Struggling Bulls…


The Bulls fell hard at the end of the day...

The market looked extremely weak all day today, as the 60 minute chart pushed hard to work off some oversold conditions.  Unfortunately, the 15 minute chart didn't help much as it was already in overbought territory, which meant that the 60 was trying to swim upstream against the monthly, weekly, and daily charts that were pushing it back down.

Tomorrow morning we have consumer confidence data and FHFA housing price index out at 10 am.  Not much else to move the market, as there isn't any earnings announcement on any company that can move the market.  Too me, it's a little frustrating as I could have gotten back in short at the high this morning, but I was expecting Tuesday to put in the high for the week.

It still might happen, but a gap up needs to occur in the morning.  The downward sloping trendline has held the market tight in a falling channel for several days now.  If the market can gap open tomorrow, and run higher, the next major trendline of resistance (from another falling channel) is around 1100 spx.  What a wonderful place to go short... if the market would be so kind.

We could continue falling, without stopping until we hit 988 spx area, which is the 20 MA on the Monthly chart.  I do believe that will stop the falling, but I won't be going long there.  I will exit most of the shorts I will hopefully purchase tomorrow, but I'd rather stay in cash and not get killed by the falling VIX on the ride back up.

So for tomorrow, it's pretty simple... a gap up should produce a nice run up to at most 1100 spx.  A flat or down open will keep the market inside the falling channel and the selling will continue.

Best of luck to everyone...


P.S. As was surfing around a little bit, I went over to "Follow the Money" (link on Red Pill sites on my blogroll), and started watching a video about a earthquake watch until the 27th, and it started to bore me as it was getting too technical. But at the very end his stated the possible places for the earthquake... the lower tip of South America.................... and Baja, CA!

You want an excuse to blame the coming crash on... how about an earthquake? God have mercy on those people if it does happen. I pray it doesn't, but with or without the earthquake... the technicals say the market it about to puke!


      • Wow – that's taking a pretty big risk – considering what they were saying about survival rates based on it going in further …. pls pls go …

        I hope you have insurance …. is that the reason you have being delaying this ? 🙁

  1. Nice write up red…i'm still in and believe it goes down some more also…eh…if you dont here from me in the morning that earthquake hit a little higher than baja and I am either gone or hopefully I get some beach front property…hahaha

      • red did you see how futures are tanking right now and the asia is plummeting as well look at the kospi down 3% already this news is alarming May 24 2010, 10:31 PM
        dark1p: May 25 (Bloomberg) — Asian stocks and the won plunged to the
        lowest in 10 months after Yonhap news agency reported that North
        Korean leader Kim Jong Il ordered his military to prepare for combat.
        The euro weakened and commodities declined on concern Europe’s debt
        crisis may spread.

        • I see them now… I should, would, could got short earlier today. But, there is more selling coming. I'll be getting short tomorrow asap. Remember, about 988 spx is the monthly 20ma level. That is highly likely to be hit.

  2. Hi Red 🙂 really good post

    So… what if penn was right and we needed to watch the kospi as our primary indicator for world markets? Is that sort of like… jupiter is conjunct uranus in the north node of Venus?

  3. Red, earlier today when you said you were hoping for a gap opening tomorrow, I thought that was akin to betting that the next woman to walk into a room would have a mustache; possible, perhaps, but unlikely.

    You may be onto something, however. Stocks advanced very little today for the decline in VIX that we had, perhaps indicating some noise in the averages.

    • Guess we don't have that possibility anymore, barring an FM (a ****ing miracle).

      Hope we get some kind of reaction rally so that you can get on board, Red. Or, you could buy some TZA to have a dog in the fight.

  4. Well just so you know… I sold SSO at 35.25 yesterday.

    Didn't like the way it was free falling and Red's valid reasons for a free fall coming.

    I'm in wait and see mode.

  5. Goooooood Moooornin all…rainy CA is still here for another day….boy red glad I listened to you….I am in your camp when it came to the charts lining up…I didn't get out yesterday still in and I still think we get close to 998…I will probably get out to day on the way down and take my little cut and be happy…

  6. Hey Red if you could send this to Anna, if she has not already seen it.. Gartman calls to jump into gold, and Whitney Tilson says more than Fast $ wanted him too..LOL! I guess Anna went all Pay site.. good for her tell her I wish her the best on her Gold trades.. 3 of 3 of 3 of wave 1 is on.. Dark, and yourself should do well, I am in 100% to the downside.. have a great day…

  7. ouch ouch ouch…early morning pain…we are going straight to the bottom this mornin…S3 is 105.30 and we are at 105.06 now…I think I'm safe in sayin going down eh…

  8. I don't think the big drop will happen till a little later.

    jobless claims thurs, what if they are bad, ie two weeks in a row!

    ism manufacturing last tradingday of the month. High dollar and weakness overseas could means weak number.

    these are two reasons for a tank

    • FTSE plunged at their opening and is backtesting. They ought to be done about when we open and we will probably drop together in the first hour. I expect we will spend mid-day backtesting and plunge again late in the day.

      Put and ETF prices may actually peak in the afternoon, higher than the actual bottom tomorrow which may be a relatively calm affair. That's what happened last time.

  9. Futures are piling on. A gap up looks out of reality. Question is when to get in. At open ?? or do you wait for that pause.

    I guess i will add a little at open and see where it goes. But this expected bounce is gone IMO.

    DOW Theory did say a break below 10221 was it.

  10. Carl’s morning call:

    June S&P E-mini Futures: Today's range estimate is 1030-65. I expect a long lasting low to develop today or tomorrow. Once the low has been established I think the ES will begin a rally that will take it to 1300 and higher.

    1036.75 – 1169.50 range last night (32.75 points)
    1030-1065 estimate for today (30 points)
    average actual range last 10 days has been 24.6 points

    1044 currently, so estimate is -14 to +21 from here (a bit bullish)

    • mornin…whats your guess for today…all charts are back in line and macds are pointing down…maybe 103.50

      • i have no idea big bad. all i can tell is that the next level of support from diablos and suns charts looks like around 102.63 or even slightly lower. whether it gets there today is anyone's guess but i would not be surprised if it did.

        • I was trying to setup suns charts and with what info there was I have next stop at 101.85…but I dont know if that is right…

          • yes, diablos' also has a line around there but one at 102.63 as well and I don't actually know which one provides support (maybe ask him). Anyway, I will be curious to see if we hit those fake prints today or maybe on the way back up?

  11. i believe the next stop is diablos' 102.63 area or so. i will sell my puts in the 990s.

  12. Gang,

    I did see a fake print to 1072.00 last night, but I seriously doubt that we will even get close it for awhile. Maybe 1050.00, but that's about it. The bulls are trapped and want out. The market won't let them.

    Before the end of the week I expect the 20 MA on the Monthly chart to be hit. Currently it's around 988 spx. I did get short this morning, although I was I would have done that yesterday.

    But, this isn't “The Big One”, as that won't happen until later this year. When? Unknown right now, but I'll be more prepare for it when it finally does arrive.

    So for now, it's just a waiting game…

  13. FYI…

    If you all remember my Sunday post where I mention a site called BAM Investors. Apparently, “Network Solutions” lost 100% of their email list of clients… just before this big sell off we are having.

    I think you can put two and two together here, and say that “they” didn't want BAM Investors informing their clients of what is coming.

    I doubt that this site will ever get that popular, and I hope it doesn't. For if it does… it might disappear one day. If so, make sure you all have my twitter, facebook, etc… feeds on your buddy list.

    If that disappears…

    well, you can figure that one out for yourself… can't you.

    Go read the twitter feed at BAM Investor

    • Does this BAM investor thing make you scared enough not to want to get long in the 990s? My issue is that if you listen to a bunch of people, you'll get a bunch of answers and so far, you know who has been 100% right. He said that as the market came down, everyone would panic while he was getting long.

      • No Monica,

        I just don't want to get long because of the high vix, and how it will kill anyone with straight calls. Plus, there will be a lot of whipsaw action the first few days.

        I may take a call spread, or just sit it out until the dust settles. There still is a small chance that the 20ma (about 988 spx) will fail and the market will continue down to the 875 spx level.

        I would rather just sit in cash and watch…

        • I'm not talking calls. I was going to start buying stocks. I guess I will stick to my plan of investing about 40% there and the rest lower. I have a whole list of stocks I have selected if you are interested although a monkey could probably pick stocks better than me!

          • again, a monkey can pick stocks better than me but here you go:

  14. Hi Red, When I open an attachment here it opens in this window. so I have to hit the back button to return and then scroll back down the site. I have noticed at other sites that when I open an attachment it opens a new window. then I a can just tab back and forth. Is that a setting on your side that can be change?

    • It's called a “lightbox”, and it simple opens up over top of the website, and is closed by simply clicking on the image… anywhere on it.

      You can still “right click”, and select “open in new window” or “open in new tab”, and view it that way.

      • It doesn't matter. You either ride the waves or you don;t. Trying to time an entry is difficult. I would say Red is right though. I would get in at Diablos' print. 106.44 or 106.99. How do you guys like them apples? 106.99 = 666!! CUTE!

  15. Gang,

    The 15 minute chart is what's hold the market up for now. It is working off the oversold conditions from this morning. It's in positive territory now, and should roll back down into the close, causing more selling. Patience… 988 spx is highly likely to be tagged by this Friday.

  16. Blood,

    I just seen your chart. I went to bed, and you must have posted it after that. I don't think this is P3 yet. But, I do think we are going lower by the end of the week. I see 988 spx being tagged before the end of the month. It's the 20ma on the monthly chart, and should provide a nice rally back from hitting it. That doesn't mean that it couldn't be pierced intraday and close on it or higher, as that is also possible.

  17. She knows her options, that's for sure. She can tell you about the delta, theta, vega, etc… which is over my head. Of course her style of trading is different then mine, but I've learn a lot from her on how to play options.

  18. I am hoping we get up to 106.99 and then tank into the close. May the force be with us 🙂

  19. well we busted through that print. Wonder if that's where the market will close instead.

  20. Do not know where they got it together but that is some bounce.

    Not sure I want to add into this yet. Normally i would but the bears got scared today.

  21. The vixes were the enemy today. there is no fear selling. It will be interesting to see the volume.

      • on a cup and handle formation (as rip mentioned the VIX appears to be in), the handle should be lower volume than the cup and once it starts to break out of the handle, the volume should increase.

  22. red, how are we looking on the charts? I am hoping this is our usual backtest of containment.

  23. Carl at day’s end:

    1030-1065 estimate for today (30 points)
    1038.50–1073.75 actual range today (35.25 points )
    Market was 8 points above Carl’s range.

    For the past 10 days, average actual range is 25.7 points
    Trades: No Trades (only one trade in the past 10 days)

    Grade: C (lost no money)

  24. We are now in a New Moon Trade, which tends to favor TZA.
    TZA opened up 6.6%, and the opening gap was filled. TZA was up 11.6% at it’s high, and closed up 0.13%.

    AmericanBulls had TNA with a Wait today. TNA was down 3 cents, so TNA will likely be a Wait again for tomorrow.

    AmericanBulls had TZA with a possible sell today, but TZA was up 1 cent, so TZA was not sold. TZA might remain a possible sell for tomorrow. The buying price was $6.10, and TZA closed at $7.64, up 25.25% in 6 days.

    Volume for TZA today was 33% above it’s 1 month average. Good for TZA.
    Volume for TNA today was 42% above it’s 1 month average.

    $RVX (VIX for $RUT) closed down 7% with TZA up 0.13%. A divergence.

    TZA had been down 1 day, up 3, down 1, and now up 2 days. Choppy, and went no where the last 3 days. Not good for TZA.

    The low for TZA was from 20 days ago at $5.30. Today’s low was $7.62, 43% higher. Good for TZA.

    Today, Ultimate Oscillator for TZA fell from 56.1 to 49.0 (-7.1) while TZA was up 0.13%. Big divergence. Bad for TZA.

    MACD fastline & slowline both above zero rising Good for TZA.

    Bollinger Bands for $RVX (VIX for $RUT): Today, $RVX gapped up & touched the upper Bollinger Band then fell to create a long red candle and closed far below the top Bollinger band. The fast MACD line is pointing down, the slow line is still rising. Yesterday was the 3rd day of a 3-day sequence ending in a $RUT buy signal. Bad for TZA.

    Bollinger Bands for $RUT: Today, $RUT had a white candle that closed above the lower Bollinger Band, with a long tail below that band. MACD is falling sharply. Hard to read.

    Last Thursday: On the NYSE, down volume was 73 times the up volume. Usually, the market bounces after a number this large. Maybe not the next day, but the day after that.
    Last Friday: On the NYSE, up volume was 9 times the down volume. A nice bounce, as expected (for today or tomorrow).
    Yesterday: Expected, but did not get a bounce in $RUT.
    Today: no bounce in $RUT. (Good for TZA)

    TZA had a much lower high & higher low & slightly higher close (Good for TZA)

    Money flow for the Total Stock Market:
    $13,442 million flowing out of the market 2 days ago.
    $ 232 million flowing out of the market yesterday.
    $ 2,671 million flowing out of the market today.
    Good for TZA.

    I will post the AmericanBulls candlestick interpretation a bit later.

    Overall, No guess for TZA for tomorrow Too many unusual happenings.

  25. why can't 990 wait until Monday, last trading day of the month? Oh Oh is monday a holiday and the markets are closed??? duh I hate if when I do this.

    Maybe thurs jobless claim will be low. two in a row will pounce the market. John Williams of Shadow Stats (whatever they're called) stated a month ago that mid year weakness in the economy will show- indicated by the “M3-adjusted for inflation” (He says he can still put together an M3- the Gov quit revealing it.)

  26. Is friday the “end of the month” options expiration???????
    because monday it's closed?

  27. The Daily view from Americanbulls

    TNA was a Wait today, was down 0.14% today, and is an (unlikely) possible buy for tomorrow.

    TZA was a possible sell today, was flat today, and is Confirmed Sell. The buy price was $6.10, and TZA closed at $7.63, up 25.1% since the buy.

    Of the stocks & ETFs I follow, these are to hold on to:
    GLD (gold), UGL (2x Gold)
    UCO(2x Oil)
    ERX(3x energy)
    QQQQ, QLD (2x QQQQ)

    The list to avoid:
    UUP(US Dollar)
    EWX(emerging mkts)
    RWM (-1x $RUT), TWM (-2x $RUT), TZA (-3x $RUT)
    SRS (-2x RE)
    SCO (-2x Oil), DTO (-3x oil)
    FAZ (-3x Financials)
    SPXU (-3x $SPX)
    QID (-2x QQQQ)
    DXD (-2x DOW30)
    DZZ (-2x Gold)

    The following are possible (but unlikely) buys tomorrow:
    IWM (1x $RUT), UWM (2x $RUT), TNA (3x $RUT)
    DRV (-3x RE)
    EPV (-2x Europe)

    The following are possible (but unlikely) sells tomorrow :
    IYR(1x RE), URE(2x RE), DRN(3x RE)
    ERY (-3x energy)

    The following are quite likely buys tomorrow: none
    The following are quite likely sells tomorrow: none

    Summary: Fairly Bullish
    Action for TNA or TZA for tomorrow: Avoid TZA, possible (but unlikely) buy of TNA

  28. Boy, am I tempted to cash in the next morning I turn on a computer to see a vast quantity of dollars but, come to think of it, that might be operant conditioning.

    I don't think we saw a bottom today because of:

    1. Impressive but not stunning volume.
    2. Insufficient fear. What's with all this reflex buying?
    3. CPCI not especially high, but with other put/call ratios is within striking distance of marking a bottom.
    4. SPX is at the top of a channel; well, maybe peeking over a bit but so did the last major rally.

    VIX has made a 50% correction from its top. I'll allow that the 5 day chart looks pretty grim, but it could be ready to roll tomorrow.

    Top end for a rally is 1100, IMO, because 8 and 200 dmas converge there. Think it might spook the bulls if we had trouble getting back over the 200 dma? Also, it was a long climb up from 1041; the gap drop this morning took no energy at all.

    I'm thinking tomorrow COULD look a lot like May 18th so I'm going to stick though a 1-2 day rally seems very likely. I've stuck since 116, so what the hey. Will re-evaluate at EOD tomorrow.

  29. Carl’s morning call:

    June S&P E-mini Futures: Today's range estimate is 1065-95. I think yesterday's low at 1036.75 ended the drop from 1216. I expect to see a series of 20-30 point swings up and down within the 106–1100 range over the next few days. Once the market stabilizes a move to 1300 will begin.

    1070.50 – 1185.75 range last night (15.25 points)
    1065-1095 estimate for today (30 points)
    average actual range last 10 days has been 25.7 points

    1082 currently, so estimate is -17 to +13 from here (a bit bearish)

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