Archive for January, 2010

What a wonderful time it is to be a bear!  The market just keep on selling into Friday, closing around 1071, surprising even me.  I said in last weeks post that I believed we would pierce the 1080 level intraday to trick the bears into believing the level has broken, and pierce did we ever!  We went straight through it, and continued on down to a low of 1071.59, which probably had the bears jumping up and down thinking the next level is 1030-1040 area.

Not so fast Mr. Bear (I am one… by the way).  Every down move will have a bounce back up from time to time… and that’s exactly what I’m looking for next week.  A rally back up to at least 1100, or maybe as high as 1120 is overdue, and should occur next week.

Looking back at the chart I posted on last weeks “Weekend Update“, I see that it played out fairly well.  I was off on the 1080 level holding, but other then that… it’s pretty accurate.  I believe the breaking of 1080 is a bear trap, as it requires 2 days below the level to confirm the break, which would allow the market to fall to the next level around 1030-1040 (I don’t see that happening).

Last Weeks’ Chart….

So, looking ahead to Monday, I believe we might have a gap down in the morning, followed by a rally up to close the day positive.  If the gap down doesn’t occur, then it might just rally up and sell off a little in the evening… but I still expect a positive (or flat) close on Monday.  I don’t think it will close down big again, like Friday.  It should be a flat to up day, for the market to consolidate before a move higher to 1100-1120 by Friday the 5th, (or Monday the 8th at the latest), as the finally high before wave 3 down starts.

To be on the safe side, I will most likely be going short on Friday the 5th, not Monday, as I don’t want to miss out if it crashes Monday instead of Tuesday.  Since the first larger wave 1 down from 1150 to 1071 is 79 points, wave 3 down should be well over a 100 points before it’s finished.  Whatever you do… don’t go long on anything!  No dip buying, only ”sell the rips”!  You will get killed if you go long in this market once larger wave 3 starts!

This Weeks’ Updated Chart…

Once the larger wave 2 up is finished by next Friday (or Monday), you should get short and stay short until options expiration on Friday the 19th.  This larger wave 3 is probably going to last until then (or longer).  This second cut through of 1080, on the down move from whatever high we reach this Friday, should pierce it quickly and not look back.  The first decent bounce level is at 1030, and should cause a pause day to occur, before the selling continues.

Once it breaks… hold on to your hat Nellie, as this is going to be one hell’uva ride down!  The 1000 level should also be heavily protected by the bulls, but when it breaks… look out!  We’re going to 910-920!  This is a rare opportunity to make a ton of cash as this thing falls.  I will be holding on for dear life, as it’s going to be scary as hell!

Best of luck to all of you…

Red

Gap UP, then Sell off hard… back up, down, up, and down!  Whew… what a day!  We did go lower intra-day to tag the 107.91 spy level, which should complete the 5 wave move down, of the larger wave 1 down.  It was possible that yesterday’s 1083 was the end, but it turned out to go lower today to 1079… which hit the lower channel perfectly.

Are we finished with the larger wave 1 now?  I’m not sure yet… but we’re close.  I could see another little push down tomorrow morning, and then a move back up to close around flat.  Then a move up all next week, just as forecasted on my weekend update.  I think that the support will hold this week around 1080, and the traders will calm down over the weekend and start buying again next week.

How high we go is unknown, but the ideal place would be 112.00 spy by the end of next week.  I did not go long on the SPY as I don’t trust the up move next week.  We could just go sideways next week, and either end the week flat or only up a couple of points.  It not worth the risk for only 1-2 points on the SPY.  So, I decided to go long on the USO, buying the 35 call for $1.60 today.  I’m looking for a move to around 38 by the end of next week.

So, for tomorrow… I don’t expect much more selling.  A flat day is my forecast.  Then a small retracement rally all next week.  It’s risky right now to go long on anything… but I think I’ll be fine with the oil trade.  I just wouldn’t touch the spy right now, as it’s in good support now which could break or bounce?  It’s safer to sit and wait for now.

Red

The market is looking pretty scared right now.  It rallied a little, and then sold back off into the close.  Tomorrow night is what the market is waiting on.  Although I think we will go up into the events, it is possible that we sell off tomorrow in anticipation of bad news from Obama… (which never happens as he’s a great liar) and then start the 2-5 day rally from the low tomorrow.

It’s hard to guess at this point?  I’d only recommend that if you are already short… stay short.  We are either going down into the events (FOMC meeting at 2:15 and State of the Union after-hours) or down after them.  Either way, I expect 108.00 to be hit.  I will look to close my shorts there… assuming that it doesn’t pierce the level with huge volume!

That’s one of those “iffy’s” as I’m only assuming that it will hold on the first hit.  Now that’s on a “closing bias”, not intra-day.  I do believe we could pierce it intra-day to suck in more bears, and then close right at the support level… which could setup a good place for a bounce… with “could” emphasized!

This is a tough place to be if you aren’t already short.  You Damn sure don’t want to go long when it hits 1080, as it’s way too risky!  So, you hope for a rally into the FOMC meeting, or a rally on Thursday (after Obama yaps his jaws late Wednesday night).

I’m sure our smart President will save us from this mess we’re in… right?  After all, I know how Patriotic he and his wife are… just look closely at how well they honor the Pledge of Allegiance by holding their right hand over their heart (ops… that’s their left hand!  Must be a new trend to use your hand with your wedding ring on it?)

Red