T16:46:00.004-04:00

LQD description: "The investment seeks investment results that correspond generally to the price and yield performance of a segment of the U.S. investment-grade corporate bond market as defined by the iBoxx $ Liquid Investment-Grade index. The fund typically invests at least 90% of assets in the bonds of the underlying index, and at least 95% of assets in investment grade corporate bonds. It may also invest in bonds not included in the underlying index. The fund may also invest up to 5% of assets in repurchase agreements collateralized by U.S. government obligations, and in cash and cash equivalents. It is nondiversified."

I don't understand how bonds (even the investment grade variety) can be trading at all time highs, even above the Jan 2008 peak. Looks like a bubble in bonds and stocks as investors ignore fundamentals and embrace risk.

Bond Risk Drops Most in Two Months as Recession ‘Likely Over’

Sept. 16 (Bloomberg) -- The cost of protecting corporate bonds in the U.S. from default dropped the most in two months as investor confidence in an economic recovery increased.

An index of credit-default swaps tied to U.S. investment- grade bonds fell below 100 basis points for the first time since May 20, 2008, while contracts linked to high-yield debt in Europe declined for a 10th straight day. A decrease typically signals an improvement in the perception of credit quality.

No new high for SP500 in Euro terms

2009-09-16T12:34:00.004-04:00

New highs are made in the market every day but it is entirely due to dollar destruction. Look at the chart below.

I don't know when the dollar will stop falling but it has to be soon. Otherwise, European companies simply can not compete against American counterparts. EADS/Airbus will lose against Boeing. BMW and Mercedes against GM and Chrysler.

Labor Day 2008

2009-09-04T21:06:00.000-04:00

A chart showing Labor Day 2008 which marked the top of 2008. Last year Labor Day fell on 09/02/2008.

ES Mirror Image

2009-09-03T16:58:00.002-04:00

Take a look at this picture.
Top picture is a chart of ES, 1 month chart with hourly candles.

2nd picture is if I take the chart and mirror image the left side to the right side.

3rd picture is the same chart of the ES as #1.

Pretty spooky how it is playing out as mirror image, right?

uidezine comment about me

2009-08-14T19:30:00.010-04:00

For what it's worth:

1. I did not blame him for not posting real time trades. I offer $500 to the first person who can prove otherwise. Claim your free money by being the first commenter on this post with proof.
2. I was making a reply to Nofear on a private blog. It's idle chit-chat and you shouldn't try to read too much into it. In other words, I didn't start anything. I simply said that people shouldn't trust uidezine (or any other guru for that matter) on his trades if they were not posting in real time.
3. I am trading with a nice group of people at Nandu's blog. This can be verified by uidezine since he has a member at his blog who has access to NK's blog. He can tell you we are doing very well, on both sides long and short.

I don't have access to UID's blog since he went private so I was quite surprised to see his comment about me on Disqus.

I wrote the following messages in response to Nofear's post. FOR THE RECORD:

1. "I think he is backdating trades. I have never seen him post real time. "

2. "No offense intended, but let's think about this, when was the last time you saw him post a real time trade?"

3. "uidezine.blogspot.com
it's private but you can read his comments via Disqus
http://www.disqus.com/people/uidezine/#main

He got famous for buying at the March bottom. He used to post real time trades but I haven't seen one since May. Always seems to magically have entries at the highs for shorts and lows for longs. Seems like a nice guy but record is not verifiable so be careful."

4. "Not sure why you are mad at me for. I simply made a fair observation as a neutral person that I have not seen real time trades from him. How does that make me "pathetic"? It's just an observation, don't try to derive any meaning from it."

That's it. I think I would have written more carefully if I knew it would raise such a ruckus. I hate controversy and drama, and left that all behind when I joined NK's blog.

Consumer Sentiment reports today

2009-08-14T12:47:00.002-04:00

The chart below has arrows showing when consumer sentiment numbers are reported. Today is one such day. Strange that IT tops and bottoms happen on these same dates when University of Michigan Sentiment Index gets reported.

Mashed against the trend line

2009-07-28T01:09:00.003-04:00

$SPX mashed against the trend line going back to mid-January.

Also 38.2% Fib retracement since the bear market began in 2007, is 1014. Look at the RSI(7) in bottom pane! >86, that's higher than the bubble top in 2007 (~75).

Is the bear market over?

2009-07-28T00:58:00.007-04:00

Showing you charts of Japan's Nikkei bubble and Dow in the 1930's. The dow chart from Tim Knight.

Sorry for lack of updates. I probably will not write much until the market starts going down. This has been frustrating as hell since I am positioned short. Never seen anything like this, 100+ point rally without any retracement. The head and shoulders pattern is dead, kaput. Instead, we are plain overbought.

I hope some of you took my SQNM trade recommendation (100+% gain). Thanks Jigsaw for your comment. Today's close was $6.35. My entry was $3 and there were lots of opportunities to get in since I pointed it out in April. Link

The 2008 Head and Shoulder

2009-07-13T22:17:00.002-04:00

Above is a 2-year chart of $SPX, with daily bars. Note the 2008 head and shoulders pattern. The way the pattern played out was with a break of the neckline, then a big rally above it to shake off the bears before a final plunge through the neckline again.

Since there is a current head and shoulders formation today, it is possible that this plays out the same way. For example, the market broke above the neckline today. Some people say this is a failed head and shoulders because of that, but it seems to me that the bearish case is not at all out of the picture.

Below is the current head and shoulders in 2009.

Decent risk reward to go long here

2009-07-08T01:43:00.006-04:00

As I type this, ES is at 877.50 and there's decent risk/reward to go long, in my view. This is previously an area which have acted as strong support since beginning of May.

I circled the times the market bounced off this level in the chart below. Note: Numbers below are for $SPX.

The lows on the following dates... Note the large cluster of lows between 878 and 889.

05/04/2009 - 879.21
05/13/2009 - 882.80
05/14/2009 - 882.52
05/15/2009 - 878.94
05/18/2009 - 886.07
05/21/2009 - 879.61
05/22/2009 - 883.75
05/26/2009 - 881.46
05/28/2009 - 887.60
06/23/2009 - 888.86
07/06/2009 - 886.36
07/07/2009 - 879.93
07/08/2009 - 881.90

In addition, 877 is 61.8% Fib level of the November 2008 high to March 2009 low.

Sentimentrader.com shows extreme short-term pessimism. Also total P/C ratio is 1.01 which means retail crowd is too bearish. Link

NDX at critical support

2009-07-07T16:47:00.003-04:00

Above is 20-year chart of $NDX, with monthly bars. As you can see, I draw a trend line from high in March 2000 to the low of August 2007. The inset picture is a zoomed view.

The index is right on critical support now at around 1400. I do not expect this to fail on the first try so I am long NQ and ES near this level.

Dollar in Abandoned Baby pattern

2009-07-03T13:17:00.003-04:00

When the US dollar is strong, equities are weak, and vice versa. UUP is an ETF that reflects US dollar strength. The above 2-year chart shows a classic double-top when US Dollar hit its peak in March 2009 which was when equities hit bottom. Since then, UUP has dropped from 26.83 to as low as 23.43, or nearly -13%. That's a big move for a currency.

I think US Dollar bottomed yesterday because there's an unusual bullish "Abandoned Baby" chart pattern as you can see below.

For an explanation of this pattern, see this link.

Head and Shoulders nearly complete

2009-07-02T17:23:00.002-04:00

The neckline is 895 and we're right there.

Reverse split AIG

2009-07-01T19:26:00.012-04:00

AIG reverse split today. Stockholders receive 1 share for every 20. It's down more than 22% from yesterday's close on huge volume.

Which brings to mind why. Nothing changed really. If you had x shares of AIG yesterday, today you have x/20 with a price 20 times higher.

But mentally, I'm thinking that people are not prepared for it. With a $1 stock, the maximum downside is a buck. If the stock is $20, suddenly horrors, they think "I could lose 20 dollars a share!!" Investors are just dumb that way...

Some Of Yesterday's Buyers Of AIG Shares Couldn't Sell Today

Article at Reuters

American International Group Inc (AIG.N: Quote, Profile, Research) shares tumbled nearly 20 percent on Wednesday following a 1-for-20 reverse stock split by the troubled insurer.

The shares were down $4.53, or 19.5 percent, to $18.67 in early-afternoon trade on the New York Stock Exchange.

The reverse split was approved at the AIG annual meeting on Tuesday. The shares closed at a pre-split $1.16 on Tuesday.

Donald Light, an analyst with Celent in San Francisco, said, "It looks like AIG was trying to seek some kind of psychological advantage, but what they were hoping for did not occur."

IYR Real Estate

2009-06-30T23:08:00.003-04:00

SRS was down today despite market dropped. Take a look at the real estate IYR chart.

You see where it dropped out of its uptrend channel on June 15th. Then it fell below all the moving averages on my chart.

Red = 20-day
Blue = 50-day
Green = 200-day

Furthermore, IYR is advancing on declining volume. AKA the Jaws pattern. The June 22nd drop had nearly 30 million shares traded. Today, just 18.2 million.

And it's been trying but can't even close above the 50-day MA. I expect IYR to turn down again soon.

Month end

2009-06-30T22:04:00.002-04:00

Re-cap of June 2009

May closed at 919.14
June opened at 923.26 and closed at 919.32.

In other words, market has not gone anywhere in the past four weeks.

The $SPX appears to be carving out a head and shoulders pattern with a target of 840. The neckline is at 895.

Caveat about the golden cross

2009-06-29T01:13:00.001-04:00

article at Hussman Funds

June 29, 2009
Green Shoots and a Grain of Salt

John P. Hussman, Ph.D.

Similarly, we are skeptical about things that cross our desks urging us to forget the economy's debt fundamentals and break into a chorus of Zippidee-Doo-Dah. Last week, for example, I was treated to a report on the so-called “Golden Cross” – the event where the 50-day moving average of the S&P 500 crosses above the 200-day moving average.

Next to a carefully compiled set of dates were the purported returns of the S&P 500 over the following 1, 3, and 12 months. As one moves down the report, the analyst either figured that investors would no longer pay attention or forgot how to operate a calculator, so one-year gains of 100%, 200% and more were piled into the average (the figures were about 10 times the true returns).

Suffice it to say that the true history of the Golden Cross is bronze at best, with actual 1, 3 and 12 month gains in the S&P 500 (since 1940) coming in at 1%, 3% and 14% on average. Those figures, however, benefit from three particular instances where the S&P 500 gained over 40% over the following year – those instances were 1942, 1953, and 1982 – each which began at multiples of just 7-8 times normalized earnings (not the current multiple of nearly double that). Excluding those three instances, the subsequent returns from the Golden Cross are no better than throwing dice.

In short, beware of analysts bearing indicators that all is suddenly well, and check their facts.

To the haters

2009-06-28T19:41:00.002-04:00

I am reading all this negativity against indusequities (Nandu Konat) and his site acetraders.net and I don't get it. Where is this coming from. If you have been on his site past 4 weeks, you can see he is an excellent trader and mentor.

Are you upset because:

1. NK made negative comments about Elliott Wave?
2. You got banned by violating his house rules? Such as no advertising for other blogs, etc. I mean really it's his blog his rules.
3. You didn't get an invitation? Unfortunately blogger limit is 100 for private blogs.
4. You lost money listening to him? Doubtful.
5. You are angry because he wants to make a pay site? Why is this ok for oscar carboni then?

Really I want to know. Nandu is my friend and does not deserve this.

Friday 06/26/2009 was Bradley Turn Date

2009-06-28T03:05:00.002-04:00

Friday 06/26/2009 was a Bradley Turn Date.
Link about these turn dates

Also note Hurst 6 day low is due Wed afternoon.

Commitment of Traders (SPY added to charts)

2009-06-26T19:56:00.004-04:00

Charts updated with SPY closing prices added to the charts. Thanks icdoc for the suggestion.

Commitment of Traders 06/23/2009

2009-06-26T17:24:00.003-04:00

The drop in open interest is of course due to June contracts expiring last Friday.

Remember that the COT report tends to be more accurate with regard to the "big" SP contract rather than the E-mini. Therefore, I will only look at the SP contracts COT report in my analysis below.

======================================

RE: SP contracts

Interesting that non-commercials have gone net short for the first time since March 17, 2009. They have been net-long since March and rightly-so.

Commercial traders have reduced net-short positions. They are still pretty short though. For example, they are more short now than the entire year in 2008. Commercial traders tend to be most accurate and patient with their money.

The so called dumb money (Non-reportables)is as long as the Commercials are short.

Website to get rail statistics

2009-06-26T01:17:00.001-04:00

http://railfax.transmatch.com/

Just to show you how bad the economy is, you can review the numbers and charts for rail traffic at the website above. Worth a bookmark.

Golden Cross

2009-06-23T17:16:00.004-04:00

A lot of traders mention the golden cross which is when 50-day MA crosses the 200-day MA. This is supposed to initiate a rally, but today's market reaction is decidedly muted. We got a narrow range day, less than 10 SPX points. I think the market will reveal its true intent tomorrow (Wed) after the Fed decision at 2:15 PM Eastern.

And remember the 200-day MA and all the hoopla when the S&P500 went above it for the first time since May 2008? We went back below it yesterday and couldn't even reclaim it today.

Breakdowns

2009-06-23T16:22:00.003-04:00

In my "Top is in" post, I showed a chart of IYR which broke support. Below is a picture of IYR to the present, along with another "leader" which broke down today.

As you can see, AAPL has fallen beneath support today. It is not unusual for a stock to backtest the broken trendline, so traders would probably try to short AAPL at 136 to 137 level, with target in the low 110's.

"Commentary: The supply of stock is mushrooming -- a bearish sign"

2009-06-17T00:49:00.000-04:00

Article at MarketWatch

Notwithstanding the carnage the stock market suffered between October 2007 and March of this year -- the worst since the Great Depression -- corporations' share issuance departments are partying like it's 1999.

In fact, firms have recently issued far more shares of their stock (either through initial public offerings or secondary offerings) than they did even in the go-go years of the late 1990s and at the top of the Internet bubble in early 2000.

That's not good news, from a contrarian point of view: The stock market historically has tended to perform poorly following periods in which firms have flooded the market with more shares

Top is in

2009-06-16T23:17:00.006-04:00

It looks like last Thursday is the top. $VIX broke out of its channel yesterday, backtested it today and closed at today's high. Key sectors like IYR (real estate) broke below its trend line from March lows. Actually, despite the strong rally in IYR, it never exceeded its January high, a noted divergence from $SPX which made a marginal new high for 2009.

As I mentioned before, commercial real estate is the next shoe to drop. The "W Hotel in San Diego" just went into foreclosure a week ago. Link

Having said that, if this marks the beginning of the next down leg, the first move should be very quick, designed by goons to not let any bears get on the bus before it leaves. Kind of like March in reverse.

Look at the November 2008 high, in two days, it dropped from 1007.51 to 899.73.

Look at January 2009 high, in two days, it dropped from 943.85 to 896.81. 2 days after that, it was 864.32.

Look at Feb 2009 high, in two days, it dropped from 875.01 to 822.30. 3 days after that, it was 789.17.

Fact is, the rise up is like taking stairs, move down is like express elevator or sky diving. My concern is how do we get onboard ASAP without getting a bad position and taking losses (at least initially)? In my view, you can short now and to hell with taking a drawdown. By August, that will turn out to be the one of the best trade of your life. The most patient bears will likely miss the first 100 points for sure.

uidezine said it like this: "Let's say you reshorted at today's close 912 and rally tomorrow and you are screwed. By August, you probably will say, "Damn, that was the best trade I'v ever made in my career" :) Now that's IT trading."

Today's low and close / Question for Swinger

2009-06-15T21:26:00.011-04:00

Question for Swinger at bottom of post

During the last 10 days of doji's / spinning tops, the market was building up energy for its next move. Today it decided to first make a trip to the downside.

Whether or not this marks the beginning of a change in direction is not clear at this time. Given this is quadruple options expiration week, a lot of weird things can happen.

1) In the above picture, you can see that we closed at the same level as the June 1st low. Incidentally, the month of June opened at 923.26. Today's close was 923.72. Market is trading above it's June open and this is not at all bearish.

2) I showed how today's low is the same level that we closed the month of May just prior to the huge move on June 1st that resulted in a huge gap-up. Technically, the market has closed the gap. As long as market stays above 919.14 (SPX cash), the monthly candle is up.

3) RE: ESU9 September E-mini ---> We did make a new low (915.25) for June today but ESU9 closed above its prior June low of 918.

If I had to interpret what I am seeing, I would argue that we remain in a trading range from 915.25 to 952.75 for ESU9 which has been the case for the first half of June. Remember what Swinger said in his last ES Update: "Short-term trend remains bullish above 915. Last intratrend ideal entry was at 883 on May 26th. Next upside target is at 977 for a >3:1 gain/risk ratio. Current intratrend profit stop (sell partials) is at 923."

I assume that his numbers are adjusted for ESU9 and we are above 915 which is bullish on short-term basis.

My question for Swinger is how does one trade this on a short-term basis and what decisions to make at 915 level. For example, one could go long today at 916. Would Swinger set the stop at 915 or lower? Would the stop be a mental stop that requires a daily CLOSE below 915 to exit the trade, or would one close the trade upon any penetration below 915?

Swinger's ES Update for June 12, 2009

2009-06-15T04:08:00.001-04:00

Below is from 'swinger', posted here with permission.

Rollover day was yesterday, so volume has shifted from the June contract to September. Difference at rollover was about 4 points, so the support/resistance numbers I have been quoting will be adjusted from here forward to reflect the September contract pricing.

Market has essentially flat-lined for the past 10 trading days and has been hovering around the January 6th high of 935.50 (continuous contract adjusted). Why is that significant (in my opinion)? That was likely the most prominent point on the charts for any bear who shorted the down leg during the first quarter. By pinning price above that pivot, a >100% retrace has assured that no bear (trading futures) has a profit on any trade entered since November of 2008.

June 19th is quadruple-witching day, and could be a huge payday for those who engineered the rally off the March lows. The bearishness was incredible at the start of the rally and the defiance continued for months. That was exactly the sort of environment that was needed to sustain a squeeze of this magnitude. Add a large dose of government and quasi-government liquidity to a determined set of bankers and the result is what we have seen.

The bear abuse trade has reached a point of inflection, however. Market is nearing long-term resistance levels and the question is whether sufficient momentum exists to punch up and through to start a new long-term bull market—or if we are nearing a point where a pullback is necessary, and would even be welcomed by many as a place to take profits and re-enter at lower levels. Hard to say at this point what the plan is going forward—but we can look at some levels to watch and then react to whatever scenario eventually presents….

Long-term trend (which started at 1424 in May of 2008) remains bearish below 977. Last intratrend entry was countertrend long at 894 (partials covering for LT bears). Upside target for that countertrend move is 977.

Intermediate trend remains bullish above 877. Last intratrend ideal entry was at 802 on May 28th. Intratrend profit stop (sell partials) is currently at 923. Next upside target is 1075 for a 12: 1 gain/risk ratio from here.

Short-term trend remains bullish above 915. Last intratrend ideal entry was at 883 on May 26th. Next upside target is at 977 for a >3:1 gain/risk ratio. Current intratrend profit stop (sell partials) is at 923.

Long-term bears may be seeing a chance to re-deploy partial positions covered on the rally--near the resistance test of 977-1000 area.

For those holding ideal long entries in the intermediate and short-term timeframes, the goal here is an eventual test and possible breakout of LT resistance. Significant long-side gains are now locked in and protected with the current profit stops. We should not see any significant selling volume until/unless the IT/ST support levels mentioned above start failing.

This bear market rally has been a wonder to behold. The quarterly goals have likely been accomplished with the push above the January pivot high and quadruple-witching payday looms for the leveraged plays.

…now we just watch the support and resistance and, as always, try to stay on the right side of the trends in the trading timeframe of choice.

The shipping index shows most stocks are heading down

2009-06-12T11:28:00.001-04:00

Article at MoneyWeek

Have you been watching the Baltic Dry Index lately?

It may sound a bit dull. But it's a key barometer of global freight activity – in other words, it measures the cost of ferrying raw materials around the planet.

The message it's starting to send is very clear: shipping rates and commodity prices are set to tumble. And that means the share prices of many cyclical stocks – which have led the recent rally - will be heading south, too…

Range contraction

2009-06-11T17:10:00.005-04:00

Since the March bottom, the range of points from highs to lows for each month has been contracting. March was more than 150 points. April was around 100. May ~50. March, ~30. Looks like a topping pattern to me. The car is running out of gas.

As the market goes up, the fact that the range is contracting is implying smaller percentage moves. If the S&P500 is at 666, a 150 point move is 22%. At 950, a 30 point move is 3%.

Market has not gone anywhere last nine trading days.

My guess is that Wall Street is holding up prices here to distribute to late buyers. A lot of people are getting extremely bullish. Stock valuations are stretched to the limit.

Quote: "This morning, the Investor's Intelligence survey is out and Bulls are now at 47.7%, while bears are at 23.3%. These are heights not seen since close to the peak of the last bull market..." Link

SQNM Update #2

2009-06-09T16:32:00.003-04:00

From the archives: SQNM Update

SQNM jumped 58.21% today. Just wondering how many of you are in this stock with me. I recommended it in May at $3 based on my wife's familiarity with the company and the product. Buy what you know, so they say.

Sorry for lack of posts. I don't have much to say these days since I am mystified by the "bull" market. It doesn't make a lot of sense, at least to me.

Critical week

2009-06-04T05:23:00.001-04:00

This week is critical in my opinion. According to one interpretation of Elliott Wave theory, this is the end of P2 (primary wave 2). The waves last week is ABC in 5 waves. Today's decline was wave 4. There is one more wave 5 up that could go as high as 960. This would make the C leg equal to the A leg.

Kenny's blog shows this clearly.

Link

Second, the Bradley turn date is June 3rd, yesterday. These dates are not exact, but plus or minus 2 days.

more on the Bradley turn date:
Link

Third, the US will need to raise a huge amount of debt next week. If the dollar is weak and bond prices low, they will have serious problems. If they can put a little scare in the equities market, that helps them. They will announce how much on Thursday including a three-year note, a 10-year note and a 30-year bond.

I remain very nervous because despite all of these factors, the markets have gone up a lot more than should be expected. Stock prices have no fundamental reason to be at this level. So anything can happen.

CBOE Equity Put/Call Ratio

2009-06-04T00:50:00.004-04:00

(Chart from www.schaeffersresearch.com)

The red line is the 21-day MA of CBOE Equity Put/Call ratio. At 0.619 as of Tuesday 06/02, that is pretty low. Even at the beginning of 2009, the value was only 0.70. What this is saying is that people are buying a lot of calls (relative to puts). The ratio of calls to puts is 1.61 to 1. Put another way, 60% more calls than puts. Since the majority is often wrong, you are supposed to read it in a contrary way and this is bearish.

WSJ: Finance Crisis in Latvia Deepens

2009-06-03T23:56:00.004-04:00

Finance Crisis in Latvia Deepens

Latvia's financial crisis escalated after a government auction to sell 50 million lats ($100.8 million) of short-term debt failed to attract any bidders, adding more pressure on the government to devalue its currency.

The failure hit the prices of other Eastern European currencies and pulled down stock prices of Swedish banks, which are heavily exposed to the Baltic region. It also boosted the U.S. dollar, which had been weakening recently against the euro and other currencies.

Latvian Prime Minister Valdis Dombrovskis avoided questions about a devaluation in an interview on CNBC after European markets closed, but said the country needs to reach a quick agreement with the International Monetary Fund and the European Union to secure the second portion of its €7.5 billion ($10.7 billion) loan, granted in December in the aftermath of a previous failed auction and pressure on the lat.

=== END ===

Eastern Europe is a mess. Like commercial real estate, it was something that I felt would escalate into a crisis very quickly when people least expect it. Spain and Ireland are other problem spots. GE has heavy exposure. If entire countries start to default on their debts, it will not be pretty for the market.

3 tops

2009-06-03T23:49:00.009-04:00

The last 2 tops in January and February were all marked with a sharp rally, then a doji-candle, then a sharp drop. Some people call this a spinning top. Will yesterday's doji mark the end of this rally?

This is only a possibility though. There are plenty of dojis on the chart, but it seems like tops are usually marked by a doji.

The $SPX bounced exactly at the 200 day MA which was 923.31. The low was 923.85. Some people say this is bullish. As long as support holds, I have to admit they have a point. The bears need to step up and take it below 920 with decent volume.

May closed at 919.14. As long as we stay above this level, market is showing green monthly candle. That would be the fourth one in a row. No denying the trend is still up.

Another problem for bearish case is the 50-day MA at 870 and rising. The 200-day is falling. If the 50-day crosses the 200-day MA, some people call this the "golden cross" and have in the past ended the bear market. As long as market stays above 870, the 50-day MA will keep rising, so time is running out.

No sign of an end to mortgage crisis

2009-06-02T23:41:00.001-04:00

Above is from a presentation by T2 Partners. Source: ZeroHedge

Question on ProphetCharts in TOS

2009-06-02T21:02:00.003-04:00

Let's say you drew your lines on a chart in ProphetCharts. But you want to start over on another possible scenario. So you want to erase everything and start with a clean slate, but if the scenario does not work out, you want a way to restore the original drawings. How do you do this?

Thank you.

Strange Day

2009-06-02T01:08:00.007-04:00

Today is very strange. VIX (+3.87%) and the SPX (+2.58%). Also $TNX (10-year US Treasury) up a stunning 7.22%.

1. VIX and SPX

SPX is up and VIX (fear) is up by an even larger amount. Several blogs said that it has never happened before, but vixandmore blog says it happened once back on November 2002. That time marked an intermediate top that saw markets drop -17% before putting in a final bottom in 2003. Link

2. $TNX

Treasuries are selling off. You can read it both bullish or bearish short-term, but long term is bearish.

Short-term bullish: Money is leaving safety of government bonds for risk. Only problem is, this looks like near panic selling. When does something as boring as US Treasuries move nearly 8% in a day?

Short-term bearish: Is China or another central bank dumping US government debt? Because US still has a lot more debt to sell. Will US lose its AAA rating?

Long-term bearish: Higher long term yields affect fixed rate mortgages. The move also looks like part of a continuation move with more upside. Mortgage modifications to stem foreclosures generally favor putting delinquent borrowers in fixed rate mortgages at lower rates. That is not going to work if long-term rates are spiking. Another problem: These high-yields are starting to look attractive enough for risk-averse investors versus corporate bonds (the triple-A rated stuff like those issued by Johnson and Johnson, Walmart, or Microsoft). Thus depriving corporations when they are more likely to raise cash through debt offerings.

3. $BKX banking index

Odd that this critical index closed RED for the day. When was the last time SPY jumped nearly 3% but banking did not participate?

4. Punched through 200-day SMA

People were calling breakout breakout, go long! But what short memories. Do you remember last time market pushed through 200-day SMA? Let me show you last two times.

(in picture below, 200-day SMA is the red line)

======================================

Can this possibly be new bull market? Beats me, but look at the economic picture.

foreclosure starts hit one million mark

Article at thetruthaboutmortgage.com

quote: "Through 2012, the CRL expects foreclosures to rise to at least 9 million, costing 92 million families $1.9 trillion in lost home value."

======================================

Finally, I'm closing the poll early because we got so close to 950 that it's pointless to ask people this question. I was hoping we are still stuck in 880 to 930 range. At last count, the vote was...

SPY down leg has already started (if adjusted for constant currency)

2009-06-01T22:36:00.006-04:00

Markets look unstoppable but it's all due to weakness of the US dollar. If viewed through the lens of "constant currency", the market has already started going down. You can view markets adjusted for constant currency by doing a ratio chart of $SPX:GLD (S&P500 to Gold). As a practical matter, you can also execute such a pair-trade for real by buying GLD and shorting an equal dollar amount of SPY.

Lower highs since the first week of May. Negative MACD.

As you can see from my post below, I am fascinated by pair-trades. Long something, short something else. The reason is I believe capital is always looking for the best asset; if it does not want to be in stocks, then it must want to be in something else, be it bonds, commodities, etc. At this point, I believe commodities have the mindset of investors and equities in general are falling out of favor.

Update on Long China / short SPY post

2009-06-01T22:25:00.005-04:00

From the archives: Long China / Short USA (markets)

Look at how this strategy has performed since I wrote that post.

CAF and FXI are up 85% and 77.50% respectively, while the SPY is up 16%. What this is telling me is capital flight is away from US and into Asia. Exactly what I predicted last November.

Since the strategy was long CAF and FXI (25% / 25%) while short SPY (50%), net-net is a 32.63% gain since 11/19/2008. To see how this is calculated, imagine you have $100 to invest on Nov 19, 2008. You buy $25 on CAF, $25 on FXI, and short -$50 on SPY.

The $25 CAF position is now worth $46.25. FXI $44.38. SPY $58. Your gains are 21.25, 19.38, and -8. Total 32.63. Divide by 100 gets you the 32.63% gain. That's not too bad for 7 months in a bear market being short SPY with quote "the 2nd biggest rally in US history".

Even if you bought these positions at the open the next day after reading my post, on Nov 20, 2008, you still did very well. See below. Note that the SPY shows a gain but is actually a loss because it's a short.

The following shows the last 6 months of CAF, FXI, and SPY.

Swinger's ES Update for June 1, 2009

2009-06-01T21:35:00.001-04:00

Below from 'swinger', posted with permission.

After weeks of sideways consolidation below the swing sell signal at 929.50—but above the ST support (currently at 895), ES has finally punched out of the 875-930 trading range this morning by taking out the swing high at 929.50.

By spiking above that number, they have likely run the stops of many bears who have tried to short the market since 5/7/09. We’ll just have to wait and see if the early morning spike was just a stop run prelude to an eventual sell off—or if this marks the start of a new leg up to eventually test long-term resistance, which is currently around 984. The bears have been on the run for a while, and this could be the final wipeout to force capitulation heading into OpEx for those who shorted the March lows--but we’ll see.

By breaking above 929.50, the previous swing sell setup is invalidated and the bulls are set up to run a bit. The new range (if the breakout is sustained) should be between 929 and 984-999.

Next upside target for the goons would likely be the bear stops sitting above the 1/06/09 pivot high at 939.50.

ST stop/reversal line is now at 924 with a new long entry at 929. My intratrend bias is bullish above/and countertrend bearish below 924—though I will trade around the 929 entry to avoid taking an early loss if wrong. Don’t usually like chasing breakouts—but this is the trade opportunity at present.

Next upside target after the bear stops at 939.50 is long-term resistance at 984, which is > 10:1 gain/risk ratio from here.

Depending on how the day goes and where the market closes—we should either see a thrust into the new range—or, if it sells off, and closes below 929.50, then we will be seeing a pullback from resistance and then the game will be to try to catch the next support buy signal—or to sell a failure of support if the trend eventually changes.

Bull markets always start when the news is bad and bear markets start when the news is great. Still a LT bear market here, but this ST/IT bear market rally has been a thing of absolute beauty (or horror, depending upon one’s perspective and bias).

So, bottom line for the current configuration is that the ST trend remains up > 895 with the intratrend stop/reversal line presently at 924. Long here from 929 on breakout, but will not carry the entry under that number. Buying breakouts can be tricky and are not my preferred entry. I am counting on a squeeze here to move away from the new range bottom, but if it turns out instead to be a bull trap, then will be gone under 929.

Stocks didn't go anywhere in May

2009-05-29T10:38:00.002-04:00

Stocks haven't gone anywhere in May. On the first Monday of May, the close was 907.24. Yesterday, the close was 906.83. The entire range is 5%.

Commitment of Traders 05/19/2009

2009-05-28T23:08:00.001-04:00

NEW POLL ON RIGHT SIDE. PLEASE VOTE. VOTING ENDS IN TWO WEEKS.

Fractal Update

2009-05-28T22:55:00.002-04:00

From the archives Fractal? History often rhymes

Here's an updated picture.

I don't know if this is wishful thinking or not, but like last year, we have made a series of 3 lower highs within a relatively tight range. Last year, the range was 70 points and this year, 50 points. Considering the index was trading from 1370 to 1440 last year, the 70 point range was 5%. Today's 50 point range from 880 to 930 is also 5%.

SQNM Update

2009-05-27T22:57:00.006-04:00

From the archives: SQNM Sequenom crushed

In that past post, I wrote: "I don't have a single share of SQNM, but I placed a limit order for some at $3. If I get filled, I will be very happy."

My order for 3000 shares of SQNM was filled at $3 on May 15th. The company was upgraded today and it is currently trading for $3.44. Not a bad gain for two weeks. I plan to hold this for the long-term, despite that biotech plays are generally very risky. If the company gets their issues resolved, and the product out the door, it's a 10-bagger. High risk, high reward.

Article at Yahoo Finance

Sequenom shares rise on Lazard analyst comment

Shares of Sequenom Inc. jumped Wednesday after a Lazard Capital Markets analyst took a neutral stance on the company's prospects, still cautioning that issues with a Down syndrome test could hurt the diagnostic test maker.

The stock rose 31 cents, or 10.4 percent, to $3.29 in midday trading. Shares have traded between $2.86 and $29.14 over the last 52 weeks.

In April, the stock crashed after the company said it will delay launching its SEQureDx Down syndrome test because of "employee mishandling" that the company said appeared to affect all studies of the test.

Lazard analyst Dr. Sean Lavin upgraded the stock Wednesday to "Hold" from "Sell" and said the rewards for investors are likely greater than the risks with the stock trading so low. Future study results for the test could boost the stock if they are positive, he added. Those results are expected toward the end of the year or possibly in 2010.

10-year Treasury yields surging

2009-05-27T22:47:00.004-04:00

Since the beginning of the year, 10-year Treasury yields have surged from a low of 2.038% on December 8th, 2008 to a high of 3.705% today. This is the highest rate so far this year. This has thrown cold water on the Fed's quantitative easing policy.

What this means is the Fed tries to keep a lid on long-term rates by buying US Treasuries. When they buy, it acts as a source of demand, which is supposed to increase the price (supply and demand theory). Price goes up, yields go down.

But the problem is that it is not working! The supply seems endless. The Fed regularly gets three times more offers than they actually buy from dealers, and the US Treasury continues to issue hundreds of billions of dollars in new debt.

The Fed has committed to buying $300 billion total this year, about a third of which they have purchased. Yet the US Treasury issues $100 billion in auctions on a monthly basis.

The implications of this is that as the interest rate rises, it can retard economic growth. Among other things, it affects mortgage rates which are surging today. And that does not bode well for a bottom in housing.

Article at WSJ

Treasury yields and mortgage rates surged Wednesday to their highest levels since November, dealing a blow to the Federal Reserve's efforts to stimulate the economy by keeping borrowing costs low.

The gap between yields on two-year Treasury notes and 10-year notes, known as the yield curve, widened to 2.75 percentage points, its highest ever. Stocks also slipped as investors worried that the higher Treasury yield could jack up market interest rates, damping economic recovery. The Dow Jones Industrial Average dropped 173.47 points, erasing nearly all of Tuesday's 193-point gain, closing at 8300.02.

The Fed has made low mortgage rates a priority in its strategy to stem the U.S. recession. To achieve that, the central bank has been buying mortgage-backed securities and Treasurys. Through programs announced since last fall, it has bought more than $460 billion of mortgage-backed securities and more than $125 billion of Treasury bonds.

SPX update

2009-05-27T22:38:00.005-04:00

Since the high of 930.17 on May 8th, the market has zig zag between 880 and 930, a 50-point trading range for the short term. This has been frustrating for both bulls and bears, to say the least. Bulls had the ball 3 times but failed when the market sold off swiftly from 930, 925, and 914. A series of lower highs that might be a sign of topping process.

On the other hand, bears could not take the index below 880 after 5 attempts (2 were on the same day though).

This stand-off can't last forever. Closing below 875 would unleash a wave of selling while a close above 930 would force short covering.

Swinger pointed out the importance of 897 for intermediate-term picture. Below that, the IT trend is bearish until short-term support at 875 where buyers are expected to step in. How many times can it bounce from this level? My guess is that eventually, this support will break and we could see 830 to 850 level in a hurry.

Swinger's ES Update May 22, 2009

2009-05-26T19:28:00.002-04:00

The following is from 'swinger', reposted with permission. If you like this post, please give swinger points in Disqus.

Between 875 and 930 is whipsaw territory, so I am in no hurry to jump into the fray in the current trading range—so still in spectator mode here.

The goons are building a structure that can either morph into a bearish 'M' pattern with a close below the recent pivot low at 875--or that can be forced into a bullish 'W' pattern with a jam back above 930. I have seen them do this before and my best guess is that right now they are letting folks place their bets and then they will go in the direction that best benefits ‘the house’ when the shock and awe time comes.

Arak asked if I would short under 875? I would consider cautiously entering there, but would have the trade on a hair trigger to cover if it goes back above. The real test for me is at intermediate trend support currently at 855 area--so the potential gain would be only 20 points from entry if buyers do step in. They have not retraced the initial IT breakout since inception of the trend, and that would seem like a good place to rejoin the uptrend if a deep pullback happens.

This is a tricky area here…

It certainly seems reasonable to expect the market to sell off here since a confirmed swing sell signal is in place and upward momentum has apparently stalled with deteriorating internals—but I notice that they keep buying ST support and protecting that pivot at 875, so it keeps the possibility of a surprise jam above 930 in play—which would likely screw a lot of people if it happens. This has been a very strong short-term trend and it has to be respected (in my opinion) so long as it remains up.

First step for the bears is to get a close under ST support (hasn’t happened since March bottom). Then they have to break the pivot low under 875, and then they have to bust IT support under 855 to claim a confirmed reversal.

As I read around, it sure seems like the crowd sentiment remains bearish and if they continue to place bets accordingly—then the goons might just seize on the opportunity to run them some more until they are just too exhausted or too afraid to short…and then maybe we’ll get the sell-off that so many expect.

No need to do anything here but just wait…

Chart of $SPX

2009-05-21T16:37:00.000-04:00

A back test can be expected of the trend line at around 897 to 900.

Commitment of Traders 05/12/2009

2009-05-20T21:01:00.002-04:00

Swinger's ES Update May 19th 2009

2009-05-19T23:23:00.004-04:00

Below from 'swinger', reposted with permission

ES remains in an intermediate term rally within the context of a long-term bear market…

The long-term trend turned bearish back in May of 2008 at 1428 and has dropped 521 points since. The long-term bear market remains intact (in my opinion) below descending primary trend resistance at 988.

The intermediate trend turned bullish at 806 on April 1st and has risen about 13% since. Current intratrend stop/reversal line is at 898.

Short-term trend turned bullish at 741 on March 12th and has risen about 22% since. Current stop/reversal line is at 886.

On May 7th, a swing sell setup signal was generated and then was confirmed by a close under 898 on May 13th. That swing sell signal hit it’s first objective (short-term primary trend support) on May 14th and then rallied back to yesterday’s high.

Strongly trending markets tend to ride the short-term support (or resistance in a bearish trend) on pullbacks. The strength of this rally is evident from the persistence of the ST trend to hold support since 741. Dip-buyers again stepped in right on cue at the ST support and along with some apparent short covering the result was yesterday’s rally.

Had I been a bit more aggressive, I could have taken the ST buy signal at 878, in which case I would now have an 8 point profit cushion locked in with a trailing stop at 886 and looking for a breakout at 930 as an upside target. It is always a good idea to visualize the ‘ideal trade’ after the fact and to do a little self-analysis. My 20/20 hindsight conclusion is that I snoozed on that particular entry. :-)

My current assessment is that we could be in a trading range here between 930 and 875 awaiting resolution of the swing sell signal versus the ST trend continuation buy.

==============================================================================

Yes, I would reenter long at 930 with the stop/reversal line set right at that line.

I would reverse to short either at a failure of a breakout at 930, or if the primary support fails under 886.

==============================================================================

You have it right for my hard deck primary trend support number being 853 for IT and yes, below there is where I would feel that all the trends had rolled over and that the bear was officially back.

Under 898, though, and that swing sell signal starts to reassert and so that is why you see the number creeping into my intratrend stop/reversal line calculations.

Arak 1 week ago posted a great question and as it turns out, he had it right going into OpEx:

Link to my comment

I explained then what I planned to do if his scenario played out. In retrospect, I should have bought the pullback to ST support at 878, which is what I referenced in my reply to Arak--but try as we might, nobody gets them all.

I have a great deal of respect for swing buy/sell signals when they trigger and so in deference, I trade a bit more cautiously with the trend than I normally would. Not that I am bearish yet—but I am warming up to the possibility, just in case.

Blog Recommendation: Ace Traders

2009-05-19T23:19:00.004-04:00

Folks, I want to point you to my favorite blog. http://www.acetraders.net/ It is hosted by Nandu Konat who many of you know as indusequities. He is an amazing trader and a great guy.

Market Update

2009-05-18T23:50:00.002-04:00

As predicted by my fractal observation Link, the market hit a high on Monday after OpEx. Just like last year. If this fractal is going to play out the same way again, we need to start going down tomorrow.

What would be the catalyst for the next move down? I can think of a few things.

1. GM is likely to go bankrupt. Chapter 11. But they still got until the end of the month, so this is low probability of causing the move down right away.

2. California holds a special election tomorrow. Link Quote "The Golden State's prospects for clawing its way out of recession next year could be pushed off -- but not derailed -- if voters reject special budget measures designed to partially bridge the state's $21 billion budget gap, according to a local economic forecaster."

A failure to pass those bond measures would mean the state would need to slash payrolls drastically, which would increase the number of unemployed, and push the recovery from the recession farther out, in the most populated state in the US.

Finally, Hewlett Packard reports tomorrow. Although they are not part of Nasdaq, it's a major tech company and Nasdaq already broke down before other indices.

Big drops versus small drops

2009-05-13T18:10:00.003-04:00

The above picture shows why it is so hard to short and micromanage a short position. The rally in the past two months have had only 3 big drops and many small drops. Prior to today, only two drops exceed 48 points. Today's drop did not exceed 48 points from the top. The rest of the drops range from -23 to -37 points.

What is interesting to me is the recent drop from 930.17 to 882.80 is -47.37. This is close to the maximum the market has dropped in the past two months before moving higher. So even if we continue to make a series of lower highs and lower lows, I would not be surprised to see the market move higher from here first. To unclog the pipes, as some people would say.

First time since March 6th: 3 down days

2009-05-13T17:29:00.009-04:00

For the first time since the March bottom, the $SPX was down three days in a row. Currently, the index is at the bottom of the red channel and is also finding support at the 20-day EMA. Tim Knight went long 20 contracts of ESM9 at 883 with a stop below 880. Link Due to OpEx, I guess that we could noodle around this level plus/minus 5 points until Friday. If there is a rally, it could go as high as 905, in my view. But my opinion is that the top was put in last Friday at 930.17 and we should make new lows in the future (say 3 to 4 months).

Next levels of support could be 877 which is 61.8% retracement level and 850 which is 50-day EMA.

If I am not mistaken about Swinger's system, because ES closed at 884.5 which is below 898, that confirmed the swing sell setup signal. That means that short term traders would be exiting long positions now and wait for a pullback to support before initiating new long positions at the lower support of 878.

From what I understand from Swinger's system, short-term is still bullish above 878. Intermediate term is also bullish above 846. Long-term is bearish below 919. Swinger, let me know if I got this correctly.

Swinger's May 13th ES Update

2009-05-13T08:58:00.001-04:00

The following is from 'swinger'.

Out of IT long position from 809 at 898 for 89 points of profit.

I posted a swing sell setup indicator 5 days ago (see Link). Those are usually powerful indicators when they trigger. There was a distributive push back up on May 8th to take out the cash index highs--but the futures remained on a sell. After the push up stalled, support has been tested repeatedly and has now been pierced, so have exited the position and will wait for the expected pullback to test support at 878 area. The sell setup will trigger and confirm on a close below 898 today. We’ll know then if exiting here at 898 was the right thing to do, or not.

ST and IT trends remain up above 878 and 846 respectively. Will watch to see if buyers step in there and will attempt to rejoin the uptrend, if so. Otherwise, if ST and IT support fail and the trends flip, then I will be back to fully bearish mode.

That was a fun trade.

…my .02

Commitment of Traders 05/05/2009

2009-05-13T01:11:00.003-04:00

QID: The Day After

2009-05-08T16:25:00.008-04:00

From the archives: QID: (2x Nasdaq bear) Breakout of Falling Wedge

In the above post yesterday, I wrote: "Not sure about charting these 2x/3x ETF's, but if it follows technical analysis, the QID should backtest the wedge at 36 or so before moving higher. Highest volume since March 6th (the 'bottom')."

The low today for QID is 36.08. Closed at 37.20. My order was filled at 36.10 and I sold it at 37.10. I would like to hold this short for more than one day but this market just won't die. I've been reduced to picking up pennies to avoid getting stomped by bulls. Sigh.

Confluence of Resistances

2009-05-08T15:31:00.005-04:00

1) 200 day EMA = 950
2) 78.6% Fib retracement from November 2008 highs to March 2009 lows = 935
3) Top of Parallel Channel. Top of channel today = 931.

I shorted at ESM9 at 925 today (equivalent to $SPX 928). Stop above yesterday's high.

Fractal? History often rhymes

2009-05-08T07:51:00.007-04:00

History doesn't repeat but often rhymes.

Above you see a picture showing $SPX. Top picture is Jan to June 2008. Bottom is same for 2009. Time and price shows a lot of similarities. The March 2009 sell-off looks way overdone in comparison and should have been our clue to go long.

In 2008, markets topped on May 19, 2008 at high of 1440. It didn't reach IT bottom until July 15, 2008 with low of 1234. What is in store for the rest of 2009? Will "Sell in May and go away" ring true once again?

UPDATE: Looking at the calendar, May 19, 2008 Monday was right after Options Expiration (OpEx). If that is the case, we may see a rally next week since next week is OpEx.

Excessive Optimism

2009-05-07T22:40:00.004-04:00

Look at $BPNYA at stockcharts. BPNYA is NYSE Bullish Percent Index. Look at how the market is at all time levels of bullishness. Even higher than October 2007!

This market just won't drop, but I imagine that all the bulls are fully aboard the bull-bus! Looking at this picture made me realize how stupid I was to start shorting at 730.

QID: (2x Nasdaq bear) Breakout of Falling Wedge

2009-05-07T18:22:00.004-04:00

Not sure about charting these 2x/3x ETF's, but if it follows technical analysis, the QID should backtest the wedge at 36 or so before moving higher. Highest volume since March 6th (the 'bottom').

For a retracement, watch for re-test of 36 on lower volume.

10-year Treasuries are screaming higher

2009-05-07T18:07:00.006-04:00

Chart of $TNX, 10-year US Treasury yields
(yields move opposite of price)

Article at Bloomberg

Treasury 30-year bonds fell the most in four months as investors demanded higher-than-forecast yields at today’s auction of $14 billion of the securities with the U.S. slated to sell a record amount of debt this year.

“This is a problem,” said Chris Ahrens, head interest- rate strategist at UBS AG in Stamford, Connecticut, one of 16 primary dealers required to bid in Treasury auctions. “The market required a fairly significant discount to buy the bonds.”

Thirty-year bonds have lost investors 20.9 percent this year, Merrill Lynch & Co. indexes show, as the Treasury increases securities sales to help fund a swelling budget deficit. Yields climbed to a six-month high today as the auction drew a yield of 4.288 percent, higher than the 4.192 percent average forecast in a Bloomberg News survey of seven primary dealers. Demand was below average, judging by total bids.

=== END QUOTE ===

You can see how the Fed's attempts at Qualitative Easing in the past 6 months have completely failed. Yields are now back to levels of November 2008. As yields push higher, it has negative implications for the housing market since the 10-year bond tends to follow the fixed-rate mortgage rates closely.

Furthermore, the US Government will be selling a humongous amount of government debt in the near future. That is money that, at sufficiently high yield, will attract money out of the equity market. Money has to come from somewhere.

Lastly, a high interest rate may be giving us an early indication of high inflation in the near future. Hyper-inflation will put a quick end to the Fed's zero interest rate policy which has been crucial support for stocks.

US Debt: 95.09% of GDP

External debt (as % of GDP): 95.09%
External debt per capita: $44,358
Gross external debt: $13.627 trillion (2008 Q3)
2008 GDP: $14.330 trillion

Swinger's 2nd May 7 2009 update

2009-05-07T17:12:00.001-04:00

Below from 'swinger'

HOD was 929.50, so not too shabby on the upside target from the March lows, eh? : )

Got a swing sell setup signal today at the close on all the major cash indices and index futures--but the signal remains unconfirmed until we get a subsequent day’s close below today’s LOD, which was ES 898.

Not all swing sell setups get validated…

If today’s high of ES 929.50 gets taken out by even a single tick on any subsequent day. then the sell setup is absolutely invalidated—and instead would morph into a continuation buy.

Swing buy/sell setups are always counter trend when they appear—and that makes them dangerous if misinterpreted. The ST and IT trends remain up above 868 and 839 respectively (in my opinion), so buyers potentially exist at and above those levels.

Next VST support is at 887. Trends tend to roll over from shortest to longest, so next order of business for bears is to see if 887 can be taken out on a close.

I remain IT long from 809, but will continue watching for an eventual sell confirmation.

Swinger's ES Update May 7 2009

2009-05-07T09:17:00.003-04:00

The following is re-printed with permission from the author 'swinger'.

Original 918 target from 809 entry has been hit. Next upside target is 927-940.

I have moved my trailing profit stops up to 868 now that 918 target has been hit and am looking for a swing sell trigger to eventually exit the position.

If they go parabolic here, then > 940 should pretty much take out the last of the hard-core bear stops. ES 918 was an important number—as that was the last intratrend sell signal for the long-term perspective triggered on 1/7/09. Long-term trend is now on a countertrend buy > 918 with a potential upside target of 990. If they take out the swing high > 940, then bearish pros with any sort of discipline will be forced to cover, and the goons know it.

Still watching for a swing sell signal and will post something somewhere on Disqus when the time comes.

Futures just dumped

2009-05-05T21:57:00.002-04:00

Don't know what happened, here are some headlines that I found

BofA to need $34 billion in capital: source (Reuters)
GM details plans to wipe out current shareholders

The unusual plan, which was detailed in a filing with U.S. securities regulators, would only need the approval of the U.S. Treasury to proceed since the U.S. government would be the majority shareholder of a new GM, the company said.

OK, so if the US Treasury alone (without any other votes) can just wipe out GM shareholders, who is to say they cannot do the same to the banks in which they have lend the billions of dollars?

Results of the vote

2009-05-04T10:16:00.000-04:00

Commitment of Traders 04/28/2009

2009-05-03T12:12:00.002-04:00

Bloomberg: U.S. Stress Test Results Delayed as Early Conclusions Debated

2009-04-30T20:05:00.001-04:00

Article at Bloomberg

The Federal Reserve will postpone the release of stress tests on the biggest U.S. banks while executives debate preliminary findings with examiners, according to government and industry officials.

The results, originally scheduled for publication on May 4, now may not be revealed until toward the end of next week, said the people, who declined to be identified. A new release date may be announced as soon as tomorrow, they said.

Regulators and bank executives are concerned about how the disclosure is handled because weaker institutions could suffer a collapse in their stock prices.

=== END QUOTE ===

This can't be good, can't it? Stress test results were supposed to be released tomorrow, then they said Monday next week, and now "end of next week".

Swinger's ES Update April 30, 2009

2009-04-30T17:14:00.001-04:00

The following is posted with permission from the author.

Out of ES partials at 868 from 809 for +59 near the close. Price is still above my ST & IT stop/reversal lines here, but for a combination of factors that I will detail below—I decided to exit partials today. Still have IT long position in case this turns out to be a fake out to bait the bears at the channel top—but would exit that upon confirmation of the signal below.

Okay, I got a swing top setup signal at the close today for ES. This is the first signal since the last swing low detected on 3/6/09, which got me prepared to exit the short side and ready to get bullish once it was confirmed.

I posted that bottom turn in real time on another board and was pretty much ignored—probably because people generally come to boards with their minds already made up and rather than looking for insight, are instead looking for confirmation of their preexisting bias. No doubt, this post is going to get a lot more attention since it now portends the possibility of bearish things to come—maybe.

The signature I look for has two parts—first a setup and then a trigger. First step is to get a setup alert (happened at the close today)--then you need a trigger on a subsequent day to verify and execute the trade.

Not all setups are followed by a valid trigger confirmation! I want to make that very clear to anyone tempted to go all in short against an unconfirmed signal. Swing top setup signals are always countertrend and countertrend trades are dangerous…as many who fought the trend since the March lows have learned.

The trigger for this trade is a subsequent close below today’s ES bar low of 864.50. If that happens, then the new stop/reversal line hard deck would be today’s high at 887. For those willing to take a shot at a knife catch in the countertrend (not me)--you can never let these guys drag you to the wrong side of a stop, so it is very important to respect that and immediately exit the trade if 887 is breeched. Let me be very clear about that—this signal is absolutely invalidated if 887 is exceeded by even a single tick on any subsequent day. Either 887 is the exact swing top or it is not. No gray area.

In a previous post I detailed the current downtrend channel and described the top of the dominant (bearish) trend channel at about 880 area. There was a slight throwover today with a close below. This is about as tempting a setup as a bear could possibly want—and precisely the reason to be very careful with this since it could be a trap about to be sprung on bears desperate to finally get something going.

So, in a nutshell—the first setup for a swing short is finally in place from the March lows (in my opinion). It is not yet confirmed and needs acceleration below today’s low and then through the stop/reversal lines I detailed in my morning post before I get bearish again. If today’s high of 887 is exceeded--the bearish knife catch setup is dead and bears who fail to heed that hard deck could get killed in a continuation buy signal into the new range.
The number that bears are now concerned with is 864.50. Action is bearish below but still bullish above. Need to have lower highs and lower lows to start a downtrend. -swinger

SQNM Sequenom crushed

2009-04-30T16:36:00.005-04:00

Sequenom, Inc.(NasdaqGM: SQNM)
Last Trade: 3.62
Trade Time: 4:00pm ET
Change: -11.29 (-75.72%)

File this in the category of buying what you know. Before the layoff, my wife worked for a company that sold diagnostic medical equipment. The company was not Sequenom, but her work involves pre-natal screening. Anyway, long story short, she is familiar with SQNM's products and thinks today's reaction is overblown. She believes that the company's technology is sound and a potential breakthrough. Anyway, we'll see if she is right about it. I don't have a single share of SQNM, but I placed a limit order for some at $3. If I get filled, I will be very happy.

AP Story: Sequenom aims to calm Wall Street as shares plunge
http://biz.yahoo.com/ap/090430/us_sequenom_stock.html?.v=2

Do you guys have any stocks that fit in the "Buy what you know" category?

Technical Analysis: Candlestick Course

2009-04-30T16:33:00.002-04:00

Link to Candlestick Course

Just a brief post with a link to interpreting candlesticks.

Multiple Quotes: Free real time quotes in Excel 2007

2009-04-30T13:31:00.003-04:00

From the archives: Free real time quotes in Excel 2007

Hint: If you are pulling multiple quotes, don't create multiple 'Connections' because the spreadsheet will be slow to refresh.

Instead, enter multiple symbols in the query. See the following graphical example.

Swinger's ES Update April 30, 2009

2009-04-30T10:07:00.001-04:00

The following is reprinted with permission from the author

ES poked through the top of the downtrend channel I mentioned in my post yesterday and is testing that line (880) as I type.

I am now watching for a particular complex reversal signature that comes at swing highs and lows. When the setup eventually comes, I will post somewhere on Disqus. Still haven’t found a new home yet, but if anyone wants to follow my comments you can click on my avatar (Alfie from Mad Magazine) and then click on ‘view profile’ and then the ‘follow’ button…pretty easy.

Current trade is long ES from 809. Trailing profit stop has moved up to 868 on ST partials. Stop/reversal line for remainder is now at 827. Next upside target is at 918. Eventually, I will get taken out of this trade by either a trailing profit stop strike, or from a reversal signature and confirmation.

Don’t pay much attention to the news and noise and never consider myself bullish or bearish. Trends are manufactured elsewhere by very clever people--and I just try to stay in those trends as long as I can and see where they go. -swinger

Painting the Tape

2009-04-30T00:09:00.003-04:00

There are some interesting comments about painting the tape where markets tend to rally at month end to end the month with a 'happy print'. Here's a look at the last six months and how they ended.

(analysis below compares closing prices)

October 2008 was down month
10/29/2008 down
10/30/2008 up
10/31/2008 up

November 2008 was down month
11/25/2008 up
11/26/2008 up
11/28/2008 up

December 2008 was up month
12/29/2008 down
12/30/2008 up
12/31/2008 up

January 2009 was down month
01/28/2009 up
01/29/2009 down
01/30/2009 down

February 2009 was down month
02/25/2009 down
02/26/2009 down
02/27/2009 down

March 2009 was up month
03/27/2009 down
03/30/2009 down
03/31/2009 up

April 2009 was up month
04/28/2009 down
04/29/2009 up
04/30/2009 ?

I don't really see a pattern here.

Free real time quotes in Excel 2007

2009-04-29T18:40:00.009-04:00

Reminder: There is a poll on the right. Voting ends April 30th (TOMORROW). Please vote (but not more than once). Thank you.

In Excel versions prior to 2007, you could get stock quotes via 'macros' or 'functions'. For example, Microsoft provides the free MSN Money Stock Quotes but the quotes are delayed 20-minutes. Link. Prophet.Net offers the Add-In for Excel Link. More features including real time quotes but requires a monthly fee from $9.95 (delayed) to $19.95 (real-time) to $29.95 (including options and futures).

So the problem is either delayed quotes (MSN) or it costs money (Prophet).

Well, starting with Excel 2007, you can get real-time quotes directly filled into a cell, which you can reference in a formula or a calculation, for free.

I'll show you how.

1. Click on the Data tab. Choose From Web.
2. Enter 'http://finance.google.com/' in Address box. Google Finance is one of the few websites where the quotes are real-time and it loads fast. Enter the symbol in the quote box. For example: SDS
3. Click on the yellow arrow on the left of the stock price. Note that there are 3 arrows, choose the middle one. Click the Import button.
4. Find a blank area to store the information (for example, a separate worksheet is highly recommended). Enter the cell location and click OK.

4. After a while, the data shows up. Note that it uses an area 13 columns wide and 6 rows deep.

5. As you can see, the price in my example is located in cell B1. This cell can be referenced in other locations of the spreadsheet. For example, I go to another worksheet, put the number of shares I own in cell B2, and the formula =Sheet1!B1*B2 in cell B3. This formula is simply the "real time price" times the "number of shares", or how much SDS position, in dollar terms.

6. Finally, to refresh the real time prices, click the Refresh All button.

Why is this important? Well, for one thing, I was paying $19.95 per month plus all the exchange fees (total about $3 per month) to use the Prophet.Net Add-In, which incidentally is not even compatible with Excel 2007 nor are there any plans to upgrade it as such. So it's about saving me some money and I was able to cancel my Prophet.Net subscription for the Excel Add-In.

Doing multiple quotes? Link

Swinger's ES Update April 28

2009-04-29T07:17:00.002-04:00

The following was posted with permission from the author.

Long term: The ES has been in a long-term bear market since 1428. That sell signal was generated on 5/20/08. Net change to date is –583 points (-40.82 %). Current intratrend stop/reversal line is at 919.

Intermediate: The trend turned up at 806 on April 1, 2009. Net change is +39.50 (+4.90 %). Intratrend stop/reversal line is presently at 824.

Short-term: ST trend turned bullish at 742 on March 12, 2009. Net change is +104 (+13.97 %). Intratrend stop/reversal line is at 837.

My assessment is that the ES is in an intermediate term bear market rally within the context of a long-term bear market. So long as price stays north of 837 (short-term stop/reversal line) and 824 (intermediate stop/reversal line) then the rally remains intact.

If the bears are able to push it below those ST and IT stop/reversal lines—then the bias switches back to fully bearish. Pretty simple.

Different folks trade in different timeframes, so essentially some bears are ‘right’ and some bulls are ‘right’ depending upon perspective. In reality, the only indicator that is ever 100% accurate--is your account balance. If it is up—then you are ‘right’ on that particular trade. If the position is at a loss, then you are wrong…simple as that.

Current dominant trading trend is the ST and the upside target of 868 has been visited twice recently and has pulled back. That target represents resistance formed by four price rejections since January of 2009 in the same area. On the other side of that line is undoubtedly a huge cache of bear stops. Odds are that many of those who are short here and elsewhere currently have their stops located near the recent highs. So, the game here could be for the goons to continue fishing these waters to lure in as many bears as possible before eventually making a fast run up and through that resistance to open a new trading range > 873. If that is so, then once the buy stops are harvested, then and only then will we get an idea of the next trending direction. Goons bought the junk at the March lows and will need to offload that at some point. What better place to sell their wares than the buying frenzy sure to occur > 873 where bears will be forced to cover buy and bulls will be buying the trading range breakout. If I were a goon—that’s what I would do.

ES pulled back to the ideal buy zone (837 – 844) overnight and then bounced a little. Ideal buy zone for me is when the gain/risk ratio is greater than 3:1 on an entry (ES upside target = 868).

If the bears can take out the stop/reversal lines mentioned above, then I’ll be stopped with a profit and will switch sides and reformulate my thesis.

Long from 809 with IT stops currently at 837. Next upside target is stops > 873.

Bank Upgrade Astonishes Traders

2009-04-28T21:32:00.004-04:00

From CNBC Article

After 5 years at underweight, a widely followed analyst upgraded the entire US banking space.

We're talking Foxx–Pitt Kelton analyst David Trone who rather suddenly changed his outlook on the sector.

Clearly he could have waited until after May 4th, when the stress test results came out, but he didn't. Should you be reading into that?

"Absolutely," replies Trone on Fast Money. In fact it might be because of the stress tests that banks are getting the thumbs up.

=== END QUOTE ===

If bank stocks tank after stress test results next week, it would put analyst David Trone's call in the same esteemed (cough cough) category as Dick Bove's famous recommendation that "Banking Is Sound - Time to Buy Financials" in March 2008. Link

Blast from the Past

Graphical Take 2: Solutide Model

2009-04-27T00:22:00.010-04:00

Reminder: There is a poll on the right. Voting ends April 30th. Please vote (but not more than once). Thank you.

From the archives: Graphical: Solutide Model

I decided to redraw the chart to resolve a few issues with the original.

Since the model uses "closing prices", the chart was re-drawn as a line-chart instead. Green lines means you are long for that period of time according to the model (green circles denote the date of entry). Red lines means you are short (ditto with the red circles).

The circles with the hollow centers are the 'bad' trades where you'll lose money following the 'system'.

saahilcap asked in the prior post's comments: "Hi that is a very interesting chart.. when is the next buy date? thanks".

Chris Carolan answers on his blog (carolan.org): "The question was asked when the solutide model flips to long. As written, the model flips on Thursday, May 7." Link

Commitment of Traders 04/21/2009

2009-04-25T20:29:00.003-04:00

Graphical: Solutide Model

2009-04-23T00:19:00.004-04:00

From the archives: Turn Dates

The chart shows the Dow Jones Industrial Average ($DJI) with the buys and sells pasted on it as green and red circles, based on the Solutide Model developed by Chris Carolan (carolan.org). I find it uncanny how many tops and bottoms line up. I mean, it sounds silly to buy and sell stocks based on the phases of the moon and the level of the tides, but WOW!

The last signal was a Sell on April 17th, 2009.

FAZ is like a drug (for daytraders)

2009-04-22T23:57:00.007-04:00

First of all, I hate FAZ with a vengeance. Somebody should drive by Direxion's office and throw cow dung at the windows. Having said that, are you guys watching the nutty volume on FAZ?

It traded nearly 322 million shares today. A month ago, it was 68 million. Granted the price was $20 back then. Hmmm, twice the price but one-fifth the volume.

By comparison, Bank of America stock is priced at $8.26 and traded nearly 621 million shares today. It is heavily traded by pension funds, mutual funds, hedgies, etc.

Pretty soon, these retarded 3x ETF's are going to be the tail that wags the dog. Meaning, traders buying/selling FAS/FAZ will force Direxion to make humongous bets for and against the banks, rather than the banks' collective performance marking up/down the ETF's. It sort of explains why banks sort of all rise or fall together nowadays.

Article : Leveraged ETFs: New Source of Systemic Risk

QUOTE: Inverse ETFs in particular have a magnified hedging demand relative to their long counterparts (e.g., as shown above, a 2x inverse ETF has the same hedging multiplier as a 3 leveraged long ETF) The analysis above shows leveraged and inverse ETFs amplify the market impact of all flows, irrespective of source. Essentially, these products require managers to "short gamma" by trading in the same direction as the market. There is a close analogy to the role played by portfolio insurance in the crash of 1987. The magnitude of the potential impact is proportional to the amount of assets gathered by these ETFs, the leveraged multiple promised, and the underlying index's daily returns.

Newsflash: ProShares Files For 3X Leverage On 94 New ETFs Danger, Will Robinson, Danger!

Putting Oscar on Pause

2009-04-22T21:27:00.014-04:00

Reminder: There is a poll on the right. Voting ends April 30th. Please vote (but not more than once). Thank you.

From the archives: Thanks Oscar!

If you noticed that the Oscar spreadsheet hasn't been updated since 04/16/2009, there is a reason.

The entire spreadsheet covers the period of March 17, 2009 to April 16, 2009. A full month period to evaluate Oscar's methods, strategy, etc. My conclusion, and you are welcome to agree or disagree (feel free to use the comments area), is that it is not possible to make (on a RISK-ADJUSTED basis) any significant progress with his trading advice. Now, if I keep going month-after-month, the results may change and I may change my mind, but the membership is $100 per month, and I can't justify spending that money if I don't have confidence that his system works.

Link to my Oscar spreadsheet

There are a few problems with his style of trading. I will talk about each in turn.

1) Trades are generally set up in the middle of the night and entries/exits during the evening are usually required.

This is purely subjective. You may not have a problem with it. But flash alerts come in the middle of the night. So depending on where you live, you may get a 'ding ding ding' at 2AM or 3AM or 4AM, etc. I am more keen on a day-trading service where I can get a good night sleep. Again, my personal preference.

2) Very wide stops.

I am scared of the very wide stops that Oscar uses. For the Euro trade, as an example, the entry on March 25 was 1.3508 and the stop was 1.3665. That's 157 pips. At $12.50 per pip, that's a $2k loss per contract! It's enough to cause a lot of stress. I personally was not comfortable with the very wide stops that Oscar recommends.

3) Misses the Key inflection points / major trend changes.

Oscar has a system he calls the Omni. It tells him the price is going up (Green Omni), down (Red Omni), or Neutral. If Neutral, there's no trade. He'll say, Wait for a Sweet Spot, etc. But I have noticed the Omni tends to miss key inflection points or reversals. It is like trend following. If prices are going up, the Omni tends to be green. If prices down, Omni will be red. But it missed some key reversals that traders who employ more subtle techniques may catch.

This caveat is strictly my gut feeling. I am interested in other traders' perspective on the 'Omni' indicator. Do you feel it works?

===============================================================================

Having said that, I have a theory about how Oscar trades. Please let me describe it and tell me if I make sense or if I am way off base. I am open to any kind of feedback.

First of all, the first order of business is to figure out if tomorrow will generally be an up day or a down day. So first order of business, Oscar tells you it's going up and we want to buy on a pullback, or it's going down and we want to short on a rally. I think the Omni is a simple trend following system, maybe using some elementary TA (moving average, parallel channel, head and shoulders, etc.). Since today is a down day, and we broke out of a bearish wedge going back to March low, I am pretty confident that tomorrow's Omni would be red. ES closed at 837.50.

Second, once we have guessed direction, we need to figure out an entry. We know the ES ATR (average true range) is about 24 points. So we can say Short half the ATR or 12 points. 837.50 + 12 = 849.50. So I would say "Omni wants to sell at the 850 to 852 level".

Third, add the other half of the ATR and you will arrive at the stop. 849.50 + 12 = 861.50. So I would say "Set stops above 862. Wide stops are needed for the evening session." So that's how I would set up the Omni trade.

Again, this is pure guesswork on my part based on following Oscar for a month.

If what I described is how these trades are set up, it's a simple trend following system where you just add/subtract half the ATR to get your entry, and the full ATR to get the stop. So my conclusion is that there is no reason to pay $100 per month for this. The stops are too wide meaning that when there are losses, the losses are BIG. What I am looking for is more day trading service, where the Expert Trader says "Short ES right now and set a stop +3 or +5 handles away". That person would be watching for divergences in things such as fast stochastics, MACD, etc., or he would monitor supply/demand indicators, or trend lines. There is never a good reason to have a 12 pt stop, if you know what I mean.

Based on my reasons noted above, his trading system is not for me. Please feel free to leave feedback.

final result

I made $212.50 before commissions. After paying the $100 monthly fee, I have a net gain of $112.50. On my worst day, I lost -$2,975 on March 22nd. There were 3 really bad days with daily losses of more than -$2,000. On my best day, I made $1,550 on 04/16/2009. I had 3 good days with daily gains more than $1,000.

Lastly, I received several relevant comments in the past month that I present to you without commentary or judgment (in the order that I received them).

================================================================================
sadasdasd (unregistered) wrote:

Snakeoil salesman Oscar couldn't even pay his mortgage with the OMNI...and you're trusting him with your hard earned $$??? It's sad to see him prey on newbie traders. No free money in this life people...well except the funds that Oscar gets each month in subscription fees from you lemmings...this guy is so pathetic...YOU'VE BE WARNED OMNIACS!!

emotions are IN!!....profits are OUT!!

-Former Prem member

http://209.10.98.182/seven/01162007/business/hot_commodity_business_zachery_kouwe.htm
================================================================================
anonymous (unregistered) wrote:

Also Premium Member. At the end of the day you are accountable for your own trading management and should not blindly follow anyone. I am more than satisfied by Oscar's professional demeanor , training, and market setups.
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johnny S (unregistered) wrote, in response to Lawrence_Chiu:

just saw your spreadsheet....today you took about 30 pips from the Euro 6E, and your stop was almost 200 pips?? Are u insane?

your profit and stop levels must be more symetrical or you'll get really hurt in the long run.
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SIAD (unregistered) wrote:

Ha ha, that spreadsheet was very funny Lawrence. Theres a reason why Oscar trades a paper account only. LMAO. The turnover rate there is huge. People are not stupid, they come and go. The problem is that his a hole is just continuing to feed on newbies. How can this scam be prevented? Any ideas?
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gametheory wrote, in response to Lawrence_Chiu:

Lawrence, I know I'm new to your blog but I really enjoy it. Just wanted to say good trades with Oscar. You should be learning a lot from him, but be sure to adjust your risk tolerance to your account size.

When he is good, he is very precise with his entries. But when he is wrong, it hurts like a bitch. The best thing to do is learn the tips and techniques, and try to duplicate according to your own risk structure. My Rmultiple for any trade MUST be higher than 3 and I keep my trailing stops tight.
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MiniReaper wrote, in response to Lawrence_Chiu:

... That is my biggest problem with the way Oscar trades...the biggest loser is generally bigger than his biggest winner because his stops are too wide for daytrading IMHO. Today was a perfect example..he had a 20 pt stop on a daytrade with clear resistance on multiple timeframes...traders taking the trade had no chance to make money.
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gametheory wrote, in response to MiniReaper:

That is a good point. Simple mathematics will tell you traders with an inverse risk reward ratio are statiscally guaranteed to fail. One thing I notice about Oscar is that he is primarily a trend trader, he doesnt catch inflections well imo. The problem is that by the time he agrees with the trend, it is getting ready to inflect. But ocassionally his entries are awesome with a margin of error of less than 1-2 points.
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Dirty Business (SRS/VNO)

2009-04-21T19:44:00.012-04:00

If you're bewildered why SRS cratered in the last 5 minutes today, read this article at Zero Hedge blog about Vornado (VNO) a real estate company and a major component of SRS.

http://zerohedge.blogspot.com/2009/04/vornado-to-issue-125-million-shares.html

The stock traded no higher than $44.55 today until just about the market is about to close, only to be overwhelmed by trade imbalances that resulted in two orders at $47. Now, why 2 orders? Imagine you need to manipulate the tape. You need two people to do it. Crook #1 sells to Crook #2 who then sells it back to Crook #1 for the same price.

2-day chart of VNO, 5 minute bars

What is the purpose of this? Well, as the article says, VNO priced 12.5 million shares in a secondary offering. Estimated price for the new shares are as high as $44. By printing a $47 last print on VNO, it looks like secondary offering buyers at $44 are getting a $3 discount. That's a lot better than 55 cents discount right?

It's a travesty.

Related: Commercial Real Time Bomb Goes Off But No One Notices

Read this article in New York Times about the fake bank profits.

Bank Stocks

2009-04-21T14:28:00.001-04:00

Banks are rallying today, but behind the scenes, CDS (credit default spread) numbers are climbing, which normally implies lower equity prices.

GS +12,
MS +5,
AXP +30,
GECC +45,
COF +25
(above numbers from zerohedge.blogspot.com)

Yahoo Finance has an article Link

Traders Mounting "Speculative Attack" on U.S. Banks

What it is time to do, says Johnson, is look at the credit markets, which are telling us that the major U.S. financial institutions are being hit with a "speculative attack":

“The view being taken by people who trade credit in the United States is that we’re definitely not out of the woods. And I would say, in fact, there’s something of a run taking place in the credit market. Not a traditional bank run, but a speculative attack on some of the biggest financial players ….”

Specifically, traders are shorting credit of major banks, betting that the government won't protect bondholders forever: