Monday, October 21, 2013

10/21/13: as an aside

I posted this on daneric's blog regarding why I thought the next down wave ought to be larger than the more recent ones and figured what I wrote wasn't too bad:

I'm a believer that for the broad indices (not necessarily individual stocks), the news will fit whatever move the market makes. Market is up it's because of X and market is down, it's because of Y. To me, hence, news is meaningless for indices.
What matters to me is how investors react to what happens to the market? So let's say price starts going down...based on all the buying last few days and lack of support, there's a lot of stops to trigger. More stops triggered lead to more selling and it's a cascading effect. So, even though something small in the news may trigger the snowball effect, it's probably meaningless news in hindsight. By the time prices really snowball, then the media is like "Oh yea - it's because of X" and it's some big event that only becomes easily discernible after most of the damage has been done.
So what could be bigger than a default? No idea, but one thing is clear to me is how much worse we are at solving issues. Each drama has resulted in practically an 11th hour deal. This latest one almost brought the US to default (to the last day). It's hard to believe we suddenly figure out how to solve the next issue in a more timely manner. In fact the next issue is right around the horizon and time is running short.
To solve the issues, my hunch is the market wants to pressure decision makers way beforehand in order to urge decision makers to start resolving quickly.

Sunday, October 20, 2013

10/20/13: Looking for down wave to commence this week

Based on how the futures opened up Sunday evening, it seems like the markets want to pop in the morning.  I'll look to add to shorts if that is the case.

Looking back on how I had forecasted, I did forecast a new all time high but revised it later.  Maybe it's a lesson that I ought to stick to my guns a bit more.

Timing window wise, markets blew past a couple of the ones I was looking at.  Usually if markets hit a high at the timing window then it takes a break into the next timing window, but in this case, the 16th and the 18th both ended up being highs.  This tells me that the next down wave is at minimum 1720 (or around 77 on UPRO) by the 25th.  We'll see how realistic this is.

There are numerous negative divergences floating around at the weekly, daily, and hourly level.  There are too many to's kind of pointless to list them all.  At the same time, if this wave decomposes into 3 waves where A=C, then we tomorrow's pop will be as close as it gets to A=C.

The daily negative divergences are a bit egregious.  Looking at the TSI, we've made about 4 negative divergences in a row.  We no longer have a positive reversal setup on each low this past year, TSI set up a positive reversal meaning a lower low on the TSI but a higher low on price.  This generally leads to higher high.

In the most recent one that transpired, TSI did not make a lower low.  At the same time, there is a large NYMO negative divergence.  This seems to indicate to me that the next trip down will break our support line and head to 1600 (which is approx the 200MA - I use 233 as a fib avg).  Then I think, a bounce up from 1600 to back test broken resistance...maybe in the 1700s area before another sizeable move down into the low 1500s.

Given I believe we are in a 3-leg upwards B wave that decomposes into A=C, then I am expecting a down wave to commence starting this week and into the end of October.  I am expecting November to open weak but bounce up into Thanksgiving, then December weak(?)

Tuesday, October 15, 2013

10/15/13: Possible H&S forming

Nothing new to add really except there is a potential H&S is forming on the hourly.  Neckline is approximately 1697.  There is the potential for a pop tomorrow morning into early morning which is the next timing window.  If that's the case, I will be looking to add to shorts at the timing window.

Monday, October 14, 2013

10/14/13: Switched to short, looking for 1670s

Markets gapped down at the timing window (green line) which was different from what I expected.  If it was a high, I would have shorted but instead markets gapped down so I had no choice but to buy some more SPX.

Towards the end of the day, we started sporting some negative divs on the hourly so took off longs and switched to small short.  Currently STILL looking for a retrace back to 1670 area.

If this rally is for real, we need to see a test of support.  So far, this rally has just gone up in one straight line without a true test of broken resistance.  Rallies like these are very "suspect" and we could potentially label this as a wave B rather than the start of a new rally.

So while I hope / expect new highs, I am open to the idea that this may in fact just be some false "B" rally.  Again, need to see some testing of support otherwise hard to trust.

Friday, October 11, 2013

10/11/13: Looking for 50% fib correction and then off to the races

Closed that small short at the beginning of the day for very minor loss.  Support was better than I thought and jumped on some more longs but in hindsight, wish I was bigger.  Wave looks fresh for a correction so since the timing window is at the open Monday next week, if we get a nice pop on Monday, then I'm looking to short it for a correction down to the 200 MA hourly by mid week.

200 hourly looking like prime support right now and market would need to get a nice correction to get more momentum to the upside.

CCI short term is sporting negative div still while cycle is turning up so looking for that short term correction and then giddy up for some wave C (or wave 3 for alt count) action.  Either way, the next wave is looking like at least another 2+% up.

Leads me to believe a more concrete govt plan gets done this weekend but on Monday there are realizations that there is not enough agreement on the debt ceiling.  Then, lo and behold, congress figures something out in the minutes to the deadline coinciding with a blast off for the indices.  We have seen this type of stuff before.  Just watch the price action....we get a nice correction into 10/17, I'm buying that no doubt.

My thinking for next 1-2 weeks is in red arrow/green arrow.

Thursday, October 10, 2013

10/10/13: Small short at EOD, start of bullish wave

I closed out a bunch of longs today in the short term trading account and started a small short at EOD.  It looks like a practically complete 5 waves up so I'm taking a stab at a possible wave 2 unfolding.

Given the magnitude of this wave (wow, I can't quite remember a bullish move like today start to finish), I feel like a small correction is worth a small short.  Even taking 38% of 2+% move is not a bad call to wager especially when there are small negative divergences forming.

Nevertheless, this small short is very short term, and I'm looking to get bigger long on a decent pullback.

If we are in a bigger wave B then if this first leg of wave B was 2+% then once can expect the third leg to be ~2+% as well.  This would put us either at a double top or a new high.  I'm hoping for new high but taking this a day at a time.

We have negative divs on the short term CCI and the short term aroon oscilator.  There is also the possibility of a negative reversal on the medium term CCI.  However, given the daily chart shows this as a massive bullish belt hold, I am inclined to believe that given what the various indicators are suggesting, it's a very short term pullback and then another run up.

I'm still in the camp looking for a new 52 week high.

Tuesday, October 8, 2013

10/8/13: Assessment was incorrect, still fishing for a bottom

Markets really took me by surprise today.  Like I said, if market opened marginally lower, I would buy so I did.  Then during the day I watched it break hourly support line after support line and trend down on the 10 minute chart.  Not my day but hopefully the next few days will be better.  I bought a bit more at the EOD.

Looks like a falling wedge formed so we may pop tomorrow in the morning and then get beaten down again.  If the timing window is any indication, if we do see pop and drop, then I'm looking for a low to be put in the afternoon.

What concerns me is the 50/200 hourly cross and if we broke major trend lines.  It's hard to tell unless we are 3-4% away from support.  1-2% is noise so it's not official yet if we broke major support trendlines.

Monday, October 7, 2013

10/7/13: Closed hedge, added long, looking to add tomorrow

Still no resolution to the govt shutdown, now all eyes are on the debt ceiling.  This whole shutdown has been so confusing, I have no idea where it stands now.

Saw this headline many times have we seen website after website calling for massive recession?

Both the weekly and the monthly charts are still in a big time uptrend.  If you look at the August 2011, price action was weak for several months before the head and shoulders on the weekly came to fruition.  Currently we are nowhere near a similar type of setup on the weekly or monthly.

The daily has been weak but is already oversold near trendline support.  Hard to argue for a break of support here.

Anyway, closed out the short hedge, and added to long at the open.  Waiting for tomorrow's open to decide what to do.  If we open marginally lower, I add to longs.  If big gap down, I have stops in place to account for that scenario (though unlikely).  If we gap up, let the longs run.  If we are up marginally then I want to wait and see for a bit longer before making a move during the day.

Saturday, October 5, 2013

10/5/13: Hedging longs, looking for ST pullback, then another rally

No resolution on the government shutdown yet so market is acting erratic.  However, as more time progresses, it would become more clear to market participants when a bill passed and we are back to normal again.

Judging by the way the markets are setting up, I think a resolution to this matter is likely this week.  Why I feel this way is because the ADX is almost crawling on the floor.  Periods of consolidation/confusion precede big rallies (in one direction or the other).

It seems that markets have priced in the worst of this shutdown already and frankly it hasn't been much of a factor.  If it was more pressing, we should be seeing a far larger correction, not this shallow sharp version.

Anyway, I hedged my longs towards the end of the day (marked in purple arrow for hedge).  I am looking for a pull back on Monday but likely not exceeding the low we witnessed earlier this week.  Afterwards, I plan on taking off the hedge and adding to longs.  My expectations remain a higher high > 1720s but not sure when exactly

I'm hedging rather than outright short because CCIs are displaying negative reversal potential (higher high on indicator but lower high on price).  Additionally, price action seems to be mapping out a rising wedge.  However, on the flipside, aroon oscillator has been progressing moving higher so it gives me a bit of caution moving into next week.

Tuesday, October 1, 2013

10/01/13: Small long position heading into tomorrow

Government shutdown was expected based on all the dealings going around.  Now that this is a reality, market is looking ahead.

Today, SPX bounded up +0.80%.  I think now there is more upside to be seen in SPX.  On the hourly, it looks like a small irregular shaped inverted head and shoulders.  I think the setup is favorable for bulls here.  A lot of fear and negativity went into the government shutdown and well, you buy when people are fearful and sell when people get greedy.

I've been playing a lot of short term trades (I added a bunch of markers for trades).  It is hard to post in real time so I probably don't have much credence but so far some of these small trades have gone favorably.

If the inverted H&S plays to fruition then we should see a rapid rise into SPX 1715 give or take.  Ultimately, I think we see another new all time high by the time this month is over (1750).

On another note, we ended today with a very blatant positive reversal setup on aroon oscillator (aroon osc made new low but price made higher low).  I love aroon, I think it's one of the best indicators out there as long as you know how to use it and incorporate with other indicators.