Charts, and beating a dead horse!!!

The correction is coming, most see it, although many have now given up on it!

But, the timing is what is important, for options holders anyway (and futures players).

Here are a few charts, you may very well interpret them differently, and I expect that!

The latest conspiracy theory...

Ok, here we go. No one wants to believe them, but everyone is skeptical. I believe them, I can even prove them to a degree. So, here are my thoughts on the "swine" flu...

First off, a few "facts" to question, do these things really add up????

81 Mexicans confirmed dead, thousands more infected. But, we seen 11 cases in the US with 1 hospitalized??? Um, how did them find the other 10?

No deaths in the US, yet we don't send the stuff needed to stop it to Mexico???

No matter how you add this shit up, the sum does not equate.

So, try this thought process...

The markets need to compensate. Yes, NEED to compensate. Yet, everything we try leads to bullish behavior, or sideways behavior. Now, to get the markets to correct, we do not want to drop the bomb... cause, jeeze, volatility is at an extreme already, we do not need more, our pockets just aren't THAT deep.

Let's put out something that is POTENTIALLY catastrophic, yet can be controlled. An epidemic. All deaths outside the US, hard to track, report cases wherever the hell we want, in quantities we want. Controlled response of the market as deemed fit and neccessary. Does this flu REALLY exist??? If it does, is it really all that much of a threat? You will believe now whatever the hell the press wants you to believe, you are now very susceptible to a herd type response. Propaganda can manipulate millions, leaving them very impressionable...

Lights out???

My daughter missed the school bus this AM. On my way taking her to school I figured I'd turn on the radio for the "Friday morning weekend blast-off". That got me jammin'! I can't quite singing the song "Angel is a Centerfold" now (and that is probably NOT the correct title either). After the music, of course came a quick update of the world economy... and it gave me a nice warm fuzzy feeling! BAC had great earnings, Wells Fargo had record quarterly earnings EVER the radio said, and then of course Geitner will speak with seven different nations to "fix" things further. The world is saved, we can now continue prosperity in the financial markets. Whew, I was getting worried. I believe AMZN had some good news also... can anyone think of a good reason NOT to buy in??? I mean, if you were the average Joe Lunchbucket, would not everything look great now? The grass really IS greener! I see absolutely, positively, NO REASON to short this market! Of course, this is why I am short, and feel extremely at ease. Yes, a little impatient (jeeze), but nonetheless, comfortable with my positioning.

My observations

Where the ETFs/Indices?futures lie now, we have some support here. Not sustaining mind you, but some. If today were slightly up, flat, or a crumbling mess, none of these would surprise me. I have plans for any scenario. What I see most likely is a bounce this AM, then a deterioration that posts new daily lows followed by more weakness this afternoon. One thing I am pretty sure on though, in a relative context, the NASDAQ will be the leader of weakness, the S&P and DOW are on even ground, there would be no advantage either way with relative strength/weakness there. Thankfully, my largest ETF position is short the QQQQ. Have a good day, I wish you all the best of luck.

When I do nothing...

You may find many bloggers dissapear when things don't go quite as expected. This allows time for the market to come back and they can make excuses for a loss (which of course they closed for a minimal loss before a big move against them), or the market finally moves the way they wanted and they state they held through the draw-down against them (did they not use a stop???). Well, when things go my way, that is when I become scarce, for there is nothing to do. What did I do today? Absolutely nothing as far as the market goes. If things went against my position, well, then I would be posting additional entries. Have a good night.

Chart posted here for storage, has no pertinence to post:

Added to some trades, new highs set...

Fridays prediction of a significant down day did not come to light. Oh well, this is why a methodical trade plan is required. Odds were in favor of it. This does bring some distinct advantages to the table. When the corrections does occur, it will now be more significant of a move. Many of those that were attempting to short the market have now sworn off ever shorting the market again (I know, been there, done that). I ultilized more capital of the allotted amounts on Friday, I added to SPY only. The Q's missed entry by a mere 0.04. This 0.04 will result in some unrealized profits, but entry can not be rushed, for the quicker you burn the fuse, the shorter it becomes. Staying power is the game here, those with the most methodical plan to stay the trade without burning capital will survive. Check back on the previous posts comments section, I did respond to some commentors with some relevant information. Enjoy the rest of your weekend!

Resistance close

Todays close was hitting the resistance areas of many channels, from the lower (broken)side. The channels were broke and now being retested for resistance. I see this on the YM and GS, I did not look any further, for it does not effect my trade decisions whatsoever. Tomorrow should be set up for a significant down day. Time will tell, let's get this wagon rollin'!

A hint of what is to come...

Browsing through some "other" blogs, I have come upon a few notworthy commentators. While the vast majority are completely blinded to what is coming, some have a grasp on what is to happen. This is spelled out so blatantly to me, that even a few less veteran traders are seeing this one. The writing on the wall is typically faint, yet this time is pretty obvious. The markets are extended to a point never seen before in the entire history of the markets. The correction will be fast and furious. You will see noone knows the specific time of its approach, and in fact, no one ever does. I don't, that is why, when it is due, I am in it and keep the staying power to run the course. The correction will be no "black swan" event, or black monday, friday, or whatever, for I do not believe in the existance of these items. Anything, in the past, that has recieved these labels, have been perfectly comprehensible. I am most comfortable, in my held positions, when I have to look far and wide to find someone who sides with me on market perception. My feelings of comfort are ill founded regardless, for I quickly dismiss any feelings regarding trading. The trading public firmly hold their bullish outlook, and anything possible, to reinforce that belief, is being implemented by news events. On that note, let me list a few of these comments.


Black Swan Alert

The Incredibly Shrinking Market Liquidity, Or The Upcoming Black Swan Of Black Swans

“Anyone who is doing anything sensible right now is either losing money or is out of the market entirely.” These are the words of a quant trader, who is seeing something scary in the capital markets. Scary enough to merit a warning that we could be on the verge of another October 87, August 2007, or January 2008.

When will all this occur? The quant trader I spoke to would not commit himself to any specific time frame but noted that a date as early as next Monday could be a veritable D-day.


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Quick cumulative Tape Read:

I don't have time right now to go into all the details as I'm working on taxes, but all the indications I'm seeing is the Market Makers are getting close to pulling the rug out from under this market. That doesn't mean we couldn't spike higher, but the continuous manipulations to run us up to this point on very low volume at times speaks to their intent to let'er rip to the down side. Personally, I'm not holding any longs or other trades overnight except the ES as the charts make sense. So be prepared for it. I wish I had a firm idea on timing, if I see a tell on that I'll post.

Later,

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Well, that's about it, looked a while, found two... That is two more than what usually agree with me! To my preference, I would have it no other way.

It is Easter Sunday, the wife had to work (damn slave drivers), the kids celebrated Easter a day early for we start traveling tonight to spend a few days up north. Feel free to start up comments in the comments section, for I will be available most of the day!

Hmmmmm........

Gaps against a fade...

Let me make one more point, the reason large gaps are advantageous regardless of direction...

Let me list an example, there numbers are purely for example purpose only. I'll use a lot size of 1 share for the example.

If, I am fading an incline, I may have orders in to buy 1 lot at each of these price levels on stock XXX.

buy one lot when XXX is at or above 50.00
buy one lot when XXX is at or above 51.00
buy one lot when XXX is at or above 52.00
buy one lot when XXX is at or above 53.00

In this example, if the stock traded up during the day, tick by tick, my cost average would end up being 51.50.

If we gapped straight to 53.00, of course, all contingent orders would be satisfied and all would execute at the gapped price if above 53.00. I would then hold 4 lots at an average cost of 53.00 (better than 51.50 when being short!).

Gapping against my position allows better use of capital utilization and gives me more bang for the buck on the averaging process. Now if we gap in favor of the trade... take some off or close the postion and rebuild on further strength. I did this with GS yesterday, and as of the open I may fill 3-4 lots!!!! Lovin it!!!

YM (DOW Futures) Channels

You see here, the larger black channel bears most weight. It has already broke and is testing the underside for new found resistance. The other channels pictured reinforce this bearish potential. As I have stated a million times, every trendline has its parallel, if it is not there yet, it will be. I use none of this analysis for my trading, but it proves to be the highest degree of accuracy I have ever obtained via technical analysis. We may likely check the top of the green channel before heading lower, this would give us a mid-afternoon high, followed by the descent. This would also include a double hit of the underside of the black channel.

Now, pleanty may be saying this is a bull flag, an ascending channel, an ascending wedge, or whatever... Truth is, I can make this chart look as bearish or bullish as I would like, and do so pretty convincingly. The YM is currently NOT extended, for futures have a lower degree of magnitude when it comes to extension levels. They run for many more hours and gives them more opportunity to compensate. The Futures remaining compensated helped fuel the run up in the regular indices, but all things come to an end. The futures extension does not implicate and downward bias or obligation in the markets, but the indices and ETFs sure do!

If you are long, and we hold this upward gap, take some off, for the profits will not be there long to enjoy! Since we will not be posting higher highs, I will not be adding to my bearish positions, although I may roll them further out and deeper ITM to hold a higher rate of delta and lower gamma. Have a good day!

Latest trade activity...

To sum it up.... nothing! Yesterday I did not buy, nor sell, a single lot. It makes for a slow day, but I am no market andrenaline junkie either. No new highs were extablished in any of the ETFs or indices and we did not fall far enough to even consider taking some profits off. Today may very well be the same. We may churn lower, although I believe a very abrupt violent down move is more suiting for the current market to compensate the large upward thrust. A quick down move would actually have better longer term bullish implications, which is what I would preffer. WYNN having its reset taken out has destroyed the last bullish sign I was seeing for the markets in the next few months. To add to that, I do not see any overwelmingly bearish signs either (not after the 6.5-7% (from yesterdays close)down move expected). I will simply need to evaluate the markets at that time, until then it may be prove to be pretty uneventful.

Across the board, new record extensions...

SPY has held the previous record extension of 19%, this extension has now been pretty much shattered. Across the board, DJI, DIA, NDX, COMPQ, QQQQ, SPX, and SPY are beyond this level. The extension levels range from 23.5% to 27%. In all of market history, one thing is for certain, they ALL compensate. Extending to these levels sets the bar higher for professional market participants. Now, more capital, and/or shares, need to be held in reserve to support potential moves of this magnitude. This means, at lower extension levels, there is not as much regulative intervention. The lack of intervention at lower extensions allows the speculative crowd to push markets VERY fast in ANY direction. Hence, you will see volatility increase tremendously. The volatility I refer to is not that of the VIX, for it is a lagging indicator and based off irrelevant information. The volatility I refer to is the dynamic swings of the market. These swings will be MORE violent and more lopsided to an extreme. They will move a good ways and remain uncompensated, and when they do compensate those moves will be even more violent. If you've been getting chewed up in the market prior to now, I forwarn you, it is gonna get worse. If you have the skill and the plan to harvest gains, great, but if you find yourself subjected to the emotions of fear and greed... stand down for a bit. It's gonna be a ride for sure, those expecting a sideways market for a while will be baffled. End result may be sideways, but the girations getting there will be tremendous! Have a great day!

Draw-down days...

A fact in the life as a trader.. It happens, and is planned for well ahead of time. Draw-down days are expected, and even welcomed, by myself and those I trade for. Time and again, they see the results of what happens after draw-down. Draw-down is planned for when a trade is initially placed, if no position ever went in to draw-down, it would never be compounded, and trade capital utilization would remain low and returns miniscule. So... bring it! Buy, everyone, buy! Come get some! Good stuff here! No worries, just buy more stock, make your money back! Now, I kind of sould like Jim Cramer and the CNBC bunch, huh? They are some of the best people there are, they pump the crowd, they keep volatility alive! Just be carefull of what appears to be a silver lining, anything done in excess, hastily, is typically not a good thing. Put it in reference to technical analysis, if that is your thing. Is it not true that the quickest, steepest, most extraordinary moves, are done to re-check support or resistance that has already broken? It is just checking it from the other side. Hence, a shift in the slope of the channel traded, a channel made of ratios and percentages. A change in such a channel allows oscillators and indicators to become skewed as they calibrate for the new trading range (which is sloped). I would recommend EXTREME caution to be long at this time. A much better time is coming. If you are long, take some off the table, before those profits disappear. Hell, the table your taking those profits off of may even disappear in short order! Have a good night!

My positions have been updated in the spreadsheet on the right sidebar. Sorry for the delay!

Com'on Sheep!

Market seems to be dying off a little, I am hoping for a very high open for my adds to trigger. At these current levels only the GS short will be added to, but the other three are not that far off (.1-.25%). I first found it odd that I was always cheering against my positions... but it has become the norm. The more it moves against me, the more the position is compounded, which leads to a larger return on capital. So... com'on bulls (really no bulls or bears, they are all just participants, only two sides to the market... right and wrong) ... do your thing!