02/12/09 PLUNGE... NO WAIT.. RALLY... WTF..

So I believe today was important.

I'll start with a chart of the 3 month long channel. You can see in January we spent awhile bouncing off the top... then we dropped.. spent awhile bouncing off the bottom, relatively the same amount of time. Which is interesting because we have a turn date period on deck between Feb. 9th and Feb. 18th. The last turn date signaled the drop from the top of the channel to the rattle around the bottom. So this SHOULD signal a rise back to the top. Which would complete a "Bear Market Rally"

Channel chart for the S&P starting mid Novemeber at the bottom;



In a 6 month chart like this (3 month long channel), today will just look like a pin underneath the rising trendline (bottom of the channel). The important part is that we closed back inside the Channel and today was a hammer. Which is the most bullish candle you can have.

Here is the definition of hammer if you said to yourself.. "Dude.. WTF is a hammer?"

http://www.investopedia.com/terms/h/hammer.asp

If "Candle" confused you,.. that's just a line that represents the high and low of a trading day.

O.k... so we have a Hammer.. we have time symmetry that signals a possible reversal which is most likely upwards. We also had good retail sales news...

"Government is so full of shit... reporting a bunch of BS... wonder what they did with the numbers to make sure this came out positive!"

That is the typical response to the retail numbers today.. which were above expectations by quite a bit and well into positive territory.

Here's my explanation, please consider it;

Here are facts;

1) you have tons of people going into foreclosure

2) very often these people end up living for free for several months.. sometimes up to a YEAR.. for FREE.. until they are foreclosed on.

3) the next step for these people is to rent. Often rent in a similar home is 1/3rd of what they were paying in mortgage previously.

4) Not only is rent cheaper... gas is 3$ lower.. everything overall is cheaper..

See where i'm going with this.. these people are going to have a lot more money in their pocket. How much money would you have after 6 months free rent? and then how much after 12 months of renting at 1/3rd the cost of your old mortgage?

Think you might go out and splurge a little on a nice car for cheap? or a nice sound system or sweet TV? Maybe that new laptop upgrade you've been waiting to get?

There might be a surprise increase in retail sales going forward. Which might result in some new hiring and slow the pace of job losses.

Lets talk about the financials for a minute;

The recent proposed plan does not bode well for the financials. Things like "stress tests" are necessary, however this is starting to go down the path of let the banks who are going to die..... die. Who knows if this plan actually works the way it was said to, since no details were given. However, it will be hard for the financials to rally with his hanging in the air. If we do rally hard, it is possible the financials lag. I would expect commodities, energy, and tech to do well.

Now the financials could certainly have a good run.. maybe even more than what I mentioned, but that is not a given right now like it might have been a few months ago.

Lets talk important levels;

804 S&P... this is THE bottom.. if we break this.. good night.. 600's is on the table.. maybe even lower

868 is the 50DMA... if we cross 868, then we could see a run to the top of the channel, in which case the target is up over 1000. Ths would be a bear market rally and probably would become more violent than the charts suggest.. so I wouldn't write off 1100. This kind of rally would produce a bottom call from every talking head on CNBC before it ended. In fact it would go as far as a kid in the mall talking about how the stock market is the new place to be.

Nothing interesting happens without breaking 804 or 868. They must break convincingly and on volume. 868 will need to break MORE convincingly. If we just stumble below 800.. it will be lights out.

Last thing to mention, weather has been unusually warm for a few weeks in the NE, that is changing next week with a potential snowstorm in the works. That will affect energy. Oil has been hitting new lows with the warm weather along with nat gas. Top weighting in the Russel 2K is energy stocks at the moment. So a bump in oil and natgas will help the market.

That's about all I have for you now. Stay frosty, this reversal portends good things, but is not written in stone by any means.

We technically should see somewhat of a pullback tomorrow, maybe even enough to make it seem like the afternoon rally was just a freak occurance. But that should end and we could have a chart that looks very similar to today.

GL trading...

CJ

02/02/2009... Decisions will be made soon...

Technical decisions will be forced upon us soon.

I still can't find much leadership for any type of rally. Although tech and small caps had a decent day today. Usually those can't lead the market though, but we'll see.

We have the S&P in a triangle or a channel right now. Either way, it is right near the bottom of the triangle or channel. I will post a chart of the channel, because I think it is more relavent longer term if we bounce off the bottom;



We also have the XLF in a giant triangle on a 20 day chart. That triangle only has about 3 days, 4 at most until it terminates itself. My guess is that whichever way that breaks is which way the market will go. Obviously a financial break north will send the market higher, a financial break down will make it nearly impossible for the market to rally. Here is the XLF chart;



So.. i think market direction will be settled by Friday. We are either going to head to the top of the S&P channel, which is near 1000. Or the XLF will fall down out of that triangle and we will AT LEAST test the previous low at 747 on the S&P.

Good luck trading! its rough out there.

CJ

01/16/09 ... Weekend Edition

Lots of interesting things happened today.

1) The market clearly regained 844, which was the 50% fib retrace level of the 747 to 942 rally.

2) It was OPEX, so could be lots of games going on, that are not to be trusted

3) The financial sector reached lots of multi-year and in some cases multi-decade lows. BAC hit a 17 year low, WFC sank to a 8 year low, Citi sank near the Nov. 20th low, USB sank to a 6 year low.. etc.

4) leadership was hard to find... i'm not sure where the strength came from. Small caps weren't doing well, financials sucked huge, basic materials were blah, REIT's were blah, Tech was blah, etc... i don't know what made up for financials sucking so bad that the S&P closed in positive territory. Reason being that financial stocks make up a large portion of the S&P 500.

Just a scan for leadership makes me think that this was a fake out OPEX rally, but technically the market did close above some resistance levels,... i just don't know how... but it did.

So... next week.. 1 of 2 things happens...

1) whatever was floating the market fails and we go MUCH lower..

2) financials find a bottom and rally hard, along with many of the other sectors I mentioned above.

Watch financials!... specifically BAC, C, and WFC ... if these find a bottom and start to rally... there could be a LONG way to go in a rally. The financials are making new mutli-year lows... BELOW where they were on November 17th when the S&P was at 747. But we closed today over 850. A financial rally here could easily propel us far over S&P 1000 with the co-operation of whatever is holding us at 850 with the financials making new lows.

It would take time though... DO NOT expect that a rally over 1000 happens quickly. Any rally that happens for the next several months.. WILL take several months, volitility will drop and the market will seem extremely boring compared to what has been the recent norm.

That said.... if the financials do not rally... that is something that could be a horrible outcome here. IF things fall apart here, OPEX turns out to be a sham move on whatever has kept us at 850 with financials hitting new lows. 747 (Nov. 17th S&P low) will likely get taken out to the downside.

Next target is somewhere around 640 on the S&P. .... yeah.

WATCH FINANCIALS.. WATCH C, BAC, USB, and WFC next week.

If these stocks recover and start to rally... target over the next 3-6 months is over 1100 S&P.

If these stocks continue to sink and the market starts to follow them down...

well... lets say that it might be nearing time that you buy some guns, ammo, lots of bottled water and at least 6 months worth of canned food.

Good luck trading.... i think.

if you are an American. You pray that we rally next week.

01/15/09 ... Is the downturn done?

Well I had a very busy holiday season, saw some family members I hadnt seen in years, so haven't posted in awhile, but time to get back to it!

Yesterday we got a big reversal from heavily negative to positive territory. This is always a good sign. But... we took a lot off the move near the close, this still could just be an oversold bounce, financials are not really joining the reversal attempt so far. All of those things are obviously negatives.

The reversal yesterday does not mean the downleg is over... yet. Today will be key to see if strength shows back up in the financials and we can hold the rally as the futures are pointing towards a higher open by about 10 points as I type this.

Key levels... all fibonacci retracement zones of the move from 747-942.

896 ( 28.6% )

867 ( 38.2% )

844 ( 50% )

821 ( 61.8% )

788 ( 78.6% )

We are apparently going to open over 844. So key will be whether we run north and try to take out 867 or fail on the attempt to rally and fall back under 844.

I think taking out 867 or making a run at it, means we are going to blow north real fast through the inauguration. Rally attempt fail back under 844 means we have further to go and 788 would be in play.

Good Luck Trading!

12/032008 More stength on volume..

Today will be short.

The market is still pzchzoid (spelling?? no idea :) )

but the reversals on attempted sell offs accompanied with volume must be viewed as strength. Must respect the tape... and right now.. the tape is saying we go higher.

900-905 is still the neckline of the inverse H&S. We are getting close again. Today the financials showed up to play... the commodity space is still lagging.

look for financials to continue plowing ahead and for the commodity space to make a strong move up soon that really pushes the market over 900. Could happen anytime between now and the end of next week.

Because of the strength showing up,.. I think any additional sell off back down under 800 is probably off the table. If that were to happen, it would kill whatever confidence is brewing and it would be a failure of the inverse H&S breakout.

On the other side... if financials pullback and commodities fail to make a move.. i.e. oil keeps sinking and doesn't start a sharp rally.. if gold still flounders... if basic materials don't try to join in the rally.. steel, aluminum, etc.. (X, AA, etc) Then a potential failure to break out should be considered a high probability.

Current positions;

Long 1000 FAS 18.65 average

Long 300 ERX at 36.45

Only 30% invested.. will be hesitant to add more without a breakout over the neckline.

GL trading.

12/02/2008 Some more small signs of strength....

A few things I liked about today if you are looking to go long.

1) We bounced off the huge sell off (really huge)... this would normally be expected but given the current market climate, it was just as possible that we could have collapsed.. The sell off yesterday being on low volume is telling.

2) The bounce failed... twice...but both times we reversed higher yet again and on volume. This is a good sign, first sign of real strength after fairly large moves down intra-day in awhile.

3) we closed very near the high of day and on higher volume than yesterday. It's beginning to appear that this market has literally run dry of sellers at least for awhile.

We want to see 900 get taken out to the upside...

this will require these 3 things to happen;

1) UYG takes out 6.30 in the northerly direction

2) UYM takes out 14.30

3) FAS (which represents the Russel 1000 section of financials) needs to take out 31$

The S&P will need help to take out 900.. particularly from commodity stocks and financial stocks. Which it is full of. So these 3 indexes need to take out their previous highs when the S&P reversed off 898. Those indexes don't take out those levels, we fail at 900.

My guess is that we test 900 again with these 3 indexes still off their highs.. reverse one more time, but not as far.. and then these 3 do a rocket shot and boost the S&P past 900 and confirm this inverse Head and Shoulders pattern...



GL trading. It's wild out there.

12/01/2008... Gathered thoughts..

I've been absent for a couple weeks. This market is almost too crazy to attempt to relate daily commentary to.

So i will keep the updates short and sweet and very technical.

822 was the 50% fib retrace of the rally from 748 to 898. We closed beneath it, but not enough to convince... it could just be a pin underneath. It was a huge down move, but did so on very low volume. (at least compared to recent volume, which is what matters)

804 is the 61.8% fib retrace. If we close below that.. we are going to head for a double bottom test.

An inverse H&S is in play.. 900 is the neckline. A close above 900 could be a massive breakout north.

I have no big bets in either direction right now...

Here are my options...

TBT .. ultrashort long bonds... we have a potential bubble in treasury long bonds. Ben is going to keep this going by buying the long end of the curve, so this is just an idea for the future.

UYM and ERX... UYM is 2x basic materials long... ERX is 3x energy long... these should both kick ass if the government manages to reinflate the economy. Cause if they do.. there is no way they shut off the money spigot quick enough to not cause massive inflation. Commodities will do well.

If deflation wins... well... save every penny... cause you'll need it.

FAS is also a potential short term trading option... 3x financial bull.... the nice thing though about FAS is it is mostly comprised of Russel 1000 financial companies.. which have much more to gain from the destruction of the large conglomerates like Citigroup going into the future....

if we have one...

GL trading.