Amazon is looking tasty here

Back in late August I posted on Amazon, pointing out that it looked like a big move was coming.  You can click [here] to revisit the post, but below is what the chart looked like back then.

And here is how Amazon looks today - what a difference a month makes, huh? (both charts are clickable)

Talk about a parabolic move - that's almost straight up, and a 28% gain in less than 4 weeks!  Well friends and neighbors, nothing goes straight up forever, and while price seems to be consolidating between 155 and 160, I think this is a great spot to get into a trade to the short side, with a tight stop, should this move up not be complete.  I didn't show it on this chart, but the RSI and Stochastic have both shown over bought for weeks and are now descending, and the MACD also looks to be rolling over from an extreme high (all on the daily chart).

I will be watching price action in the morning to gauge my entry - ideally we will open somewhere within this current range, and I would want to make my entry as close to 160 as possible.  November 160 and/or 150 puts (the monthly options) are the play.  Stop loss would be if the stock trades to 165....small risk.  If you want to tighten risk further, you can buy the 170 or 180 puts.  The options will be more expensive, but the delta is higher and you won't lose as much if we stop out.  Amazon moves fast in both directions when it gets going - the past four weeks are evidence of that - so if we do start selling off, my first target would be 145 to take profits on at least 50% of the position. 

If we start the day with a gap-up over 160, or a gap-down below 155, I will likely scratch the play and re-evaluate...all depends on how things go after the open.

The reasons why this is a broken and manipulated market

Over the past few months since I started writing this blog, though I've made a conscious effort to try and keep my posts somewhat neutral, I've also been pretty clear that my bias is bearish.  So SingleMalt is bearish, yet the market keeps rising, or at least fails to fall.  Now SingleMalt says in the title of this post that the market is manipulated.  Is this just a case of sour grapes?  Is SingleMalt simply suffering from a case of hubris?  Well, allow me to present you with a few factoids, and then I leave it to you to draw your own conclusion.

Early morning thoughts

Well, early morning for the US folks at any rate.

Yesterday I was looking for some sort of direction into the close, but we ended the day with a fizzle, stuck within the same range previously noted.

On deck later this morning are the following econ reports with consensus expectations noted.

Thursday, 8:30am, Initial Claims 450K
Thursday, 8:30am, Continuing Claims, 4450K
Thursday, 10:00am, Existing Home Sales, 4.04M
Thursday, 10:00am, Leading Indicators, 0.1%

As usual, a big miss or big exceed on any of these reports will get the market going...at least short term.  Speaking of which, econ reports out this morning in Europe showed their PMI growth to be slowing much more than expected, which has the FTSE, DAX and CAC all down about .75%  as I type.  This in turn has driven down US futures. 

On the technical side, please refer to the chart below.

-click to enlarge-

As was pointed out yesterday, the thick blue line represents the June highs.  This acted as support during yesterdays session, but as you can see now in the pre-market, we are trading beneath this level (as a reflection of lower futures described above).  We still have over 3 hours to go before the market opens, so too early to make any real forecast, but if we do end up gapping down to start the day, I would look for the bulls to at least try to test this blue-line level in the first hour of trading.  The econ reports will set the stage however, so if you plan trading at the open, I would get in and out during the first 29 minutes, then get back in to trade the momentum move resulting from the 10:00 AM reports, if any.

Probably won't have time for any additional posts today.  Good luck trading.

Intraday update

Nothing too exciting happening at the moment.  The thick blue line is the previous high from June that is now acting as support (equates to roughly 1130 on the SPX).  As you can see, we've been meandering back and forth between this support, and yesterday's lows as resistance.  Should see some sort of directional movement come the last hour....I'm not trading today, so won't even try to guess at this point, but if we do sell off and close significantly below the blue line on heavy volume, a short play later in the week would be looking better and better.  Then again, the primary dealers are sitting on $2 billion from today's POMO, so a last hour ramp remains a distinct possibility.  We should see soon enough....

Another short update

Have a lot going on right now, but wanted to take a few minutes to sum up my thoughts regarding our current situation in the market.

-click to enlarge-

Just to stay consistent with my posts prior to my Germany trip, I've put up a follow-on SPY chart that I'll be referring to as I lay things out.

1.  Interesting FOMC reaction yesterday to say the least.  Not much was really said...i.e. no QE2 announcement, and no other really unexpected news, but the dollar started getting pounded almost immediately and the drubbing has continued through the overnight session into today - and this is across all currencies vs. the dollar.  Strange.  Sure the Fed said that they are prepared to provide additional support (QE) if needed, but they've been saying that for months now, so why did the dollar suddenly plunge across the board?  Not that I think the US dollar is anything to write home about these days...I just find it strange.  As a result, Gold has continued its climb and is now flirting with $1300. 

2.  So how does that leave things for the markets now?  Let's start with the bearish case. 
 - We saw a sell signal in the VIX a few weeks ago that is still active.  Click [here] if you need a refresher.
 - Though we saw a breakout above the June highs on Monday, as of yet, we haven't seen much follow through, and the volume has still been pretty miserable...on par with summer volume. 
 - The Stochastic is showing us as being over-bought almost the entire month of September and due for a correction.
 - Though we've seen some "preliminary" signs that some economic indicators have been improving recently, some of the biggies like the Philly Fed and Empire Manufacturing Index have shown continued month on month decreases, and in the Fed's comments yesterday, they too admit that any improvements we're seeing are coming much slower than expected, and marginal at best. 

On the bullish side:
 - We did finally break out of the multi-month range to the upside.  If the break out is for real, we could conceivably test S&P 1200 again this year.
 - As I've posted several times in the recent weeks, we are in the midst of QE-Lite, with Fed POMOs buying up USTs and providing primary dealers with new billions with which to ramp the market.  Click [here] and [here] if you need a review. 
 - We are seeing some technical symbols (see above chart) that seem to be confirming this move.  Though volume is low, at least it has been increasing, and we're also seeing the MACD putting in a new relative high confirming the new price high vs. the June highs.  While the Stochastic shows over-bought, keep in mind that we can stay in an over-bought condition for a long time while price continues to rise - see Feb - April in the above chart.
 - Mid-term elections coming in November.....a crash now wouldn't look good for the current administration. 

So that's how I see things in a nutshell.  Overall, I have to admit that my longer term bias is still bearish, but I am going to wait and see how things play out over the next few days before getting into any more swings.  A break of S&P 1130 to the downside would prompt me to revisit a short position, and if we can get above 1155, I may get long (for the short term).  Don't forget, today is POMO Wednesday with $3 - $5 billion teed up to enter the markets after 11:00 AM EST.

Good luck trading.

Pretty hilarious, and pretty sad...

I've been following Bruce Krasting's blog for quite some time.  I don't know him personally, but he writes well, and as a former Wall St. insider, his insights often bring a unique perspective to many of today's financial issues.  One of the areas he has covered in great detail is the current sad state of affairs surrounding our Social Security system.  His latest post [here] can be summed up in the title of this post...at least for me.  Take a look and draw your own conclusions, and if you have the time, skim through some of his archived posts...lots of good stuff. 

A quick catch-up

Hello all and apologies for the long hiatus.  As mentioned a couple of posts below, I've been on vacation in Germany for the past 10 days or so, and won't be back home until this coming weekend.  On top of that, several days worth of drinking German beer resulted in me forgetting my blog password....but now that I'm back to Scotch, my memory has suddenly recovered.

That said, I want to provide just a couple of quick updates.

1.  Stopped out yesterday on the small short position entered a few weeks ago when the SPX was trading at the top of the symmetrical triangle.   If you joined me, I hope you kept your position small, as I warned that if the bulls got some momentum going, it could get ugly for the shorts.  I was positioned in November deep in the money puts, so still had decent residual value left when I stopped out.  I didn't trade at all last week and have been pretty out of touch, so I need to get myself caught up on things and figure out my next move.   Will let you know soon.

2.  POMO is definitely the name of the game.  My last post before getting on the plane said that this could be a game changer, and so far, it definitely has.  Yesterday saw the Fed purchase another $5 Billion in Treasuries and we have POMOs on Weds and Fri of this week still to come.  I'll be posting more on this topic later in the week or early next week as time permits, but unless we get some really bad news from other areas, these POMOs should continue to propel the market higher....look for next resistance between 1150 and 1155 on the SPX.

3.  Today is FOMC day - 2:15 EST.  What the Fed says, and how it says it, could have significant impact on the markets this afternoon.  There was a lot of speculation last week that a massive QE2 would be announced this week...first an announcement by Morgan Stanley (MS) that QE2 was imminent, followed by a series of reactions in the markets....most notably the Bank of Japan's intervention on the USD/JPY pair, and of course Gold's new all-time high, then a follow-up announcement from MS that they were mistaken in their original prognostication...no QE2 to be announced this week.   So what's the verdict??  We'll find out this afternoon, but my guess is that there will not be a QE2 announcement....not while the S&P is trading at current levels.

4.  And last but not least....let's all belly up to the bar and have a celebratory toast to yesterday's news that the recession officially ended in June/July 2009.  I mean, aside from the fact that this news sound-byte was responsible for the rally of irrational exuberance we saw yesterday that triggered my stops, isn't it great to hear that all is now well in America?   Sorry, but what a crock of shit.  I don't know how things are looking where you all live, but I can assure you that things are not at all rosy in my neck of the woods....especially for small businesses, and I know a lot of their owners.  In fact, my Mercedes mechanic for the past 7 years will be closing his shop at the end of this month because business has fallen off a cliff.  Fortunately he is in the position where he can take early retirement, but had the economy remained intact, he would've preferred working another 5 years.  And let's not forget the ongoing record foreclosures and near record unemployment levels....but the Government says everything is better now.......so move along everyone....nothing to see here.....

This could be a game changer

Just caught this on zero hedge -

according to Morgan Stanley, the Fed will make sure that over the next three weeks hedge fund LPs are happy, that redemption requests are sparse, and that September will be an up month for all those levered to the hilt and chasing beta: for September/October the Fed is now expected to monetize double the amount of bonds in Aug/Sept. In other words, the Primary Dealers, aka Fed Lites, will be using tens of billions of brand new Fed printed money to chase the highest beta stocks they can find.

Full article can be found here http://www.zerohedge.com/article/fed-ramp-stocks-september-thanks-front-loaded-pomo-schedule.

Two or three posts down, I provided commentary on the Fed's POMO activities, and things like shown above are why I say that this is a rigged market and very difficult to trade on technical signals.  So bottom line, though the technicals are saying loud and clear that we should be moving lower, there's a very good chance that this extra liquidity injection will ramp us higher - just like we saw last year.   If you're swinging positions, keep them small, stay nimble and maintain discipline on your stops.  Things could really go either way right now. 

Good luck trading.

Off to Germany

Guten Morgen - I'll be off in the great State of Bavaria for the next two weeks with Mrs. SingleMalt.  I'll still try to keep up with things while away but if the posts come less frequently....below is one of the reasons why...

No - none of these pictures are of SingleMalt, but I'm thinking of changing my name to SingleHops for the next several days, as I'll be attending the Rosenheim Herbst (Fall) Fest, which is Germany's second largest beer fest, behind the Oktober Fest, which starts in another week or two.  Probably won't attend the Oktober Fest though...it has become much too commercial and crowded over the past 20 years, but if you've never experienced it at least once, you should add it to your bucket list.

As for the markets, my plan and positions haven't changed as of yet.  Will keep you posted if they do.

Auf Wiedersehen und viel Glueck!

The VIX is predicting another sell-off

I completely missed this over the weekend, but caught it during my reading tonight over at Zerohedge.com [click here.]  The VIX (Volatility Index) closed below the lower Bollinger Band again on Friday...a sign of peak complacency in the markets.  The last two times this has happened have been followed by spikes in the VIX and sell-offs in equities.  Back in April when this occurred, I bought out of the money, forward calls on the VIX and made 10x profits on my position within 4 weeks.  I will definitely be making a similar entry this week, but I'll warn you all right now, just because a technical sign has always worked in the past doesn't guarantee it will work again in the future.  Translation:  don't go fucking nuts with your position size.  This is just another trade, the same as any other trade you would make, so keep your money management principles firmly in place and manage your downside risk. 

-click to enlarge-

Off to bed now...good luck trading tomorrow.

I'm gob-smacked...

Well after I'll my ranting about POMO days in the post immediately below, the bulls weren't able to ramp the close today.  I'm stunned!!  They gave it whirl between 13:30 and 14:30, as can be seen in the channel below, but the bears came out and gave them a smack down at 110.20, and that was all she wrote. 

Have a good evening all.

Oh yeah....forgot that today is POMO day

That means we are almost assured of a ramp in stock prices going into the close.  If you're day-trading, going long the SPY, or ES E-Mini contracts should be like taking candy from a baby, but keep your stops tight in case someone fat fingers a $100 Million sell order instead of a $100 k sell order.... or wasn't that someone's explanation of the flash crash?  :-)

For those of you who aren't familiar with what I'm talking about, POMO stands for Permanent Open Market Operation.  It is conducted by the Fed, and it has been their primary tool for injecting "liquidity" into the system since March 2009.  In very simply terms, on a POMO day, the Fed buys Treasuries, Agency debt and Mortgage Backed Securities from our friends, the banksters.  They usually do this in pre-determined fixed amounts....anywhere from $2 or $3 Billion, to $40, $50, even $70 billion at a pop.  Pretty cool, huh?

Where does the Fed get this money, you ask?  Well, they simply print it.  That is how the Fed creates money, and POMO's are how they get that money into the system.  The other word for this activity is called Quantitative Easing, and if you've been following my posts, you've seen this term before.  The banks are happy....they've either sold off some of their Treasuries inventory, or they've unloaded some of that toxic crap from their balance sheet, and put it onto the the taxpayer's balance sheet.  The Fed is happy....they've just devalued the dollar a little more, which is Bernanke's overall M.O.  But anyone else holding Treasury bills is getting decidedly unhappier, because their investment is getting devalued right along with the US dollar...this is anyone from the Widows and Orphans fund, to other major Governments like China, Japan and many European countries.

Okay, so now what happens?  Well, our friends at the banks have all of this new cash on their hands, and what do they do with it?  Maybe loosen up their credit facilities and loan it to individuals and small businesses? Oh heavens no....that's too risky.  Nah, we're going to take all of this new money and jam the stock market.  Don't believe me?  Well take a look at this graphic, put together by Chris Martenson over one year ago, as it provides the perfect visual for how Fed POMO activities directly correlate to the meteoric rise seen in the stock markets during the same time frame.  For more from Chris on this topic, please click on the following link - http://www.chrismartenson.com    

-click to enlarge-

The above chart only shows the Fed POMO activity through August 2009, but POMO's continued through March/April of this year, and this is what I was talking about in a previous post when I said that the Govt. tit had been taken away.  Once the Fed stopped printing money ahem, injecting liquidity, the markets started to fall.

Just recently however, Bernanke and the Fed came back out and said that they would be recommencing POMO activities, now through the end of November, but on a limited basis - only buying Treasuries.   Though not nearly as much liquidity as was provided last year (some call it QE Lite), POMO days like this are still putting enough money in the bankers hands for a probable last hour ramp to close stocks green on the day.   Dave Fry at TheStreet.com recently posted on the phenomenon as well [click here for more], and guys at Zerohedge.com have been highlighting this for over a year as well.  See here [http://www.zerohedge.com/article/feds-ust-pomo-pyramid-scheme-exposed and here http://www.zerohedge.com/article/tradition-mindless-stock-ramping-fed-pomo-days-back lest you think that ol' SingleMalt has been taking a mid-day nip. 

For those of you who really have some free time on your hands, the Fed is required to make public all of their POMO activity, and you can view it in all of its glory by clicking here: http://www.newyorkfed.org/markets/pomo/display/index.cfm

Oh, one final note - more POMO fun to come on Thurs.  Enjoy!!

Good luck trading.

Oh, and regarding last week's ISM....

......and it coming in much better than expected......I'll bet you all a dollar that we see that number get revised down this month.  That's why these econ reports are such a farce....they are easily manipulated so as to goose the market in the short term, and when they get revised later, it's all but forgotten.

Short morning update

Good morning - hope everyone had a relaxing 3-day weekend.  I certainly did.  Meant to spend more time on this blog, but the weather was so incredible that I just couldn't get myself to spend anytime inside on the computer.

Below is the SPY daily chart from Friday's close at 110.89.  Currently futures are down and the SPY is trading in the pre-market at 110.20 at the time of this posting.

-click to enlarge-

So as mentioned on Friday, the market bounced back up into the resistance range that I had been targeting for re-entering short positions - which I did.  I also kept my position size rather small, as the bulls seem to have a lot of momentum behind them...at least over the last three days, and if they really get up a head of steam, you don't want to be standing in the way of that train with a portfolio loaded with shorts.  So, as previously mentioned, I'm in a small position with stops in place just above the June highs.   If we end up selling-off below 1080 on the S&P, I will add to this position, and move stops to entry on my initial position.

I was talking with a friend last night about the markets and he asked me why I seem to be fixated on the short side, and not willing to take a long position.  A fair question, so I figured I'd post on it today, in case anyone else was wondering the same.

So here's the SingleMalt rationale for my bias and trading style.

1.  First off, I do trade both long and short on an intra-day basis, so I'm not a total bear. :)
2.  Overall, I see a lot more negative in the US and Global economies than I do positive.  All of this talk of recovery and improvement has been nothing but government induced fluff via trillions of dollars in stimulus, not organic growth.  That's just the way I see it. 
3.  The aforementioned stimulus program was hugely responsible for the run-up in stocks since March 2009, and since the majority of these stimulus initiatives have expired, we are seeing most economic indicators rolling over and getting worse.
4.  Until we see either signs of a true, organic recovery, or until we see another massive round of stimulus by the govt., I don't see a fundamental reason to be in long positions.
5.  When it comes to holding positions for more than a day trade, I consider the risk to be too high in this type of market when it comes to bullish/long positions.   There are, in my opinion, simply too many bad things that can occur overnight or over the weekends that could cause a huge drop across the U.S. equities markets, and since I trade mostly options, my positions would be wiped out by a 200-300 point gap down on the open.  What do I mean when I say, "too many bad things"?  Well, all you have to do is follow the international news and you'll see plenty of things that could happen....how about a sovereign default by Greece or Ireland, or an all out attack by Iran on Israel or vice-versa?  These are the types of events that could take our markets down in a hurry, and I think the probability of bad things happening now is higher now than it has been over the past several decades.  And clearly, I'm not the only one to think so, as mutual funds have shown a net outflow of over $50billion in the past 6 months, and have been bleeding out for the past 17 weeks straight.  I'll post a link to that stat later, but it's a fact.  Very few people have any faith in this market on a long term basis.  If you're a trader and are watching the action all day, every day, you can do well, but for people on Main Street with 401k's, the risk is too high for a buy and hold strategy, and the record redemptions we've seen over the past 17 weeks is proof of this.

So bottom line, show me a real recovery, or show me another stimulus program, and I may get more bullish, but in the meantime, my bias is bearish.

Good luck trading.

Update on AMZN, WFC & INTC

10 days ago or so, I posted on Amazon and Wells Fargo, and last weekend I posted a longer article on Intel.  Today I want to take just a few minutes to revisit and recap what has happened since those initial posts.

Starting with Amazon, last time I provided a chart showing how price had been consolidating within a narrow range, and pointed out how low the ADX was getting.  Taken together, a pretty good sign that a larger move is coming.  In today's slide (as of Friday's close) we see that Amazon has now broken out of its range, going from 125 to 138/139 in just three days. 

-click to enlarge-

Now that the consolidation pattern has resolved itself to the upside, I would expect to see this trade higher and at least test the previous highs at 150.  If not already long, I would wait for a slight pullback to get a better entry.  The 135 area should provide some support here. 

                         -----------------------------------------------------------------------------------


On Wells Fargo, last time we were looking at a head and shoulders pattern, where price had already cracked the neckline by a significant amount, indicative of much lower prices to come, but first, I was looking for a small reversal, and perhaps a back test of the neckline before heading back down.


Over the past week, we did get a reversal, and on Thursday's close, a re-test of the neckline....all somewhat according to plan.  Then on Friday, we saw a pretty big gap-up across almost the entire market, due to the employment numbers being "less bad" than expected.  WFC gapped up with the market, getting back over the neckline, but didn't do much else. 

-click to enlarge-

Now we're sitting in no-man's land, and it's difficult to say what comes next.  The problem right now, is that we have an extremely high correlation across almost all stocks and sectors....I think I read somewhere that over the past 3 days, correlation has now reached 80%, meaning that 80% of all stocks in the market are moving in tandem in the same direction.  Why this is problematic is because it makes trading on technical signals almost impossible.  From a technical standpoint, last week WFC was looking very weak and ready to fall, but with correlation being as high as it is, WFC has risen on the coat tails of the overall market, and could continue to do so.  That all being said, I don't really have a recommendation at this point for WFC, other than to say that I'll be watching the financial sector in general over the coming weeks.  Financials have been getting pounded pretty good over the past months, so a rebound in this sector may be on the horizon. 

                         -----------------------------------------------------------------------------------

Moving on to Intel, at the end of my rather long post last weekend, I speculated that it was due a bounce, and could get back up to resistance at 19, followed by gap fill resistance at 19.50. 

As can be seen in the chart below, while Intel did get a bounce, along with the rest of the market, it looks pretty weak compared to the moves we saw across the broader markets, or even compared to Amazon and Wells above.  Also note that 19 represents a H&S neckline for Intel, which unlike Wells, wasn't re-tested nor broken during the past three day's move.

-click to enlarge-

Someone posted a comment a few days ago that the chip sector is a good place to go long now.  Based on the relative weakness seen here with Intel, not to mention the fact that they've lowered Q3 guidance, I would be cautious about getting too bullish on chip sector stocks for more than a day-trade or short term swing.  I would wait on the retail sales numbers coming out later this month, as it captures back-to-school spending in August.  This should show us what the demand for PC's and laptops was.  If this was a strong number, I would be more inclined to go long, but right now, it's not looking too appealing. 

Stone Mountain on a Saturday morning

For whatever reason, I was wide awake at 5:00 AM today....on a Saturday no less.  Don't know what's up with that, but there it is.

At any rate, as a part-time denizen of Atlanta, Ga, for the past 10 years or so, one thing that I try to do on a somewhat regular basis is get over to Stone Mountain for some much needed exercise.  Though most Americans in my generation have grown up believing that bigger is better, trust me when I say that SingleMalt in a trim, 750 ml bottle is a heck of a lot more visibly appealing than SingleMalt in a 1.75 L package, hence the exercise regime, but I digress....

So this morning I got in my car and headed over to Stone Mountain early....arriving just before dawn.  There are numerous options for getting one's daily dose of exercise at the park, including walking trails, a 5 mile loop around the mountain for joggers, walkers or bikers, and a hiking trail to the top of the mountain.  I chose the latter this morning, and as I made my way up the trail in the pre-dawn half-light, the slight chill in the air and the faint whiff of pine on the breeze suddenly brought on a powerful bout of nostalgia...childhood memories of early morning hunting and fishing excursions with my father that I had all but forgotten, came rushing back as if they had just happened yesterday.   Needless to say, this immediately brought a smile to my face and a spring in my step as I revisited those good times on my way to the top - thanks Dad!!

Now I must have made this trek hundreds of times over the past decade, and even though I'm typically an early riser, this was the first time that I found myself on the summit in time to watch the sunrise.  Wow, what a pretty scene....a light scattering of clouds bringing out shades of pink, yellow, orange, red and purple that one can only find in nature.  I just sat there for half an hour taking it all in....can't find the words to express what I was feeling and observing, but it was pretty awesome.

So what does this all have to do with trading the markets?  Not a thing!  But I warned you at the top of the page that I would also be posting on life in general, and this is one of those times.  Besides, not all of my circle of family and friends are interested in the markets, so I'll be mixing in posts on other topics on a fairly regular basis in attempt to keep everyone engaged.

By the way - comments and feedback are always welcome - just click on "comments" below.

Wishing everyone a great Labor Day Weekend.

We're in the range

Below is the SPY on a 144 minute interval including pre/post market, and as you can see, the better than expected unemployment numbers have pushed us up into the trend line and target zone I mentioned in my previous post below.  I'll be looking to see what sort of follow-through we get after the market opens, then picking a spot for a small short entry. 

-click to enlarge-

Good luck trading.

The long awaited bounce is in

Apologies for not posting more regularly over the past few days, but my day job and other activities have been taking up more of my time. 

In the chart below, we see the bounce that I had alluded to and have been waiting for in posts since last week.  I'm using the SPY to show this, as my E-Signal feed on the SPX looks sort of screwy. 

-click to enlarge-

So, we are now getting pretty close to the descending trend line on both the SPY and S&P 500.  Also, not pictured, we have the 62% Fibonacci retracement  just a few ticks up from where we currently sit.  This is the area that I was hoping we would get to so that I could start legging back into short positions, as I still see us going down much further from here.  I'm not a big Elliot Wave technician, but I follow a few people who are, and several have pointed out that according to their wave counts, we are in the midst of a wave 3-of-3-of-3 down, which in Elliot Wave world is supposed to be pretty catastrophic.  My problem with Elliot Wave theory in general however, is that you can ask 20 traders for their wave count on the same chart pattern, and likely get 20 different interpretations.  Elliot Wave purists will admit this themselves, so I tend to take this type of analysis with a grain of salt, but I don't dismiss it entirely, and especially not when I see several independent sources starting to agree with one another.

Anyway, I'm still sticking with my story that we are in the middle of a larger move to the downside, so I will be positioning myself appropriately.  A word of caution:  This is not a normal market.  In my opinion, it is a highly manipulated market.  I commented on this briefly in my post last weekend about Intel, and I will be writing about this more over the coming weekend, but in a nutshell, the thing everyone needs to keep in mind is that the stock market is the ONLY thing that the current administration can point to as proof that we're in some sort of recovery.  Everything else in our economy has at best, flat-lined, and in most cases gotten worse.  This being the case, it is in the Fed's and the administration's best interest to keep the markets propped up as much as possible....especially going into mid-term elections.  This being the case, be very, very careful getting into short positions now.  Here is how I plan to play the overall market. 

1.  Open a small short position as we go into resistance (110 - 110.50 on the SPY, 1097 - 1100 on the S&P).  Stops set just above the June highs
.
2.  Pyramid into a larger position if and as we sell off into the 1080's and 1070's.

3.  Take profits on the initial position at 1040 support, hold the other positions with stops at entry in order to profit from a move through support.

4.  If we do stop out of our initial position, this likely means that the trend has changed and we are headed up.  More analysis will be done if/when that occurs.

As for today....we have some unemployment figures that will post shortly that are likely to be market moving, but on a Friday going into the last holiday weekend of summer, volume will likely be very light, and I wouldn't expect to see any major moves...unless of course the unemployment numbers are horrifically bad, or amazingly good. 

Have a great weekend, and good luck trading.

Are the Bulls finally going to get something going???

Yesterday was another roller-coaster day with the market trading up and down based on news driven events.  Looked like we were going to end sharply lower based on the less than rosy implications of the FOMC minutes that were released at 14:00 EDT, but then we saw huge buying in the last 10 minutes of the official trading day, and the first 15 minutes of after-market.....specifically, 175,000 S&P futures contracts at a net notional value of $9.1 Billion.  [End of day ramp job] in the minute between 15:59 and 16:00.  Sorry folks, but this smacks of Fed intervention to me, either directly, or in-directly via one of their primary dealers like GS or JPM.  No one else has that kind of liquidity. 

At any rate, as of yesterday's close, we are still basically in the same place we were at the end of the prior day.  Below is a 144 minute SPY chart that shows the downward channel we've been in for the past several weeks.

-click to enlarge-

And here is the same chart, including after hours and pre-market activity.  As you can see, we will be starting the day with a gap up, and above the channel. 

-click to enlarge-

But we still will have the resistance levels discussed in yesterday's post to overcome if the bulls want to show some follow-through.  On the SPY, the comparable gap fill to the S&P discussed below is right around 107.  Let's see what they can do!

Econ reports this morning:

Wednesday, 8:15am, ADP Employment Change, 13K
Wednesday, 10:00am, Const. Spending/ISM Index, -0.7%,53.0
Wednesday, 10:30am, Crude Inventories
Wednesday, 2:00pm, Auto/Truck Sales, 3.9M,5.1M

Good luck trading.