Going forward, I expect to see more upside. However, be careful as the market is still jittery and prone to selloffs.
As the market normalizes, I will be posting more trade setups. Check back often and follow me on twitter for my latest thoughts.
Showing posts with label thursday. Show all posts
Showing posts with label thursday. Show all posts
Thursday, August 11, 2011
Possible bottom still in place
The possible bottom I posted about on Tuesday is still in play. I will continue to hold this belief until we close below the daily low of 1101.54 sometime in the next few days.
Going forward, I expect to see more upside. However, be careful as the market is still jittery and prone to selloffs.
As the market normalizes, I will be posting more trade setups. Check back often and follow me on twitter for my latest thoughts.
Going forward, I expect to see more upside. However, be careful as the market is still jittery and prone to selloffs.
As the market normalizes, I will be posting more trade setups. Check back often and follow me on twitter for my latest thoughts.
Thursday, July 28, 2011
Markets pause as the US House votes on key debt resolution
Tonight's market wrap-up will be brief as there isn't much new to report. The markets gyrated up and down today before closing the session flat. This isn't unusual after a big move in either direction, but today it's mostly due to traders waiting for the US House of Representatives and Senate to vote on Speaker Boehner's plan to raise the debt ceiling.
The outlook for tomorrow is simple. If the House votes yes and the Senate votes no, I will expect a moderate decline in the markets. If both the House and Senate vote yes or no, I'll expect either a large rally or a large fall respectively.
The only way to handle situations like this is to tread lightly. I'm positioned mostly in cash with just a few long positions because I think a deal will eventually be struck. I'm also holding a small short hedge just in case we see further selling if no deal is reached tonight--or worse, if no deal is reached even by August 2nd. I will not be breaking the bank no matter what the outcome is.
Tonight I will be watching the futures closely to see how they react to the US House vote. I suspect that if it passes, the markets will take it as a sign of Speaker Boehner finally getting his party in line--even if the Democratic held Senate votes it down as promised. If not, it indicates that a consensus between the two parties by the deadline is increasingly unlikely.
Tomorrow's trading will be interesting to say the least. Stay nimble, and good luck.
The outlook for tomorrow is simple. If the House votes yes and the Senate votes no, I will expect a moderate decline in the markets. If both the House and Senate vote yes or no, I'll expect either a large rally or a large fall respectively.
The only way to handle situations like this is to tread lightly. I'm positioned mostly in cash with just a few long positions because I think a deal will eventually be struck. I'm also holding a small short hedge just in case we see further selling if no deal is reached tonight--or worse, if no deal is reached even by August 2nd. I will not be breaking the bank no matter what the outcome is.
Tonight I will be watching the futures closely to see how they react to the US House vote. I suspect that if it passes, the markets will take it as a sign of Speaker Boehner finally getting his party in line--even if the Democratic held Senate votes it down as promised. If not, it indicates that a consensus between the two parties by the deadline is increasingly unlikely.
Tomorrow's trading will be interesting to say the least. Stay nimble, and good luck.
Thursday, July 21, 2011
Another big up-day for the SPX
The S&P 500 traded sharply higher today up nearly 18 points, or 1.35%. This rally came presumably on the back of good earnings reports and optimism that US debt ceiling negotiations may be close to an end. Progress in Europe in securing a bailout packages also helped to buoy prices.
Readers of this blog will know that I don't believe in fundamental explanations of market moves. As I've written numerous times, this 50 point rally we've seen so far since Monday is based simply on technicals and contrarian market psychology.
You'll recall from my previous posts that last week the market was oversold, overly-bearish and into technical support at a key 61.8% Fibonacci retracement level. Interestingly, traders last week and over the weekend were as bearish as they've been in years--this is what gave me the confidence to call not only for a pause but a significant bounce in prices this week.
Psychology plays an important role in determining the short term cycles of the market as big financial institutions look to shake out smaller traders from their short positions and devalue their put options. Once these same traders have been discouraged enough and become bulls, you can be sure the market will reverse and correct downwards. Combine this this contrarian psychology with good support and resistance levels and you will see powerful moves in the market.
If you were monitoring intraday trading on the SPY or any other major market index, you saw these concepts in action on a micro level. At approximately 12:40pm ET, the SPY rallied sharply on a rumour that debt negotiations had concluded, only to fall back sharply 10 minutes later on another rumour that a deal had not been reached. Both of these reports turned out to be either inaccurate or unsubstantiated and the SPY continued to trade upward as normal.
Going forward, I'm no longer strongly bullish although I think the likelihood of further upside tomorrow is reasonably high. I mentioned earlier this week to look for resistance at the 1340 and 1356 levels on the SPX. Today, we breezed through 1340 but 1356 should continue to act as resistance should we reach it. I may consider picking up some short positions if we reach 1356, but I will keep them small and maintain a tight stop.
Check back here regularly and follow me on twitter for my latest thoughts on the market.
Readers of this blog will know that I don't believe in fundamental explanations of market moves. As I've written numerous times, this 50 point rally we've seen so far since Monday is based simply on technicals and contrarian market psychology.
You'll recall from my previous posts that last week the market was oversold, overly-bearish and into technical support at a key 61.8% Fibonacci retracement level. Interestingly, traders last week and over the weekend were as bearish as they've been in years--this is what gave me the confidence to call not only for a pause but a significant bounce in prices this week.
 |
| Monday's hit of 61.8 fib level leads to big bounce on SPX |
Psychology plays an important role in determining the short term cycles of the market as big financial institutions look to shake out smaller traders from their short positions and devalue their put options. Once these same traders have been discouraged enough and become bulls, you can be sure the market will reverse and correct downwards. Combine this this contrarian psychology with good support and resistance levels and you will see powerful moves in the market.
If you were monitoring intraday trading on the SPY or any other major market index, you saw these concepts in action on a micro level. At approximately 12:40pm ET, the SPY rallied sharply on a rumour that debt negotiations had concluded, only to fall back sharply 10 minutes later on another rumour that a deal had not been reached. Both of these reports turned out to be either inaccurate or unsubstantiated and the SPY continued to trade upward as normal.
 |
| SPY 10 Min whips up and down then continues sideways |
Going forward, I'm no longer strongly bullish although I think the likelihood of further upside tomorrow is reasonably high. I mentioned earlier this week to look for resistance at the 1340 and 1356 levels on the SPX. Today, we breezed through 1340 but 1356 should continue to act as resistance should we reach it. I may consider picking up some short positions if we reach 1356, but I will keep them small and maintain a tight stop.
Check back here regularly and follow me on twitter for my latest thoughts on the market.
Thursday, July 14, 2011
Thursday Market Summary
Today's trading was very much reminiscent of yesterday's. The SPY opened just about flat then rallied and ultimately fell to make new lows on the day.
The take-away from this is that the market remains in an extremely weak position and will continue be this way until the US and EU debt crises get some kind of (temporary) resolution. Until that time, or until we're in a stronger technical position, it appears that every rally will be sold into.
From a daily chart perspective, today we came very close to my 20MA average target, which today is at approximately 131.63. I may regret not covering my short position there as sometimes a near hit is as good as an actual one, but I think this market remains weak so I'm not worried going forward into the next few days. Also, please note the bear flag that is potentially playing out based on the last 5 days of trading followed by today's down-move.
Intraday, the SPY opened at 132.17--a huge recovery from the dump on the futures last night, which at one point was down over 10 points. From there, the SPY traded as high as 132.78 before falling all the way down to 130.68. After hitting these lows, the SPY got a big bounce back up as high as 131.70 and then all the way back down to 130.75 before chopping sideways for the rest of the day. The SPY closed the day at 130.93, down 0.69%.
Something else of interest I'd like to point out here is the massive intraday ranges we're starting to see, while never closing that far away from the open. This ends up making what's known as doji candles on the daily chart and can make swing trading a position over several days somewhat frustrating. On the other hand, it makes for a fantastic day trading environment.
Tomorrow will be very telling as we'll have a better idea if this breakdown will persist or if the market will rally off of daily support levels into Friday and next week. Be sure to check back here and follow me on Twitter for my latest analysis. I expect to have some actionable levels and trade setups very soon.
The take-away from this is that the market remains in an extremely weak position and will continue be this way until the US and EU debt crises get some kind of (temporary) resolution. Until that time, or until we're in a stronger technical position, it appears that every rally will be sold into.
From a daily chart perspective, today we came very close to my 20MA average target, which today is at approximately 131.63. I may regret not covering my short position there as sometimes a near hit is as good as an actual one, but I think this market remains weak so I'm not worried going forward into the next few days. Also, please note the bear flag that is potentially playing out based on the last 5 days of trading followed by today's down-move.
 |
| SPY daily bear flag breaking down? |
Intraday, the SPY opened at 132.17--a huge recovery from the dump on the futures last night, which at one point was down over 10 points. From there, the SPY traded as high as 132.78 before falling all the way down to 130.68. After hitting these lows, the SPY got a big bounce back up as high as 131.70 and then all the way back down to 130.75 before chopping sideways for the rest of the day. The SPY closed the day at 130.93, down 0.69%.
 |
| Massive range on SPY 10 min chart |
Something else of interest I'd like to point out here is the massive intraday ranges we're starting to see, while never closing that far away from the open. This ends up making what's known as doji candles on the daily chart and can make swing trading a position over several days somewhat frustrating. On the other hand, it makes for a fantastic day trading environment.
Tomorrow will be very telling as we'll have a better idea if this breakdown will persist or if the market will rally off of daily support levels into Friday and next week. Be sure to check back here and follow me on Twitter for my latest analysis. I expect to have some actionable levels and trade setups very soon.
Subscribe to:
Posts (Atom)