Are we in the Twight Zone?
This has been any extremely frustrating week for all bears... especially myself. Â Although I'll be a bull when the market points in that direction, I like being a bear better. Â 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. Â It is also getting ready to hit the 200ma too, which should cause a nice bounce up. Â That will again support the s&p, and prevent any big down move. Â 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. Â Oil is a different story, as demand has too come back for it to go higher again. Â I'm neutral on oil long term, but short term I'm looking for a bounce. Â 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. Â The UUP (dollar) closed at 22.68, up 18 cents for the day. Â Another big move on Monday could cause a sell off in the market. Â 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). Â 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. Â I'll be selling my shorts, at a loss of course, whenever I get a decent move down. Â If my positions weren't options, I might be able to get out without much of a loss. Â 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. Â 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). Â I don't see any heavy volume coming into the market until next year, after the holiday's. Â 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.
Red
Hey Red,
Thanks for sharing your market updates and thoughts.
I am from the O'Neils school of thinking that the market is a great, collective force that small individual investors simply have to listen and follow – no argument, no predictions, no bitching etc (unless one is the head of $10 billion hedge fund operation!).
So I was skeptical about this government manipulation theory. How does it work? Who is buying to keep it artificially high? May be we can follow the trail of those stocks where this money is pumped into? Or is it limited to currency weakness through excessive money supply, which indirectly inflate stock/commodity prices?
If it is indeed the case where government can have such control, then there is no better time to have such control than now in seeing the markets propped up – at least until the State Of the Union address in January, through continued policy announcements of some sort. Now I'm turning into a believer 🙂
I wish it was that way MS. But unfortunately it isn't. I'm sure heard on the news earlier this year about Goldman Sachs getting their computer trading program stolen. It was used to buy and sell the market based on what everyone else was doing.
They had their phone lines tapped into the trading floors computers and were able to see the new orders coming in before they were executed. They would then take a position before those orders, and benefit from them as the market then moved in that direction.
It worked in milliseconds, but it was basically like seeing the hands of all the card players sitting at the table before they made their bets. You could adjust your bet accordingly. Crooked and illegal of course.
But, they have many former employee's in the government to protect them… including Tim Giethner, and Ben Bernanke.
Goldman has been receiving money from the government on a weekly basis, every since the March lows. Goldman is the “PPT” (Plunge Protection Team)!
Ronald Regan created the PPT after the 1987 crash. It was supposed too be used to prop up the market in case of another crash. It has since been used to “Control” the market direction.
Now, it wouldn't be so bad if they hadn't got a huge raise in March. In the past, the amount of money given to the PPT was truly small, in comparison to today. Mole, over at EvilSpeculator.com actually charted the amount going into Goldman (the PPT).
The last I read it was 3-5 Billion each week. I read somewhere that Obama printed more money in first 90 days then our country has had in existence since it began in 1776.
Where did all that money go? Into the stock market, and into the pockets of a lot of crooked people. Huge Bonuses didn't come from actually making a profit, but by buying up your own stock, making it look profitable.
It's always been rigged MS, but now they an unlimited supply of money to back their evil plans. You could play the game before March as they didn't have the funds to prop up a huge volume day (and they really still don't), but light volume days are totally in their control.
Don't expect any technical's to work on light volume days, as buy programs almost always come in at the end of the day to prop up the market, preventing it from any natural correction.
When you constantly prevent something from naturally correcting, it will eventually crash huge! That's what they are doing, and it's not what the originally PPT was designed to do. They were suppose too be used “Only” for an emergency, not daily manipulation.
Anyway… it's real my friend, but all we can do is to try to figure out the next move, and be there to profit from it. Next year should give us the large volume we need, so this market will soon find it's “real” direction.
Red
Good evening well i hope we get a lil selloff overnight maybe low of day around open then Santa Clause Rally until Christmas?
If they manage to hold us in this zone until OPX, they might trick us and sell off instead of having a Santa Rally… you never know?
could be we have extended past the full moon without the monthly correction maybe we selloff at the new moon instead on the sixteenth
Don't fight the FED. Don't fight the tape. — Marty Zweig, a quarter century ago.
The more things change, the more they stay the same. 🙂
I wish it was that simple SC… Now, if only the “FED” would tell me when they are going to rally the market and sell the market, I'd ride along with them. Unfortunately they don't make it that clear.
The “Tape” is clearly rolling over to the downside now. How can you go long when it points down? What are people to do… throw out TA's and just go long forever?
I don't know the answer, but if I did, I'd certain follow it. If you find out, be sure to let me know. LOL!
Red
Red, my answer is to pretty much stop trading…just been rolling options to later months when prices are attractive….like that nuclear holocaust movie…the only way to win is not to play….sad isn't it?
I might just do that Steve, at least until next year. This crazy twilight zone trading has killed me… both mentally and financially. I do see next year as being much better trends, and the first one will be down.
Red
Your site is a “labor of Love”
Good work !!!
You're right Red Baron… it is a “labor of love”. I think I only write on this blog because I need an outlet to post my thoughts.
Thanks for stopping by… Red
Chart of Charts 121109 — Boneless Chicken on Hot Tarmac
In some unusual action the normally stable 20 Day Moving Average is
Flipping Around Like A Boneless Chicken on Hot Tarmac
There are alot of elements to this chart. I know it is confusing, spend some time to review it.
On Sunday, I added in the Heat Map (now near the bottom 5 DMA chart), and the little dog started mouthing off too…..
Questions or suggestions appreciated, I will respond as time allows. Sign up as a follower please….it's just a click.
http://oahutrading.blogspot.com/2009/12/chart-o…
Nice chart Steve… much cleaner and easier to read then the other ones. I signed up as a follower too.
Red
Thanks, I will try to make the dates more readable next week.
Thank you for your post, good luck.
Thanks for reading Blue. It's good to know that people are out there reading and hopefully benefiting some too.
Red.
Hey Red. Enjoyed your post.
I don't trade options often, not only do you have to contend with theta burn but also gyrations in the VIX. Best way to avoid these issues is to go deep ITM, but then you can run into depth of market issues (harder to get fills).
Hey Red. Enjoyed your post.
I don't trade options often, not only do you have to contend with theta burn but also gyrations in the VIX. Best way to avoid these issues is to go deep ITM, but then you can run into depth of market issues (harder to get fills).