I woke up and while I was eating breakfast, saw that the S&P500 futures were up around $2.25. I made a note saying "Sell long puts from the diagonal" thinking we broke 1125. I figured I would take a small loss right now and by August expiry I will have made a little profit from the short puts in my put diagonal (see Revisiting Old Friends).
I got to work and checked the futures and to my surprise, the futures are now DOWN $10!
All I say is "Told you so" and scratch my note.
-Wown
stockjockz.blogspot.com
Friday, August 6, 2010
Wednesday, August 4, 2010
Revisiting Old Friends
In my previous posts I have stressed the importance of the SPX price levels at 1104 and 1125.72. Time and again since November 2009 we have come to these price levels and seen resistance. The market closed today at 1127.74 - just above the higher of the two levels mentioned. We tried this level back in June (note also that this area served as intermediate support in May) and failed to breach it. Will be make a run to the upside this time after beating 1125?
Who knows - all I can say is that we will probably make a sizeable move one way or the other and so I am setting up for a trade to capitalize on that.
A couple of interesting points on this chart:
The same chart on a daily time frame shows an even bearish picture. Firstly, please excuse the light gray channel on the chart - it is the channel as shown in the chart above. I would have liked to simply hide that channel but TOS will not let me hide a single channel.
Getting back on track, you can see that 1125 has held its resistance for three days and now we have approached the top most leg of the downward sloping channel. IF we were to break this channel and break the 1125.75, it would be a very bullish signal. However, seeing as how the EW pattern seems to have played out in a perfect 1-2-3-4-5 and that the oscillator has been trending downwards while the market is rallying, I have serious doubts that we can break this resistance without more buying pressure.
When I started writing this post, I felt I had a neutral outlook on the market. However, I sound very bearish in this post. Originally, I was going to trade a straddle with as high (least negative) a theta as possible. Instead I think I will go with a put diagonal (I believe that is now my most frequent trade). If we break 1125 and the channel top, at least I can sit on short puts until they expire.
The Heat Map/TD studies filter
I have had a couple of questions on the update for the heat map/TD studies filter I have been working on. Unfortunately, I have not had the chance to work on that at all. Suffice to say that one point I had everything working but then realized it was quite buggy. I am still trying (well not really at this moment, but soon will try to) figure out the cause of the bug.
-Wown
stockjockz.blogspot.com
Who knows - all I can say is that we will probably make a sizeable move one way or the other and so I am setting up for a trade to capitalize on that.
A couple of interesting points on this chart:
- Firstly, notice how well the chart has followed the blue fibonacci channel. I drew this channel back on July 19th. The accuracy of the support and resistance points is uncanny - still amazes me. Anyway, the point is that I see the market trying to break the resistance but really not able to do so - giving a bearish indication.
Do not forget, however, that this is an upward sloping channel thus indicating that we are in a bull trend (on the 15 minute chart at least) and we may simply be in for a correction before a rally (or perhaps the correction already occured and once we break the resistance its a bull-run!). - There have been multiple sell signals on the DeMark indicators. Additionally, the top of market failed to reach the top of the channel, indicating that the market may be contracting. Again these are bearish signals.
The same chart on a daily time frame shows an even bearish picture. Firstly, please excuse the light gray channel on the chart - it is the channel as shown in the chart above. I would have liked to simply hide that channel but TOS will not let me hide a single channel.
Getting back on track, you can see that 1125 has held its resistance for three days and now we have approached the top most leg of the downward sloping channel. IF we were to break this channel and break the 1125.75, it would be a very bullish signal. However, seeing as how the EW pattern seems to have played out in a perfect 1-2-3-4-5 and that the oscillator has been trending downwards while the market is rallying, I have serious doubts that we can break this resistance without more buying pressure.
When I started writing this post, I felt I had a neutral outlook on the market. However, I sound very bearish in this post. Originally, I was going to trade a straddle with as high (least negative) a theta as possible. Instead I think I will go with a put diagonal (I believe that is now my most frequent trade). If we break 1125 and the channel top, at least I can sit on short puts until they expire.
The Heat Map/TD studies filter
I have had a couple of questions on the update for the heat map/TD studies filter I have been working on. Unfortunately, I have not had the chance to work on that at all. Suffice to say that one point I had everything working but then realized it was quite buggy. I am still trying (well not really at this moment, but soon will try to) figure out the cause of the bug.
-Wown
stockjockz.blogspot.com
