Wednesday, September 28, 2011

Out at 1156.75

If the lunch weakness was reversed on Monday, today wasn't the case. "The market giveth and the market taketh away."

Long at 1171

The market is strong after touching support at 1162.75

Out at 1168

I will try again around 1160

Long at 1174.5

I was hoping for 1160 but the support at 1170 (yesterday's close) seems to be holding

Ready to Reenter Long

Now that the danger has been averted and the market did not fall further, I will look to reenter my long today. The 3 day fractal, of which today is the second, may play out like this (May 2008):

There is a high resemblance between the market action and closing hour on yesterday and on the 14th of May 2008, the first day in the fractal highlighted above.

Another factor suggesting a continuation of the rally is the vote in the German parliament on the EU sovereign debt rescue plan. The market will most probably rise in anticipation.

Tuesday, September 27, 2011

Covered Long at 1175.5

The market is very weak near the close and this is very unusual given the strength up to here.

Monday, September 26, 2011

Sunday, September 25, 2011

Bear Market Rally Still Not Over

The market is in a bear market and is starting to fall very fast, but I still feel like looking for longs, playing a continuation of the bear market rally. This is not just gut feeling, of course. I have shown two indicators in my last post suggesting that the market has not been overbought and that the economy has some positive news to provide.

Back at the beginning of August I was thinking that the FOMC meeting will mark the end of the rally. The Fed has failed to deliver, indeed, but the market technicals are not aligned for a new downleg. I now think the market will be supported by the anticipation of some positive outcome in the European crisis over the next weeks. All until the first advance estimate of the Q3 GDP comes at the end of October - maybe we will get an answer as to whether the anticipated economic acceleration is taking place. I expect this event to mark the top of the bear market rally.

Meanwhile, I will start to go long next week, whenever conditions are favorable. In fact the first opportunity to go long presented itself on Friday but it would have been too risky to hold longs over the weekend.

Given the way the daily chart looks right now, a marginal brake of the August lows cannot be ruled out, before the move towards 1200 starts again. I personally do not have any clue to tell me if that will happen or not. I will leave it all to chance and let risk management do its job.


Tuesday, September 20, 2011

Covered Long at 1211.25

I am not sure that the market will reach my initial target of 1223 ES. I am leaving just a third of my initial position to run further.

Analogy

Here are a few analogues from 2009-2010, with the candle corresponding to yesterday's trading circled in green.


In two of the cases, the market was two days before a FOMC meeting., just like today.

This suggests that the market may correct starting on Wednesday, after a move up today. The strength is not guaranteed for tomorrow too, given the analogues above and with the SPX hitting the 50 simple DMA around 1225. Thus, I will take profits today if the market reaches 1223 ES.

Looking further, the bear market rally will continue after a few days of downside. The 5 day ema of the total put/call ratio is far from overbought ...

... while the economy has some positive surprises coming first.


Monday, September 19, 2011

Long at 1190.5

The market is strong after a bigger correction. I think strength will last until Wednesday afternoon.

Wednesday, September 14, 2011

Out at 1166.5

The market does not seem to be holding strength. I think it can head lower today and start rising again tomorrow.

Tuesday, September 13, 2011

Long at 1159

Yesterday's rally did not fail, so I have to go long again.

Covered Long at 1148

I expect a fast sell off today towards 1130 (December contract). This is what happens with reversals from oversold that go too fast too far. Here are some examples from 2010:


Monday, September 12, 2011

Long again at 1137.25

The market is acting strong after the lunch.

Covered Long at 1138.5

This rally looks like it is going to fail. I will try again, most probably tomorrow.

Long at 1134.25

December contract

Still Bullish

Patience and luck have kept me from buying on Friday. These are two essential ingredients for successful trading, although only one can be controlled by the trader himself.

I am willing even to push my luck, given that I am now in a much better position to risk money on the long side, since, if my bullish bias is still right, most of the downside has already come to pass.

The put/call ratio suggests the market is oversold and ready to bounce. The Fed meeting next week will attract buyers this week, or, at least, will deter sellers.


I think anything today around or below 1335 ES (December contract) is a good price for a long position.

Friday, September 9, 2011

Bullish

I think the market is heading to new highs for this bear market rally. I will look to buy today in the 1180 zone. If the market does not hold this level, the sell off might continue deeper toward 1160.

The total put/call ratio made a "bearish spike" yesterday, supporting the bullish scenario.


Friday, September 2, 2011

Bear Market Rally Not Over

I saw some comments throughout the online financial media stating that the bear market has probably made a swing high this week and that we should look for new lows from here. I do not agree. There is no intermediate term indication of an oversold market.

Here is one indicator, the cpc 5 day ema, which is still depressed. It will have to reach close to the upper horizontal line before a top is made.



Until then, deeper pull-backs lasting a few days are buying opportunities.

Thursday, September 1, 2011

Covered at 1224.5

Short at 1219.5

Covered at 1213

I will look to short again after the US open. For now, it is time to bank some profit while the market gives it.The market will probably only break down after a "bullish spike" in the total put/call ratio.