Archive for October, 2009

Here we sit at line in the sand. With just a few points away from an extremely important closing price of 107.65 on the spy, it seems that the Bulls might just have the juice left to get there? Monday is Columbus day, and many traders will be gone. Plus, there is NO major economic news on Tuesday either. That means light volume for sure on Monday, and nothing to push the market down on Tuesday.

So, the Bulls must close above 107.65 on Monday, and push on up to that gap fill line at 110 by Tuesday. If that happens, then you can surely expect a lot of selling at that point. On Wednesday JP Morgan will release earnings, then Goldman on Thursday and Bank of America on Friday.

What’s all that mean? Heavy volume… that’s what! And what has heavy volume brought us in the past? A big sell off! Light volume equals an up market, and heavy volume equals a down market. Will it happen? It depends on whether or not the market believes the funny numbers that the banks are going to report.

Make no mistake about… they will beat estimates. Probably kill estimates! But, the bar is set so low that just about any company can beat estimates. When they changed the accounting rules back in March it made it too simple for banks to fabricate their earnings. So beating estimates is a given now. But, the market wants to see them beat the “whisper numbers”… and that might be tough to do.

It’s really a tough call here as the market really wants to close that October 2008 gap at 110 (spy), which would be the Dow over the 10,000 mark. That sure would look great for the 3 stooges (Obama, Geithner, and Bernanke), as it would appear that the recession is officially over! Yeah right, and I’m qualified to be president too. Hey, actually I am qualified… I coached a softball team for many years. That’s about equal to “community organizer” right?

Anyway…

The big cycle turn window is in effect now and the market should roll over next week. If it makes a run for 10,000 first, then it had better do it on Monday… as that will be the lightest volume day of the week. However, I don’t expect it to happen as too many people expect it… hence it won’t happen. I see a flat day Monday with a slight upside bias.

Tuesday through Friday the volume should pick up quite bit. How the market reacts to the banks’ fake numbers will be the real question. I’m going out on a limb and I’m going to take another short position on Monday or Tuesday as I expect that to be the top…. where ever it is!

On Friday the TBT rose again, as you can see the 2 day rise in the 5 day chart above. This not good for the market folks. Something is going on that is signaling a change. A plunge is near, that’s for sure. If it’s from the current level or the gap fill level around 110… I don’t know. But, Tuesday through Friday should be down.

Now, keep this in mind…

Once the down moves starts the first level of support is at 1040, then 1020, and finally the 995-1000 area. I give the 995-1000 area an 80% chance of a bounce, so I’d get out of all shorts at that mark. I also expect the fall to be fast, taking out the 1040 level quickly and the 1020 level too. It will fool many bulls that buy those support levels, only to see them fail as the market falls further.

On the other hand, many bears will be fooled too, when the 1000 mark is broken (remember, the support is 995 to 1000), and they will pile on short. They will be squeezed, as a nice bounce from that level occurs. It could go back up to the 1040 area, or possibly higher? But, I think 1040 will provide good resistance, so that would be a safe place to get out of any longs you may take from the 1000 area.

However, let’s play it one day at a time. I’m not saying to go short again at 1040, as I don’t know how high the bounce will be. Only to take profits there and look for another place to short. We’ll cross that road when will get there.

All of this assumes that the market doesn’t rally to the 1100 area first. If so, then time line is off. On one hand it’s worrisome as everyone is expecting the market to rally to 1100 first before tanking, and on the other hand it’s refreshing to know that I’m not in the majority this time.

Well, that’s about the best I can do to help guide my fellow traders.  Sorry I don’t have a crystal ball.  Just be patient when the market does start to fall, as the 995-1000 area should be the first stop before any decent bounce.  Hold on to your positions till then and get out and go long,  as I will be doing so.  Whether or not this happens before next Friday is anybodies guess?  We definitely will have the highest chance of that happening in the coming week, as the banks reporting are big movers of the market.  If the market doesn’t like what they report, then the move might happen by option expiration?  Let’s hope so…

Red

P.S. Here’s a interesting video for you…

The market rallies again today as more people are kicked to the curb!  It seems that nothing matters to the market, as it rises again, and again, and again, etc… etc… etc…   Are the Bulls snorting crack again?  What is it going to take for a serious correct to happen?  I’m speachless at this point…

I’m now underwater on my short positions, but I’m still in them and will hold them until option expiration if needed. I still believe the market will go down next week. Tomorrow should be a flat day, as rarely does the market sell off on a Friday. Just another consolidation day before the next move occurs.

Since today didn’t sell off as expected, and tomorrow won’t likely do so either, I’m inclined to believe that 102 is about as far down as I can see the market going to before expiration. Of course all this changes if the market closes above 107.65 on the spy. Then we are off to 110 in a hurry! However, I still don’t believe that to be the case. The news is still bad, and this rally is running out of steam.

Can it go to 110… yes, of course it can! But, isn’t everyone expecting that now? Today squeezed the bears hard. Will next week butcher the bulls? I can’t answer that for sure. But, I’m staying short, as I think the forecast is just off by a day or two… not wrong! I believe today was another trick to lure in more bulls, and scare out all the remaining bears.

There are some strange things happening in the market right now. For one, all the major movers were down today while the market was up. Goldman, JPMorgan, Apple, Google, Qualcomm, BIDU… all down! Why? The news was good right? Only 10% of America is unemployed, so the rest of us all have good jobs (Yeah, right!).

This rally was all about the dollar… that’s it folks! Nothing else! Not Alcoa or the unemployment numbers caused this rally. The dollar tanked hard today, and that is the reason for the rally. The PPT is at it again. They pushed the dollar down to keep the market up on the bad numbers. It’s just that simple.

However, something else happened today that is really weird. The TBT rallied hard about midday. It rallied from about 42.70 to 44.30… a huge move on the treasuries. This is really negative for the market. Is something big going to happen? I don’t know, but something smells fishy too me!

Red

I love it when a plan works out… I had hoped for 1060 and it hit it perfectly! Tomorrow is the big turn date that everyone is talking about… but, which way is the bigger question? My money is on “Down”, as this rally up today was just a back test of the broken triangle.

Tomorrow should be a consolation day. I’m expecting them to try to push upwards again but I believe the high is in for now. I already went short at 1060 today, and if you get so lucky to see it push up to that area again I’d jump on the short side as Thursday and Friday should start the down move.

Today’s volume was up a little to about 200 million shares on the spy. That’s better then yesterday and increasing as expected. By Thursday and Friday we should be at 200-250, or more? With the negative jobs numbers expected to come out that should push the market down hard. I’m looking at 995-1000 before a decent bounce. There will probably be intraday bounces at 1040 and 1020 on the way down, but those levels aren’t that strong anymore as they have be broken once already.

Going forward I believe that the tide is shifting back to the bears. Do you remember during the Goldman Sachs rally from March to September, that they always seemed to know what the jobs numbers (or any numbers for that matter…) was before they were announced? It’s no surprise to anyone that Goldman has an inside track to the Government. So, of course people listened to them when they spoke. After all, they’re practically the Government!

Do you also remember how they seemed to leak out information at critical times… just before the market was ready to tank. I have to give them credit for that, as they are great at this game of chess. It was perfectly timed to release little bits of information out so that the market would react slowly to each bit.

Many times they would leak out negative information on the jobs number, and then beat those estimates when actually released, only to give worst continuing claims numbers. The market was confused? They would sell off on the leak numbers only to rally when they were actually released better then expected, and then ignored the worst then expected continuing claims.

It was a game of illusions, just like a great magician keeps the audience focused on one thing in order to distract you from looking at something else. Goldman did the exact same thing last week by changing their forecast from 200k to 250k jobs lost. They did this on a huge down day (Thursday) so that when the numbers really came out the market would have already factored those numbers in and didn’t continuing crashing.

Instead, the market had a slight down day on Friday, as all the bad new had already been known. But, here is where the tide is shifting. Before, when Goldman leaked out bad umbers, they could beat those high jobs numbers with slightly less bad numbers. You remember… they would come out an say that the number of job losses would be 300k and then actual numbers would 260k. Of course the market would rally, looking at the numbers better then expected.

Now, look at today…. What happened lasted Thursday? Goldman raised their forecast from 200k to 250k, and the actual released numbers were worst! They were 264k! That my friends… is a change in the tide! Will the Bulls escape? Or will the rising tide behind drown them? I hope they can swim!

I’m short and will remain short until 995-1000 area, at which time I will get out as I expect a bounce on the first hit of that major support area. Time expected… 2-5 days.

Red