The market seems to be like a dog chasing his tail... going nowhere fast!
What can I say that hasn't already been said? The market is still in the Twilight Zone. No direction has been chosen, so it could go either way at this point. Raymond Merriman has a "Turn Date" window of the 18th-21st... which direction is unknown. Do we have Santa rally from these ridiculous highs, or do will sell off a little? I don't know at this point.
Fund managers will most likely buy and sell some stocks to "pretty up" their portfolios for their clients. That's typical for the end of the year, (which might also be the main reason behind the Santa Rally?). But, at these highs... maybe they would rather sell and lock in the gains? After all, they've had a big rally up from the March lows.
I think a pullback next week to 105 spy, and then a rally to the end of year would be the logical thing to do. But, what do I know? I'm just a lowly peon looking for crumbs from my master... Lord Godman Sachs. (Kidding of course). Needless to say... I'm not expecting that to happen, but it should!
From a technical standpoint, we had a black candle... which means a big reversal could be coming! Will it come next week? Maybe, but I can't see anymore then a 5% correction down, and then back up to end the year. We may not get any sell off, as the light volume makes it easy to control the market. I'm not expecting much, but if we rally to the 112.30-112.50 spy level this week (possible intraday level of 113.00 even number hit), I will go short for next week.
The only way I can see it happening is for some big volume to come back into the market, which the PPT (or whoever) can't control. Then the technicals would take over and a nice sell off would occur. Maybe another scare like Dubai, or something else to spook the market before Christmas. Otherwise, everyone will be off for the holiday's and the only trading left is being done by computers. (Maybe my previous post of Forest Gump playing ping pong should have been the 80's computer game Pong?)
If not, then I'll probably just sit it out until next year. I just can't go long at these level. It's like being the last person to arrive at the party... chances are good that you'll be going home alone (or waking up the next morning beside someone that you don't recognize).
Sometimes I have written these posts a day earlier... at least part of the post. It's now 9:26pm on Monday night, and I've already written my Monday Night post earlier today, so this will be for Tuesday. I feel like crap today, as I have a headache and a sore throat. I think this weather is getting too me?
Anyway, I wanted to get these thoughts down before I forget them, and then post another boring post on Tuesday. Watching a video from one of the paid services I subscribe too, they mention how many people go to sleep during the holiday's and then come back and lose money because they're "out of sync" with the market.
I feel the same way. I want to just take the rest of the year off, as I'm sick of this sideways trend-less market. You can't make money in a trend-less market, unless you are a day trader... which I'm not. I buy options and hold for a few days to a few weeks. But, you can't make any money on these small up and down moves in the market right now. I guess you could if you were able to track the market all day, but I pop in an out to see where it's at, which makes it really hard to catch the high or low of these 2-3 day moves.
Then you get killed with time decay if you miss the exit. It's been really hard lately, even when I can pinpoint the support or resistance level that the market will turn at. For an option trader to make any money, you have to be in a trending market. Rarely does anyone catch the exact high or low of any market, so you are forced to wait for conformation of a new trend before entering the trade.
That means that you might miss a good portion of the move, if the trend isn't really a trend... but instead just a short lived rally or correction. I've been really frustrated lately, as you might be able to tell from my posts and comments. I believe this is exactly what they plan too do... frustrate all the bears, until there are NO more bears left. I'm almost at that point now.
But, after watching a video about "people falling asleep" during holiday season's, I realized that's exactly when they will take the market down. Remember Thanksgiving? While everyone was enjoying the holiday the market tanked on the Dubai news. Today, they rallied on the Dubai news, as they are getting a $10 Billion Dollar bailout.
My question is... could some other event bring the market down 20-30 points over night? All the bears are asleep now, so the market maker's wouldn't have to give any money to them. But, they could take the money from the fat gloating bulls with a sharp pull back. Wouldn't that be the perfect scenario... screw the bulls, and not give any to the bears?
The ol' "Heads they win, Tails you lose" game. I know that I personally missed out on the Thanksgiving down move. I was planning on going short that Friday, and they gapped it down a day before... preventing me from making any money of course. Crooked? Yes... of course it is! Again, we are playing against gangsters, (or should I say banksters?).
Regardless of how crooked it is, we all know it's a rigged game. We just have to learn how to cheat like they do... which evens the odds, and gives us a fair chance. Looking at the open interest in the SPY, I see that the 108 level would cause the most pain to option holders for the current month of December. Now, does that mean that it will close at 108? Maybe, maybe not? It only means that all strike prices above and below would cost the market makers more money to pay them out.
It's not 100% in their control, but while we will have such light volume it is possible move the market toward the price that benefits them the most. I really don't see a sell off that far, but that's exactly what I thought around Thanksgiving too. Some surprise event could spark a quick sell off, then the big Christmas/Santa Claus rally would then occur until the end of the year.
The level to look for on the way up is at 1126 SPX, which is about the same as 112.30-112.50 SPY. This will be an excellent level to short at, as it's got huge resistance there... dating back to the 2007 highs. Since everyone and their brother is expecting the usual Christmas Rally... what if we don't get one? Right now the percent of Bears in the market is lower then the October 2007 highs... coming in at only 16.4% (Source: Investors Intelligence)! That's a lot of Bears that are asleep!
All I'm saying is that we... meaning myself and all of you traders that read this blog and others, had better stay awake! The enemy always attacks when you are most vulnerable... AKA - Asleep! Yes, this sucks... as we would all like to take the holiday's off and spend it with our family. Of course that's exactly what they want you to do. Then you can come back next year and miss a big move in the market.
Believe me... these people are trying to take our money from us every chance they get. Stay awake, and watch your support and resistance levels. I think a big move is coming soon, and it will catch most bears off guard again.
Does this game look familar to you? It's Forest Gump playing Ping Pong between 1120 and 1085!
Since November 11th, we have rallied up to 1108, down to 1085, back up to 1114, and back down to about 1086, then back up to 1113, and then down to 1084, and back up to 1119, and back down to 1085, and back up to 1114... whew, I getting sick watching! My heading is spinning, and I think I'm goning to vomit now. Someone please get me off this ride!
At this point I couldn't even begin to tell you where the rest of the week will go? I can't even forecast tomorrow! I will say again that we are very overbought and should correct back down... so I guess I should go long, duh! WTF? I think I'll just stay out the market until the beginning of next year. You can't compete against someone as good as Forest Gump (AKA... Goldman Sucks/Government Sachs).
This has been any extremely frustrating week for all bears... especially myself. Although I'll be a bull when the market points in that direction, I like being a bear better. But don't get me wrong... I'll go long if there's a good chance to make some money on it.
Problem is... this market should be heading down, but it's not? How can you go long when the technicals point down on so many different charts. Very few charts point up, and if they do... they are overridden by the larger time frame. If a 60 minute chart is bullish, but the daily is bearish, then you shouldn't take a long position (unless you are a day trader only), as the daily chart over rules the 60 minute chart.
Going into next week, the market could actually continue this insane sideways up and down movement... all the way to option expiration. We are within just a few cents of hitting the 200ma on the USO (oil), which has very high odds of a bounce for at least 2-3 days. That will give the S&P an "up" move as the big oil companies, (that are in the s&p) will rally from the bounce up. This could stop any big down move in the market.
Then there is Gold. It is also getting ready to hit the 200ma too, which should cause a nice bounce up. That will again support the s&p, and prevent any big down move. It means that the market will be in this Twilight Zone as it bounces up and down, until gold and oil has their bounce done, and are ready to rollover to the down side again.
As for gold, I'm very bullish on it long term and think that it will explode next year. Oil is a different story, as demand has too come back for it to go higher again. I'm neutral on oil long term, but short term I'm looking for a bounce. Now for the wildcard... the dollar!
The dollar had another strong day Friday as it finally broke out of it's bullish consolidation trading pattern. The UUP (dollar) closed at 22.68, up 18 cents for the day. Another big move on Monday could cause a sell off in the market. The UUP will hit heavy resistance at 23.00, (which, by the way, a move from 22.68 to 23.00 is considered a big move in it). If the UUP hit's 23.00, the market should sell off hard, but it could be muted by oil and gold.
I'll be looking for some movement down next week, but I'm sure it will just bounce around some more... and not breakout of the zone yet. I'll be selling my shorts, at a loss of course, whenever I get a decent move down. If my positions weren't options, I might be able to get out without much of a loss. But, options get killed with time decay, and that's just exactly what the market makers want... to take you're money.
I have too say that I'm really getting tired of all the manipulation done by the government to keep the market up, and not let it correct naturally. It will come back to haunt them later on. In the meantime, I might have better success trading oil or gold, as I expect a huge bull market to occur in gold over the coming years. Oil... I'm not sure about long term, but both are ready for a bounce up next week.
Anyway, at this point, I don't see my prior forecast of a move down to 1070 area coming true. The S&P has so many different backup markets supporting it that any one of them can keep it up... (as long as we continue to have light volume of course). I don't see any heavy volume coming into the market until next year, after the holiday's. That means that commodities (oil), financials, gold, or the dollar can come into the rescue and keep the market up at any time.
Look forward... the only way I see the market falling hard at this point is for the dollar to get a huge rally up going, the financials to collapse, oil to fall hard on weak demand and large inventories, and gold to fall as investors flee to the dollar for safety. I do see all that happening next year, but as is for next week... it's unlikely.
Overall, I'm very disappointed, as it seems like all technical analysis's on the S&P is worthless... as they simply will not let is correct naturally. I spend a lot of time studying the market and where it should go, and I believe that it would have went there if I had made my forecast last year, or anytime before March of this year. I say that because of the massive printing of money that has been thrown into the market has changed all the rules.
You can't play poker fairly with someone who just prints more money to bet you whenever they run out. How can you ever beat them, even with a royal straight flush (spade high of course), by betting everything you have (as you can't lose on a royal straight flush)... only to have them go print some more money and raise the bet beyond what you have? That's what it feels like too me when I pick the right direction, but the time decay, and quick rally back moves, prevent me from getting out with a profit in time. You are forced to be a day trader only, which I'm not, as I don't have access to a computer all day... nor could I watch it all day, even if I did!
I'm sure many of you are also frustrated too. I know that there has always been some degree of manipulation in the market... but never to the degree that's it's at currently. They couldn't control the markets this much in the past, as they weren't printing trillions of dollars out of thin air... too be used to buy up the market, instead of stimulate the economy... of course.
Well, that about wraps it up, as I can't think of anything else too bitch about (I can really... but it's not worth wasting your time on, or mine!). If you plan on playing the market next week, you might look to buy gold once it hits it's 200ma around 108 on the GLD. It should rally back up to the 50ma around 113 currently.
Sorry my orginal forecast was wrong (or will be, as I now don't see it being accurate next week). The only way it could come true is for a huge rally in the dollar, which could (maybe) produce a big (20-30 points) down day in the market. Could we have a "Black Monday"? It's possible, but not likely. I just want to throw that out there, as technicals could easily support a "Black Monday", but oil and gold could stop it.
If... by some long shot, it does happen, I'd definitely be expecting it to rally back up before Friday. The "Current Pain" is now at 110 spy, so I don't expect any sell off to continue down. If you see it... get out of all shorts asap, as a rally back up will most likely follow it.
Looks like we got our up day... now what? Well, that's a tough one, as the dollar, oil, gold, and the S&P are "out of sync" now.
Here's what usually happens...
The dollar sells off, gold goes up, oil goes up, and the S&P goes up. It's not always like that, as oil sometimes doesn't follow the dollar exactly, but it's close. You see, when the dollar is lower, the exchange rate to and from other currencies will give a net effect of oil companies being more profitable.
Of course gold will go up when the dollar goes down, as it's a hedge against inflation, and a "flight to safety". All other commodities will also benefit with a weak dollar, but...
Here's the problem...
Oil has been selling off hard lately with about 8-9 down days in a row. It's due for a bounce, as it's coming into some serious support levels. This doesn't bod well with the dollar... that is if we want the dollar to continue to rally up. If oil bounces up, then most likely the dollar will continue to consolidate sideways for a few more days, and then break out big to the upside.
They are at odds with each other, so either the dollar will patiently wait for oil to get a little bounce (while trading sideways for awhile longer), or the dollar will go ahead and break up out of it's consolidation zone, which will put oil down through the support level and onto another support level.
I just don't see that happening with 8-9 days down already with oil. Now, if it was just oil that was ready for a bounce, then maybe I say that the dollar would rally hard tomorrow, but there's also gold.
It is coming into some major support and should bounce up too. Both gold and oil are ready for a bounce, which means that the dollar is going to be hard pressed to break out to the upside until both of those two finish their bounce. I don't see the dollar selling off hard, but instead just a continued sideways to down movement, while everyone gets back in sync together again.
Ok...
So how does this affect the S&P, since the dollar and the market seem to be on opposite sides of the coin? Well, I think it means that we could continue to chop around here for another day or two. Yes, it could just stay in this zone of option death until option expiration next week.
That's the worst case scenario, and one I hope doesn't play out as I added to my short position today. Technically speaking the market is still looking very weak, and should fall 20-30 points (spx) in a quick one or two day period. But will it? Or will it just suck the last dime out of the option traders until opx, and then drop the market?
I don't know the answer yet, but I'm short and hoping for some "Sh#t to Hit the Fan" tomorrow or over the weekend, as that might be the only way to get this stupid market to move out of the death zone and into the bear zone.
As for tomorrow, if they cook the retail sales numbers, then expect another day like today. Remember, volume will be light unless something big in the news happens. That means that the PPT or whoever can prop up the market for another day.
Bottom line...
Anything can happen as no clear direction can be pinpointed for tomorrow. Some technicals point down, and others up. Oil, Gold, S&P, and the Dollar are out of sync. A big news event (that's bad) should cause a big sell off. No news, or good news should produce a slight up to flat day, which just keeps the market in the holding pattern a little longer.
So, in this case... we should think back to when we were children and hated to go to school. What would we do in the winter time if we didn't want to go to class the next day? Pray for Snow of Course!
Well maybe it's time to Pray for Bad News... if you're short of course?
Once again, the market stays afloat. I don't know how many fingers Bernanke and team have, but it's seems that they managed to keep the dam from busting one more time! I guess Spain isn't a big enough country to be of enough significance to cause any panic in the market, as they had their credit rating lower today, but the market ignored it.
I've never seen such a long time period where the market just won't go down. It's like Rocky Balboa or something... you keep punching it, but it keeps getting back up! It's time to retire Rocky! Give it up man! You're old and tired, let someone else step up and take over... like the "BEARS" for God's Sake! These Bullish Bulls are too full of Bullshit, and need a good lesson given too them. Sheessh, I'm getting tired of working so hard just to get the crooked government to come in take my money again.
Argggh...
This market should already be on it's way down, but I think they might hold us in this stupid sideways channel until the end of year, or decade... or maybe until every last Bear is dead! Hell, I don't know? Regardless, once again I'm staying short! Time definitely isn't on my side, as options' expiration is next Friday, but I still see a fall coming before then... if this dead horse will every die?
Moving on...
The Financials are now getting bought up as the money moves out of commodities and into the banks again. That, plus the constant selling of the dollar (from "The Three Stooges" of course) seemed to get the market back up again. I borrowed the chart below from "The Chart Pattern Trader", and once again I added my thoughts in Yellow.
I'm looking for a possible break out (but just another "Head Fake") of the top downward sloping trend line tomorrow, and then a big gap down by Thursday or Friday to take out the 1085 support line, and to fall all the way to the bottom downward sloping trend line... which should be around 1070 by then. But, for tomorrow... we have to wait for the MACD to rise up above the zero level and curl back lower by Thursday or Friday.
It should be a lower tower then the one just before it, around December the first. This will create a negative divergence, and that along with other indicators should cause the gap down to occur. Of course some future news event will be blamed for it, but it's coming... with or without the news.
Volume picked up today to 187 million shares traded on the SPY, but still under the 200 million, (or above) that usually produces a DOWN day. That's 2 day's that the market fell with light volume. What do you think will happen with heavy volume? Yeah... now you're getting exciting!
I expect some news out in the next few days to be reason for the big fall, but it's really just the technicals that are pointing down. However, people trade with their emotions, so a bad jobs number or some other news could be just the reason to sell hard. Regardless of what news the media blames for the coming fall, I don't care... I'm just glad to see the technicals starting to work again.
As for tomorrow...
We could pause or go up a little during the morning, and then sell off in the afternoon. If the market closes tomorrow below the low today at 109.27 spy/1088.61 spx, then that will confirm the move and the market should fall quickly to 107.65 spy-108.00 area. At that point, we should have a bounce.
We could push down to that level on Friday, and then rally back up next Monday for option expiration. I'm told that the "Current Pain" is 109 spy for this opx. The difference in current pain and option pain is that current pain only takes into account the last month of option purchases, whereas the option pain list all the purchases since the option became available. That could be over a year ago... which really doesn't make the market move to that area as those positions are too old. The last 30 days of option purchases is more accurate.
So, it's possible that we close next Friday around 109 spy. I suspect we will go down to the 107.65 level, (or possible lower?), and then back up for option expiration. However, we could just bust on through to the 104 level before a bounce? Any thing can happen at this point, so let's just hold on and see what happens over the next few days, as we are headed down for now.
With only 128 million shares of the SPY traded today you would expect a huge UP day... but it was DOWN! This is a big change in the market, and could make a big difference in the coming days and weeks. Apple was down, Goldman Sachs was down, JP Morgan was down, Oil (USO) was down, Gold opened down, and of course the dollar was down too... but recovered later.
The only reason the dollar (UUP) was down... was again due to government manipulation. Bernanke spoke and the dollar fell... coincidence? I think not!
This market is getting ready to fall hard folks! Stay short! Tuesday could be another pause day as the dollar tries to break overhead resistance. Once it does... the market could quickly fall to the 1070 area within a couple of days!
Everything is looking negative right now for the market. All the leaders... the Financials, Commodities, Gold, and the Technology are all struggling to rise up. The XLF (banking index) has been falling for several weeks now. Gold dropped huge on Friday and gaped down today. It may recover as it isn't viewed like other commodities because people flock too it when fear comes into the market.
But, the leader in technology... Apple, has been falling hard too. Oil (USO) broke out of the lower trend line in the downward channel it's been in. If it closes below it tomorrow then it will then be confirmed, and will fall hard to the next support levels. If oil can't support the S&P500, and the financials can't either... then who will?
Tech can't do it, Gold can't do it... what's left? NOTHING! The market is hanging on by a thread, and the "Three Stooges" can only delay it's demise.
It's coming down folks! Again, it might not be tomorrow... but Wednesday through Friday should be ugly! I just can't see any possible way to hold it up with all your leaders falling.
In the past, when one sector would struggle to make new highs, the other sectors would step up to the plate and rally the market. We have seen it time and time again. The financials start to fall and then Exxon would rally, bringing the market up. Or, technology (like Apple) would rally the market while oil took a breather.
It looks too me like all the big players are tired and ready to take a break. Simply put... the market is out of steam and ready to fall. I'm staying short! End of story...
First we gap up huge on the low jobs number, only to finally hit the master level of resistance that I'll been talking about for weeks now... 1119.13 (SPX)/112.38 (SPY). Then, we fall hard as the dollar gets a huge squeeze. Back up again to about the 20ma intraday level, then down one more time to put in a double bottom, and finally back up to about the 50% fib. intraday level to close out the day. Are we done now? Are the Bulls finally happy? I think so!
Monday should be a "pause" day (basically flat), as the dollar (which controls the market) hit a resistance level, will probably sell off a little bit to form a "Bullish Flag Pattern". That means that the market will head lower next week as I forecasted on last week's "Weekend Update" post. This now looks like Scenario ONE is going to play out. Here's the chart again, (from last week)...
Our first big move going down should take us to the gap fill area around 1070 spx. I believe we will break the 1085 level sometime this week, so I wouldn't be buying on any hit of that level, thinking that it's a big support level. Keep in mind that every time you hit a support or resistance level, it becomes weaker with every hit. Looking back, I see the first hit on November 12th-13th, then again on 20th, and a third time on the 27th.
That last one bust through the level and dipped to 1083.74 intraday. This will be the fourth hit of the 1085 spx level, and I believe it will break this time around. I think we will hit the 1070 level, and then bounce back up to probably the 1085 level as a "back test". From there I'm looking for more downside to about 1030-1040 area. I still believe this will happen before option expiration. (By the way, the "Option Pain" level is 102 SPY for December OPX)
Sidetrack...
There are a lot of great traders out there that many people don't even know about. Most don't publish blogs, as they are too busy trading to add all the extra work and headaches you get when you decide to publish a blog. I myself only started this blog to post my thoughts on the market and the economic, as I didn't want to make these "sometimes" long story's into posts or comments on other peoples' blog.
Although many people don't mind reading long posts, some people get annoyed with it... and rightfully so! Some posters, including myself, will have a moment that they need to air out their frustrations in some long bitching, and complaining post that has nothing to do with where the market is going, and of very little help to other's reading the blog.
So, I decided I'd put up my own blog, and that way I could bitch and complain all I wanted too... about Goldman Sucks, the government, the 3 stooges (Obama, Geithner, Bernanke), or anything else I felt like "airing it out" about. Well, that was my original reason for creating this blog. But, it's seems that now that I have that freedom, I don't post too much about it... but instead I post about where the market is headed. Isn't life funny sometimes?
Back on track...
In closing I am still short and will stay that way until OPX if needed. I will close out some shorts once we hit the 1070 level, and reload on the bounce. That's the plan for now, and it's of course subject to change. One final thing, you and I... meaning everyone who reads this post, should go over to The Chart Pattern Trader and watch Ron Walker's latest video. It's excellent in my opinion, and will definitely open your eye's a little if you think that this market is going higher next year.
Red
P.S. If some of you were on this page between 8-8:30 pm Sunday night, you may have seen the blog change back to the default theme. Sorry about that. I updated the blog and it erased my pictures. Stupid wordpress... Arrgggh!
In several of my weekend updates I have spoken about the market wanting to go to the 112.30-112.50 spy area. This area was almost reached today with an intraday high at 112.18 (spy). Will that be enough to satisfy the market? I believe it's close enough, and that the high for the year is now in.
Unless the jobs number Friday is really great, I don't see anymore rallying by up to try again. The market sold off hard the last hour of the day, as many are expecting bad numbers tomorrow. Comments made warn of weak numbers, and that should stop any rally back up to 112.18, or higher.
Of course it could rally some in the morning, but I expect any rally to be sold back down hard. We could simply gap down on bad numbers, rally back a little, and then sell off into the close. Regardless of whether it rallies up in the morning or gaps down, the end result should be the same... a lower close!
I believe this to be the start of the move down that will take us to 104 spy by option expiration. I posted on my weekend update that I see a move down to the 107 area for gap fill first, then a rally back up to under the lower support level around 1085 (SPX), and finally a push down to the 104 level (1035 spx) by OPX.
I know many people don't think that could happen, but I believe it fool a lot of traders. Several things are supporting this forecast, with one being the continued sell off in the banking stocks. Goldman, JPM, Chase, Citi, and others have been going down for over a week now.
Next you have the dollar and the fact that it appears to have found some type of temporary bottom here. It seemed to "not want to go lower" today, even though I'm sure the boys in Washington were trying to do so. Let's not forget about the SPX making a Triple Top too.
Gold also seem ready to pullback now. Everything is now pointing to another 5% correction in the market over the next 2 weeks. If the dollar gets a decent bid the people who are short, and there's a whole lot of them, are going to get caught in a huge short squeeze. Gold will fall, and so will the market.
Too many people are thinking that we are going higher, without any pullback. I don't believe it. Remember, the market makers like to take everyone's money... not just the bears! Bulls had better sell now, before the stampede start...
What am I going to say today? The weather was Hot and Sunny out today... just like it was yesterday, and the day before that, and that, etc... This is getting really old now. I feel like I'm in the movie Ground Hog Day! I wake up and it's the same thing today as yesterday.
Will it every end? I don't know? I'm still short and looking for a sell off to occur soon... if I don't get old and gray waiting on it.
We rallied back up again today, taking out many stops as Mr. Topstep explains above. This is what I said might happen in my weekend post. Looks like Scenario One is now in play. Let's see if the down move starts tomorrow or Thursday?
As I said yesterday, I'm still short. This was nothing more then a "Bear Squeeze", designed to scare everyone out. I'm not scared! Every major technical is still pointing down. I'm sticking this one out, as I'm looking for a move down to 104.00 SPY before OPX. I expect to see it start this week. It could only be a few days, but a week is probably needed to get down to 104.00 spy.
In order to confirm the down move from Friday we needed a lower low to be put in today. That didn't happen as light volume floated the market higher as I expected it might. I posted on my weekend post that Monday could be an UP down, and sure enough... it was!
The volume was less then the 200 million or more needed to produce a DOWN day, coming in at around 160 million shares traded on the SPY. What does this mean? It means that the market could trade sideways, up, or down tomorrow. No direction has been chosen yet.
We may simply chop around here all week, as it's hard to get any real selling when the Fed keeps manipulating the market by selling the dollar. On the other hand, the market can't seem to get over the 109.68 spy to 110.38 (Great Wall of China) area on a conformation close. That means 2 days above it, or below it, with the 2nd day closing higher or lower then the first day.
I'm still bearish as the daily charts are pointing down, as well as the weekly and many other indicators that are now bearish. I will hold my position as I believe the market will break to the down side some time this week. I do expect some bigger volume later this week, as there is lots of news out this week.
I'm still inclined to believe that the news must be really positive to get a big rally going, and on the other side... a really negative news event to cause more selling. Another news event like Dubai could come out this week. I seriously doubt that "everything is ok now". Traders aren't stupid. They are waiting for something really good... or really bad to happen.
Otherwise, they will simply day trade above and below the Great Wall of China... until something happens to cause a big break out! I think it will be something negative, and that's how I'm positioned. I continue to believe that a sell off needs to occur before any successful rally above the great wall will happen.
Has the market really topped? What's in store for next week? Those are the two biggest questions that are going through my mind right now. To answer the first question... I'm not sure yet? It all depends on how far down we go in the next week or so. If we take out the 1030 SPX level, then I will have to say that the market has most likely topped.
Now... with that being said, I don't think we will take it out on this coming down move. Christmas is coming up soon, and that means that traders will be going on vacation. This will leave the market with very light volume... and we all know that light volume usually equals an UP market.
Regardless of the light volume or not, the end of December is usually Bullish... which is why they call it a "Christmas or Santa Claus Rally". But, for the nearer term... meaning next week, I believe we are headed down. I'm going to present 2 different Scenario's, but both are pointing down.
Scenario ONE
We open Monday and rally up a little more as Monday's have been bullish lately, plus some of the traders will still be out for the holiday. Light volume is also common on Monday's. Let's not forget that the governments around the world have had the entire weekend to come up with a plan to ease the fears of default over in Dubai. Trust on this one... they will announce something positive to curb anymore heavy selling.
However, the rest of the week should have lots of economic news coming out... and most of it should be negative. Any rally on Monday should be shorted as I expect the rest of the week to sell off. If it's really bad, then the target is 1030-1035 SPX. The "not so bad news" target is 1045-1050 SPX. If we rally up on Monday, then the 1045-1050 SPX area is where I'd expect the low to be this week.
Scenario TWO
We continue down on Monday to the 1070 area to fill the gap, then rally back up on Tuesday to hit the 1085 support turned resistance level. Then fall the rest of the week to 1030-1035 SPX. This is the most bearish forecast, and I really don't see it happening. But, anything is possible?
Ok, as you can see... both Scenario's call for the market to be quite a bit lower toward the end of this week. As I previously stated... I'm am now short the market, and will remain short regardless of how high the possible rally on Monday is. I'm sure that the market makers will try to scare all the shorts out of the market by taking it as high as possible.
Come to think of it... they probably have a lot of people short right now, which could be the fuel they need for a nice "short squeeze" on Monday. Again, I will ride out any push higher! The maximum that I can see is for one big "Hell Mary" push to touch the 1120 level. I don't really see it happening, but it's possible.
Looking forward, I think the more probable scenario is for a nice sell off this week, and then a rally next week, that could simply form a lower high, or possibly a new high up to that 1120 level. I don't think they will make it this week. Simply put, this week should be down, and next week should rally back up.
Brief post tonight. I went short today as I expect next week to have some decent selling. I'll have a weekend post update by late Sunday night. Have a great weekend.
The dollar had a huge gap down on Wednesday, but the market didn't really rally up that much? Could a big "disconnet" between the two be starting? The market should have been up 100-150 Dow points on such a big sell-off in the dollar. But, it struggled to make it too 1110 SPX? Something doesn't smell right, that's for sure.
Regardless of whether we make to 112.30-112.50 spy, or not, I still believe the market is ready to tank next week. So, I will take a short position Friday even if it doesn't make it to that area.
Cancel that Post... NEW IMPORTANT INFORMATION!
WOW! Futures TANK over Dubai...
Looks like I missed my chance to go short on Friday, as the S&P Futures tanked 23.75 points to 1085.00, in response to Dubai's Credit-Default's.
This is HUGE folks, as it clearly tells me that "The Top" is almost surely in! I just can't see them making it back up, and going above the current high. I think Primary Wave 3 has now started! I'm trying not to bitch too much, but I'm really quite angry right now, as they did this on a holiday when the markets were closed. That keeps the bears from jumping on board and making some money. Never forget that the Market Makers are evil and will alway try to keep you and me from making any profit.
I'm sure they were already positioned short, and will profit nicely while most of us have missed the big move down. So what now? Do you go short on Friday, and try to catch this falling knife? I can't answer that question, as I'm very frustrated right now, and angry at myself for not seeing the signs on the wall yesterday.
You definitely don't want to go long at this point. It looks like the best play is to wait for a bounce back up and then go short. We could be looking a some really big selling the next few days folks! If you are already short... hang on tight as this roller-coaster is going straight down!
Where this ride stops is any one's guess? There is support at the 1070 gap area, and then 1040. If we break through the 1030 intraday low from the 1st of this month... we are in for a whole lot of trouble. That's the level that Mr. TopStep said that needed to be broken to send this market back down to the 900 area. Here is that video again... and by the way, that's his latest video. I'll put up his next one when he does it.
The post I was going to do, which is crossed out above, was going to talk about how the banks weren't rallying up with the market these last few days. In fact, they have been selling off quite a bit. Since the financials were the one's who started this whole rally up from March, it only seems logical that they will be the one's who cause it to crash back down too.
Moving on...
I think there might be a small bounce Friday (I hope), that will allow me to get into a short position. Monday could be brutal as traders come back from vacation to read the bad news in Dubai. As they always say... "The toughest time to go short is after it starts falling without you". Just like going long is tough after it has already started to rally.
If this downturn is anything like the rally up, then there won't be many bounces to get short from. Remember how many people were waiting for a 38.2% pullback (or any normal fib level) to happen before they were going to go long. From the March low to the high, all the pullbacks were about 5%... never giving any bulls a chance to get on the rally up, or any bears a chance to switch sides and profit on the rally too.
They never allowed us any chance to go long a make a decent profit. They always wanted people to buy the high, and hope it would go higher. It's just like now... we will have to go short after the big fall, or wait for a bounce that may not happen as technicals indicate they should.
Don't get trapped with "in the box thinking"...
I really need to "think outside box" on this one, as once they have every bear thinking that "it's just a pullback before another rally higher"... that's when it really is Primary Wave 3! I remember thinking that same thing with P2 (Primary Wave 2...up, of course). I just thought that every up move was just a bounce before the sell-off continued... but it never happened!
P2 had begun, and most bears had no clue! Every bear thought they were still in P1 down, and of course none of the bulls went long either, as they too thought we were still in P1 down. Everyone expected the market to continue lower then the 667 spx low... but it didn't.
Now, everyone is expecting 1120 area as the high... will history repeat itself? I think it will. I think this is the start of P3 down, and any rally back up will not take out the current high of 1114. This Dubai issue was release on Thanksgiving for a reason folks! I promise you that our government and their's planned out every detail possible, before making it known to the public.
This "Cat and Mouse" game that our government, and every government around the world plays, is going to spiral out of control once it collapses... and that's really soon I believe. As I said above, I think we will find support at the 1070 gap area, and then 1040. After that, well... it's all bad news! Breaking the intraday low around 1030, will put the finally nail in the coffin of what the P2 top is, as P2 will be officially DONE!
Bring on P3...
Sorry this post is so long, but sometimes peoples' thoughts are more important then just a bunch of chart's and technical data. Anna, over at Hot Option Babe, (my close friend... by the way) stated to me over the phone yesterday that my posts are too long and she gets lost and falls asleep reading them. We'll if you've made it this far, then thanks for not falling asleep on me.
I try to entertain my reader's and as well as inform them. Lot's of other great blogs to read for TA's, Elliottwave, Astrology, etc... This blog is about putting all the pieces together and trying to make some money from it. Since "People" are the driving force behind the buying and selling of this market, I have to try and figure out what they are thinking ahead of time.
Remember this... ultimately, after all the technical analysis's, elliottwave counts, fib retracement levels predicted, and astro turn dates discovered... people still make decision's based on "Fear" and "Greed"! So, you have to ask yourself this question...
What is everyone going to do when the Dubai news becomes well known by the public and all the other traders? Do I think that next week will bring more good news or bad news? If I'm already worried about the Dubai problem, am I likely to view next weeks' news as positive or negative, if it simply comes in "as expected"?
I remember how all the news that came out during the March rally up was still bad, but some how it was viewed as "less bad"... which gave the market the "juice" to rally some more. Now... let's look back closer at that time period some. Was the market over bought or over sold back then? It was extremely over sold, from all TA's and Fib levels, and Elliottwave counts. By all means, it could have, and should have turned back up for awhile, to rally and work off some of the over sold conditions.
Now, let's look at today. Would you say that we are over sold or over bought? Clearly most people will agree that we are over bought (from a longer term outlook, like the weekly charts). At this point, any news that is released... even the exact same news as in March, could now be view as negative. Why? Because we are so over bought now, as opposed to over sold then.
During the rally up, all the news was spun as positive if it was only slightly failing to meet expectations. Now, I think the reverse is going to happen. The news will be spun as negative if it only slightly beats expectations. I believe from here on out... you shouldn't be "buying the dip" as much, but instead "selling the bounce". This is a start of a big change in mood.
I haven't even talked about the dollar yet, but I'll try to keep this short and sweet. Once the falling dollar no longer creates an opposing rally in the market... the rally is over! I think that has already happened here folks. At some point, the dollar collapsing is going to be viewed a negative, and the market will sell-off too. Then when the dollar rallies hard, the market will sell-off there as well. Either way you cut it... the market is screwed!
Rapping up...
Going into tomorrow, I don't like the idea of going short after a big fall, but I'm going to go with my gut on this one and go short sometime tomorrow. Of course I want it to bounce some tomorrow, but if it doesn't then I'm going short anyway.
Of course I missed getting in at the top yesterday, which means I'm not the first person out the door. But instead, it's kind of like being the 10th person to hear the story being passed around, not the first person... but also knowing that there are 100 more people behind you that haven't heard the story yet! What are they going to do on Monday morning?
Think like the retail trader here... does "Fear" ring a bell? In the video above, Mr. TopStep says to "K.I.S.S. it" or "Keep it simple stupid". The market did "seal the deal" at 1108.30 when it closed above it at 1110.63 yesterday. Is it time to "sell the farm"... I believe so!
Happy Thanksgiving to all my America followers. For all others, sorry about not posting last night as it's holiday here in America. I will make a post tonight about what I'm planning for Friday and next week.
Just as I guessed would happen, the market was flat. A sell off in the morning, and then the usual slow grind back up in the late afternoon. This seems to happen day in and day out. Yesterday the market gaped open, and then rallied up some more in the first hour, only to slide back down the rest of the afternoon into the close. The end result was a flat day.
So, ask yourself this question... If this Friday kicks off the big holiday buying season, and the government wants you to believe that the worst is behind us, what do you think the stock market is going to do? Crash? LOL! Not on your life! What do you think a 400-500 point DOW down day would do to the confidence of the shoppers about to go spend a bunch of money on Thanksgiving... and start their Christmas shopping too?
The best we could hope for is about 100 points or so down. But, I seriously doubt that will happen as the market is dead set on making that 50% fib level around 112.30-112.50 spy. If there wasn't any major goal in the cards, then a small down day could occur. However, I believe the news out tomorrow, on the jobs and everything else, will be "cooked". That's right folks... the government will get out their erasers and fudge all the important data tomorrow, so the market will rally some more.
If we don't hit that 50% level tomorrow, then Friday, or even possibly Monday it should be hit. If this market wasn't so controlled by the dollar, (which the government controls completely), then I wouldn't put so much effort into writing and focusing about how the news is spun and the dollar controlled.
The technicals do work, but they can be delayed by the obvious manipulation by the government. Many times when we should actually retrace to a 50% or 61.8% fib level, the government intervenes by dumping the dollar, and the market only sells off to the 38.2% level. This will eventually catch up to the market, as you can only take so many hits of speed before you crash... and you will crash hard!
But, for now, I still say that we will hit the 112.30-112.50 level before any sell off will happen. We might even push a little higher intraday to an even level like 113.00? That will be the ideal place to short for a nice 5% or more pullback in the market. It should last 1-2 weeks, before a Santa Claus rally starts and pushes the market back up some to end the year.
Well, the dollar got pounded Sunday night, and market gaped up big when the market opened Monday morning. I missed this opportunity to profit on this move up, as I didn't get into a long position on Friday. It seems that the market makers don't want to give us little guys a chance to profit, so they gap it open causing us to miss the big move. Of course they would like us to jump on board and chase the tape up, but I'm not falling for that old trick.
Tomorrow should be a pause day, but anything can happen... so I'm setting on the sidelines. Since today put in a double top, that kills the head and shoulder formation. So, the next target up is around 112.30-112.50 spy. Notice that where the market gaped open is about where the market closed today. Just pennies in difference.
The only way to play the tape today was to day trade it. It's not for a swing trader like me. So, I'm now just going to sit and wait for the 112.30-112.50 level to be hit, or for Friday to come. I do believe that they will take it higher to hit that target.
It's the 50% fib level from the 2007 high to the March, 2009 low. This is the perfect time, as the market will be light on volume all week, as traders go on vacation. Everything is looking good for the bulls right now. We all know that the government has been manipulating this market in a HUGE way since the March low this year. What do they want... to trick the average Joe into buying into this recovery, by giving a false impression that the economy is now good. Of course they use the stock market rally as an indicator to lure in more suckers.
Moving on to another reason to push a little higher...
Looking back at previous news releases, I remember that every time an event was released early... it was good. And, everytime they delayed the news release... it was bad. Since this Thursday is Thanksgiving, and the news scheduled out for release on that day is the "Jobs Number"... when would you release it if it was really bad?
Friday of course. It's a half day, which means really light volume as all the traders are already gone for the holiday. So, if it was really... really bad news, you could easily support any selling with the money the PPT gets from the government to buy up the market with. Then, the traders would have too wait until Monday to do anymore selling, which would give the government something to spin as positive on Monday to keep the selling from happening on a bigger scale. Many times a rally could even be produced, as they could buy up the market before the open when only the furures are trading... which is lighter volume and easier to manipulate.
But... that's not what's happening! No, No... they are moving all the news scheduled for Thursday to Wednesday this week. Now, what does that mean, or imply? Well, if I was going to release the news on a day that still has a lot of traders in the pits, and it's a full day, not a half day... I would only do it if it's good news. That way the traders would react and buy up the market on basically the last trading day before the weekend.
That means that it would be the following Monday before all the traders come back, and normal volume returns. Since many of them will take Monday off too, that means that Tuesday December 1st would probably the first big day back with real volume in the market.
That's a perfect way to close the month of November out positive... in a big way. Of course this is all just speculation on my part, as I try to think like they do. It's tough for me to do, as I am a real honest person, so thinking like a dirty rotten scoundrel is not in my nature. But, sometimes you have to waller around in the mud to think like a pig... and believe me, those government thugs are pigs!
Anyway, just like I said in my weekend post, I think we will go sideways to up this week, then down next week. I'm waiting patiently for that magic number to be hit... or just for the week to be over. If 112.30-112.50 is hit this Wednesday, or Friday... whenever basically, I will be going short!
I'll start off by saying that next week should be a boring week, and preferably skipped or simply not played all together. It's a holiday week with Thanksgiving right smack dab in the middle of the week... on a Thursday no less. Instead of falling on a weekend date, where the trading wouldn't be too overly light, it's going to cause very light volume throughout the whole week.
So, what do we know about light volume? It usually means an UP day... that's what. I don't think that any of the news out next week is "market moving", meaning something that traders wait for before going long or short. Couple that with the sell off we just had over the last few days, and you have the making of an UP week.
I believe the whole week will chop around going nowhere. There is now some serious resistance up around the 1100 area. You still have the "Great Wall of China" between 109.68 and 110.34 (spy) that still hasn't been "confirmed" as being pierced through. Remember, we jumped over the entire area by a gap open on the 16th this week.
That was exactly what I said must happen if the bulls wanted to go higher to capture the 1108 spx level... which they did! But, gaping over the area of great resistance means that the resistance is still very much intact, as they haven't went through it to break it down... so too say. Going over it is basically cheating.
So, now that you have been caught, you are now back where you started from... under the great wall of China. To show you how important this level now is, I want you to take a look at the chart below. Notice that we now have a downward sloping trend line to cross, as well as the 50% fib level at 1121.44. There is also the fact that we have now officially closed the gap from October 2008. The only thing left to do is rally to 1121.44 for the exact 50% fib level to be reached. However, that isn't required or necessary, as the 1113.69 high last week is technically "close enough" to be considered the 50% fib level.
So the big question is... what is going to happen next week? Well, I think that the light volume will allow the market to go back up and form a right shoulder as shown on the chart below. Remember, the light volume in the holiday week coming up is one of the reasons that should allow this to happen.
Keep in mind that a choppy/sideways market is great for day traders, but horrible for short term option swing traders. So, how do you play this market next week... if you decide to play it at all? Some of you might want to wait until after next week is over, and get on board the short side the following week... as I expect it to be down hard.
However, if you still want to play it then here is how I plan to do it. I'm looking to purchase deep in the money calls on Monday, once I see that the selling has stopped and the market looks like it is forming a base. I'm expecting Monday to be an UP day, so buying at the open is the idea. Of course, if the futures are down hard in the morning before the open then I'll wait and re-think the position. But, I really don't see that happening right now, as there isn't any news event that can cause more selling before the open on Monday.
Continuing on... The reason for the "deep in the money" call is to avoid the time decay that will occur as the week progress forward. Remember, time is your enemy when buying options, but your friend when selling them. So, a more advanced position to take would be to purchase deep in the money calls and sell at the money calls. This is called a vertical debit call spread. For example...
Buy the FYNLA 105 SPY call option for $5.50 (ask price on Friday's close), and sell the FYNLF 110 SPY call option for $1.92 (bid price on Friday's close). Your cost to do this is the difference between the 2 prices, or $3.58 per option.
Since the closing price of the spy on Friday was 109.43 the 110 call would have 57 cents of actual value in it, and the remaining $1.35 ($1.92-$0.57) is a combination of time and volatility. The VIX, which measures the volatility, is currently pretty low (when compared to the high last year). So, most of that amount is time value. Regardless, the bottom line is this....
Of the entire price of $1.92, only 29.6875% is actual value (57 cents). That means that if the stock didn't move for the entire week the remaining $1.35 in time and volatility value would slowly erode away. Since you sold the option instead of buying it, you would be able to benefit from the decay, as the price to buy back the option, and close the position, would be a lot less.
Now, let's look at the 105 call that you bought. Again, since the closing price of the spy on Friday was 109.43, we simply subract that from the 105 price, and you get $4.43. Since you will be paying $5.50 for the 105 call, the time and volitility value of the option is the remaining amount... which is $1.07.
Now, that means that 80.54% of the value of the option is "real actual value", and the remain 19.45% is time and volitility value. What does all this mean? It means that as the week progresses forward, and the market goes sideways or slightly up... your option doesn't lose much value, but the one you sold did! And that's what you want it to do, so you can buy it back at a cheaper price... and keep the difference of course.
This is really about the safest way I can think of to play a market that is going sideways or slowly up. Time will finally be your friend, not your enemy. Of course if the market goes down, then you will be hurt the most... but that's the risk we all take.
Red
P.S. Per request... here is the latest Mr. TopNotch video. I haven't posted any as he hasn't done one since the 12th. Anyway, here it is again.
