Market Commentary 6/29/2010

In my previous posts I mentioned that SPX would reach 1104 and then turn around. I also said that if the move was confirmed on the daily charts, I would take a short position on the SPX.



I did just that - bought a Put diagonal when SPX was trading at around 1094 (see chart - the blue circle). Of course since then we dropped significantly and bounced off the 1040 area that I said would prove to be the support. Not surprisngly, the sequential hit 13 today on the 15 minute chart.

However, the trend is still very much bearish. Look at the fibonacci channels in the chart - it shows the market is still very much within the bounds of the channel and the lines have not broken.

Keeping this in mind, I sold half my diagonal, capturing ~21% profit. I am now sitting on a diagonal with very high theta. If the price consolidates or continues falling, I anticipate making ~40% profit. Meanwhile, I am keeping an eye on the daily oscillator and setup count (Which has reached 7 already). If that turns bullish, I will tighten my stop loss and exit the entire position.

Additionally, take a look at the table below. In ninjatrader, I finally have setup working to perfection. Sequential and Combo studies are nearly there as well, just needs some tweaking.



The colors really help you see when the trend is reaching exhaustion. For example, notice that most stocks are showing up as green while only a couple are red. This means that the bear trend may be ending soon. I can also filter the table so that I only see stocks that hit a 8/9 yesterday.

-Wown
stockjockz.blogspot.com

Feels good to be right!

In my previous post:

The new retracements and expansions confirmed the 1104 level. I found a new confluence zone at 1125 area that could prove to be stiff resistance.

The SPX topped at 1131.72 (a mere 6 points off) and fell around 3% in a matter of a day and a half. Not only did we have a fairly dramatic sell off, but we closed today below the 1104 support that I have been stressing.

As far as trading strategy, I have been taking small profits along the way down but the sell off occurred so quickly I did not find a good entry point. Moving forward, I am going to wait on a confirmation of the 1104 breakout to the botton on the daily chart. I think we could rebound a little tomorrow and test the 1104 area before moving downwards again. If this occurs, I will take a large short position with a price target of 1040 and a stop loss at 1125.

-Wown
Stockjockz.blogspot.com

1104 the support now?

The SPX finally broke and has maintained the 1104 resistance on a closing basis. As I mentioned in my earlier post, I thought that if this event occurred it would herald a resumption of the bull trend.

However, today I suprised myself at how much my perspective changed in just a couple of added days on the same chart:


Firstly, the two days that we registered (keep in mind today is not over yet) above 1104 have both been down days. This indicates that the breakout is fake and we could reverse yet. Secondly, notice that the TD setup has reached 6 meaning that the potential bull rally is over in 3 days. Third, the oscillator has reached overbought territory further indicating an exhaustion of the bull run.

So I decided to pull one of the older tools in my arsenal: Fibonacci levels. I have not used these for a while. My first observation came as no surprise: the new retracements and expansions confirmed the 1104 level. I found a new confluence zone at 1125 area that could prove to be stiff resistance.

Finally, my monthly oscillator is taking a dive from the overbought area indicating that this may be simply a correction in a much larger bear trend.

So here is my hypothesis: we will continue to rally to around 1125 area and then go right back down. I think I will wait for the confirmation of this move to come around before I make any major trades.

In the meantime, I think I may switch brokers to Tradestation. Their platform allows for much better custom studies and more importantly much better screens. Not to mention their commission rates are lower. My only concern is the whopping 7% margin interest rate which would be a pain.

-Wown
stockjockz.blogspot.com

Retested 1104 and failed

Today I thought we might break the 1104.7 resistance for the S&P500. There was a break on the daily downward trend (blue line) that has been holding up for quite a while now. Early afternoon today we also broke the 1104.7 resistance I have been stressing for a while and I ALMOST took a long position on the S&P500 (I have liquidated by short positions I mentioned in my earlier post).

Instead, I shorted the market and took a small profit as the market retraced. However, I am out of that position as well because I think we can still break the resistance. Already the selling pressure is abating and as I am typing my oscillator is turning positive. I think that during this week we can see a confirmed break out above 1104.7 but it could come after a couple days of consolidation around that level.

My GS short calls and SPY short puts are nearing expiry, both OTM. The SPY is a near guarantee while GS still has around 3% chance of going ITM. I am reading The Black Swan at the moment and so I believe the 3% is definitely a risk. I am considering getting out of that position, especially if the SPX breaks 1104.7. I have already made a 95% profit on that trade and now I am just being greedy.

- Wown
stockjockz.blogspot.com

Short on the market

This is my first post in nearly a month. As usualy, I have been very busy but have been keeping track of the markets.

I believe for the moment we are in a bear trend and even as today we are up ~1.60%, I think we can expect a few more weeks of sidways or downward movements. I am watching the resistance levels established by the market (S&P 500) at 1218, at 1170, at 1107 during the up swing from Feb to April. Since mid-April, when we started going downwards, the market rebounds, hits or approaches these levels and falls down again.

So, keeping that in mind, I am short on SPY. The only 2 things on my books right now are:
1. Short calls on GS at 170 expiring in July
2. A put 101/108 June/Sep diagonal (got very high premiums for the 101 puts so worst case scenario I get stopped out for the Sept puts and still make profit).

Still working on that spreadsheet, although slowly. The more I read about the study the harder it gets to program the damn thing...

-Wown
stockjockz.blogspot.com