Friday, February 26, 2010

Got Long

I covered my short at the close and also got long for an overnight trade.  The market seems determined to squeeze as many shorts as possible.  I was surprised at the lack of intraday weakness during the 2nd half of the day.  It doesn't look like this market wants to selloff quite yet.  Monday happens to be the first day of the month, and usually that is bullish for the market.  I usually don't like to play seasonality, but it is in the bulls' favor on Monday. 

The only problem with being long here is that the economic data and European news has been a negative and will eventually weigh on this market.  If not now, sometime later. 

Intraday Short

I played a quick trade on the long side and have now started a small short position anticipating 2nd half weakness on the day.  I will give it room to go higher so I can add short at higher prices.  I would be surprised if we kep blasting higher, but the action seems range bound to me so I see the chance of a late day breakout as low. 

Yesterday Was A Rarity

I have rarely seen such a late intraday reversal, especially when the market was not that oversold.  It does happen when the market gets stretched to the downside over several days, but the previous day was up 1%.  It was another piece of price action that tells me the trading is getting more shark-infested. 

But usually the day after such reversals tend to have a high probability pattern which I will play today.  Usually, you get follow through momentum in the 1st half of the day, which fades in the 2nd half and closes weak.  I will be looking to buy early weakness down to 1097-1098 area, and will be selling 1st half strength to around 1108-1109.

Thursday, February 25, 2010

Monster Short Squeeze

We are only trading down 2 points from yesterday's close as I write.  All we did was add a bunch of squeezed bears and shaken out bulls to the equation.  The equity put call ratios are running very high despite this intraday run up.  That tells me a lot of retail money is fighting this intraday up move.  This is a sick market to trade.  There is no rhyme or reason for some of the moves, every downmove seems like an overreaction because we go right back up.  I think we need to go higher before its safe to short.

Right now, the bad economic news is only adding more shorts to the equation, and that leads to these parabolic short squeezes out of the blue like we had this afternoon.  As for tomorrow, I have no idea whether we gap up or down, after such a big run up, I would say a gap down but this market has been unpredictable for me lately.  I am not a buyer or a seller here.

Shorting Environment

The market feels like there are too many people looking for a flush down lower.  The market feels like its filled with a bunch of shorts waiting for Greece to offer them a gift.  I tried a daytrade and quickly got run over.  The short side is too crowded right now.  The action is unusual, these kind of random parabolic pops out of nowhere are hard to game.  

Quick Daytrade

I think we will be weak for the remainder of the session, I have just gotten short and will cover in the final hour.  I will also likely be taking a long position for the overnight session.  I don't think we'll go below 1080 so I want to be on the long side rather than the short side when taking longer term positions.

Great Buying Opportunity

Today is going to set up to be a beautiful buying opportunity with continued weakness to the close down to around 1080.  I still believe we'll get back to 1111 and probably to 1130 after that in the next few weeks.  I will be setting up for that next rally. 

Big Gap Down

Worries about a Greece downgrade and general weakness in Asia and the bad jobless claims numbers have us gapping down big.  I am slightly bullish, but I didn't expect this big a gap down.  Its possible that we could selloff for much of the day, but I see it as more likely that we have another day staying within the range.  I am not too confident about my long position though. 

I do think if we do selloff today, it will be a great buying opportunity, so if I do sell, it will be just to buy at lower prices.

Wednesday, February 24, 2010

Bullish About Overnight

I will be staying long and holding overnight.  I believe we will gap up based on two reasons.  No one wants to be short ahead of another Bernanke lovefest/ longs want to jump ahead of the possible lovefest tomorrow, and the European markets are oversold.  I would not be surprised if we hit 1111 early tomorrow. 

Banana Ben Never Disappoints

He is a dove's dove.  A helicopter's helicopter.  A banana republic's banana.  I think he will never raise interest rates as long as the S&P is below 1200.  I don't know what shorts were thinking he was going to say to crash the market. 

We are stuck in a range.  We've got upside to 1111, and downside to 1091.  If we get a bit more rally today, I will be dumping my longs.  Too much too fast.  I am now thinking that we will close lower than current levels, but may squeeze a bit higher during lunch.  I still think playing long is safer than going short. 

Like the Other Dips

I think the selloff yesterday was just like the dips that we got after getting overbought in November and December.  The market would go down 1 or 2 days and that would be it.  Traders would get a bit nervous during those 2 days, and then the market would go straight back up.  I expect the same to happen this time.  Until I see more signs of weakness or a rally to 1130, I will shy away from the short side except for quick daytrades.  The easy money still seems to be on the long side.  I expect the 2nd half of the day to be strong today.

Tuesday, February 23, 2010

Turning Bullish

It is simply amazing to me what 1 down day will do to investor perceptions of the market.  Consumer confidence data came in bad, and now everyone is worried about the consumer.  There are a lot of nervous longs, but I think after today, many will have been shaken out. 

I have initiated a long position and expect us to be higher than these levels by Thursday.  I will be adding on weakness today and tomorrow. 

Bottom of the Range

I don't see much more downside for the rest of the week.  We are near the bottom of the range, and I see us creeping higher starting from tomorrow.  We are in a trading range, from 1093 to 1111 on the ES and it should keep the action contained for this week.  Next week will determine whether we go to a higher trading range or a lower one.  Based on this week's action, I will pick a side.  I am leaning long though. 

Europe is Weak

The market is clearly much weaker in Europe, and that is what is dragging down the ES.  I don't see much weakness in the US market.  It is those jitters again about Greece.  Its a good excuse to selloff and eliminate the overbought condition.  Greece is having a bond offering and it is sell first and ask questions later in Europe. 
I think we'll have a mild selloff today, but I am not very confident on that.  I will be watching and waiting for a better short entry. 

Monday, February 22, 2010

Inside Day

Volatility is shrinking and we got a narrow range intraday.  This seems to be more bullish than bearish.  The market is not letting longs in unless they pay up above 1100.  I don't want to press it on the short side yet, it seems like there is an underlying bid just like 2009.  Maybe a bit weaker than last year, but its still there. 

Covered Partial

Disappointed with the trading action today, there should have been a bigger dip on the Obama healthcare news, but the market held on above 1103, and I think we're not going to have much downside today.  I covered some of my position, and will likely close out the rest soon before the close.

Another Monday Gap Up

The buyers come rushing in on Monday as the norm these days.  The squeeze continues, and we'll probably need to get to 1115 before we get that turnaround.  I would be very surprised to see a big trend day up today with the current overbought readings.  I am fully short again, and expect there to be a gap fill at the least today. 

Saturday, February 20, 2010


There is thread on Elite Trader called Taking 410K to 4million by Year End 2010 .  The trader is down 44% this year, even though his performances were outstanding for 2007, 2008, and 2009.  If you look at his past posts, he made a lot of money in those years.  I don't know his exact strategy, but it seems to be a mean reversion type of strategy, shorting overbought stocks and going long oversold stocks. 

Do I think he just got lucky in 2007-2009 with his trading?  I don't think you can get those kind of returns by pure luck.  He seems to be a skillful trader, but through a combination of trendy markets and a bit of emotional weakness, he ended up with a big drawdown.

I bring it up because this can happen to anybody.  I myself am having a negative year, but I don't think I've suddenly lost the ability to trade.  Part of it is the market, and part of it was just getting impatient and overtrading, trying to make back my losses.

Let's not forget that the market will always be around.  There is no need to rush.  When the right market comes, I want to be there with ample capital to make as much money as I can when the sun is shining.  Because I know I'll need to have a surplus for the money droughts that await.

Friday, February 19, 2010

1111 Top

I think 1111 has put a short term top on this market, and I would key off that level as upside resistance for Sunday overnight and Monday.  I closed out part of my shorts and will put it back in the overnight market.  I think we'll be trading a range between 1096 and 1110 on Monday.

Bad News Ignored

We are going from the left side to the right side of the spectrum.  Bears are giving up, bulls are feeling bold, and we are squeezing higher.  I am hanging on to my short position, we are reaching serious overbought territory and only the strongest of markets can overcome that. 

There is a mass migration going on now from bear to bull camp.  I don't know if we'll have a good top till its nearly complete, but I think we'll probably be there within 2 weeks.  In the meantime, I expect us to pullback from this very overbought levels either later today or Monday.

Alfred E. Neuman Market

The futures are down just a few points and are rallying from their overnight lows.  This market doesn't want to give up easily, its funny, last Friday when China raised reserve requirements, the market was worried, and now the US raises the discount rate, and the market thinks of it "normalization" and nothing to worry about.  The market is overbought short-term, and I see some complacency regarding this Fed move. 

I think we will selloff intraday and I am hanging on to my short.  I don't see a huge whack, maybe down to around 1090.  Psychologically, the thesis on unlimited Fed liquidity is seriously brought into question and that should shake some investors today.

Thursday, February 18, 2010

Lethal Combination

We are very overbought, hit resistance at the 50 day moving average, got a discount rate hike.  I think this weighs on the futures overnight and we will probably open around 1090.  Euro is getting pummelled as I write, along with all the other currencies.  This is a huge game changer psychologically.  Sure the discount rate doesn't mean much, but it tells the market the Fed is starting its exit strategy sooner than everyone expected.  I expect all risk assets to be pressured tonight, commodities, stocks, etc.

Fed Raises Discount Rate

This is a huge psychological hit to the bulls' psyche.  So many of the bulls' thesis rely on Fed easy money and a delayed exit strategy.  This discount rate hike puts that thesis into question.  This is huge.  It cannot be underestimated.  The tools on CNBC are downplaying it but this will gap down the market huge tomorrow.  I expect to wake up to 1090 in the morning, if I don't see it later today.

Bear Meat

Another squeeze higher.  Bears are getting killed here.  Its too late to cover now.  I will hold on to my short position and wait for the buying panic to subside tomorrow or Monday.  I expect us to revisit 1090 next week. 

Shorting Intraday

I am fading this up move intraday and expect us to close weaker on the day.  My target is 1090.

Waiting For False 1100 Break

I am sitting on my hands and waiting for the regular market to open before I place any shorts.  The overnight market traded in a range, and is shrugging off continued euro weakness and weakness in commodities. 

I believe the first hour should be strong, and will look to sell on a false break of 1100.  Philly Fed could squeeze this market higher at 10:00.   If I get filled, I will hold this short to the close, or perhaps till tomorrow morning. 

Wednesday, February 17, 2010

Not Like Wednesday February 3rd

I don't know what other traders are thinking, but let me put in an educated guess.  For those that looked at the last 2 days, their first flashback will be to Wednesday, February 3.  That is when we were last trading at these levels.  The similarities don't stop there.  The market on Tuesday, February 2 was a strong upday.  So was Tuesday, February 16.  The market is short term overbought now.  It was short term overbought on February 3. The market traded in a fairly tight range, closing near 1100.

This is where the similarities end.  The investor sentiment was more positive back then, the Greece worries were yet to be headline news, and many traders were thinking that we were going to go right back up like those dips in 2009. 

What are the warning signs that this time is different than 2 weeks ago?  This time around, traders are more cautious, yet the price is higher!  That is warning sign #1.  Warning sign #2 is the stock market and crude oil ignoring serious euro weakness to add to yesterday's big gains.  Warning sign #3 is the low volume rally.  Contrary to what the public believes, low volume rallies in this environment of low demand and low supply are more sustainable than high volume rallies.

The market trades like the weak eager sellers already sold last week.  The buyers are coming back slowly with the Greece headlines fading away with no eager sellers willing to sell to them.  Thus the low volume and higher prices.

Closed Out Short

I am no longer short.  I feel like we need to have a mini blowoff top before it is safe for shorting.  I am looking to re enter my short position tomorrow hopefully on that blowoff.  Anywhere from 1105-1108.  The strength of this market surprises me but I can't fight it just yet. 

2009 Flashback

Yesterday and today's trade feels like one of those moves off the bottom in 2009.  That bothers me a bit but I don't see us ripping continuously higher like last time.  But it does tell me that we're not going to go down to 1040 or even 1060 anytime soon.  I expect at least the next few days to be holding above 1085 and maybe one more push higher to the 1113-1118 zone. 

The Greece jitters are mostly gone, but there a few after effects, mainly in the weak euro.  The market has formed a short term uptrend, and we need to see more bullishness before that uptrend breaks.

I have cut back on my shorts and I'm probably going to cover the rest on any intraday weakness today.  I will look to re-enter higher.  I am not interested in longs at these levels.

Buying Panic

We are seeing some buying panic this morning.  This buying rampage looks like a classic 2009 buying spree, but the technicals are worse than back then.  Can we repeat 2009 and act like nothing happened over the 3 weeks?  I doubt it, so I am holding my short. 
There is resistance at 1100 on ES, which held in premarket.  The buying in Europe is especially strong, which tells me that traders are no longer worried about European sovereign debt issues.

Tuesday, February 16, 2010

Short Again

Reflecting on the past week of trading, the short side definitely got too crowded and days like Friday and today happen when there are too many shorts and nonbelievers.  That is the one downside of my position, it is a bit crowded on the short side.  Or more aptly, there are too many people waiting for the market to go lower to buy. 

I got short around the close and will be holding this position for a swing trade.  I don't think we'll go down much tomorrow, and it may even squeeze up a little higher.  But I don't want to miss the next down move which I believe can start at anytime.  

Current Market Action

The action the past week was defined by lots of volatility and a slight upward slope.  The range was not that big for the week, about 27 points, but there was lots of back and forth action.  It is ironic that we finished near the high of the week when traders were supposedly afraid to be long ahead of a 3 day weekend. We're in an intermediate downtrend now but in the short term, we could go a bit higher.  There has yet to be a true moment of relief other than Friday, February 5.  If we go up today and have another moment of relief by longs, that should be a great short entry for the rest of the month.  A 50% retracement of the down move from 1147 to 1041 would be at 1094.  I think that is the upper bound for any short term rally.  The lower bound for a selloff is 1026, which is the low from November, and near the 200 day MA.  I don't believe we go up in V pattern like in 2nd half 2009.  Those dips were never 100 points like this time.  We'll need to do some more work at lower levels before going higher.

I am intermediate term bearish but I think there will be relief buying today after a long weekend where nothing eventful happened.  Crude oil and gold trading higher should be a tell for today.  I expect the markets to trend up intraday.  I have closed my short position in premarket and will reinitiate my short later, probably at the close.

Sunday, February 14, 2010

Daytrading vs. Swing Trading

Recently, I have reduced my daytrading to try to capture more points while trading less.  When I was daytrading, I would be extremely sensitive to small moves and had to be in front of the screen and focused at all times.  I am still in front of the screen most of the time, but I can do other things like research and data mining during trading hours without worrying about the next 3 point move in the ES. 

There are drawbacks to swing trading.  There is less capital turnover and fewer trades, which means the profit per trade has to increase to make up for it.  Also, it is riskier if using the same trade size.

The positives are that you can get a much bigger profit looking at bigger time frames.  Also, with daytrading, you can get lost in the forest by staring at the trees.  I've realized that losing your position is deadly in this game.  I don't want to lose my position just because I make a bad day trade.  With swing trading, you aren't daytrading so minor intraday swings don't take you out of your position.  You can keep your position and stay with it when swing trading.  That is the most important factor.

I will daytrade less.  I have noticed from my past results that more than 90% of my money is made on 10% of my trades.  I will follow Jesse Livermore's words, the big money is made in the sitting. 

Friday, February 12, 2010

Setting Up for A Big Slide

The market is setting up the bulls for slaughter. Looks like the shorts panicked at the close and closed out their positions ahead of the 3 day weekend.   The risk reward for longs is very poor at these levels.  I see at most 10-15 points of upside and 50 points of downside.  I hope to see traders get bullish next week which will allow me to short more aggressively. 

Big Picture

Let's not get dazzled by rabid short covering during the middle of the day in front of a 3 day weekend.  I always think intraday reversals are overrated.  They are much more often false signals than real signs of a bottom or top.  If I told you right after yesterday's close that we would be trading on Friday between a range of 1060 to 1075, would you have considered that bullish?  I think most people would not. 

The intraday volatility that we are having at these levels is telling me that bulls are having a hard time putting together a string of strong up days.  I stay with my call for us to visit 1040 before 1080. 

Yesterday Was A Top

The gap down confirms my suspicions that yesterday was likely the top for this countertrend move started from last Friday.  I don't expect us to fall straight down today ahead of the President's Day holiday.  I expect choppy trading, but with a negative bias.  The euro weakness is giving a big hint that the market is not ready to make another up move.  I think the big move on the downside will start early next week as the Greece non-news is digested.

I would short any strength in the first hour of trade as I think it will be unsustainable.  It is a good time to get short and stay short.

Thursday, February 11, 2010

From 1:30 to 4:00

The market went nowhere.  Yes, we had a 1% up day, but this market doesn't have that overpowering buying force that was present in the 2nd half of 2009.  If this was November 2009, we would have probably gained another 5 points from 1:30 to 4:00 on a trend up day.  I will be an eager seller of a gap up tomorrow.  I don't even have much confidence that we'll get one, but if we do, I'll be selling. 

False Break

I think we'll likely finish up strong today but this feels like a false breakout of the range and is probably a selling opportunity either at the close or tomorrow morning.  I will probably add daytrading shorts to my swing short if we close strong and gap up tomorrow.  I remain in my swing short position and will hold it till at least next week. 

Charts Becoming More Bearish

When a market goes down and stays down, its a sign of weakness.  This market is giving traders a lot of time and opportunity to buy the dip in the 1060s.  The more time the market gives at these prices, the less likely the dip is a good buy.

News Is Really Bad But

Investors are worried about European sovereign debt and the news seems horrible just to the average person, but most traders are just looking for a correction and then a resumption of the up trend.  That seems to be the consensus view.  With all this bad news and contagion talk, I would figure there would be more people calling for the end of the bull market rather than for just a quick correction.  Sure, the put call ratios are high lately, but that is not an exact timing tool.  If you followed that in 2008 and early 2009, you would have gotten killed buying dips.

Without this Greece bailout news, we'd be much lower.  I think once the effect of this news wears off and we get the details, we'll be ready to go down again.  The bailout anticipation is keeping the sellers from getting bold at the moment.  The intraday action seems unpredictable lately, so I'm not even going to guess.  I stay short.

Wednesday, February 10, 2010

More Bailout Rumors

We got a bailout rumor about an hour ago and it bumped the market to intraday highs, and it has been steadily downhill ever since.   My feeling is that traders will be disappointed with the announced plan.  Both the longs and shorts are nervous at this point, but the intermediate trend is now down.  I don't see a sustained rally until we see more of a washout.  The action reeks of hopeful bulls spiking up the market anytime there are bailout rumors.  I remain short until I see more fear.

Reluctance on Short Side

I see a lot of traders that are reluctant to go short now that the market has fallen 80 points from its year's highs.  Its either cash or hanging on to longs from higher prices.  I see less outright bearishness and more traders just looking for corrections.  Considering what happened last year, I understand the reluctance to short the market.  But I think its a different market than last year.  I am not super bearish, because it is starting to get crowded, but I don't see how this type of contagion situation gets resolved with a bottom like last Friday's.    Most are scared to short here, or are waiting for a bigger rally to short.  I remain bearish and look for the ES to retest 1040.

Tuesday, February 9, 2010

Greece Trap

The bailout of Greece is setting up a trap for bulls.  The market now has high expectations for a European package which could disappoint when announced.  The rally today was quite reluctant.  The price action reeked of heavy overhead resistance above.  Let's see what tomorrow brings, but  I think we see 1040 before 1080. 

Europe Decides To Bailout Greece

Getting news that Europe is set to bailout Greece, that is what is spiking up the markets at the moment.  Most likely scenario is "bilateral help" according to my news feeds.  I think it will not keep the markets up for long.  We may stay strong for the day, but I see further weakness over the next few days. 

Bull's Best Shot?

If that was the bull's best shot at ramping this market higher, the longs are in trouble.  I think this market is headed for a deep dive that will surprise traders.  And it should happen this week. 

Not If But When

This market is surprising us with another monster gap up coming out of nowhere, mainly due to expectations of a Greece bailout.  That is what is soothing markets today.   Is it buy the rumor, sell the news?  I don't even think traders are patient enough to wait for the news, they will likely jet on their long positions as soon as they get a little profit.  Until we get a big washout, I don't think we'll have any sustained strength.  Markets that don't bounce back quickly from oversold conditions are weak markets.  Today, I expect us to falter from this gap up, so I remain bearish, and will hang on tight till I see the white of their eyes. 

Monday, February 8, 2010

Flush Out

I am looking for a give up by the bulls tomorrow as those that became bullish on the manipulation on Friday give up the ghost and sell into weakness tomorrow.  Then we may be able to rally for a day or, day and a half.  I doubt this market has the strength now to string together 2 straight up days.  I expect us to break 1040 soon.  On that flush out, I will be looking to reverse positions from short to long. 

Showing Weakness

This market is showing its true colors today, the inability to rally after everyone got bullish on Friday's close is causing the bulls to pause here.  There are fewer fools to buy the rallies and manipulations as the hours pass by.  This correction is yet to be buyable for more than 1 day.  Tomorrow should be a bloodbath, likely starting with a gap down and a weak close.

Art of Manipulation

There are certain patterns in the stock market that the majority of traders view as bullish. The V shaped rebound pattern is widely viewed as being bullish by the majority. This is despite the fact that the market closed pretty much where it opened, and around the levels of the previous day's weak close. It's funny that a flat day of trading between 1055-1060 and closing at 1060 would have been viewed as less bullish than a big dip down to 1040 and a close up to 1060. Even though the first case would have a higher daily VWAP than the second case.

Let's look at the motivation of the manipulator. The manipulator is already long and in a losing position. He can either take his loss or double down and hope the market bounces back. Or he can quadriple down and force the market up. They are not in a good position. So they dig in their heels, get bold, and run a buy program and raise the price as high as possible, and maintain the buying, until the crowd takes over. The crowd buys in to the rally near the close, as they view the strong buying as an all clear sign, and pay up because the action looks good. At that point, the manipulator can dump as much size as they bought plus the previous inventory that they were already holding. They sell at prices that are higher than they would get had they not manipulated and just sold their inventory. What happens is they turn a big loss into a small loss by manipulating the price higher, while clearing out all their inventory at the same time.

Why the afternoon to manipulate? Two reasons. 1. The market is thinnest in the early afternoon than at any other time during the day. Thin markets require less money and are easier to manipulate. 2. There is less time necessary to keep up the manipulation charade, so less inventory to add while massaging prices higher. By 3:30, the crowd will have already taken over the job, and will be scrambling to either cover shorts or to buy after "the bottom".

I remain bearish, but think we could oscillate a bit higher from current levels. I have closed out a part of my short position and will add it back on if we can revisit 1067-1068 zone which I view as stiff resistance.

Saturday, February 6, 2010

Program Trading Manipulation

Friday's action was straight out of the pages of 2007 and 2008.  During an oversold market, when the past week included several down days, a buy program comes out of the darkness, when it looks bleakest, nails the shorts and pumps up the ES several points in a few minutes.  The buying continues into the close and we close near the highs of the day.  It looked like a hockey stick save for the bulls.  The sad part is that these hockey stick saves only bought time and didn't induce a new wave of serious buying. 

In less mature and smaller stock markets, for example Hong Kong or Korea, this kind of program trading manipulation happens all the time, especially when the market is very overbought or oversold.  Usually in the opposite direction of the short term trend and in the 2nd half of the trading day.  Why put in a program trading buy and force the market higher instead of trying to buy at the best price possible?  Its because these program traders think they can macho the market higher with their purchases.  You can manipulate the market for half a day and get the crowd to do as you please, but in the long term, the market will go to the level that it wants to.  No one is bigger than the market.  Except the PPT.  (That is a whole another topic)

Right now, throw in all the reasons that you want, but the intermediate trend is down and the market wants to go lower.  A strong market ignores these reasons (see Dubai, Thanksgiving weekend), a weak market doesn't (see Soc Gen MLK weekend, January 2008 and Bear Stearns, March 2008). 

Greece, Portugal, and Spain are the reasons cited for the selling, and those trying to rationalize it by saying that's irrelevant to S&P 500 earnings don't get it.  The market got too high, and it was vulnerable to these bits of bad news.  Greece, Portugal, and Spain could all go into a Great Depression and it wouldn't mean much for S&P 500 earnings.  The contagion effect is feared, people say.  I say that you have to look at the big picture.  The market got too expensive, and complacent, and when sellers got a bit more aggressive, the buyers just weren't there.  The value buyers are not going to support this market until we get under 1000.  It only looks like a good time to buy because all the past dips just exploded higher.  But most of those past dips were from lower levels.  The absolute level of price is still too high compared to the fundamentals. 

Friday, February 5, 2010

No Mutual Fund Monday

The Monday gap up day pattern has been so well ingrained in traders that I believe that the last hour rally was due to traders front running Mutual Fund Monday.  The idea is asinine considering the poor inflows into equity funds.  I even heard about Mutual Fund Monday from Fast Money.  When you hear it on Fast Money, its too well known and the market will do its thing to discipline them.  Unless we get some miracle bailout out of Europe this weekend, I expect a gap down. 

Looking For Fear

These are the type of markets that I like to trade.  I made some good reads throughout the day except for the last short squeeze higher of 20 points which I didn't see coming.  It was totally artificial, and I am betting that much of that move will be taken off with a gap down opening on Monday.  If we hear about no bailout plans out of Europe over the weekend, I think traders will get nervous again and start to sell off the euro and the European markets. 

Program Buying

A fund is swooping in to squeeze the shorts and that has pumped up the averages.  This sets up a beautiful gap down opportunity for Monday.  I will be selling the close looking for a gap down on Monday as long as we close above 1061. 

Sold My Long

Maybe we rally into the close, but I don't like how we broke through 1050 with such ease.  If we rally into the close, we'll probably gap down big on Monday.  There is a lot of fear percolating, but the selling seems orderly.  I am going to look to go long on a fear based gap down on Monday.  I will not go long over the weekend this time.

Fund Liquidation

This is a wholesale liquidation of risk assets today.  It feels panicky to me, especially the sharp selloff in crude oil and gold.  I expect us to finish strong in the 2nd half of the day as shorts cover and longs bargain hunt ahead of Mutual Fund Monday.  I am now fully long.

Volatile Range Day

I think we've bottomed, and its risky to stay on the short side.  I have been playing the long side on dips, and believe we will finish strong today.  Either side seems to lack conviction, but the bulls have the slight upper hand because they've been able to bounce back from an intraday dip.  We're in a bottoming process, but I think we need another bad down day to put in a firm bottom.  Ultimately, we should test ES 1038.

Nonfarm Payrolls Pessimism

There is a lot of pessimism going into this nonfarm payrolls report.  The European debt situation is only adds to the fear.  I think those fears are evident in the prices of the ES and in particular, the Eurostoxx index.  It seems to me that most nervous longs are already out ahead of this nonfarm payrolls number, and if it comes in close to expectations, I expect a pop and a gap fill.  If we do get that pop, I will short into it and look for intraday weakness to cover and reverse to long.

Thursday, February 4, 2010

Out of My Daytrade

There are real fears of sovereign debt.  It will make investors hesistant to stay long on overnight trades.  I have closed my short and have no strong feeling about the nonfarm payrolls report.  If we sell off more tomorrow down to the low 1050s, I will be looking to buy.  If we get a bump higher on the NFP, I will look to short around 1068.

Daytrade Short

I have entered into a daytrade short, I expect us to trend lower, I think new lows are very possible today.  The updays on Monday and Tuesday along with the consolidation yesterday has built up the bear ammo.  We've eliminated much of the oversold readings from last week.  The selling should last all day.

Missed Opportunity

This market is cooked.  We are heading to 1050, and its just a matter of when, not if.  I got shaken out yesterday and feeling sick looking at the lost opportunity.  We are shaping up for a trend down day and no one will want to be long overnight with European canaries floating around.

It is definite now that we are at least going to make new lows on this downleg with today's action, so it is important to find a point to get short.   Obviously it was at the open, but the risk reward is going down on a short as we go lower today. 

Greece and Portugal Worries

It is clear that the next big panic will be over Greece and Portugal.  These countries are dead corpses with vultures starting to smell blood.  I would not be surprised to see a rout in Europe next week, probably on Monday, as the vultures swoop in.  The only thing holding the vultures at bay are the nonfarm payrolls on Friday, which people are positive about.  I am hoping to get a short opportunity on Friday, I may not.  But if I do, I will ride it for a swing trade. 

Wednesday, February 3, 2010

CSCO Surge

The futures got a boost on the CSCO earnings and it looks like we're heading higher for the near term.  I think this sets up a grind higher tomorrow with a blowoff top on Friday.  It is not a great risk reward in my view to go long here, even though I think it goes higher near term.  It looks like I'll get another chance to enter my short position at higher prices. 

Resilient Market

I believe it is likely that we rally tomorrow.  But I think we're going to go back down next week.  So I don't want to trade counter to what I believe is the new intermediate term trend, which I believe is down.  Maybe today was a shake out and we keep going lower but I don't think it is.  I expect us to creep higher heading into the NFP on Friday morning.  I will just watch for now.

Likely Going Higher

The action in the first part of the session is not to my liking, so I have taken my loss.  I plan on reshorting at higher prices later in the week or early next week.  I have not given up on the short side, just waiting to re enter at higher prices.  


The reaction to the 2 strong updays in a row will be a foreshadow for the rest of the week.  I am betting that we will go back down below 1090.  If we don't, the drop becomes delayed and likelihood is that we go a bit higher, into 1110-1115 before going back down.  This market seems like it will be in a period of consolidation till at least March.  It is interesting that the recognition that we're in a correction is opposite to what one would expect with the good earnings and above-consensus economic data.  I think this good economic data has made it hard for people to get very bearish here.  Most are just looking for a correction and a resumption of the rally like all the other dips. 

ADP Employment numbers are coming out which will shake up the market a bit.  Expectations are getting higher with the better economic data coming out in recent weeks.

Tuesday, February 2, 2010

Bull Stampede

Relentless buying all day.  If we don't drop significantly tommorrow, it will be a sign that we're going to edge higher into the weekend.  I'm staying short, we're right near resistance of 1103 which was the Bernanke and Obama highs from last week.


The markets are rallying in the overnight market and have overshot resistance zones.  I am keeping my short because I don't see us going much above these levels.  I have a moderate size position, I may add during the first 2 hours of trade to bring it up to a large position.  I am bearish on the market for the next few weeks, and I don't want to lose my position.  I will wait out this rally.  I expect a reversal lower either later today or a gap lower and trend down day on Wednesday. 

Monday, February 1, 2010

Point of Recognition

The short side will be a bit tougher going forward.  That doesn't mean we won't go down more.  I think we will. But it won't be right away and with the ferocity of the past several sessions.  Traders now realize that this pullback is a bit bigger and bit different than the previous ones.  So they won't be caught as offguard when we have the next selloff. 

We're not bouncing back with the vigor as in previous selloffs.  And we are selling off hard on good news.  We might have 1 more up day, with upside to 1090.  But we might just be topping out again today and gap down tomorrow.  I am leaning more towards the latter.  In either case, I expect the gap to be filled at 1069, and more selling down to 1062, perhaps by Wednesday or Thursday. 

Getting Ready For Lower Prices

I am building a short position today taking advantage of Mutual Fund Monday and the rote buying of the funds on the 1st day of the month.  We have a newly established downtrend, and despite being oversold, we're working that off today.  Fast money Halftime is also 3-0 Bulls to bears.  I haven't seen them this bullish in a while.  Historically, they have been wrong more often than right.  I will be holding this short overnight.

Reversed To Short

At 1081, it is no longer a good risk reward on the long side.  We may trend a bit higher today, so I have just initiated a starter position short.  There is resistance right above around 1083.

Support Zone 1062-1068

Now that we have broken through the 1080-1085 support zone, the next area of decent support is at 1062-1068.  That is area around the September top.  Today is the first day of the month, a historically bullish time for equities.  Both seasonality and oversold conditions are working for the bulls.  I will be leaning long all day.