Thursday, February 28, 2013

02/28/13: holding short SPX - target still 1505

Markets rallied into early afternoon, painting what appears to be a wave 5 of the wave that started from the 1485 low before "collapsing" to finish in the red.  I increased the short position around 1523.

The target is still somewhere between 1500 and 1505 though I think more likely 1505 now that markets moved up to the 1525 range.

There is a confluence of support on the hourly chart at 1505
1.  downsloping red line support (charted)
2.  50% retrace of this wave.  If it bounced here, it would make a good candidate for wave 2 before launching up into wave 3.
3.  200 hourly MA would be roughly 1510 but can easily slice through this to run some stops

There is a possible fib trend change late morning/noon so I expect a low to occur in the first half of the day.

Currently still on a roll although some calls haven't been dead on.

Happy trading.

Wednesday, February 27, 2013

02/27/13 - small short SPX, target 1500-1505

Markets opened flat but rallied in one heck of a straight line to slightly beat 1520 before taking a breather.

As pointed out yesterday, the hourly OBV believed price was too low at sub 1500 and implied price ought to readjust to near 1520.  Lo and behold it took less than a day to reach 1520.

The question is whether or not we are heading to higher highs.  Well, based on OBV levels, not surprisingly, it's telling me we ought to be > 1530.

Volume leads price.  Not necessarily a law but has historically been a good indicator.


I closed out the longs and shorted near 1520 at the end of the day.  The reason is although I think price should be > 1530, the problem is the CCIs are now moving overbought on the shorter timeframes.  Additionally CCI 8 showing a small negative divergence.

Preliminary target for end of day February is somewhere at 1500 is my guess

On the 10 minute, the ADX is cooling off a bit and price has finally come back into the kelt band.  The entire day, price exceeded the kelt and was bumping along the upper BB.

Happy trading.

Tuesday, February 26, 2013

02/26/13 - remain long, ST target 1515

Markets made a new low today at 1485 then rallied back up to 1496 to knock on 1500's door once again.

I increased the long position by purchasing a couple lots today.  Once near 1485, and the other near the low 1490s.  My short term target is a revisit of the upper down channel which is ~1515.  From there, I think the bulls stall and we come back to test 1500.

Why I think this rally has legs...OBV is telling me we should be at a level very close to 1520s...not down here below 1500.  Secondly, CCIs are slowly turning up, but all remain oversold still.

On the Daily chart, the CCI 233 is at support of the trendline.  Additionally, 233 is still way above > 100 implying strength.  The trend is still strong.  I would only really consider the bearish options out there if that trendline broke.


I still believe that we ended wave 4 today and are in the process of completing a fifth wave that should terminate somewhere in the vicinity of 1530-1570.  The current target is 1560.  I am not sure if it gets truncated or if we extend to beyond 1570.  I think both scenarios are likely.

Note that I don't put much emphasis on EW because it can lead you down a bad path.  I use it more to give myself a better idea of what the possibilities are out there.  In the end, trading is just a matter of managing probabilities (aka risk).

ST target: up to 1515

MT target: up to 1560, possibly more into March, likely 1st week or 2nd week.  I will be looking to take off a significant portion of my long term holds

LT target: Entering late April, I am looking for a large decline to 1420-1440.  That's the time to go heavy short, not now in my opinion.

Monday, February 25, 2013

02/25/13: closed SPX short, going long again - bring on the volatility

Markets ran a few red lights to get close to the original target I had posted of 1480 for wave 4.  Unfortunately I didn't really stick to it as closely as I wanted to since I didn't think it would drop this quickly to reach the target.

SPX started hot out of the gate.  I added to the shorts at the open and let it sit for a bit before slowly closing out throughout the day.  I didn't hold all until the end.  The last 30 minutes was quite surprising.  Started a small long at 1495.

It is interesting to see sentiment shift from one extreme to the other. I am neither a bull nor bear, but right now I'm seeing a lot of bears come out of nowhere and a lot of bulls thinking this run up is over. Think of it this way: the bears who were holding underwater shorts and are finally in the green were looking to close today, happy to get out at break even or with a profit. Meanwhile, the speed of this decline made bulls think the top is in.

One could make the argument that this looks like late February 2012/early March 2012. There was a quick almost out of nowhere 2% drop. A lot of bears missed it and a lot of bulls got scared. Afterwards, market rallied to new highs. We could be in that scenario right now.

Levels are extremely oversold on all CCI timeframes.  There are a few positive divergences forming: RSI, OBV, CCIs (on a few lower timeframes), CMF to name a few and ADX DI+.  However, these are the first occurrences and can be easily wiped out the next day

On the daily chart, NYMO closed below the BB once again at the same time that CCI 8 closed below -100.  CCI 8 also sporting a positive divergence.

Tomorrow has a possible fib trend change at the end of the day.  Will be looking to add to the long position tomorrow.  Overall tomorrow likely remains bearish but wanted to start scaling into the next big position.

Still in the camp that wave 4 is coming to an end.

Stay frosty.

Friday, February 22, 2013

02/22/13 - short SPX again, closed long. Looking for that C wave

Markets bounced farther than I thought, reaching the 50-61.8% retracement from the 1497 low to the 1530 high.  However, doesn't matter, as long as we are directionally putting on the right trades.

My best guess probability wise is it is still a B wave.  In the EW principle, Robert Prechter describes a B wave as "phonies" or "sucker plays" or "rarely technically strong."  Today seemed to "feel" that way.  B waves do not retrace more than 75% so we have to see if it has enough firepower to get above 1520 area on Monday.  Unfortunately I think this wave ran out of gas in the last 10 minutes.  It did reach slightly better than 50% retracement so it's within the "B top zone."  Hence, I feel more comfortable about shorting in this zone.

We bounced off a technically oversold level.  While markets seemed to advance throughout the day, it was not strong.  We started hot then flatlined for awhile until there was a final rip into the last 10 minutes of the trading day.

Next thing you know, Moody's issues a downgrade of UK rating from AAA to AA+.  Looks like the sovereign "debt crisis" is back in the foreground.  Could be the "catalyst" to get the C wave going.

C wave out to target roughly 1480-1485 on the SPX.

Thursday, February 21, 2013

02/21/13 - bought more SPX, medium long position, looking to close tomorrow

Market looked like it would rally based on futures but at the opening bell, decided to puke.

I bought some more longs to build a medium long SPX position.  If the recent wave down was an A wave, then we should be in the middle of a B wave.  If so, then the target for this B wave is 1510.

Should it reach that level, I will sell a significant portion of the longs and buy me some short SPX because there is one more wave down possibly to 1480.

Even though I thought it was not really possible a few days ago, it looks like that 1480 target by Friday was not too shabby.  I still expect markets to rally up to new YTD highs after this correction is over.

based on hourly, the reason why I think this B wave is evident Friday:
1.  severely oversold CCIs.  Smaller timeframes have broken their downtrend and are now a few hours way from spiking into 1510.
2.  OBV still showing some sort of positive divergence.
3.  Looking for a gap fill and test of the 20 hourly EMA.

On the daily chart, today saw a near vertical drop into sub -200 on the CCI 9.  This was the lowest reading in the past year.  On top of that NYMO closed below it's BB.  Good odds for a quick snap back.

Wednesday, February 20, 2013

02/20/13 - closed short, open long SPX short term trade

Wow, today's move finally woke some people up.  A more than 1% down move seems like an endangered species nowadays.

Closed the short SPX and am now small long at the close since I think the downdraft has moved a bit too quickly.  CCIs went from overbought to oversold in a day...and not just on the smaller CCI timeframes, but also on the medium ones (40).  DI- is also off the charts relatively speaking.

I am playing only what I believe is the B wave of this wave 4 correction.  I think the B wave will move up to kiss broken trendline support and the crossing of several EMAs (10, 20) with the SMA 50.  This is roughly 1520.

Afterwards, I am looking for a move down into the 1480-1500 range.  Not sure where exactly.  However, given I think markets always try to throw people off the most, I say we move slightly below 1500, run some stops, and then rally up.  There will no doubt be a lot of people waiting for the train to correct, but the train might leave the station prematurely.

Long term, I am still bullish.  I am still expecting a visit up to 1550 or beyond.

(all arrows dictate when I shorted or went long).

Tuesday, February 19, 2013

02/19/13 - shorting SPX again, small position

Initiated a small starter SPX short position today via SPXU however SPX rallied nevertheless into the close while the Dow failed to post a new high.  We did end up seeing the pop today.

The CCIs on all time frames spiked while ADX remains low on the hourly chart, telling me not bad odds for a small counter trend position.  I don't intend to hold this short for very long because the longer term timeframes (daily and weekly) continue to show rising ADX lines.  

I am waiting for the CCIs to reach -100 especially on the 7 or the 10 hourly.  This would tell me to get out of shorts and go back in long.

The wave 4 1480 scenario is not out of the question yet.  Still have a couple days for this to materialize.  However it's becoming even less likely now that SPX is at 1530.  To get back down to 1480 would take a 3% correction which markets don't seem to want to cool off.

Saturday, February 16, 2013

02/16/13 - looking for pop on Tuesday, closed UVXY, sitting in cash

We are getting close, really close to a temporary high and the start of a quick sell off to what I believe is wave 4 of the up swing since 1343.

I am currently in cash and observing at the moment after making some intraday trades on Friday.  The setup was good for a short beginning in the hour leading up to the 1524 high.  However I took profit pretty early at  the 1519 level which in hindsight was certainly too early.  I played the bounce at that level but SPX ended up getting dragged down below the 50 hourly MA to 1514 before rocketing back up to 1519+ narrowly avoiding a cross of the EMA 10 and 20.

I'm thinking Tuesday will pop up to retest the highs once again.  Triple top?  Why I think this is possible:
1.  The CCIs on the smaller time frames are highly oversold and ripe to pop up.
2.  The OBV still implies a high > 1524.69.
3.  The A/D still making new highs
4.  ADX DI- at top of channel and DI+ at bottom.  Probability wise makes more sense for markets to bounce up rather than proceed down.

In other news, I also closed out a UVXY loser.  While I thought there was the potential for some nice pops, it turned out to take a lot of my energy focusing on this.  I decided the potential there wasn't worth the cost, so I closed this out at a loss.  I wouldn't recommend this product to anyone.

Closed posns (2/15/13): 
Intraday trades
1.  SPXU 
Buy 2 lots @30.52 -
Sell 1 lot @ 30.86
Sell 1 lot @ 30.83

2.  UPRO 
Buy 1 lot @ 106.51
Buy 1 lot @ 106.13
Sell 2 lots @ 106.38

3.  UVXY
Sold 2 lots @ 9.60 for loss - never trading this again.  Period.

Tuesday, February 12, 2013

02/12/13 - SPX Hourly: 1520+ pop achieved, looking for start of reversal

Last SPX Cash close: 1519.43
Last UVXY (long volatility) close: 9.92

Current position: long 2 lots of long volatility (via UVXY).  Avg px = $10.01.  Stop = $8.95.
Closed positions: closed 1 lot of UPRO.  Avg cost = $105.9  Avg Px = $106.19
Position: currently BEARISH

Current Plan: 1520+ was reached today.  The high was 1522.29.  I am looking for the start of a reversal.
Expected position adds: add 2 more lots of UVXY if we dip back to 9.7s.  We are attempting to capitalize on an increase in volatility.

The following is a redacted version of my hourly chart.

Short term (next few days): SHIFT TO BEARISH
First, we need the correction to begin.  Secondly, difficult to predict how far that correction will go.  The important lines in the sand are 1510 and 1485.  A close below 1485 is extremely bearish.

Intermediate term (1 month outlook): SHIFT TO BEARISH
The intermediate outlook is bearish.  The target is in the range of 1400-1420 by early March however given how shallow these dips have been, it is likely 1460 is the max we can get.

Long term (> 3 months outlook): REMAIN BULLISH
The bigger picture is still bullish in my view.  Current position is we will revisit all time highs in the summer.

Monday, February 11, 2013

02/11/13 - SPX Hourly: Still Bearish but looking for a pop to 1520+

Last SPX Cash close: 1517.01
Last UVXY (long volatility) close: 10.12

Current position: long 1 lot of SPX (via UPRO).  Avg px = $105.9.  Stop = $102.7.
Closed positions: closed 1 lot of SPXU.  Avg cost = $31.04  Avg Px = $31.106
Position: currently BEARISH

Current Plan: Although bearish, I am still expecting a pop into the 1520+ range and will offload longs when target is reached.
Expected position adds: add 2 lots short SPX (via SPXU) if ~1525.  add 1-2 lots long volatility via UVXY.

Short term (next few days): SHIFT TO BEARISH
Still expecting a short lived pop up to 1520+.

Intermediate term (1 month outlook): SHIFT TO BEARISH
The intermediate outlook is bearish.  The target is in the range of 1400-1420 by early March.

The overall thesis is the runup since December 31 of > 6% is coming to an end.  The pattern formation is similar in form and structure to the May 2010 flash crash.  Although I am not predicting something as extreme as the flash crash, I am still expecting a 5% correction.

Long term (> 3 months outlook): REMAIN BULLISH
The bigger picture is still bullish in my view.  Current position is we will revisit all time highs in the summer.

Sunday, February 10, 2013

02/10/13 - SPX Hourly: System switching to Bearish

Last SPX Cash close: 1517.93
Last UVXY (long volatility) close: 10.53

Current position: short 1 lot of SPX (via SPXU).  Avg px = $31.04.  Stop is $29.1.
Position: currently BEARISH

Current Plan: expect to close shorts mid week
Expected position adds: add 1 lot SPX (via SPXU) if 1520+ intraday.  add 1-2 lots long volatility via UVXY.

The following is a redacted version of the hourly chart I look at.

Short term (next few days): SHIFT TO BEARISH
SPX is likely to make a new incremental high on Monday 2/11/13.  Unfortunately, I am seeing this as short-lived.  I am expecting a revisit of the red neckline between 1490 and 1495 by mid week before a small bullish move for 1-2 days.

Intermediate term (1 month outlook): SHIFT TO BEARISH
The intermediate outlook is bearish.  The target is in the range of 1400-1420 by early March.

The overall thesis is the runup since December 31 of > 6% is coming to an end.  The pattern formation is similar in form and structure to the May 2010 flash crash.  Although I am not predicting something as extreme as the flash crash, I am still expecting a 5% correction.

Long term (> 3 months outlook): REMAIN BULLISH
The bigger picture is still bullish in my view.  Current position is we will revisit all time highs in the summer.

It Begins

Hello there - I decided it's time to start a blog to keep track of my trades and to see how I perform publicly over a period of time.  Hopefully it will provide some guidance and help others gain more insight into how markets work.

My goal is to supplement my current income and to hopefully turn this into a full time opportunity in the future.  I enjoy this business because trading is almost a mirror of life: there are great streaks and long dry spells and it's important to learn how to get back on your feet quickly.  It teaches you to evaluate all possibilities, what could happen, what might happen, and what is likely to happen.  You will be surprised how many times the "what could/might happen" category occurs.

I've been actively involved in the markets for 3 years now but have been more serious about in the past year.  I have had my share of losses (the tuition you pay to learn this business) and had my share of big wins.  To think anyone has been successful from the get-go is folly.

To further add transparency, I am setting a hypothetical $100,000 account starting 2/10/13 and see how the trades persist over time.  The initial goal for 2013 is 50% return.  The ultimate goal is 7 figures.

Trading style

I am a short/intermediate term swing trader and I only trade a few securities: leveraged SPX and volatility ETFs.  My holding period on average is 3 days to 14 days.  Sometimes I will trade a security for only 1 day if I think the risk/reward has been met in that short amount of time.

I would like to point out that I would never recommend these to beginner or even intermediate traders because 1) the risk of loss is far greater 2) risk management is more difficult 3) time decay and 4) timing is difficult.

I'm a believer in mastering a few securities rather than trading a broad spectrum hence why I only mention trading SPX and volatility.  You might see some perspectives on other assets i.e. commodities, real estate, bonds but I believe my edge remains in SPX and volatility.  Others I can move into once I feel the edge is sufficient enough for me to branch out.

Blog Topics

There are a few topics I will mainly focus on:
1.  Trades/Market outlook - the trades are made publicly for accountability.  I have seen many others backtrack on their calls which hurts their credibility.  Here you will see all mistakes and all victories.

2.  Business - As an avid follower of all topics related to business, I may post links/topics I find worthy of discussion.

3.  Psychology - markets are an interesting lens into human psychology.

I hope this blog will be helpful for anyone who comes across it.  Always feel free to send me a note or leave a comment.  Thanks