Click chart to enlargeThe chart above of SPY (S&P500) shows the 50dma (blue), 100dma (orange), and the 200dma (red). Back in the dotcom crash, every time the market returned to the averages after a significant selloff, there was widespread talk of a new bull market. People raced to buy stocks because the sentiment was that the market had sold off in error. Watching the financial news would make you want to sell your house and put everything into stocks. And each time this happened, it wasn't long before the market turned around and crashed to new lows.
It was a very frustrating time for investors. We put a rule in place at that time that we would never trust a rally below the 200dma. All action below the 200dma is typical bear market action, so there is no need to get giddy about any rallies for a very long time.
The closer we get to the averages, the more ripe the market becomes for initiating new short positions. Given the market's severly oversold condition (since its plunge in early Oct), we will keep our long bias until the market returns to at least its 100dma. At that milestone, we'll change to a net short allocation, increasing the short positions if the market continues higher towards the 200dma.
The market is currently toying with the 50dma. A significant break and close above it, if it happens, will be an important milestone for technicians everywhere. If we take out the 50dma, the next resistance is November's highs (the election rally). If the market continues to rally, there is a chance that this resistance coincides with the 100dma. In about 3 weeks, the 100dma will be roughly at November's highs of S&P 1000. If we reach it, that will be a very tough resistance to break.
81 comments:
Snot,
You think it is too dangerous to hold SMN at the moment? I guess tomorrow will be a decisive point how we do this month. What about Tax selling at the end of the year?
Snot,what's your view on shorting Ag stocks at this level? I bought puts on MOS even though it has broke out from that semi- descending formation. I'm betting that it will bow down to the 50 day MA.
SMN? Hooo... that's a gutsy move. My TA doesnt work very well for IYM. I'd have to analyze all the individual components that comprise IYM in order to eliminate the ones that are causing the problem. But I can say this: IYM looks extremely bullish. I have to go back to late january to see such a bullish looking scenario on basic materials.
Real estate and financials are both right on the verge of breaking down. Yet basic materials has a long way to fall before it is in a similar position. I think this is being caused by the buyup of gold miners. Take a look at GDX:
http://i468.photobucket.com/albums/rr44/iconoclast421/GDX-12-10.jpg
I'm going to start tracking that sector very closely, because the chart is very tradable, like solars. This has got to be the most bullish sector out there. It looks some idiot with a lot of money to burn is buying up everything to do with gold, no doubt in anticipation of a huge currency devaluation and gold explosion.
But since commodities arent really breaking out, it makes me think its not something TPTB are very concerned with. Otherwise we'd have already seen gold break out. DGP is up 40% since I mentioned it was at support last week, but GLD hasnt broken out yet. I think TPTB know that we're still facing serious deflation, and these idiots buying up gold miners are setting themselves up for short term losses.
For a laugh, take a look at PCFG's chart.
http://i468.photobucket.com/albums/rr44/iconoclast421/PCFG.jpg
That is definately the work of some rich dumbass! (Notice the beautiful rsi support and resistance lines.) I actually made a little money off that stock back in january, and was thinking about buying it back in october when it generated a solid buy signal. It's up 300% since that signal was generated. Oh well.
wow, Icon is right about LDK so easy to predict its next move.
It seems that Oil may go up in the near future with OPEC ready to cut production dramatically.
However, deflation is in play and foreclosure and unemployment will continue to rise into next year. Doesn't not just spell "depression"? I don't see a bottom in the market any time soon. Anyone else care to comment on this?
I bought a few shares about gss, sina, and bidu, however, maybe too late for you about gss.
bigboy,
what's your rationale behind buying sina and bidu?
thanks
thebat
I hope you're selling at least half of that LDK every time it gyrates from 11.75 to 12.35! That's 5%. I always assume there will be a chance to buy it back. If there isnt, oh well...
I just sold another 1/4 for pot.
Bigboy,
Do you think POT still have some juice to run? 45% up from low?
if dow rally, pot will follow it, I have 1/4 position now.
btw agu is the best one right now
don't buy ag's stocks, maybe it's too late.
CF, MOS, and AGU are all bouncing off their 50 sma's. POT is lagging behind them for some reason. I think now is a good time to buy AGA. Too bad I didnt hold onto the AGA I bought in july for $21... I guess that's another "oh well"...
Hmm, a strange thing happened when I bought AGA... It was instantly up 1.55% the moment I bought it.
Funny, Did anyone notice James River Coal, up over 100% this week alone and more since the short was recommended by HK22 (I think, too lazy to check, sorry)
Just goes to show that this market is too damn unpredictable.. Too many stocks i can think of off the top of my head that have doubled in the last few weeks, then halved, then doubled again.. C, YGE, Ryanair,
Interesting times huh..
I think when a few of us were talking about shorting JRCC, it was at 12. It then proceeded to fall to 7. By the time it reached that point, I would think that whoever was shorting it would have taken a lot of profits, so that by the time it returned to $12, they'd still be well into the green. I personally would have dumped it completely at around 9 if it went down to 7 then bounced back up to 9.
One thing I do know is that if I could, I'd be shorting the HECK out of JRCC right now. It is sitting right on an uptrending rsi resistance line. I bet it wont break it. The whole market is looking rather ominous right now. I'm still waiting for SPX, but it is being stubborn and looking more and more like it isnt going to make it over the 50 sma. I've been adding FXP and FAZ steadily. I am anticipating being underwater for a while, but I prefer that over being long anything at this point.
I sold another 1/4 position for pot.
How many 1/4 positions do you have? :D
Btw earnings: yesterday I bought some GEF, POWL and BWY right after the earnings release (read it, digest it, buy it). It was luck, maybe.
And I bought some ZNH for 7, the bounce was soo quickly. This was luck, too. :)
Oh yes, I almost forgot. I sold them all for a very reasonable price (intraday chart, broken support, yada yada). I call this scalping. :)
In this market everything is possible.
seeer, good move, when did you buy znh ?
After the open, the bounce was very quickly, I got it for 7, that's the intraday low. :D Not a big win, but win, that's the point. :D
Just a note: BWY is Bway Holdings Co.
You are luck! Open price was $8.21, how could you get it ? I don't understand it.
Guys,
Last 5 mins before close shows us the Pump & Dump story that was going on for the last 4 days. The way they pumped up the Commercial real estate, financial and Commodities was unbelievable. All the gains in the last 4 days are lost in last 2 hrs today.
This Pete Najarian on Fast Money who was recommending a.k.a Pumping Financial sector by telling us to buy UYG or FAS on tuesday tells in today's show that Financial sector is going to suffer till end of this month and we need to avoid it. Only he needs to tell us what really changed in just 2 days that made him ultra 3 bullish to really bearish.
AK.
Anon (about ZNH): watch this
http://finance.yahoo.com/echarts?s=ZNH#chart10:symbol=znh;range=1d;charttype=candlestick;crosshair=on;ohlcvalues=1;logscale=off;source=undefined
9:37 AM
ESL is my new target to scalp. :)
Maybe I will play it. It's risky. I almost jumped in ASYS yesterday, and look what happened with it.
About the market: I think the Dow is a better indicator than the SP500, because the media pushes the Dow, so the crowd always look the Dow. You should see the correlation between the Dow and the 50SMA/support-resistance levels, and between the SP500 and the 50SMA/support-resistance levels.
My successful/not successful trade-ratio highly improved after I figured this out.
But this is just my opinion.
I picked up some ALGT at 38.50. It seemed like it was at the bottom of it channel, or one of its channels anyway. So dont be surprised if it goes down now. :P
Yes the DOw does seem to lead when we're testing the movies averages. I think the S&P is used in deeper TA, and especially non-sma based computer trading algorithms. At any rate, here is my analysis of the DOW:
http://i468.photobucket.com/albums/rr44/iconoclast421/DJI-12-11.jpg
It is not pretty, to say the least. It bounced off of a downtrending rsi resistance line, the same line it broke through a few days ago. In addition to that bearish signal, the DOW also broke a sharp uptrending rsi support line. That is an extremely bearish signal. Like I said a few days ago, that was the signal I was looking for that says this rally is over. In addition to those two sell signals, the DOW has also broken the 50 rsi support. Because of all this, I have placed a red X on the chart where I believe the DOW is headed. I havent calculated a price, but needless to say its a very large drop. Notice that this same exact technical 3-step technical breakdown signaled the top of the august rally. It took weeks to fully break down. But if you look at the chart from august, it definately signaled the top.
Icon,
you missed one rsi uptrending line. I don't have the time to post a chart, but you can see it right between the bottom (where you put the red x) and the upper uptrending line (almost parallel). The DOW is sitting right on it at the moment. It seems like a strong support for DOW. Be careful.
BTW, SMN was a good trade today. I rebought LDK at 11.90.
j
J,
Did u notice DOW futures are down 311 now ?
AK
Auto bailout talks collapse over union wages- AP
A $14 billion emergency bailout for U.S. automakers collapsed in the Senate Thursday night after the United Auto Workers refused to accede to Republican demands for swift wage cuts.
seeer, you said you bought znh at $7. I don't believe you. let's paste his link: http://finance.yahoo.com/echarts?s=ZNH#chart10:symbol=znh;range=1d;charttype=candlestick
The computer made a mistake, nobody can buy znh at $7. hahaha!
Anon: believe what you want. :) I had a limit buy order at 7 (my target price for ZNH was ~8.72 based on 1055.HK's advance) and it filled. In the trading system I saw the moment when the price was 7, and it was just a moment, soo I was lucky.
Try this: https://www.thinkorswim.com/tos/wbt/dtchChart.jsp
Type ZNH.
Hey j, you are right, there is a support line here. But it is only one support line, and it cannot support the weight of more than one distinct sell signal.
I've compiled a chart that shows my predicted course of the market on monday, along with a chart of where we currently are.
http://i468.photobucket.com/albums/rr44/iconoclast421/SPX-prediction-vs-actual.jpg
It's not exactly 100% correct, but it is close. Certainly not something chance can explain. At any rate I had 70% of my portfolio invested in FXP, FAZ, and AGA as of last night. So today looks like its going to be quite a windfall. Sort of like LDK this time last year. Decembers are being very good to me! I think I'm going to cash out some profits before Bush decides he wants to do something "presidential" today.
The kingdom was lost, and all for the want of a nail.
Ridiculous. $700B gets passed with no strings and little to no accounting for it, yet a lousy $14B LOAN with conditions and timelines gets defeated?
Talk about cutting your nose off to spite your face.
I tend to agree with Iconoclast421 that W. is going to want to do damage control to his legacy. With only 39 days left in office do you think that he'll let "failure of the Big3" be added to Iraq? No way.
Tap the TARP, put a $14B band-aid on Detroit and dump it on Obama's doorstep all wrapped up in a pretty (red) bow.
Congrats to all you bears out there- today you're eating Salmon!
Seeer, 4 X 1/4 = 1 I sold all long position for POT in last two days, Do you have any more question ? please read my post carefully.
Btw I am a day trader, I don't want to post all my trading orders on this blog for some reasons, such as I sold 2/3 gss @$0.69 (it's up 41% in one day), I didn't posted it yesterday... etc..
bigboy8882008: what was the reason behind your GSS buy?
ESL is working (bought for 32,5). :)
Good scalp again.
Bidboy,
Are you still holding your BIDU?
seeer,
1. I was a teacher, maybe I will work again.
2. I traded many orders, some days I traded more than 100 orders in one day, the most orders was more than 300 orders in one day, as you know, four years ago commission fee was expensive, I paid around $10,000.00 per month, I had 18 experience. please count how much money did I pay the tuition in stock market. if I majored some curriculum, I would got more than 10 PHD in USA.
3. I manage five accounts now. I am busy every trading day. that's why I only posted one sentence sometimes.
4.I made a mistake for USO the first step, I bought too early because I bet Opec would cut the production on last meeting, fortunately I used some skills bought 6 times at the bottom for USO, DIG, and POT so I still made lots of money in oil and AG sectors.( don't follow me about this skill, timing is very important )
Please understand me!
Anon, I am still holding Bidu.
What is target sell for BIDU? Strong resistence at $121. Thx
Seeer, I for one do not doubt your $7 buy on a low volume equity. I have had buy and sells on some very low volume items not show up on the Yahoo charts or on my broker's ticker for the high or low of the day. If it is an isolated transaction like that, sometimes it just doesn't get registered. I have a friend whose pocket got picked by some MM in a gap down at the open where someone took out his deep stop. It should have been the low for the day, but it didn't show up anywhere. He complained to his broker and they, of course, did nothing. It was a legitimate transaction and his money was gone. Period. End of the story.
Icon- Whats your plan for AGA. I'm not really familiar with the moves or what numbers to look for
bigboy8882008: thank you for you bio, again, but you didn't answer my question. :) I'm just curious.
I really don't like the "lucky" trades because I can't learn anything about them.
If your GSS trade was just a pure luck (you can't explain why did you buy those shares) then be happy with it, but you are not any the better trader for it.
No offense.
I agree I dont like to play guessing games. But looking at GSS, I see that it did generate a buy signal yesterday. That usually makes a trip to the 50 sma a sure thing. Same goes with BWY, nice solid buy signal on monday. And an obvious sell at the 50 sma. In fact a lot of stocks you guys have listed have been good buys based on what I look for. Except for ESL. That one is kinda scary. :P I dont like BIDU either.
My plan for AGA is nothing, since I sold it this morning. AGA is basically the inverse of MOS.
I just said I would not answered the reasons. You have no the right to force me to answer your question again !
I knew GSS very much and traded it several times. FA is better than ZNH
Why did you buy ZNH ? You bought ZNH at day low (exactly $7) yesterday. You are a true luck !
please respect the people, then people will respect you !
OK, your buy of GSS is meaningless. :) I just would like to know the tactic, the theory behind this, but forget it.
I bought ZNH based on news, it was a perfectly predictable move.
http://news.airwise.com/story/view/1228953665.html
or
http://www.forbes.com/2008/12/11/briefing-asia-closer-markets-equity-cx_twdd_1211markets05.html?partner=yahootix
ZNH in Hong-Kong = 1055.HK (finance.yahoo.com).
1055.HK soared 45 percent.
At that point ZNH was 6.23.
Have a nice weekend everyone! Back to making predictions on Sunday night!
j
Seeer,
Frankly, you really don't know how to trade Chinese ADRs' in US.
MMs' like you and other small investors. Most of investors lost money for trading ZNH yesterday.
Open price was $8.21, close price was $8.11. You said you bought it at $7 (Anon said:"the computer made a mistake" ) Your skill is very good !
Btw you said you bought ESL at $32.5, however, the day low price was $32.998, how could you fill it?
I 'd like to learn some skills from you!!!!!
bigboy8882008: I bought the ESL in the pre-market. Unbelievable, isn't it? :D Believe it or not, I sold my ESL pos at 36,5.
And as I told earlier, the intraday low for ZNH was 7, maybe I took out somebody's stop (watch the chart), I really don't care, because few minutes later I sold my position, and that's it, a scalp (+20%). I never look back.
You may think sometimes.
How many shares did you buy ESL in premarket ?
The SPY was able to close above its 10- and 20-day moving average. The 50-DMA, which was never broken since August, is within reach. It is currently at 91, sinking at half SPY point per day. By mid next week, it would be 89.5. So, if the long hedge/mutual funds just maintain current level, the market will magically be/stay above the 50-DMA within days. At that point, hedge fund computers will individually and collectively say "majory bullish". The brave ones will buy and the others will follow like there is no tomorrow. This senario is what I predict and hope will play out next weeek, during the all-important options expiration/window-dressing week.
For me, I sold 1/3 LDK at a small profit as suggested by icon here, could not help getting it at market open on Friday (when LDK is below 11.5, I just could not help it, got it at 11.31). Looks for me that LDK is completing a W-shaped reversal. I also got a bit of FXP at 34.6 as a trade in afterhours on Friday. I point out before that FXP is a long-term short. I occasioncally buy a bit when it is way oversold.
I appreciate all the insigtful contributions here. Good luck to you guys.
bigboy8882008 & seeer- will you two please get each other's email and go back and forth in private from now on? It's becoming annoying. This blog is not your personal forum.
Thank you.
This blog is not for you two try to get even. Thx
What is the "fair value" given each morning on CNBC for the futures of the major indexes? The three definitions found here:
http://www.investopedia.com/terms/f/fairvalue.asp
don't seem to fit.
Where did everyone go?
Can anyone explain to me why DBC is down today? Corn, wheat, gold, and oil are all up. Only alum is down. They announced a distribution today, but ex-div is already past.
Everyone's in waiting mode. Waiting for the White House, waiting for the Fed and waiting for GS earnings.
For the DBC question, the oil is down thus DBC is down today. By the way, I already sold my DBC call option that I bought by accident at double the price (blind buying and blind selling by limit order, just pure luck).
I sold FXP today. Sold 1/3 LDK in premarket. I would like to buy them back in afterhours but could not do it since it was already way up in afterhours when I looked.
LDK and a bit of SBUX call option is all I have for now.
What do you guys think about the SBUX chart?
I got interested in SBUX after hearing the news that SBUX offered free drink for voters to encourage people to vote.
It broke out of the 8-9 range last week and have been trading in the 8-10 range this week. I set a blind buy order for a bit of call option when it reaches the bottom of the new range, and it got triggered today.
By the way, the LDK analysis by Icon was good.
I think SBUX is breaking down. It is mirroring the broader market.
LDK is oddly sitting about 10 or 15 cents above its support line. I think it will follow GS tomorrow.
Hi Snot,
Where are you?
I think GS is pretty much well-sold-off ahead of earnings. It is sitting slight below support. The bulls can run it up on "bad news alredy baked in" thesis.
LDK tested and failed the 10- and 20-DMA at 13.2 yesterday. Good news is that both are dropping at 0.2 per day. One of these days it might be above it, which might trigger some automatic buying by hedge fund computers.
I'll try to sell the SBUX call today with a limit order at a slight gain.
bigboy,
great call on bidu.
Goldman Sachs upgraded Baidu.com Inc (BIDU.O: Quote, Profile, Research, Stock Buzz) to "conviction buy" from "neutral" and said the top Chinese Internet search company was set to benefit from the growth in paid search in China.
thebat
It looks like some goon at GS saw BIDU's chart and said "why is this so far below its moving average?" GS could be trying to run it up to its 50sma, so they can short it. There has to be something fundamentally wrong with the stock. Given how bullish China has been lately, BIDU should have been trading around 160 already.
GS up 7% in pre-market. Looks like the "bad news baked in" thesis is in the play. GE got energy contract. Obama appoints environment team. These should work well for the market/solars. I am holding the other 2/3 of LDK.
to the chart specialist of BIDU,
What's your take that BIDU has to return closer to the moving avg, say around 150?
thebat
I just sold last 1/3 shares @$1.03 for GSS, made 90.7% in 4 days.( I am laughing, enough, enough ) also I sold USO $39.9 -$40.52, the highest is $40.73 in premarket) and DIG around $31( bought it around $23.5 )in premarket yesterday because I didn't want to make another mistake. I still made lots of money for USO.
Correction:
"also I sold USO $39.9 -$40.52, the highest is $40.73 in premarket)"
also I sold USO ( the range was$39.9 -$40.52, the highest price was $40.73 in premarket)
anyone have a opinion on HUN, thought it would off yesterdays disaster. Now I might want a early exit.
Are you buying anything Bigboy? Thx
I bought cx, vip, and sohu, I am still holding bidu and sina.
btw look at gss !!!
50 sma broken. Fed rate cut, big rally. Who could have predicted that? When the auto bailout finally goes through, it should be good for another couple hundred points on the DOW.
I think a lot of funds have been waiting for this rate cut, so they can complete whatever forced selling they need to do. I wont dare go long because of that, but cannot go short against a break of the 50 sma either. So I will be waiting for one of the indexes to hit resistance. I've got 2 higher points of resistance on my chart. 938 and 964 for the SPX. 9025 and 9175 for the DOW. FXI will hit strong resistance at $34. Until then I'm waiting. I hope we dont crash right here, I'd miss the ride down. I hope the DOW rallies another 3% as quickly as possible.
Looks like its more than just a few rich morons buying gold mines now. This could be the prelude to a hyperinflationary explosion.
Maybe I'm dumb but these Ultra ETFs confuse me. Can anyone explain why when FAZ is at it's lowest price ever that FAS is only at 45% of it's all time high? If they're the inverse of each other then if one is at it's high shouldn't the other be at it's low? And if they are somehow "rebalanced" overnight what is the benchmark used?
Thanks.
Charlene,
Yes you are.
They are determined day by day. And how strong the Vix is.
Not over the course of long time.
Its day by day.
They lose a certain percentage due to cost overhead. For example, FXP loses about 25 cents a day. Its got to be even worse for the 3X etfs. That means ultra ETFs are not for long term trading. To maximize profits you have to buy then sell 72 hours later at the max.
On ultra ETFs, it isn't the high overhead that has such a dramatic effect as much as the double percentage effect on a day by day basis when the market is very volatile. If you start with $100 and the normal long ETF goes up 5% and your ultra inverse drops 10% as a 2x ultra, then you are working on the inverse with $90 versus $105. If the reverse happens the next day in the market the normal ETF drops $5.25 while your ultra only goes up $9.00. The long ETF if $99.75 while your short is $99.00. You are down 75 cents already. It is the percentage being doubled on the principle that has an effect over time. So what the above poster says is true. Ultras are better for short term trading, but it isn't necessary to trade them in 72 hour type trading cycles. Not that short term.
Hate to say it Anon but you are the one that's dumb.
Trying to say that the Ultra ETFs are priced off of how strong the VIX is? LOL! That doesn't have a thing to do with it.
ALGT has reached the top of its channel. I'm dumping it. Thanks Gary for an easy 17%!
To Anon Kenny,
This is the Anon whom you called dumb. Don't ever call someone dumb if they have just given a logical explanation and you don't understand it. My brief explanation of how the double percentages of an ultra work in relation to volatility is simply a well recognized mathematical fact that has been published about over and over and over on the www. I read about it for the first time in a Motley Fool column a year or two ago. When I found your post calling me dumb, it took me about 15 seconds with Google to find a more recent column giving the same information. This isn't opinion. This isn't editorial. This is math. This is as close to pure, absolute truth as you will get.
http://www.slackerwealth.com/2008/12/ultra-etfs-are-not-for-long-term.html
Why do some people in these blogs have to be so rude, running around calling other people dumb or worse?
Ben
http://investopedia.com/printable.asp?a=/articles/mutualfund/07/leveraged_etfs.asp
Another article on double leveraged ETFs. Read the section, Anon Kenny, on "Are they accurate." It even points out that the advertising for these ultras points out that they will not deliver 2x over the long term, but they don't make this mathematical fact prominent. It is in the fine print, so to speak. Just pull out your calculator and run some numbers 1x, 2x and 3x and you will understand.
Ben
One final post from the "dumb" Anon :)
A good article with charts and statistics. You know what I mean -- things like facts and data and truth that "dumb" people believe in. It shows exactly how the double leverage affect in a time of high volatility explains why FXP is not up huge even though FXI is down for the year, something many posters have lamented on this blog and have attributed to various conspiracy theories. There is no Wall Street conspiracy. It is not a scam. It is simple, scientific, mathematical FACT.
http://www.ritholtz.com/blog/2008/12/how-to-become-ultrabroke/
Here is a copy and paste from some guy in a message board somewhere saying the same "dumb" thing I said.
"Ultra long ETFs are good only for day-trading and for short-term investment. Because over the long term they tend to loose their value due to their leverage and normal day-to-day volatility.
When a 2X leveraged ETF goes down in price 50% from 100 to 50. Then it needs to gain 100% in order to get back to its previous price of 100.
At the same time, the underlying index without the 2X leverage goes down 25% from 100 to 75. And it needs to gain only 33.33% in order to get back to its previous price of 100.
And the problem is that when the underlying index gains 33.33%. Then the 2X leveraged ETF gains only 66.67% and not the 100% it needs to get back to its previous price. Which means that the leveraged ETF looses value even when the underlying index stays within a trading range and doesn't go anywhere.
The only way you can win with a leveraged ETF over the long term is if the stock market keeps going up and up without too much up and down volatility. Which is possible but not very likely to happen over the long term."
OK. I've made my point several times now and I will quit. But notice that I didn't call anyone any names and cuss anyone out.
Ben
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