Wednesday, March 31, 2010

Get Ready For More Squeeze

I expected a bit more follow through selling into the close but we got the eager dip buyers jumping all over the weakness 10 minutes before the close.   I expect a gap up tomorrow as the bulls load up in front of a rigged jobs report and more short squeezing.

Range Bound

For the rest of the day, I think the market is range bound, with a low around 1165 and high around 1170.  The ADP report came in light, but the market shrugged that off.  Same with the Chicago PMI numbers.  I think we're going to selloff later today and will likely rally tomorrow ahead of the nonfarm payrolls.

Can You Make Money?

This is a poor trader's market in my opinion.  Unless of course you have been buying all small dips and holding on till the close, which has worked almost every time.  If anyone were to take a break or a holiday, now would be the time.  I see no good opportunities on either the long or short side for the near future.  Sometimes it is best just to do nothing or take a break.

The ADP numbers are coming out in a few minutes, they aren't that great of a forecast for the nonfarm payrolls so don't extract too much information from the data.  I think we are going down today, but with the lackluster action, I doubt it will be for more than a few points.

Tuesday, March 30, 2010

Back to Flat

I have covered my short midday, I think I'll be able to short at higher prices tomorrow morning.  I am not interested in going long at this time, the complacency is just too high for a safe long at these prices.  From a pure price action perspective, the market is mixed.  It is showing flashes of weakness, but doesn't stay down for long.  I am bearish for tomorrow but bullish for Thursday, so it will be kind of tricky to play the next 2 days. 

Energy is Always Last One In

I am going to discuss something that reminds me of 2008.  No, I don't think we'll crash later this year, but something really bad will happen in 2011 because of crude oil.  If we get the economic recovery that many are expecting and S&P goes to 1250 or 1300, then we will have to contend with high oil prices.  If S&P is at 1250, oil will be at $100 easily.  And with oil above $100, that will start sucking the life out of the consumer and you will have another recession.  I don't see it happening this year, but next year, I expect a combination of overvalued stocks, high oil prices, and sufficient inventories to propel another cyclical bear market.
As for the short term, I expect decent weakness either today or tomorrow.  It just might be better to cover intraday today and short it tomorrow morning after the ADP numbers are out.  No big edges here on the short side.

Monday, March 29, 2010

Hearing a Pin Drop

Another lifeless up day.  Of course, most of the move was made overnight.  Unless you can consistently catch the tops and bottoms of these narrow ranges, it is impossible to make money.  Volume was pathetic again.  I am still short.

Prepared for a Selloff

I have gotten short and am now ready for the selloff.  I believe we'll be under 1160 by tomorrow or Wednesday.  I'm not going to try and top tick it today, so I've gotten short and will wait. 

Have To Sell It

I was surprised to see the futures get so high, I didn't expect such a golden opportunity to present itself.  Of course, as soon as I realized this, seems like other traders are hitting the bids in the futures and we are starting to weaken a bit.  The gap up seems to be fueled by a sense of relief about Greece, the end of month markup anticipation, and the nonfarm payrolls optimism.  I want to be a seller today from the get go.  Exact opposite of last Monday.

Saturday, March 27, 2010

Perverse Market

Isn't is funny how the mantra from the late 1990s to 2008 was always buy and hold and never about trading the swings.  I remember vividly how throughout that time period, the historical average of 11% annual returns were often mentioned and stocks were the best investment for those under 50.  The Motley Fool thought they were geniuses for making money when they were just catching the up wave of a giant bubble. 

Then from the fall of 2008, when the S&P is around 850, the mantra changes back to trading the swings to avoid the downswings.  Trade the swings is the new slogan that I hear.  Instead most investors have avoided the upswings and are stuck earning next to nothing on their cash and bonds.  Buy and hold is working again now that is has been abandoned by the masses.  Very perverse how the market works.  Now all those investors that sold lower "swing trading" are begging for a pullback to get back in after they traded out of their positions.  The market is not that easy.  When you take away the weak longs ("the new swing trading longs"), there isn't much urgent selling pressure anymore.  That's why the market keeps floating higher with pullbacks that hardly last more than a few hours.

A lot of traders are confounded by this market, a market that goes up steadily and slowly with hardly a pullback.  Now I am not bullish, but doesn't that action speak of a bull market?  I have always believed that markets that give you a lot of pullbacks are weaker markets than those that don't.  Strong markets don't let buyers in.  That is why it's so important to maintain your position and not lose it by trying to trade every little squiggle and to avoid every little drawdown.  We will go back down again, for more than 1 day, for more than 2 weeks, and have a more two sided market.  I just think that probably ends up happening at higher levels than where we are now.

Friday, March 26, 2010

1% Drop Waiting to Happen

I believe there will be at least a 10 point drop in the ES either Monday or Tuesday, but the question is from what level.  If we do drop, it will likely be bought up and we'd likely go up later in the week.  End of quarter forces and positioning ahead of the nonfarm payrolls due to be released on Good Friday while the stock market is closed will affect trading.  I am slightly bearish, but want to wait just a bit more before I put down my short bet. 

Toppy Action

For the short term, the sellers are lined up at 1170.  I don't think we can make lower lows intraday, but as bad as this looks, we are down 2 points from yesterday's close.  I guess you can call that follow through selling, but in a well established uptrend, shorting after a small correction is not a high percentage play.  I see no edge to going long or short at 1160. 

Fast Mover

This market does not give you time to get in or out.  Once it decides on its course, it doesn't give you much of a chance to buy or sell.  Yesterday was a beautiful opportunity to sell the 1175 but the amount of time spent at that level was not long.  Today, 1162.50 was another good buy point the market spent a few microseconds at that level before rocketing higher.  The pattern is obvious.  We are going to grind higher and finish strong. 

Big Gappa

Once again, we are stealing the RTH move in the overnight market with a healthy gap up.  Things can change with the GDP numbers, but I don't think that will be a big mover.  I was expecting a rally intraday, not premarket.  This market has a habit of moving one step ahead of the anticipators like me.  I will wait for a dip in the first hour of trade and may buy a little and see if we can run up into the close.  I don't see a gap and go move, there was too much damage done yesterday for that to happen.

Thursday, March 25, 2010

Probably a Rally Tomorrow

Although these intraday reversals look nasty and you would think there would be follow through for the following day, usually there isn't.  We are in a topping process, we probably will revisit 1170 and maybe even up to 1175, but that will be a golden sell opportunity.  I have gotten out of my short position, and I expect intraday strength on Friday.  I am not sure what will happen overnight, we'll probably gap up a tad, but not a strong feeling.

P.S. - If we gap down under 1156 tomorrow, that would be very bearish for this market.  

The Real Deal

I think this selloff is the real deal, and we should continue to weaken throughout the day.  I would not be surprised if we see 1162, which is the low from yesterday hit today.  The setup is perfect for a sell into the close scenario.  I have gotten short exposure looking for the next hour to be weak.

Calling the Top

I think we are not going to get above 1180 on this rally, and I will be shorting aggressively very soon.  I hope this selloff isn't the real deal, because I haven't gotten in my short yet, but it could be.  This market is extremely vulnerable to a sharp selloff and weak close, I don't expect it to happen today, however.  On the next little rally before the close, I will be getting short in anticipation of a weak Friday. 

Greece Agreement

On the news wires, it out that France and Germany have reached an agreement to aid Greece.  Is this the all clear signal and we have nothing to worry about anymore?  I can't help but think we are very close to a top.  I will likely start putting on short exposure later today. 

Another New High

Well, we are gapping up again with a healthy gain in the futures, the shorts look cooked again.  The buying is relentless.  The Peter Costa contrary indicator works again!  I think there will be a slight dip from the open and then we're probably grinding higher again to close strong.  The pattern is getting old, but its the most likely scenario.

Asia Divergence

Ever since last fall, there has been a growing divergence between the equity markets of Asia and the U.S.  These divergences foreshadowed the down market in 2007-8, and foreshadowed the up market in 2009.  What I have noticed is that Asian equities are viewed as being better than US equities for past couple of years, yet Asia is lagging now.  Eventually this will matter, but it does tell me that this rally is not as strong as it appears from a global viewpoint.  The Asian indices are the blue lines, the S&P is red. 

Wednesday, March 24, 2010


The market disappointed me, I was looking for a flush through at least 1160 and we couldn't do it.  I doubt we have the energy to do it in the final 30 minutes.  I will look to reshort at higher levels.  I am reluctant to get in front of this bull freight train.

Now Short

Let's see what these wimpy bears can do today and tomorrow.  I think they will be toothless and we'll fall only slightly, but I am going to give it a try on the sell side. 

Short Side Crowded?

Just watched CNBC, and I didn't like what I saw.  Trader Peter Costa talking about bubbles and a time to go short and stay short for the summer.  Talking about the market going down today or tomorrow and testing 1150.  This makes me nervous thinking about shorting now that I hear this.  Peter Costa isn't the sharpest tool in the shed.  Not what I want to hear when I am thinking about putting down a short position.

Market Doesn't Waste Time

Wow.  This market doesn't waste time when it decides to make a move.  I figured we would get a little up and down action Wednesday morning and then go down, but obviously we made the initial downthrust in premarket.  The EU summit starts tomorrow, and I think that will magnify the Greece jitters again, and with the euro hitting new lows on this downmove, it should take the market down with it.  I think ES 1145 will likely happen by Friday.  I am going to get short this morning, but I don't like to short gap downs in strong markets, so I will wait for an attempt at a gap fill to get short.  I think we'll have a weak close today and further weakness on Thursday.

Tuesday, March 23, 2010

Time To Short Coming

It has been tempting to get short and I will take the plunge soon.  I was looking for marginal new highs and we got them.  1175 SPX was the top for today, it could be the top for this whole move.  I am getting bearish.  Either tomorrow or Thursday I will probably get short.

Slow Grind

Looks like a bull market climbing the wall of worry.  A slow boring, painful grind higher for the bears.  I don't see us going down today.  It is looking like we need to go a bit higher before we correct.  Of course, we're right at a 52 week high so its easy to say, but I think 1170-1175 zone is the place to look to get short. 

Crude Oil Topping

The crude oil market has been a useful indicator of speculation in risky assets.  It peaked with the equity markets in mid January as the large speculators were getting most bullish and the commercials were getting most bearish.  Well, that is happening again.  Large speculators are almost back to mid January bullish levels.  Small speculators are also getting more bullish while the commercials are getting net short.  This is not an exact timing tool, but it tells you which way traders are leaning. 

Futures are flat, I am expecting an uneventful day with a slightly upward bias, it will be tough to get much above 1165.  1165 is probably a good point to start shorting. 

Monday, March 22, 2010

New Highs Tomorrow

The momentum of this market will probably take us to new highs tomorrow.  The sellers were notably absent today after that "horrible" healthcare bill and Greece news.  I think the sellers have pretty much gotten all the mileage they can out of Greece.  What else is new?  And the healthcare bill passage was one of the most telegraphed pieces of bad news in quite a while. I expect a small gap up tomorrow as buyers are relieved that health care uncertainty is gone.

So Much for the Healthcare Scare

The rookies were selling the gap down open today, and since this market doesn't have many rookies and chumps left, we went straight up.  The market is carving out a range from 1147 to 1165, which corresponds roughly from 1150 to 1170 on the SPX.   I see this market trading in a fairly narrow range this week, I would be a seller around 1165, and a buyer around 1147.  If we are going to overshoot, I think we'll probably overshoot on the upside.  Healthcare bill and Greece are keeping bulls from getting overly excited, which probably means that we can grind a bit higher from here for a couple more days.

Bulls Defending 1150 SPX

The healthcare bill has passed, as most expected, and Greece news is giving us this gap down.  It is only 5 points from the cash close, so the sellers aren't very active for the news that is out there.  I am suspicious about this weakness, I think we will probably at least test a gap fill for today, if not 1158.  I don't see the selling firepower just yet.  Lots of investors were left out on this 14 day SPY win streak and will come storming in on any weakness that has been mostly absent.  I will join the bulls in defending SPX 1150 if we get there.  I don't think we're quite ready to dump just yet.

Saturday, March 20, 2010

Volatility Killers

The futures market is a zero sum game.  Someone else's profits are potential losses for me.  The black boxes  taking a bigger chunk of market share of volume traded has changed how the market behaves.  In general, the black boxes have contributed to the lower volatility that we have experienced since middle of 2009.  The volatility gets lower and lower as the share of volume generated by black boxes goes higher and higher. 

I have never run a black box or done any kind of quantitative trading in my life.  But just by seeing the market action, especially the peculiarly sharp intraday up moves on Friday, February 5, and Thursday, February 25, I can determine that their main strategy is to buy on dips and sell on rips.  The black boxes are the main factors moving the market.  They are loading up on the down days and unloading inventory when the market gets overbought.  This serves to make the good buying opportunities more fleeting and prevents the market from getting very oversold or very overbought.  On down days, the market often bottoms within the first couple of hours of gap down days, as the black boxes swallow up all the inventory they can handle, preventing the market from trending lower intraday. 

The VIX is again a teenager, lower than at anytime in 2009.  The retail crowd is mostly absent in this market.  I still believe in order to continue the uptrend for the year, the retail crowd needs to jump into stocks, which I don't see happening anytime soon.  The daytrading volatility is so poor that I have all but given up on intraday daytrading except on very volatile days.  Friday seemed like a whirlwind of volatility even though that would be considered a ho-hum day a year or two ago.  I am sure VIX 30+ volatility will come back, but probably not this year.

Friday, March 19, 2010

Coin Flip for Monday

The market closed right at a level where I have no clue whether we gap up or down.  I am leaning a bit towards a gap down, but its pretty much a coin flip.  The health care bill will be good conversation fodder and a good excuse to either rally or sell off, but don't believe Cramer.  Its not gonna determine the fate of this market.  I don't have a lot of conviction on either side in this market, but I will be buying weakness on Monday for a quick flip. 

Buy This Dip

Healthcare bill is just another bad news item that needs to be bought.  I am playing the intraday swing today and gonna buy this dip and sell 30-60 minutes before the close.  I have seen this script way too many times.

Market is Topped Out

I doubt we'll have a flush out day today but it looks like we're setting up for a healthy gap down on Monday.  I think we'll probably settle down around 1155 and probably make a little dip buying run up to 1160 later in the day.  But this market looks broken and ready to test lower levels.

Gap and Crap

I think today's gap up, while modest will be sold into.  The market is very complacent, although not giddy.  I think the next 1% move will be down, not up.  I will probably get short again early in the trading day, looking for intraday weakness.  I think any pullbacks will be shallow, so I will be quick to cover.  I am still not all that convinced that we have seen the top.  There just hasn't been much volume and there are still many looking for a pullback.

Thursday, March 18, 2010

Sergei Bubka Market

Back when Sergei Bubka had the pole vault record, he would try to break his record by the slightest amount, 1 cm, so he could keep breaking his record later on.  The bulls are doing the same thing.  Currently, the ES is right at the flat line, the last minute push in the final 5 minutes of futures close could push it to another green finish, to keep the winning streak going.  What a scam.  But I can't fight it just yet.  I am looking for one last squeeze higher which I will be all over on the short side.

Fed Discount Rate Increase Rumor

The bears are pretty desperate here when we see these rumors about a Fed discount rate hike.  This would be pointless by the Fed.  They already made a symbolic discount rate hike and to further differentiate Fed funds rate and the discount rate would be pointless.  I was surprised that Fast Money Halftime members seemed cautious here after a 4 point pullback.  We'll probably close in the green today.

Momentum Markets

Here are a few things I've learned about trading momentum markets.
  • The market turn usually occurs after a surge of buying, and high volume, for tops.  For bottoms, it is a surge of selling and high volume.  We haven't had that high volume buying surge which I can say is a classic blow off.  We don't necessarily need one to make a top, but more often than not, we do.  
  • The first 3%-5% dip after making the top can be bought for a quick trade, as long as the market is not a runaway bubble, i.e. Nasdaq 2000, crude oil 2008.  This market isn't a runaway bubble.  
  • Once the blow off top is made, shorting rallies for the next 3 weeks after the top is very profitable.  We have yet to have the blowoff, but once we do, shorting rallies till end of April will likely be very profitable.
  • Don't get swept up in the momentum.  Wait patiently for a high volume top and sell it. 

Wednesday, March 17, 2010

Fund Capitulation

Trading at 1:30 PM today looks like a fund that capitulated on their short position and shot the market higher by 3 points on gigantic volume.  Very atypical for that time of day. The selling in past hour and 1/2 has muddied the picture.  I was looking for a blowoff top tomorrow morning, but with this little selloff, the probabilities are not as favorable for a morning short tomorrow.  I still think we need a blowoff top to end this run.

Runaway Market

Seems like a blowoff is imminent.  We are getting closer, I still believe today is not it.  Tomorrow morning I'll look for a quick 5 point squeeze up in the first hour of trade as a sign of a blowoff top.  Still targeting 1170-1175 zone to short.  I remain on the sidelines till I see the bear panic capitulation.

Covering Today

I don't think we'll go down today so I am doing some microtrading by covering and plan on reshorting tomorrow morning.  This market probably needs to blowoff viciously to put in a top.  There is no resistance above so I will play for a blowoff by waiting to short around 1170-1175 ES. 

13 Day Winning Streak

We have broken out above 1150.  The Fed confirmed that they want to blow another bubble and gave the buyers the green light.  It is getting giddy, it is a matter of timing the top, but I am pretty sure that its this week.  Is it today?  Tomorrow?  Friday?  I think next Monday will be a hard down day, after options expiration.  We may squeeze a bit higher, but if we do, those gains I think will be quickly wiped away on a pullback.  We should pullback today after bumping higher on the Fed news, but this market has ignored all probabilities.

Tuesday, March 16, 2010

Starting to Short

I don't think this market can go up anymore in the short term.  All the good news that this market wanted is out, and we're not having much of an up day.  It looks pretty bearish to me for the rest of the day and tomorrow.  I have initiated a short position.

Free Money Forever

Fed does nothing as advertised.  This should excite the bulls and demoralize the bears.  Maybe that will give us the good news top that I am looking for.  Let's wait and see.

Banana Ben Bulldozer

I am not going to be getting in front of the Banana Ben Bulldozer quite yet.  There are dimes to be picked up, but I want to wait for there to be more before I start my short campaign.  We all know the Fed will do nothing but posture, so we'll get the sigh of relief buying and that's what I want to sell into. 

We got the Greece S&P ratings affirmation which eased any remaining Greece jitters.  I don't know why S&P ratings are still relevant, but the market likes it.  SPX 1160, or ES 1156 will be tough to get through.  I will look to short in front of that resistance zone. 

Need A Breakout

This market is slowly cooking up the pressure on anybody that is short or underinvested.  I think we need a mini breakout to clear out the stops and relieve the pressure.  It is just a theory I have because this market is not giving that pullback that a lot of investors and traders want.  Once the pressure is relieved by breaking out, we will be so overbought that the market can do nothing but go down.  I am waiting patiently for a breakout to about 1155 to put on my shorts.  At that level, I won't have to take too much heat before we go back down.

Monday, March 15, 2010

FOMC Reversal

Today's action was fairly bearish despite the late day rally.  The sellers don't have the follow through but the fact that they were able to take this market down almost 1% intraday is a change in character from the previous few days.  The FOMC meeting tomorrow should be a mini blowoff where I will look to get short again.  I am looking for a reversal to the downside intraday tomorrow.  I am neutral on the overnight trading for today. 

1150 ES Is the Top

I think 1150 is the top, but I believe we will revisit that area again.  Today's weakness gives a good clue that the market is topping out.  That doesn't mean we go straight down, it just means that the upside will likely be contained to 1150-1155 area.  I don't want to be short ahead of the FOMC meeting, so I will likely wait till Tuesday afternoon or Wednesday morning to get short.  But the set up is lining up for a monster drop in April.

Stepping Back

I have covered this morning and going to look at this market with a clearer head hopefully.  I've looked at all the bearish angles and it's not as bearish a picture as I first thought.  When a market refuses to go down, you have to listen.  I am still bearish and there is no way I am going long here.  But I will be a bit more careful shorting this market.  The price action speaks to underlying strength and I'd like to get short later when I see a bit more volatility in the price movement, up or down.

Toothless Bears

The sellers are so scared to show up right now that any minor gap down in overnight hours is voraciously bought.  I expected today to be a decent down day, but it looks like we're not going to go anywhere.  I will likely close out my short today and look to rebuild the position either Tuesday or Wedneday.  There should be one down day soon, but it doesn't look like today will be that day.  I am still bearish, but not as much as Friday. 

Friday, March 12, 2010

Going Home Short

The bulls rounded up the troops to try to close the market up.  The shorts are all but obliterated, and right now everyone is expecting a Mutual Fund Monday with dumb money going crazy buying stocks.   Weakness in gold and crude oil tell me that funds are already loaded up on risk right now.  Next week is options expiration, there has to be a down day sometime!  I am holding my short position overnight playing for a gap down for Monday and further selling.

Sharp Selloff in Crude OIl

Is this a foreshadow for the equity markets?  I can't get the thought of traders awaiting Mutual Fund Monday and being greeted with a gap down and a Monday selloff.  Market is very complacent right now as all the data is supportive and things look so sunny.  Crude oil is selling off despite the weaker dollar.  Gold has been a laggard.  I think the last stalwart is equities and it is just waiting to collapse.  I don't see it happening right away, but after options expiration, I would not want to be long.

Market Feels Heavy Today

I can't put a finger on it, but the euphoria that we saw with the retail sales number contrasting with opening range breakdown from those higher levels smells like a selloff is right around the corner.  I am looking for us to test 1139 and we'll probably save the real damage with a gap down on Monday.  But I am sticking with the short side today.  It looks like it wants to breakdown intraday.

Breaking 1150

The paper napkin chartists are going to go bananas if we close over 1150, meaningfully.  It is just a number, but it does affect investor behavior and sentiment.  I have a hard time seeing this market go up strongly from these levels, it would surprise me if we went over 1160.  Historically, such strong momentum we've experienced doesn't lead to an immediate correction, but usually some churning and burning.  So that is what I expect, I expect us to churn from 1125 to 1155 on the ES for the next couple of weeks.  That will likely set up the next correction which should be less steep but last longer than the one we had a few weeks ago.

For today's intraday action, I expect us to trade slightly above 1150 SPX after the open, and then go back down to test 1140 SPX midday. 

Thursday, March 11, 2010

Squeeze Continues

This market is hell bent on killing all bears before collapsing.  The trading is quite curious and its something that looks like its taken from the pages of 2009.  I think rollover had something to do with the squeeze at the end of the day.  No strong opinion on gap for tomorrow.  This market probably needs to get cleanly through 1150 before we can make a significant move down.  I think 1155-1160 could be the top before we go dripping back down.

Let Me Guess

With 3 hours left in the trading day, I'm guessing we'll stay in a range of 4 points, from 1137 to 1141.  The dip buyers were very aggressive today, we hardly traded any volume below 1135 (June ES) before rocketing up from those levels.  It still feels like there is underneath demand, but there is eagerness to buy at higher levels. 

We should get a 1% down day either Friday or Monday, before the FOMC meeting on Tuesday March 16.  So I will stay short.

Volume Spin

When I was exclusively trading stocks back in the day, I would often short overextended momentum stocks.  These stocks eventually had sharp downturns, but the trick was to time it as close to the top as possible to take minimal heat while being short.  One of the tell tale signs I would look for is volume spin.  The stock would be in an uptrend, near its highs, and the volume would surge while the stock price oscillated in a range during that time.  This surge in volume while price remains relatively stable is volume spin.  This would often be a sign that we had hit the top and supply had met demand at current prices. 

Now the past 2 days, the market has gone up, but I have noticed that the volume has gone up with it unlike the previous 2 weeks.  This despite the market only adding marginal gains in the SPX.  I believe this is a top signal and we should expect weakness today.

By the way, today is rollover day for futures, I will be mentioning the June ES contract prices when I mention any numbers from here forward.

Wednesday, March 10, 2010

Intraday Volatility

To these eyes, the price action and the intraday movements speak of a topping process occurring from 1140 to 1147.  The volume is higher than we've been used to for the rally, which is probably not what the bulls want with this kind of trading.  The squeezes occurring in the highly shorted stocks like the financials are proof that the bears are throwing in the towel.  Speculation is also picking up, as can been seen by the heavy call options activity and trading in C and AIG.  I am getting more bearish here.  I have a strong feeling that we will have  a gap down tomorrow. 

Shorts Are Scrambling

This mother of all squeezes are scrambling the shorts as the regional banks and heavily shorted financials like C and AIG are squeezing again.  We are now at the 2010 highs for the SPX, it is going to cause a total give up by the bears if we get through 1150 on SPX.  That's probably what it will take to end this rally.  I think we're very close price wise.  But we may churn near these levels for at least another week till options expiration.

Never Going Down

The market feels like it will never go down.  I can't recall the last day when we were down more than a couple of points.  It must have been in early February.  This steady uptrend has gotten rid of a lot of bears, although I can't say that a ton of bulls have joined the party.  Maybe its because there isn't all this cash lying around like everyone believes.

I am going to be staying with the short side throughout this month.  I am in no rush to cover and view yesterday as a topping signal.  I am looking for early weakness today.

Tuesday, March 9, 2010

C and AIG

There is a rush of positive commentary and news coming out of C and AIG.  The speculation is also boosting FNM and FRE.  The volume is very heavy for those issues.  It looks like a dash for trash as investors get comfortable with this market. 
Today we have finally gotten more significant volume that we've been missing.  I don't think that's a good sign because of the intraday action today.  It looks like there is a big roadblock at 1145 around the 2010 highs. 
The equity put/call ratios are extremely low today.  The intraday reversal off the highs seems to be signaling a tired market.  I am looking for lower prices into the close.

Very Close to A Top

There are signs of froth and impending doom. 
  • The ES is stuck at very strong resistance around 1140 despite Nasdaq and Russell 2000 outperformance.  
  • Russell 2000 and Nasdaq outperformance usually occurs late in a rally.  Remember October 2007, the Nasdaq strongly outperformed the S&P up to the top that month.  
  • The divergence of the equity and index put/call ratios.  The equity options is usually traded by retail and speculators while the index options is mostly traded by hedge funds and smarter money.  Equity p/c ratios are low, index p/c ratios are very high this week.  
  • Crude oil and gold lagging the equity indices.  

Should Drop Today

The market looks tired and looks like it will take a rest today.  I am not looking for a big dump, but a trip down to 1121 to fill the gap from Thursday sometime in the coming couple of days.  It will take a huge effort to get this market above 1145, and it can fall to 1121 without much effort IMO.  The weakness in crude oil and gold is telling me the funds are starting to cut back on risk at these levels.  I believe stocks will be next. 

Monday, March 8, 2010

Lifeless Trade

The market has been trading in a 4 point range for most of the day.  I expected the market to show a bit more weakness today but the market isn't moving.  I'm still short looking for lower levels tomorrow or Wednesday.  Today will probably be a nothing day.

Bulls Like the NFP

Looks like we've got some more bulls now thanks to the jobs report.  Add to that we're close to the resistance area near the 2010 highs and its a compelling case for getting short here.  Maybe we'll blast through again higher, but I view that as being very low probability.  I expect some oscillating action in the first hour of trade and then the market weakening into the final hour of trade, where the bulls will try to make a stand.

Saturday, March 6, 2010

Face Mask

This market is defying the odds.  Past statistical studies are useless in the face of this uptrend. Any attempts to fade this move by shorting have been beaten down relentlessly.  The bear's face has been ripped off so many times over the past 4 weeks, he should be wearing a face mask while he trades.  That is what happens when the market goes straight up for 95 points.  This market acts in ways that defies past history.

After an extended run up into the NFP, the market tends to have a kneejerk reaction in the direction of the trend, which is obviously up.  Ok, the market followed that tendency there and I avoided being short ahead of the NFP.  I figured I was given a golden opportunity to short above 1130 and went in expecting the usual fade move as it usually happened in the past.  The sellers were ghosts, and the buyers had to pay up again and the market went grinding higher again.

I doubt this market has the fuel to keep going higher. It seems very odd after such a sharp correction that we had in January to be able to go straight up.  Those instances are not that common so long into an extended cyclical up move in a secular bear market.  Unless this is a new secular bull market, this kind of action shouldn't be happening.  Also, stocks are not cheap.  They are a bit overvalued based on normalized earnings.  And there is no retail fuel to push this higher.  The only source seems to be Fed induced liquidity at the big banks that are finding their way into stocks.

Now that we are near the top end of what I believe to be a trading range, many bears will feel a bit uncomfortable fearing a breakout and a run to 1200.  But I will play it like its a trading range from 1040 to 1140, which means I will be leaning short around these levels.  Sentiment has room to get more bullish, but the bearish levels are pretty low right now.  I actually believe sentiment can become more bullish while we stagnate at these levels.  That would be the ideal scenario for me to get aggressively short looking for the next down leg which should take us to the 200 day moving average. 

Friday, March 5, 2010

Still Short

We tested 1140 on the SPX cash and we bounced off that level.  Looking at the big picture, we've come a long way over the past month, a bit more churning between 1120 and 1140 over the next week or two should increase bullish sentiment and set us up for another significant correction.  If we close above 1150 for more than a couple of days, I will have to reassess.  I am still holding my short position expecting weakness early next week.

Dull NFP Day

Bulls got what they wanted, a stronger than expected number and the market hanging tough.  The market is exceedingly dull going nowhere for the past 2 hours.  They say to never short a dull market but I'm gonna short anyway because I think the upside is limited and I think once we start selling off, its going to be hard to jump on board. 

Safe to Short

I believe it is now safe to short at will around these levels.  The anxieties about the job report are gone, and we are levels that have a lot of resistance above.  I don't believe this market has much fuel left to go higher, so I am erring on the bear side.  Timewise, we can churn for a bit longer at these levels, but price wise, I think we are near the top.  I have initiated a short position and will ride it till next week. 

Fade The First Move

Usually when the NFP comes out, the best play is to fade the first move, that is, if we move sharply up after the announcement, then one should sell, and if we move sharply down, one should buy.  I agree with the sell portion of that theory, but I wouldn't be so eager to buy on the first move down.  I would wait for things to settle down a bit if we do have an initial selloff on the report. 

We're slowly grinding higher here in afterhours, it looks like shorts are feeling the pressure and if we blow, it will likely be to the upside.

Thursday, March 4, 2010

Tomorrow's NFP

The market is very quiet today ahead of the NFP, but notable is the lack of weakness ahead of the report.  The shorts just aren't able to get out of their positions at a decent price ahead of the jobs report.  The price action today is contrary to the consensus expectation that the number will come out poorly due to snowstorms and the weaker jobless claims numbers.  I don't know how the number will come out, but I expect us to trade higher after the release.  Thus, I am waiting till after the number comes out to put on my short position.  I am not interested in playing long at these levels.

More Intraday Weakness

The market looks like it wants to test lower levels before going higher.  The remainder of the day will be positioning ahead of the nonfarm payrolls report, which most expect to be weak due to the snowstorms.  I think we'll at least test 1114 today intraday and may crash below that down to 1110 by the close.  But I will wait till after the NFP on Friday to get short again. 

Very Close to Top

The past 2 days trading tell me that this market is near the top of its range, and will have a hard time adding gains above 1125.  Two consecutive black candle bars tell me that we are late in the rally.  I doubt there is fuel in this market to take it back to yearly highs, but we could go as high at 1135 in the next 2 weeks.   I have covered my position overnight and will look to get back on the short side after the NFP.  I am reluctant to play the long side here, because there isn't much room to go higher but plenty of room to go lower.  I still believe that we will consolidate near the upper end of the trading range for several days before having a sustained correction. 

For today, I am looking for a slight dip in the first hour and then rallying slowly for the rest of the day. 

Wednesday, March 3, 2010

March ES Projection

Making a wild guess, but I see further consolidation from here to slightly higher levels for the next week or so.  Once bullishness builds up and the Greece situation is out of the picture, the market will be ripe for the next correction.   This change reflected in sentiment surveys and anectodal evidence should be sufficient to satisfy the conditions of complacency.

Then I see a step down into a lower trading range and then a steady move down after March expiration, with the down move starting in earnest from post expiration Monday.  There should be plenty of dip buyers along the way down, which will make the down move slower but more steady than the correction from mid January to early February. 

Upper range target is 1135 on the ES and the lower range target is the 200 day moving average, which should be around 1045-1050 in late March.

Same As Yesterday

I will be looking for a top in the first hour of trade, with resting sell orders above.  I don't know if they will get hit, but I'll wait.  No need to force trades with this kind of lackluster action.  I feel like we'll have a reversal intraday and finish near the day's lows.

Tuesday, March 2, 2010

Dull Market

Intraday trading range is 7 points, but we've traded most of the day between 1118 and 1121.5.  A horrible market to daytrade.  If you play overnight, you can catch a bigger part of the range, but have to forgo your freedom/sleep to do it.  What a market!  Ahead of the NFP, I think we have now formed the top, at 1122.75, but the bottom of the range is still a question mark.

I want to add to my short soon, because I see a 1% swoon either tomorrow or Thursday intraday.  I want to catch that move.  The question is will the market give me a decent price to get short at before we swoon.  I can only hope.

No Good Setup

A squeeze up to 1124 would have been a perfect short entry but we know this market doesn't like to give easy short entries.  We are seeing emotionless trading, which is to the advantage of the bulls because we've rallied and yet to see a lot of bullish excitement.   I have reduced my short position as a result.  I want to be able to load up on the short side either later in the day or in the overnight session tomorrow at higher prices. 


Yesterday's uptrend momentum is carrying over in the overnight session. I am holding a short position, but I have plenty of room to add more and will on any pop that we have in the first hour.  I think the highs for the day will be made in the first hour of trade, and will trade accordingly.  No economic data today, but Greece is having a debt issuance tomorrow from what I hear.  That may be a market mover, along with the ADP jobs number tomorrow morning.  I expect a decent sized selloff either Wednesday or Thursday as traders take profits ahead of NFP. 

Monday, March 1, 2010

Staying Short

We are at the very top of the range.  The trading this week will be driven mostly by traders lining up ahead of the economic data, mainly the nonfarm payrolls and the Greece bailout.  I will be looking for a reversal tomorrow as we are extended short term and I don't see a breakout happening ahead of the NPR.  I stay short.

Shorting The Rally

I may be a bit early on the short side, but I like the risk reward ratio selling at these levels.  I think traders are a bit complacent amid reports that Greece has its bailout and in the face of the resilience of this market.  I have gotten short and will target lower levels in the middle of this week. 

Set to Short

I will be waiting for the bulls to overplay their hand and have resting orders a few points above, hoping for a fake breakout and a reversal.  I have closed out my overnight long.  The ISM index comes out at 10:00 AM and if it comes out well, it could push us up to areas where I will be shorting.

Hitting Neutral

The market seems to be in equilibrium, not too optimistic or pessimistic.  More Greece bailout news hit the wires and the Europeans got excited but it didn't last, and we're near overnight session lows. 

In this kind of environment, the odds favor range based trading.  I will treat this market as if its in a range, and we're probably close to the upper end of that range.  I do think we have room to go a bit higher, but not much.  We may churn between 1085 and 1115 like we did back in late 2009 again.  I don't see a breakout over the next week above 1115 as being sustainable. 

I am still long but will likely close out or reduce my position significantly by the open.