Saturday, August 18, 2007

Short Term Trading Model Forecast 8-20 thru 9/5

The short term trading model has been extremely accurate over the last 45 days or so, almost in an uncanny manner.

I developed this model over two years ago and just really brought it online this year. The most recent 45 days have been the best performance it has achieved since the creation.

With how hot the model has been I have to continue to listen to what it says and continue to confirm it with other fundamental and technical tools.

The following is the forecast from the model from this Monday all the way to Sept 5th.

8/20,8/21 - Down with a 50% retrace of the rally from the most recent lows.
8/22 - Rally with a Reversal, close very close to unchanged.
8/23 - Strong rally putting in the highest point for this forecast period.
8/24-8/28 Choppy with a Downward Bias.
8/29 - Hard Down day with a Test of the lows made on 8/21
8/30-9/5 - Strong Rally of 5% or more and putting in the final high before the retest of the Intermediate Term low 0f 8/16.

Please remember that this is only a guideline and the direction of the model is more important than the values that are created. If this model remains as accurate as it has been then it will give some great insight into the short term direction of the market.

Friday, August 17, 2007

Short Term Trading Model - Sell Calls and Longs Today By The Close

The short term trading model calls for today to be the high of this first ultra short term leg up.

Therefore, I would suggest taking profits on any short term long positions and call options by the close of today. The call options have some great profits so it will not be very hard to let them go.

The model calls for the high today and a sharp 2 day sell off going into next Tuesday that will put the market into a short term trading range until the end of August.

From the end of August we should look for another sharp leg up in the market that terminates on Sept 5. This should be the final top before the market begins a test of its most recent lows.

Remember that this model is only a guideline and the market always has the final word, but this short term model has simply been to accurate to not heed its advice!

Ultra Short Term S&P 500 Trend

Should see a sharp move up to new highs for this move in order to keep the ultra short term trend healthy.

Look to 1453 for resistance.

Short term traders should exit their positions upon a move to a new high as this would most likely complete the first ultra short term leg up.

Thursday, August 16, 2007

Commodity Update

SUGAR - Stopped out of the long position at 9.20 Loss of $275 per contract

LUMBER - Steep decline in Lumber today and takes the price to only 50 cents from our break even stop at 2.74

COTTON - Stopped out of the Aggressive Long position at 59 even. Loss of $1100 per contract and exactly why this was an aggressive trade. We continue to look for a final rally to new highs in order to put a low risk short into play.

SOYBEANS - Huge decline in the beans today. We are short from 8.70 1/4. Move the stop to break even.

CORN - Remain short off the long term sell signal.

CRUDE OIL - New Sell Signal today, Short from 71 even with a close 50 cent stop.

Bottom In Place - Begin To Cover Your Hedges

The market made our target low today and had a great rally off the lows.

The price aspect of the correction has been achieved and I began to unwind my hedge position

Aggressive traders are sitting on some nice profits from the intra day buy signal today and I really thing tomorrow should bring the same.

I am going to try and time the lifting of my entire hedge position to coincide with the high probability test of the most recent lows. While I do not expect the test to make it all the way back down I really do not see a V bottom and actually a longer bottom would be more healthy.

The most worrisome aspect of this decline to me was the reluctance of bullish sentiment to deteriorate. This fact was really starting to worry me as it was showing that many were simply taking the decline in stride.

The sentiment this week however finally took its dive and now sits at its lowest bullish sentiment level since 2003! This hurdle has been cleared.

S&P 500 Downside Targets Satisfied

The ultimate downside target for the S&P 500 has been achieved today.

While there is never any guarantee that the market will not go lower, very aggressive traders can go long here for a potential huge reversal on the day.

Please keep in mind that this is a very aggressive play, but by managing the trade with a close sell stop the risk can be very limited and the reward will be huge.

There also are a few stocks in the core portfolio that I will begin to remove the hedge from as well.

TNH - Ready For Purchase

TNH has reached its downside target, however given the nature of the market, I am only going
to put together half of my line.

IRIS - Opportunity Knocks

This one has quite a good record following the Three White Soldiers Pattern and a MACD crossing below zero.

Has at least a 20% return potential and in a very short time frame as well.

The chart says it all!

Wednesday, August 15, 2007

New S&P 500 Downside Target

While the 1387-1375 area is still important, I did get a new downside target that outweighs
the earlier targets.

Keep you eye on 1391-1392 on the Cash S&P 500.

Either way you slice it, we are very near a bottom and could get there before the August 24th time frame. August 24th in this case may end up being a test of the lows which I do anticipate once the bottom is put into place.

Similar to Summer 2006? It Seems So!!

The uncanny similarities of the Summer 2006 correction continue.

Below is the Put/Call ratio with the green circles showing now and the Summer 2006 correction.

Terra Nitorgen - Near Buy Zone

Back near the buy zone again.

Needs another push to new lows will initiate a Buy Watch.
Look for $66-$68 for an entry.

Commodities Update

LUMBER - Long from 274. Tighten up the stop to break even!

SUGAR - Long from 9.45. Looking for a sharp rally. Keep a close stop.

COTTON - Aggressive Long from 61.20 Risk all the way to 59. Main Trade will be a Short from a new high.

SOYBEANS - Short from 8.70 1/4

CORN - Long Term Short in place

We will be looking to go long the U.S. Dollar on a pullback.

Equity Comment

Today could not have planned out any better with the initial strength followed by a slight meltdown.

The market is starting to show early signs of attempting to put a bottom in, but it is very early in this process and lower prices are still in the cards. With this in mind, the hedge we put into place in June should still be in place.

The Low Target Area remains the 1387-1375 level on the S&P 500.

Tuesday, August 14, 2007

Commodity Market Update

LUMBER - Outside day today fortells of higher prices. Long from 2.74.

SUGAR - Very quiet day today. Long from 9.45

COTTON - Has risk all the way to 59 before a final rally begins. Aggressive Long from 61.21.
Main position will be taken upon the end of the final push up in prices.

CORN - Stay Short

SOYBEANS - Look like they could really fall out of bed here. Great short candadite.

Equity Market Comment

Intermediate term I continue to look for the market to move lower into its target area.

While the market may chop a bit after the decline today I still do not think the downside is complete.

The market on an ultra short term basis looks to have made a low.

I will be looking to establish more short positions at the green lines on the chart.

Sentiment has moved into an area that is indicative of market lows.

While this is no guarantee that the low is in place, it does begin to say that there is light at the end of the tunnel for this decline.

The AAII, Investors Intell. and Wall Street sentiment indicators need to decline more as these have been a little worrisome with their reluctance to show any fear. This translates into more downside and perhaps in a scary manner in order to strike fear into the hearts of investors.

I continue to look for the S&P 500 to drop below 1400 before the low is put in place and August 24th for the low.

Our hedge remains in tact and will only be released should I see evidence that it is safe to do so.

Short Term Red Flags

The markets have the capability to get real ugly in here, with a potential free fall of 25-30 S&P points. So keep a close eye on everything in here.

Remember also that the blueprint calls for a strong reversal today, so should it get ugly to the downside, odds favor a comeback.

It could get very volatile here. Only very aggressive and nimble traders should be even thinking about buying the potential meltdown that might be right around the corner today.

Monday, August 13, 2007

One Reason To Stay Long Term Bullish

I realize that recently I have sounded like doom and gloom with most of my posts calling for lower prices.

While the intermediate term low has yet to be put into place I thought it important to show the long term health of the market and why there is quite a bit of upside left in it.

The chart below is the S&P 500 Weekly.
  • The Blue Line is the Commercial Traders Positions, which is heavily long (BULLISH)

  • The Green Line are the commodity fund positions, which are heavily short (BULLISH)

  • The Red Line are the small traders positions which are Neutral
The fund traders have been selling like crazy ever since the recovery following the March correction. It is as if they have been waiting for the other shoe to drop and I am certain that the most recent market action has them smiling. Remember though, the Funds are usually wrong at major turning points and this is no exception.
It is important also that you realize the C.O.T. data trumps all other analysis in the S&P 500. This is not true in all the futures markets, but it certainly is true in equities.

Commodities Update - Quick Run Down

SUGAR - Long Executed Today at 9.45

LUMBER - Long From 2.74

COTTON - Aggressive Long From 61.21

CORN - Continue To Hold Short

Please refer to the weekend post on these commodities for the more detailed intermediate term outlook.


I am looking for a further pullback in USU in order to get back in on the long side.

I firmly believe that the low is put in place for the stock on an intermediate term basis, but a retest of the lows cannot be ruled out.

Equity Market Analysis

While todays action was not exactly to the blueprint, it certainly was close enough to count.

If we waited for a direct reproduction I can guarantee that you will never see it. The best we can hope for in analysis such as the blueprint is a general outline and this is what we got.

So from here we can look for the market to make its way lower and put in the intermediate term low and much lower prices. The blueprint calls for a selloff tomorrow followed by a strong recovery going into the close.

Cover Shorts - Sit Out

Looks like the market is going to try and push to new highs for the day, so cover your shorts and sit on the sidelines for another opportune time to sell this rally.

USU - Take the Money and Run

It has been an excellent two days in USU, but I think it might be time to cut and run here.

Although I am not prone to flipping, sometimes it just makes sense and with the volatility we have been seeing, it only makes sense to take profits.

Rally Should Not Hold Together

Could be just about all the rally the market could muster here.

Looking to sell this rally.

Sunday, August 12, 2007

Crude Oil - Final Hurrah?

Crude Oil is really starting to look like its time is limited.

There is extreme long positions by the public (bearish) and extreme short positions by the commercial traders (bearish)

The Commodity funds have very large long positions, so once the trend shifts you should see quite a large decline as these funds begin to unwind their longs and establish shorts.

Sugar - Get Ready To Pull The Trigger

I have been waiting for the 9.46 to 9.21 level on sugar to establish a long position and we are very close to that right now.

The potential rally off this swing low is going to speaks volumes about the intermediate term health of this market.

Keep a close eye on this one!

Lumber - Ready to Move Higher

Lumber has been a little slower to react then I had thought, but it appears to me that it will make its move very soon.

We are long from 274.

Cotton - Aggressive Short Term Play

We continue to wait for the final push up to new highs in cotton to put a low risk short position in place.

Those of a more aggressive nature can buy long in here for the last gasp up in price.
Cotton has reached a point of strong support and should begin the final rally from here.

I stress the long side as an aggressive trade and to make sure you keep a close sell stop in place.

Corn - Decline to Continue

Corn looks very weak in here and a resumption of the decline seems eminent.

Keep your short positions in place with a protective buy stop at 3.46 1/2.

Trend Analysis LLC Headline Animator