Thursday, March 31, 2011

Gut Speaking

I think the nonfarm payrolls will come in above expectations and we're going to have a spike to 1335 to form a strong gap up.  That early strength should fade on Friday and the gap should get filled intraday.  All wild predictions.
If I had to choose, I would be a buyer not a seller ahead of the NFP.

Buy the First Dip

The shorts haven't had a graceful exit here, and buyers have been left behind.  The first dip will be aggressively bought, so I would look for any gap fill down to 1315 to be bought voraciously.  You have to stick with the long side.

Wednesday, March 30, 2011

Window Dressing Myth

The thing about financial journalism is that you don't need proof to state your case.  All kinds of beliefs are passed around like they are fact.  Window dressing is one of those things which is hard to prove or disprove so the conspiracy nuts have a field day with an easy excuse to explain stock movements they can't understand.  Such as yesterday's strength being funds painting the tape and marking up stocks.  Then why are we gapping up so much in the pre market?  And how does window dressing address the seasonal tendency for weakness at the end of March but super strength in the beginning of April?  I thought most window dressing was to bid stocks up, not down.   I saw true tape painting in a few small cap stocks back in the day, in 2000 and 2001, but over the years, the phenomena has disappeared along with the fervor for stocks. 

This is just a bull market, and we had our little pullback, and we're heading higher.  I am not long because I don't think we'll get much above 1330, and do believe we have another date with 1250 in about 4-6 weeks time.  But I don't want to get ahead of myself.  I'll let the bulls roam for a few more days. I will start to look for a short entry next week sometime, hopefully between 1335-1340.

Tuesday, March 29, 2011

Bull Markets

Are boring.  Little volatility, little volume, narrow ranges.  Get used to it.  Despite that, we've had somewhat bigger ranges the last few days, it just happens to be concentrated in the first hour of the day.  The economy is getting better, don't get fooled by housing, it is not the be all and end all for the economy.  The cheap dollar and stimulus are still propelling this market, let's not forget that we had tax cut extensions and Social Security tax cuts last fall, which apply this year.    It will be a healthy fiscal boost along with Bernanke's endless QE.  That is happening to a recovering economy.  It is like adding additional plutonium to a nuclear bomb.  1400 is within reach by summer time.

Shallow Pullback

I don't expect a very deep pullback here, we had our standard correction in Feb-March, and now it is back to your regularly scheduled uptrend.  I still don't want to fight the long term uptrend, if we do pullback a bit more, I expect strong support at 1296, around SPX 1300.  So the risk reward for a long is very good if we can reach those levels sometime this week.  Today, I will be waiting for that pullback down to strong support to nibble on longs.

Monday, March 28, 2011

No Good News

The fact that there is no so-called good news causing the rally makes it even more trustworthy.  When we get the good news in the form of higher jobs numbers this week, that will be trigger to look for a selling opportunity.  By then, we should be close to the 52 week highs and a good opportunity to short. 

Going Higher

We shouldn't be gapping up today based on my models yet we are still managing a modest gap up.  When the market refuses to act the way that you expect repeatedly, it tells you the direction it wants to go.  We are going higher, no matter what traders want.  The pullback, if it happens this week will be shallow and immediately gobbled up by dip buyers. 

Friday, March 25, 2011

Street is Underinvested

You don't get these explosive V bottoms unless the Street is caught flat footed without enough equity exposure.  The short term trades are about supply and demand, the market could care less about Portugal or Japan's reactors.  If traders need to buy to save their jobs, they will buy, hell or high water. 

Just in case people forgot, we are still in a rising trend.  These super long bull trends do not die easily. 

Gap Fill and Squeeze to Close

I am looking for weakness intraday from the open and then a squeeze into the close as traders don't want to be short over the weekend with a possible gap up.  The volatility is slipping away which takes away many of the intraday trading opportunities.  We should slowly work our way up to 1320, at which point there should be more two way trading. 

Thursday, March 24, 2011

V Bottom

We just witnessed a V bottom.  There was little hesitation off the low set last Wednesday, and we've only gone straight up with very minor consolidation.  I don't see any significant resistance now until 1320.  The bears muffed it again.  They had a golden opportunity and they blew it.  Not chasing any longs but I think we'll be at 1320 by Monday.

Wednesday, March 23, 2011

Got Another Gap Down Here

A stronger signal today on a gap down for tomorrow.  We rallied off the weak morning trade, and the market has revealed what I suspected.  It is still as strong as mule's breath.  Still, I believe there is a gap down but I would be a buyer of it, especially if it is near 1280, near the low for today. 


After 3 straight big up days, all gains on gaps, we are finally having a gap down after yesterday showed signs of buyer exhaustion despite all the good news from the previous 3 days.  Let us not forget that Brent crude is back at $115, which is a negative for the consumer.  After last week's mini panic down to 1242, there will be some hesistancy to go straight up and we'll have to do some backing and filling. Looking for a trend down day.  I expect strong support at 1270. 

Tuesday, March 22, 2011

Gap Down

I expect a gap down according to my system.  We've got support on the downside at 1274, which is the gap fill from Friday and 1270.5, which equals 1275 SPX.


I am somewhat bearish for the next 3 days, and if during those next 3 days we don't break 1260, then I will expect higher prices for the next 2 weeks, up to at least 1320.  There has been a flood of good news in the market over the last 3 trading days with monster gap ups, so the market is a bit overbought.  But I am ruling out a run back down to the lows of last week because we've just traded too strong, around the levels before the Japan earthquake.  For today, I see no edge intraday. 

Monday, March 21, 2011

Overnight Steals

From the intraday gains.  If you are a scared long during heightened volatility, and go home flat every night and then get long again at the open because there is "less" risk, then you are selling low and buying high.  I don't think we are off to the races, but I also don't want to short this gap up either.  Rarely do you get 3 straight big gap ups with all of them crapping out intraday.  So we're probably due for a gap and run today.   I'll let the daytraders battle it out and if there is an attractive short entry around 1300, I will pounce.  Just watching and waiting for now.

Friday, March 18, 2011

Covered at the Close

I think we go lower but I don't want to hold short over the weekend.  Call me a scared short but I'm not going to try to catch the last mile here and risk getting squeezed. 

Market Not the Same

Since QE1, almost all big gap ups were met with further buying throughout the day, until these past 2 days.  We actually finished below the open yesterday, and today, we are fading another big gap up.  This is a change in character that shows that the market doesn't have the same upside energy as before.  We can still go higher and hit new highs for the year, but it makes those highs probable good shorting opportunities. 

Yen Intervention and Libya

Funny how all the good news comes right ahead of triple witching day.  Its almost as if its all planned out!  This Libya ceasefire means Qaddafi stays in control and rebels continue to protest.  Qaddafi is a sly one.  He knows that with a no fly zone, he can't pound the rebels, so what's the point in fighting?  And yen intervention just makes the yen cheaper, for a short time, but it doesn't solve the nuclear meltdown.  I am selling short this morning looking for weakness throughout the day.  The market isn't ready to all of a sudden run higher like everything is solved.

Thursday, March 17, 2011

Unlikely But If We Finish Down

That would be a huge change of character for this market.  Huge.  I don't think we'll fill the gap and close red, but if we do, this correction will go longer and deeper than expected.

Huge Gap Up

Normally these gap ups do not fade.  Especially since QE1 and 2.  We'll probably grind higher all day, and act like nothing bad happened.  But I'll just be watching.

Manipulation Nation

Central banks have just one playbook these days: market manipulation.  I bring this up because last night, I looked at the Nikkei price action and it smelled of government support.  Every small dip was bought and the market was slowly taken higher, with the support taken away once the cash market closed.  After the futures market reopened, the Nikkei futures  dumped 300 points on nothing while the ES was rising.  There is no real demand for Japanese equities at this price level.  The BOJ is setting the market price.  When they aren't operating, the Nikkei goes down.  When they are, it goes up.  At least they admit as much.  The PPT will never admit to anything. 

We have a big gap up in the futures which sets up a possible rally to mid day and then dump into the close scenario.  If the futures cool down in the remaining 2 hours till the open, we likely dump in the first half of the day and rally strong in to the close.  Either way, fade the move up or down intraday today.

Wednesday, March 16, 2011

Real Panic in Japan

We got the faux panic on Tuesday in Japan which cracked the ES, but today will be the real deal.  Just look at dollar yen.  It is around 76.5, shooting down below 80 in a flash in after hours.  The Nikkei is set up a huge fall because of yesterday's big rally.  Panic levels to look for are ES 1244, which is around the 1250 SPX level.  But the real buying level is when we get to 2010 support levels around 1225-1230 SPX.

Watch Japan

Until the Nikkei bottoms, this market won't be able to bottom.  Based on the Nikkei chart, after that egregious gap up yesterday in the Nikkei, it is still too early to call bottom in that market.  Thus, you can't call bottom here.  Wait till tomorrow, we are possibly looking at total give up in the Nikkei ahead of the weekend which would mean big red in the futures.  I am waiting to buy, it is too late to short except for the very nimble. 

Reacting to News

On the wires there was an old comment posted about an EU energy commissioner calling the Japan nuclear situation as out of control.  Now this is an old comment, but it took down teh market almost 15 handles in 10 minutes.  This market is in a very vulnerable state, strong markets don't react to news like this.  There is more panic in the air, but it will have to be something more lasting than a 10 minute blip.  You can only buy weakness in this market.  Don't pay up for stock.

Women and Children

Hide em.  It is gonna get ugly very soon.   There is a very bearish technical setup in the ES.  We were unable to fill the gap yesterday and now we are gapping down again after an upthrust day.  There is a lot of supply out there as the hedge funds are in the meat of their derisking.  The Japanese nuclear situation looks dire.  The uncertainty of long term radiation leaks is going to put a cloud on this market.  I have gotten out of my longs here and will consider shorting if we can get up to 1280 early in the day. 

Tuesday, March 15, 2011


Making some buys into the gap down.  Looks panicky to me and we should thrust higher during the day.  ES 1252 is where we started the year and a gap area.  It should be strong support. 

Buying Opportunity

This is the panic bottom that I was waiting for.  The script is all too familiar.  After a couple of weeks of weak trading, we finally get a big gap down on panic and some bad news. Then we rally off the open and finish much higher.  I would be a buyer at the open, and we should ramp higher as the day progresses.  Nuclear meltdown is now fully priced in. 

Monday, March 14, 2011

Nuclear Meltdown

It was a factor that I didn't include in my overnight analysis.  This brings another whole array of uncertainty to the market.  The early buying should give way to selling after the first hour of trading.  I am bearish for the rest of the day. 

Friday, March 11, 2011

Gap Up Likely

Signal coming in that we're going to gap up on Monday.  Of course, this is just based on the price action, and with the kind of crazy news that we get these days overnight, my signal can be overthrown by magnitude 8.9 earthquakes.  It feels like we bottomed today and it should last till options expiration. 

Out of the Blue

Japan earthquake, day of rage, falling stock market, when do the locusts come out?  Actually, I am suprised the futures are not down more, we are only down about 3 handles from the close after an earthquake in Japan, ahead of the day of rage, and European financial woes.  If I was Alfred E. Neuman, I would feel quite comfortable. 

I think we are close to a short term low, and would not be a seller today.  Remember, the history of natural disasters is that they are quickly forgotten in the marketplace.  This is the same situation no matter how much fear is brought up on the news networks.   I would be buying any morning dips because we'll like shrug off these woes and traders will likely be staring at a gap up on Monday morning.

Thursday, March 10, 2011

Saudi Shooting at Protesters

The market just dived 10 points on the Saudi news.  Tomorrow is the planned day of rage in Saudi Arabia.  Traders were brushing it off as a non event but the recent news changes things.  If there are fireworks in Saudi tomorrow, the market will gap down hard and crude oil will launch higher.  Things are getting more interesting. 

Buying Opportunity?

Peter Costa of CNBC says today is a buying opportunity.  Another analyst on CNBC came out with the same argument.  The lower oil price has lured in the retail buyers today who are salivating at a down day in equities with lower oil.  I am not constructive on the upside for the rest of the day.  It looks like traders are a bit too eager here to buy the dip and there is little fear out there. 

Overnight Action and Computers

The computers are running the show.  Why do I say this?  Because about 40% of the current gap down from the cash close happened from 4:00 PM to 4:15 PM.  So in an overnight session that last 17 hours, 40% of that gap down happened in the first 15 minutes without any news.  So 40% of the gap down happened in less than 2% of the overall overnight time period.  

In order to grab your positions, either long or short, you have to think more than one step ahead, but not too far ahead.  It's a fine line.  Just even one step ahead is not enough to get in a good position because the computers are all wired to jump in "one step ahead". 

Otherwise, you are left in the dust with mediocre entries that have poorer risk reward characteristics.  That is why the lows and the highs of the day rarely last long.  The computers are gobbling up shares at these extremes from the common folk.

This has to be the worst case scenario for longs.  You see the oil futures down 2 bucks and the ES is gapping down 10 handles from the cash close.  We are coming back higher as the US traders arrive at their desks reflexively buying futures on lower oil but I don't think it will last.  Calling for a trend down day today.  

Wednesday, March 9, 2011

Expecting a Gap Down

One of these days the market will have a big gap down.  Calling for another gap down tomorrow.

Careful on the Short Side

Fast Money Halftime were all bearish for the close.  I would not be surprised to see us grind higher into the closing bell. 

What's Your View on Oil?

If you don't have a view on oil, then you can't trade the ES with confidence.  Right now, my view is that oil will go even higher short term, so I am leaning on the short side.  I can't say its a great short opportunity, but this market is not strong enough to overcome rising oil prices.  Since my view is that oil will rise, I can't be a buyer of ES here.  I either want to be short or flat, until we get that oil spike and resulting fear. 

Tuesday, March 8, 2011

Should Gap Down

Got another strong signal today for a gap down in the market.  When I look at oil, Brent crude oil is a better gauge of worldwide demand than NYMEX, so it is understandable that we rallied so strongly because Brent did selloff about 2%, much more than NYMEX.  I actually think oil will keep going higher short term because we've received oil bearish news over the past couple of days and it didn't do too much to the oil price.

Oil is in a very ignitable position right now.  I don't think we've seen the end of this oil rally on this runup. 

China Strong Europe Weak

The emerging markets trade is back on.  They got oversold after all the hedge funds reduced their weighting in the sector.  China has been on fire lately.  The funds are just back to beating up on the helpless, Europe. 

Crude oil continues to look like a bull trend that won't stop until we go still higher.  I haven't seen a climactic move that usually signals a reversal.   Anectodally, I am hearing of hedge funds derisking like they did in May 2010, but to a much less extent.

A reversal from a healthy gap up to even on the futures is a bad sign for the first couple of hours of trade.  I will take that to mean that we have early weakness followed by strength in the afternoon.  No one wants to be short in the overnight session when we've had so many of these mindless gap ups on nothing. 

Monday, March 7, 2011

Gap Down Signal

I am getting a fairly strong gap down signal, at least a 75% probability.  I'm not too bearish on the market, but I do think we've got to flush out some longs soon before we can thrust higher for good.  A gap down tomorrow with another move up in oil would be a good opportunity to flush out the weak hands.  Otherwise we'll likely just have more listless trading and choppiness.

Crude Higher, So are Stocks

Futures slightly higher despite another $2 bump up in crude.  The market is amazingly resilient, even as Europe lags and Asia ex China underperform.  As I have repeated before, the US will be the last to fall among world equities, not because it has the best economic prospects, but it has the easiest monetary policy.  Don't confuse asset inflation via easy money with organic real GDP growth.  Expecting some oscillations early in the day to give way to selling in the 2nd half of the day.  A retest of 1306 support and gap fill is in the cards.

Friday, March 4, 2011

A Weak Close

We just had a fakeout stop run intraday and crude is pushing new highs.  I am expecting selling to come in for the final 30 minutes.

Feels Weak

The dip is just too big and didn't occur in the first half hour.  I am taking away my call for the market to rip higher in the 2nd half of the day.  I am feeling a bit neutral about the intraday pattern, but more likely we'll keep going lower, crude oil is just too strong here for the market to make any headway.

Early Consolidation

Job report came around consensus but it looks like oil is pressuring the market a bit.  I would not be short this market today.  We washed out the weak hands on Tuesday and its likely headed to higher ground before we get another whack.  Yesterday, the market was up big but the put call ratios were not as low as one would expect.  There is still that wall of worry that this market is easily climbing.  Expecting any early dips to be buying opportunities.  We should grind after the first hour.

Thursday, March 3, 2011

Short Squeeze Day

Watch for the market to keep heading higher into the closing bell.  Market still feels short to me and they will be flattening out ahead of the nonfarm payrolls report which traders do not want to be short in front of.  1333 looks very doable by 4 PM. 


Trichet's hawkish tone at the ECB conference call is putting a scare into the Europeans.  The Americans could care less, but the European indexes are near the day's lows, despite the big up move in the ES.  The breadth of the global equity rally is narrowing, first it was the emerging markets, and now it is Europe.  The US is the last man standing in this bull run.  Still expecting the run up into 1340 by next week, but the upside from 1340 will be limited. 

Gap and Runs

I can't remember the last time we had a big gap up and a move lower in first two hours.  It has almost always been a chase for risk right off the opening and we move higher substantially in the first hour.  And by lunch time, we are pretty much done with the day's upside.  I have a strong feeling that the algos and the quants are all over this pattern and buying hand over fist in the first 30 minutes of the day.  Just an observation on a big gap up day.

Big Gap Up

Today's gap up seals the deal.  The pullback is over.  We are going back to at least 1340 by next week.   I would buy any morning dip but I doubt there will be one of any size because the fund managers are underperforming and need to get in to this market. 

Expecting a run up into the nonfarm payrolls number tomorrow and a big beat of consensus Friday and another gap up. 

Wednesday, March 2, 2011

Oil at 101.80

And the market is still positive.  Even though we are off the highs of the day, if you told me coil would be up over $2 and the market would be positive, I would have been very surprised.  Hoping for an oil spike to $105 or so to put in some real fear and scoop up ES into the dip.

Pullback Almost Done

The market is trying its hardest to shake out the bulls without giving bears too much time to cover.  You still have to lean long in this market, even with the early signs that the long term uptrend is straining to overcome geopolitical forces.  I will probably be a buyer around the lows from last week around 1295. 

We are consolidating the long term uptrend and it is quite violent, because the trend was quite long.  Off the consolidation, I will have to see how sentiment is.  We seemed to have shrugged off yesterday's weakness which is a good sign that any further selling will likely be limited this week.

Tuesday, March 1, 2011

First Day of Month

We are used to the big up day in the first day of the month like the rising of the sun.  Well today, the sun rose in the west!  We have a down day on the first day of the month.  The pattern on a day like today after 2 strong up days is usually a trend straight down for the whole day.  There is strong support around 1306 so it will be tough for the bears to crack, but I've learned over the years never to give too much credit to very short term support and resistance levels. 

No Big Gap Up

I was surprised to see the ES fade away from the European highs of 1336 down to 1328 earlier this morning.  This isn't the same market that has been powering higher for 6 straight months.  The price is sufficiently high to put pressure on bulls when the momentum fades away.  I am looking to enter short this morning, but I'm afraid the market won't oblige me with a first day of the month pop which most fund managers are gaming.