Saturday, December 15, 2007

Equity Market Comment for Coming Week 12/17/2007

The correction continues as the final low for this corrective phase has yet to be met.

The 15 minute, 5 minute and 1 minute chart are all signaling an eminent micro short term rally into the 1481.14 - 1478.59 area. We should see this move Monday as the probability model is not looking for a down Friday down Monday pattern.

If we achieve these upside rally targets and turn lower then I would be looking for this to be the final leg lower to complete the correction. The 1445-1451 target zone continues to make its presence in all time frames of my work, with 1445 having the heaviest weighting.

So continue to sell strength as we have been doing, but also have your buy list ready albeit options or stocks as I do anticipate a very powerful rally once the low is put into place.

I also encourage you to take a look at and see the most recent results. I certainly do not want to jinx myself, but we had a great day trading week last week and it only consisted of three days trading. The other thing is that by looking at the 1 minute charts you can learn price patterns that also work on the daily chart as well, so even if you have no interest in day trading the site will be of help in our continuing education as traders.

Friday, December 14, 2007


There is no question that we are getting clobbered on our grain positions even after averaging down. It looks as if the rally in the grains is drawing to a close and the only reason I have stuck by Beans and Corn is their strong potential for a nasty bear market. If I had it to do over there is not a doubt in my mind that I would have exited the shorts a while ago, but we have stuck it out this long we will continue to hold the shorts.

That being said, instead of averaging down on the soybeans and corn, I am going to put on a large short line in Soybean Meal to help speed up the recovery process.

Notice the ascending wedge on the weekly stochastics as well as the bearish wall of fury on the price chart. You will recall that I discussed the value of chart patterns on momentum indicators and how they generate a more powerful signal than a pattern on just price alone. In the case of Soybean Meal we have both!

The smart money is also exceedingly bearish with their largest short position in over 15 years!

Now that alone sends a message.

The small investor is the most bullish they have been in over 12 years and the commodity funds are the most bullish they have been in over 15 years. Remember, the commodity funds are trend followers and momentum players and we can get a feel for how large a move to expect based upon the size of their position. The larger their position, the longer it takes them to unwind and the further price will go. In this case their position is extremely immense and could really lead to an all out collapse in prices.

For those of you that are not carrying the losses in corn and soybeans that I am then shorting meal offers and incredible long term play with a strong probability of 600% or more returns on investment.

Those that are bleeding a bit on the grain positions as I am, the meal trade offers a superb way of getting out from under the boulder.

Take a serious look at Soybean Meal as I sincerely believe it is one of those trades that come along no more than every 5 or 6 years.

Thursday, December 13, 2007

Daily Equity Market Comment - 12/12/2007

We remain in a corrective phase regardless of the reversal today.

I continue to look for one more leg down to end the correction in the 1451 area on the S&P 500.
The daily pattern today, an inside day after a long legged doji has very bearish implications.

These bearish implications only last one to two days which falls very nicely into the theme of one more quick smash down.

After this final leg down I anticipate an exceptional rally so we need to get ready with some solid equities that will do well in the rally.

Wednesday, December 12, 2007

Keeping The Secular Trends In Perspective

I know it is easy to fall into the sky is falling camp as we are surrounded by all of the doom
and gloom of the sub prime fiasco and also the potential of the credit markets freezing.

These are legitimate concerns for sure, however they do seem to be overstated and used at every turn in the road.

Keep in mind that the truly big money is made hand over fist buying when the panic button has been hit over and over and over and there is blood running on the streets. Not every sector meets these criteria, but there sure are some excellent quality financial issues that are selling at simply ridiculous prices that have been gravely overdone to the downside.

I have also attached a long term chart of the trend in Put/Call ratios and as you can see, there certainly is no rampant speculation on the bullish side. If anything, the Tech Meltdown remains fresh in most investors minds and they simply are waiting for the other shoe to drop and stock prices to follow.

This is also not the only sentiment figure that is giving bullish indications.
If this economy were about to go into a meltdown phase and stock prices with it then I would highly doubt you would see the smart money, the big boys, the commercial traders or whatever else you wish to call them in a very jovial buying mood.

With that being said, we may have some short term hurdles to overcome here, but the long term remains firmly bullish!

Crude Oil - To Buy or Sell.....That Is The Question

Crude Oil is going to tell us alot about itself right here right now.

It will answer the following questions for us -

1. Is this current rally counter trend or another impulse move?
If this is a counter trend move, then it should reverse down right here and it certainly should not take out the contract highs.

2. Is the all time high at 98.70 a major high or simply another stop on the course to higher prices.
If crude prices turn lower here, we can have a pretty high probability that the 98.70 level is at the very least an intermediate term peak and should prices continue lower for more than 17 days without a new high then we can begin to see 98.70 as a potential long term high.

The Big Boys are very heavy net sellers and seem to be saying that the major bull market in crude is at or very near its end. However, while this is the heaviest commercial selling we have seen in quite a while especially when we factor in option positions as well the price action of the commodity is going to be the telling sign of what lies ahead for Black Gold.

We are entering into a very interesting period here so stay alert to potential trade opportunities.

Daily Equity Market Comment - 12/12/2007

Well we got the volatile day that I had anticipated with the high for the day being set in the first 8 minutes of trading.

From there it was a steady decline with very trade able rallies along the way. Take a look at the Day Trading Blog and see how we did

I have attached the 1 minute chart of the S&P 500 to illustrate the clear direction of the market today. I actually thought at about 3pm that we might see my downside targets reached today, but the market was able to stabilize about 15 minutes later and close with a decent rally.

I am looking for the market to move a bit higher early tomorrow, probably to the 1490 - 1495 and then a full resumption of the correction. The most logical target now is 1446-1451 basis the S&P 500 cash index.

I will be posting a list of some short candidates, but being this close to the end of the correction these stocks should be utilized only for very aggressive traders.

Tuesday, December 11, 2007

Rate Outlook for The 10 Year

With the passing of 4.10% on the 10 year the new target becomes 3.72% and then all the way down to 3.08%. 3.72% is the most logical target, but with the cramping in the credit markets under 3 1/8% is certainly not out of the question.

The pattern today is calling for lower rates in short order.

I have also attached the monthly chart I posted back in June, not to pat myself on the back but to give some perspective as to what to expect over the intermediate term.



Copper - The Short Term Skinny

Copper is very close to showing where it wants to go over the short term.

A break on either side of the triangle will bring about a 40 cent move in the price of copper, a very respectable amount of movement to trade.

Because of the fact that the pattern is a symmetrical triangle we have no clue as to which way it will break.

The important feature of this is to jump on board of the direction that it breaks.

Coffee - Near The Point of True Direction

Coffee is nearing the make or break point.

While we were stopped out of our scalper coffee trade with a loss, I will be looking to sell
short again upon the violation of the lower line in the wedge.

The People Have Spoken

I have changed the blog layout back to the original format as the vast majority of you did not like the new layout and quite honestly the more I looked at it and worked with it the less I like it myself.

Remember, if there is anything you would like to see on the blog or changes that you might think would make the blog more seamless then you can always drop me a line.

I will also be taking the commodity trading and closed commodity trades and placing them near the bottom of the blog. I will do the same with the Aggressive Equity Trading account positions and closed trades.

Market Comment 12/11/07

Well the market answered to the FED exactly what they thought of their statement and easing for that matter.

This brings the correction into force, but don't think for a second that it will be straight down.
Expect a lower opening tomorrow followed by a rally attempt that should retrace a full 50% from the openings low to the high set on 12/11. There is going to be some great trading opportunities tomorrow as I expect a very volatile day.

However, the possible rally of Wednesday should be followed by a continuation of the decline.
I will be taking advantage of the strength by finding some very short term shorting candidates, but alas I get ahead of myself. We still need tomorrow to fit the pattern as laid out above before anything else takes place.

Regardless of what outcome that finds its way into the market we are in a corrective mode.

Targets for the correction basis the S&P 500 cash are 1465 and 1451.

From these levels we should see a very abundant rally for the rest of the year and a very strong January. I have a target of 1683 for January 2008 which is quite ambitious, but very doable.

The chart below is in response to the many emails I got about being so cautious in the face of higher stock prices, Sometimes the daily chart is just not enough to disect the short term trends. For my intermediate term work I use the Daily, 60 Minute and 30 Minute charts and need all three of them to confirm. As you can plainly see this was not the case.

Monday, December 10, 2007

Equity Market Update For The Week of 12/10/07

I anticipate another range bound day today as the market awaits the FOMC results.

I have posted the Pivot Point and Magic Numbers on the Day Trading site for those of you
who are interested.

The market continues to carve out a short term top and we remain short term defensive because of this. I anticipate that regardless of the FOMC meeting results that the market will sell-off.

We also have to be aware of the S&P today as a down close will give a Down Friday, Down Monday pattern which should bring some short term weakness and perhaps sharply so.

I do not anticipate making any short term moves one way or the other until the results from the FOMC give us the short term direction of the market.

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