S&P 500 - April 30, 2009

some charts courtesy of stockcharts.com

The sharp edge of a razor is difficult to pass over; thus the wise say the path to Salvation is hard."

—Katha-Upanishad.

It seems like the timing of my morning, intraday post was not bad at all. I almost picked the top of the day to short. Sometimes, we get lucky.

I took some profit, hedged some, and the rest is still open. As I mentioned in my intraday post, I am only betting in small measures, and only against S&P. My bet is not against foreign indexes (in fact, I like a few), nor against Nas100, which I have trimmed recently, nor against individual stocks.

This will not be a blind case of a short-it-and-forget-it position of large proportions. I will do whatever it takes to be able to carry a position, and to trim the cost of that position. And, I will not be hesitant to concede defeat and run if I feel the heat.

None of that should distract me from my goal of detached and objective analysis of the index to the best of my abilities.

So, let’s get to it

It was the second day in a row that 875-878 area contained the buyers. If what I suspect is true, and market is running low on squeezable shorts, then we will see a pullback. It is too soon to say anything with any certainty. We have to wait and see how the index behaves around the 875 area.

S&P is at a very critical juncture:

1. A lengthy sideways move accompanied with dipping oscillators may be interpreted as consolidation and, thus, a positive development for the bulls.



2. A take off from here on bad volume and/or bad momentum will probably not be very bull friendly for long.



3. A take off from here, if accompanied by healthy kick-start volume, and new momentum peaks, may be a disaster for the bears. In my books, such a development can reset the bull case to a new ground zero. They can start fresh from here. It will, after all, be seen by all technicians and their grannies as a successful H&S breakout. Under this scenario, I will seriously consider taking my bearish bets off.



4. A break down from here will present the market with a much needed breather. How the bulls behave on the way down will give us clues about the depth of the drop.
   

For the day, volume increased. Breadth was slightly positive.

Look at the Stochastics. Bernanke and cohorts could not deliver enough oomph to take it above 80.

Also look at MACD, dancing cheek to cheek.

There is some weakness in the background – at least for now. So if bulls are, for the moment, satiated, and squeezable shorts are all but chased out back to the jungle, then who is gonna run this? There is a limit to agency shenanigans and client facilitation. Such games need suckers, bull or bear. And such agencies are the first to know if there are enough suckers to keep the game going or not.

Regardless, I will have the above 4 scenarios in mind and see which one presents the script for the show.

My road map is still holding well. This is one the best channels of my speculating career. In a market super charged with emotions, it filtered out all sorts of noise from all types of unsavory characters


There are a couple of things on the chart above that I find interesting.

Notice how price has tried to stick to the underside of the broken trend line (blue line). Also notice that we have short term series of higher highs and higher lows on MACD. These are just things to keep in mind as we monitor index behaviour in hours and days ahead.

This is the 60-minute chart of June contract

I still see no reason to doubt this count, but as I said last night, we can view the entire moves from March lows as a triple abc-x and if that is the case, the last abc set may still be developing.

The move from April 21 can also be viewed as an expanding triangle. If so, the pattern looks complete at this time, a new high may alter the picture. I will worry about it when it happens.

Let’s calculate some theoretical targets

If the count is correct, then

C = 0.618 * a = 850

c = a = 820

c = 1.618 * a = 785

If the expanding triangle was the case, then theory gives us 805.

Of course, all of this may go down the drain if market breaks above the neckline or goes sideways for some time.

There was no magic to my decision to short the market this morning, just chart reading and calculated risk

I had the strong possibility of a completed pattern as illustrated above. With that in mind from a larger frame, I played the smaller frame

Short term trend is up. Mid-term trend is up. Long term trend is down.

Resistance 875-878 (neckline), and then 912 (pivot). Support is the frequently contested 850 area.

Food For Thought:

Let's take a look at the 10-yr yield.


Is this really what the matinee idols at the Fed want?

Are they incapable of controlling the rising rates? That's certainly what gold enthusiasts and hyper infaltionist would want us to believe.

Or maybe it is so that they think they have the situation under control and are willing to tolerate a slight rise in rates within the context of a rising market, and perceptions of green shoots shooting out of every crack imaginable.

I just think it is an interesting situation to watch.

Have a nice evening!

S&P 500 - Kaching - April 30, 2009 - Intraday

In my Kaching portfolio, I am going to fade this rally, and short it in small, and measured doses. So if it keeps going up, I will keep shorting at some junctures I deem important.

In my own account I did a small short. I will not hesitate to cover fast if I feel the heat. But it is small and I have, for now, made up my mind to fade this rally, but in very small measures. I have decided on the actual dollar amount that I would use to do this. I have also define the percentage of that dollar amount that I will be willing to lose.

I do not have plans to add to existing longs.

If I change my mind on the above, I will post it.

This is not a recommendation or suggestion, or advise, I do not dispense recommendation, or suggestion, or advise.

I am not qualified, certified, or knowledgable enough to dispense recommendation, or suggestion, or advise.

This is just my personal bet and experimentation with an extended rally that may be feeding more and more on desperate shorts than true longs.

Kaching does not have option trading. In my own account, I will use all measures I deem necessary to enable me to carry my plan of fading the rally in S&P. Those measures may include the use of options in a variety of ways, and/or being long other indexes, and/or stocks, and/or cuurencies, and/or commodities that I may deem as either moving counter to S&P, or outperforming S&P.

Again, this is just a personal experimentaion and bet.

S&P 500 - April 29, 2009

some charts courtesy of stockcharts.com

Let’s start with some literary excellence for the bears. If you are not much into literature, just skip it.

APRIL is the cruellest month, breeding
Lilacs out of the dead land, mixing
Memory and desire, stirring
Dull roots with spring rain.
Winter kept us warm, covering
Earth in forgetful snow, feeding
A little life with dried tubers.

...

There is shadow under this red rock,
(Come in under the shadow of this red rock),
And I will show you something different from either
Your shadow at morning striding behind you
Or your shadow at evening rising to meet you;
I will show you fear in a handful of dust.

– The Wasteland, T. S. Eliot

................................................

Warning: A good part of this post will be retrospective

Take a trip down the blogosphere, visit your favourite bearish sites, go through the posts from a couple of weeks back up to now, and take a tally and see if you see fear, or, at least, signs of finally accepting this rally, or not.

I am not sure how many times I have repeated here that price is the most important indicator of all. Everything else is complimentary at best, and plain useless at worst. That is one reason I like waves, they define the price action.

This is the 60-minute road map that I have been posting for days.

It is very hard to stay with a trend one does not believe. We saw the turn early in March. We kept pointing out improving price and market dynamics consistently. We kept wondering why bears were constantly asking for a collapse. We said that celebrity-of-the-hour econo-heads like he esteemed Roubini may be right in the bigger picture, but out of step with market movement of the smaller picture.

Since I viewed the rally as a bear market, counter move, I expected it to be corrective in nature. Sometime in late March, I thought we would get a good correction. We did get a correction, but just a shallow one. Since then, I have not been long S&P in a meaningful way. I have compensated for that by being exposed to TSX, which I said could be bought after a correction in late March and have been profiling here since then; and some other markets like Nas100, which I have mentioned as an outperformer compared to S&P.

But bulk of my blogging here has been on S&P and I did not actively participate the long side of the index from the late March correction. As momentum consistently lagged the price, I kept looking for an opportunity to trade the short side of the index.

Take a look at the chart above. Since the late March correction, I have taken every diverging pick and associated sell signal. And I have stopped myself at every buy signal. As a channel started to emerge, I laid down a road map and kept following, and presenting that.

Following of the my own road map forced me into aborting trades either with good profit, or little loss.

The two latest were occasions a post I made intraday on April 24, and a post before market open on April 28, presenting this chart

I further elaborated on my reasons for closing that trade and moving to the sidelines in the follow up regular post the same day after market close, basically saying that price would either keep falling, in which case I would join the bears, or bounce back, in which case I had no desire to be a part of it in any way.

This is the aftermath

In light of its spectacular resilience of the price, I have upgraded the waves from April 19 by one degree.

Am I proud of how I have handled my market affairs? Of course I am. I have kept my bear gains of March low and added to them. Am I dismayed that I have not fully benefited from the 2nd portion of S&P rally from late March? No. I opted to stay with the outperformers (TSX, Nas100) albeit small, and day trade S&P if I could. Also, the rally since late March looked, and still looks corrective to me. Given that, and the fact that momentum had been making back-to-back lower lows, I followed my own discipline and stayed cautious. I then trimmed/hedged existing long positions, and tried to short.

But I never argued with the price. I treated all opinions as opinions at best, and annoying noise at worst, and just did my own thing my own way.

At the end of a trade, a speculator looks at his account and he’s either won or lost, and it does not matter if he’s been right or wrong in grander scheme of things.

What now?

Index is at a very critical juncture. It will either follow up on its gains, and we may get in a melt up that I have been mentioning several times, and zoom on to 900, or it finally falls to diverging price and breadth momentum.

If I were an invisible hand in control of the market, I would pump it with free money hard, and fast, and steal every last penny of bear profit that I could shake into a squeeze. I would then turn around and steal from the bulls.

But I am not in control of anything other than my own account. And the rally looks corrective, and I want no part of it other than day trades.

What I have labelled as an ongoing triple combination can also be counted as an expanding triangle

An expanding triangle is a very dangerous thing, it does not offer a clean risk/reward situation as its upper boundary can keep expanding.

Another possibility that we should now consider seriously is that the entire correction from March lows can also be as an ongoing triple combination

I don't like it much since the correction from April 17 high looks like a 5-wave formation, but I can juggle things around and make a case of it. If this is what is going on, it can just stretch, and stretch.

As I said yesterday, a melt up is not a bad thing, especially for the patient bear, as it can flush a lot of bearish self-entitlement and hubris down the drain. This is not a prediction, just my not so humble opinion

Some perma bears kept calling for this rally to fail from the get go because they had not seen the capitulation that they expected. In a twist of the plot that only The Market can do, they are the ones being pushed into capitulation now

For the day, volume was below average but more than yesterday. The sub-par volume is quite amusing given that the world seemed at a lull awaiting the Fed’s matinee, and the spike after that. Breadth was widely positive.




The McClellan oscillator seems, to me, as a coil spring pressed hard, and ready to snap back. That’s just an observation and not a prediction

I am going to follow my 60-minute road map that has kept me out of trouble. I will stay with day trading if I find a setup to lure me in. Other than that, I’d rather observe the fascinating dichotomy between price and momentum, and learn a lesson or two from the market without paying much tuition.

Short term trend is up. Mid-term trend is up. Long term trend is down.

As I am writing this, future price has gone through the neckline of 875-878, that puts resistance at 912 pivot, and support at 875 and 850.

The rest of this week may see a very important battle among various market forces. Some like to be in afight. I'd rather watch a war movie.

Trade safely!

S&P 500 - April 28, 2009

some charts courtesy of stockcharts.com

Low volume, dull action, or should I say inaction?

Seems all bears can do with an opening gap down is to fall into it and get squeezed. It appears that my move in the morning, which I posted before market open, was not bad. After that, best thing I did today was taking a break from the market.

Same ritual again: market stops, gasping in anticipation of the Fed show and its matinee blah-blah. I am not sure why it is deemd so important. They cannot do anything but print, nothing – devoid of all monetary weapons, well behind the curve of deflation, inept at getting money into real economy, inept at creating velocity for the paper they print – nothing left for them but print, and print more, and hope that they can finally paper over the void.

What do I know? It all may change tomorrow with the shaking of Fed’s magic wand.

Volume was anaemic, breadth was negative.


I don’t know why some people regard the action these past two days as distribution. There just doesn’t seem to be any movement to call it anything.

To me, looks more like a fine balance around 850. It takes participation to disturb the balance – tomorrow afternoon, maybe.

My 60 minute road map is still doing well

Tale of two cities: up trending price and down trending momentum. Since March 16.

Can you imagine how many bear bones this thing has crushed? If you have not lost to this, congratulations, you are good at what you do. If you have money off of this, you are really good at it, keep it up.

This is the 60-minute chart of June contract

This morning, before the open, price was sitting on the red line after a successful H&S break, and we had a bit of oversold. The red line is a trend line that goes back to March 30. As I said, if price wanted to decline, I could get back on the down bound train after the break of 830. I had no desire to sit through any bounce.

The whole rise since April 21 looks corrective, but now it seems like a complex correction. I have labelled it as an ongoing triple abc-x.

To make things interesting, notice that I have identified the first abc set (W) as equal in price gain to the second abc set (Y). If this is indeed a triple combination, and if it stays text book perfect and the third abc set (Z) becomes equal to Y and W, it will end around the 875 area that everybody and their grandma is talking about nowadays – just playing with numbers and wave formations and nothing more.

There is another thing that all technicians and their grannies see

There is a potential inverse H&S. I would like a better right shoulder than the flat wedgie that we currently have. And the momentum leading up to the neckline doesn’t make a good case for a strong pattern. It is what it is, and if indeed it breaks above the neckline (875-878) on good volume, it may just melt up on collapsing short positions. It won’t be a bad thing, you know? It may clear the system of bearish self-entitlement and hubris, that may finally clear the way for a meaningful correction.

I am not predicting anything, just giving a heads up so that we stay cognizant of possibilities.

All technical evidence point to a top having been made or well in the making. There are other things, beside technicals, that impact the short term price action, freshly created free money, for example.

I am in no mood to chase any furious move up for anything other than a small day trade.

Short term trend is up (a break below 835 may change that). Mid-term trend is up. Long term trend is down.

Support is the 850 area. It is very important for the bears to keep the index below 850. Resistance at 877 (April high) and then 912 pivot.

Have a nice evening!

S&P 500 - April 28, 2009 - Before Market Open

The potential head and shoulder that I had identified worked to almost perfection. It has not met full theoretical target, but it's good enough for me, thank you!


Trying to to ignore the noise coming out of perma this and perma that, This is the deal right now.

The rise from April 21 looks corrective. If I am right (always a big if with me), It may have finished already with a double.

It may also have more to go to make a triple.

A break below 830 will make it very unlikely for it to become a triple.

There may be a lead-up to the the FED show, and their matinee blah-blah, and I don't want to be caught with a position that I started for a fast trade.

I took fast-trade shorts off for profit, and am going for a well-deserved breakfast.

Treat this as a study in wave formations, and nothing more.

S&P 500 - April 27, 2009

some charts courtesy of stockcharts.com

Messy day!

Index started with a pre-market gap down, chopped its way up, filled the gap, and eased back into a negative close.

Volume was below average. Breadth was negative.


It felt more like a consolidation day than a distribution day. We need volume to make definitive calls. Bears need to keep the action below 850.

My 60-minute road map is still doing well

The battle around the 850 level continued today. Notice that it is now more than a week that index is in the lower half of the channel, and all it has done after breaking the diagonal has been hitting the underside of the broken trend line (In Blue)

This is the 60-minute chart of the June contract

The entire rise from April 21 is corrective. we don't know if it's done (an abc) or still has more thrusts in it (as can happen with abc-x's). I still think that we will get a 5-wave minor C down, but the resiliency of the corrective rise since April 21 may cause a choppy sideway correction.

If we get a 5-wave down move, a theoretical target of C=A places aims for 820 area – just some possibilities to keep in mind as we observe the index in coming days.

Nothing has happened to force me to change my wave count.

And the June contract

There is a potential H&S on the chart. I emphasize that it is a potential pattern. If it succeeds, it measures to 830.

Not much else to say. Wednesday is Fed Show day, just be on the lookout for excessive volatility leading to their blah-blah, and the reaction after.

I meant to post this trading chart as part of the weekend post but forgot to do so. I think it is self-explanatory

Short term trend is up. Mid-term trend is up. Long term trend is down

Support is the 850 area. It is very important for the bears to keep the index below 850. Resistance at 877 (April high) and then 912 pivot.

Oil, Oilers, Drillers - April 26, 2009

some charts courtesy of stockcharts.com

The hangover from past excess and partying hard still continues.


Oil has been very slow to establish an uptrend. It has been a bit hard to trade in oil for the longer term, mainly because of a recent period of steep Contango along oil’s future curve that persisted for a long time. That could make contract rollover a costly endeavour. But now the Contango has tempred and things look a bit more normal.

I personally do not like to play oil directly for anything more than a trade. There are so many different input parameters into the price, economy, OPEC, tension in the middle east, paper backed by promises of paper pushers, etc

So let’s if we have the possibility of a trade setup in USO or not

Oil and USO are in a mid-term uptrend. But the short term trend has been down for almost a month. That is a bit of a concern since with all the hoopla about the green shoots of economy germinating out of every crack (and every bubble mouth), why is oil in a doo-doo?

Or will the new economic boom, which according to bubble heads is just around the corner, be going to run solely on solar?

Let’s stay with charts

I think the rise from the uptrend from February lows is a wave A, and the current decline a wave B. If I am correct in that, there is possibility that the correction is over with a zigzag. If so, we may have technical target for USO = C = A = 35.

There are quite a few ifs in here, but we seem to have a complete pattern that has retraced 62%, and some positive divergences.

This is a 15-minute chart of USO

If willing to hazard the gaps (natural result of the price action of a commodity that is traded round the clock, round the globe, not to mention contract expiries), it seems like we have a low risk situation for the adventurous. There is support around 28, and then 27.

This is a 20-minute chart off the June contracts

As I am writing this, June oil is being sold down to first line of support.

There are also indirect ways to benefit from price activity of oil: Oil (and gas) explorers, Refiners, and Oil (and Gas) services.

This is the daily chart of XLE, oil sector ETF

To call this disappointing is an understatement. There are so many companies of all sorts in the commodity sector that are doing OK, and this stupid dud is still in a down trend.

One reason is that this ETF is 22% XOM, another stupid dud. It also is a mixed bag of everything in the energy sector: oilers, coalies, refiners, drillers, marketers, etc. That is OK because it is a sector ETF, but having 22% dedicated to XOM is stupid at worse and ridiculous at best. Probably due to the oil index itself, and if that is so, the index is stupid, too.

There is another ETF, IEO, that is better weighted, I leave that to you to explore.

I am not aware of any ETF that would specifically contain oil and gas exploration and not refiners or drillers, or whatever else. If anyone’s aware of one, please let me know.

If I wanted to play this area, I would either try to concentrate on specific names, or would build my own index and buy a basket like ETFs do.

There, however, are ETFs that consist of drillers and Servicemen. OIH and IEZ.

OIH targets Philadelphia Service Index, $OSX. They both have been outperforming XLE and even the Oil itself

I am very interested in this industry at the moment. And if we get a pullback (not a collapse), and the trends are not broken, I may add.

AEM, GLD - April 26, 2009

some charts courtesy of stockcharts.com

On April 4, I said:

There are some signs of weakness on this chart. Price is sitting at a confluence of weekly moving averages that are all pointing up, if this cannot produce a bounce in coming days either from here or a bit lower off the support shelf of 45, AEM will be in a negative technical situation.

On April 12, I said

I think a spike down can be bought for a speculative trade and a bounce, the closer to 45, the better, with a stop somewhere below the support. If 45 gives way, 40 is the next level, and stock will be most probably in an undesirable technical shape.

Last week, I said:

It may find enough of a ground around here to bounce off its oversold readings, just for a trade, but given the volume of the selling these past 2 days, I will be wary of hanging on to a long position for too long.

It happened just like the above!

My participation in the bounce so far has been brief as I did not want to hang on to a long position for long, and felt compelled to take the fast profit and step aside.

Both bearish and bullish counts are still open


The bearish count suggests that the latest drop was either a wave A or a wave 1, to which, for now, I assign an intermediate degree.

The bullish count suggests that the latest drop finished a major wave 2 flat, and we have started a major wave 3 that should take us to the heights of heaven.

Because AEM is in a mid-term downtrend, and because of the low volume of the bounce so far, I am still leaning towards the bearish count.

If we are truly dealing with a major Wave 3, there will be plenty of opportunities to join the party. On the other hand, if this is indeed intermediate wave 1 of major wave 3, then the low of April 17 should not be violated for a very long time.

Looking at a 60-minute chart


We see a text book bounce from a trend line going back to the lows of November 2008. And a rise to an area of congestion that held for days before the spectacular drop of April 16.

This is larger view of the 60-minute frame

I can understand all bullish arguments, and am very open to adopt them, but I have chosen to exercise caution for now based on the downtrend in effect and low volume of the bounce, and the ferocity of the 2-day drop of April 16, and 17

There has been improvement across the board when gold diggers are concerned.

This is a breadth chart of HUI

Nice bounce and positive divergences. Key measures are in neutral territory and at a downward trend line.

Again, I prefer to wait and see how gold stocks perform in coming days.

The yellow metal itself had a decent week as well

The lack of volume on the bounce is a bit disconcerting.

GLD is still in a mid-term downtrend, and is approaching an area of strong resistance. I have a bit of gold and silver (using CEF), but overall I decided to let this play for a few more days.

One can argue a bullish case here as well

Or

If this is truly the beginning of an impulse, then the low of April 17 should not be violated.

GLD has the support of its long term moving averages, and they may provide enough floor for the ETF to start a new uptrend.

I just need to see some better upside volume to come into the game.

S&P 500 - April 24, 2009

some charts courtesy of stockcharts.com

Zombie banks beget zombie rallies!

Sounds like I am sore because I did not get the drop I wanted. But I am not. I suspected hostility towards the bears early on and took my measures and posted about it intraday. I was just thinking during the day how the move up looked hollow, and that reminded me of other hollow creatures of financial markets these days.

Market started in the green, apparently due to news from Ford (really?) and Microsoft (really?). I mean if these are the drivers of market for many years to come, then I should think about some other activity for my pocket money.

It matters not. What matters is that we have a rally that defies back-to-back momentum divergences. Lures the bears in, and feasts on their roasted meat. As long as shorts play the market game of bait-and-squeeze, this thing may find enough jolt of life to sprint higher.

As I posted Friday morning, I did not like how things were shaping up and hedged what I wanted to hedge and switched to trading.

In Thursday’s post I said that by rising above certain levels, market would force me re-evaluate my plans. The market rose, of course.

Here’s my 60-minute road map that has so far been a true guide through all the opposing currents and undercurrents of market action



Momentum has been consistently decreasing, and price has been incessantly rising.

Notice that RSI went well into overbought areas, and price could not make it above the center line of the channel.

Also notice that price has been crawling up along the underside of the broken blue trend line. That is not a rarity.

This is the June contract 60-minute


It looks different because of the after/before hours sessions. But notice the red lines that I laid down a while back. The lines are based on prior peaks or troughs. There has been a bounce from 3 of those lines so far. I can’t help but think that this is technical trading pure and simple.

I took a good look at the wave count from March lows. I can count the entire rally as a series of abc-x’s. Or a somewhat untidy 1-2-3-4 so far, but I still think that the high in April was major A and the advance of a last few days is a B wave (either minor or intermediate)

And the cash index chart

The whole thing since April 21 looks choppy so far, and I am staying with my wave B up scenario.

For the day, volume was above average, and better than yesterday. Breadth was positive.

Let’s look at a favourite breadth chart of mine

87% of NYSE is above 50-MA, the highest on this chart that goes back to 4th quarter 2005. In fact this is the highest reading since 1st quarter 2003 (that’s as far back as Stockcharts provides data), and we know that was the bottom of 2000-2003 bear.

Yet, only 27% are above their 200 MAs – still a long way from an established bull.

In 1st quarter of 2003, NYA200R was at much higher level when NYA50R peaked. That denotes this rally has been on a wider and faster pace. But is it sustainable in the short term?

Also notice the negative divergence between BPSPX and NYA50R. That is in stark contrast to the 2003 heights of NYA50R. What it means is that we have more stocks above 50 MA than on a P&F buy signal. That means quite a few damaged charts still need time to heal properly.

Let’s move to a more conventional breadth chart

To turn negative divergences from multiple time frames around and establish real momentum peaks, a lot of buying has to come in.

To slowly drag the index up like these past few days, a lot of uncommitted shorts have to be actively losing money

Everybody is aware of momentum divergences on multiple time frames, and it seems like the message of the market is: So the Hell What? Or: Come Play with Me You Little Bear, If You Dare!

What I have not seen discussed yet is that McClellan oscillator is forming a triangle. Also, short term RSI looks like it is in a flat base.

Are these basing for a huge thrust upside towards 900? You know what that would do to existing short position? What a spectacular melt up that would be.

You think big houses of paper that facilitate the market flow are unaware of what it takes to kill many, and many a short, and then some?

I am not sure what to read into this. And that is exactly the point. I need to be cautious.

Do I think a correction is near? Yes.

Do I know if another big run is left or not? No.

Do I know from what level the coming correction will commence? No.

Do I trust that this market is 100% free of short term shenanigans and front running? No.

Do I know if the coming correction is shallow or deep? Well, that is very subjective issue. I think if the market keeps zombie-ing up, the correction after another massacre of the bears, and yet another pumping of whatever laggard fund manager who can still be lured in, will be deep and prolonged. If market gives up soon and turns from around here, my initial bet would be on a normal 38%-50%. But that’s what I think, and market does what market does.

So, caution is what I exercised on Friday, hedges, some cross market positions, whatever, just to give me room to trade while I am waiting to see when the fat cats hit the sell button.

And I am willing to bet a buck to a muffin that they will hit the sell button, whatever day that might be, overnight forcing the market to gap down at the open. Those are my bets, at least till Monday :-)

Short term trend is up. Mid-term trend is up. Long term trend is down.

Resistance at 877 (April high) and then 912 pivot. Support is the widely watched and frequently contested 850 area.

Have a nice weekend!

QLD - April 24, 2009 - Intraday

some charts courtesy of stockcharts.com

This is what QLD (2x Nas 100) is doing on a 5-minute frame. Yet another diagonal on ebbing momentum. This is a market that does not give up until all shaky shorts cave.

I have stayed with my plan, but hedged some of my existing shorts. I will switch my attention back to trading setups like this up and down till something finally gives.
S&P is still tracking my 60-minute roadmap, and we'll see what it does at the center line of the channel

S&P 500 - April 23, 2009

some charts courtesy of stockcharts.com

Back and forth, index goes nowhere for the day, 850 area is seeing tight price action

Volume dropped from yesterday. Breadth was slightly positive.

This looks like a top that is taking its time. Back and forth action and whipsaws often happen during periods of indecision, and churn. Sometimes, that is a prelude to a change of direction, and sometimes it just creates a period of range-bound consolidation. We don't know which one we are dealing with yet - toss a coin and make a bet :-)

I still am of the view that we have completed one leg of a rally. My view is based on waning momentum, diverging short term breadth momentum, my wave count, shrinking volume pattern as the rally matured, inability of the index to push RSI into serious overbought conditions, and some sentiment measures.

On the other hand, we have a flood of money into the system. As long as money thinks there will be buyers at higher grounds, it will buy at technical junctures. Now the question is: are there buyers at higher grounds?

Those few who realized that the 666 level of March was a bottom bought bulk of what they wanted earlier. That leaves either retail, or retail extension represented by lagging, alive-for-management-fee money managers that may feel a lot of peer and ridicule pressure to keep buying lest they underperform the world yet again

There is another group of buyers: The Shorts. The break of the diagonal pattern, and continuous weakness in momentum can be seen by anyone, and can lure sizable short positions

If index can muster enough umph to bust above the high of the year, it may create a very sizable short squeeze, and cause something like a melt up.

So far, nothing has happened to force me to change my that view we have seen the top of this rally, which I have labelled as major A. I still think that we are doing a 5-3-5 for an intermediate wave A of major wave B down.

But, as I have consistently reminded everyone, market does not care what I think. So, I have the high of April 22 as a level that should not be violated. Otherwise, I will be forced to re-consider my ongoing count.

This is a 15-minute chart of the cash index


Notice the continuous weakness in momentum

And this is the June contract

Notice that the June contract has twice retraced 78% so far, which is rather deep, especially for a second time in a 3 days. The blue thick line is the lower boundary of the diagonal, around which price has been playing after it broke. That is typical technical action. Also, notice that there is a tentative H&S forming, with the right shoulder very close to the high of April 23, which I have as my level of re-evaluation.

Let’s zoom out and look at my road maps, which have performed admirably for me.

It is just walking the lower half of the red channel while momentum ebbs

And the June contract

Hitting the underside of the diagonal’s lower boundary while momentum ebbs.

So, overall, the weight of technical evidence suggests a rounding top that is taking its time.

A definitive intraday break above the high of April 23 will suggest a more complex wave structure for the correction. A break above the high of the year will suggest a more complex wave structure for the rally itself.

A break below 830 future, 835 cash, will get the correction back on track, a break below Monday's low (825 cash index or 822 June contracts) may embolden the bears.

There is a lot of noise about stress test of banks and stuff like that. I will treat that as noise that exploits emotions, a brief comedy interlude in an ongoing drama. I will stay with my charts.

Short term trend is going sideways. Mid-term trend is up, Long term trend is down

PS. As I am writing this, futures are up a few points, headline says it's because of Ford and Microsoft, for whatever a headline's worth.