Saturday, June 14, 2008
Equity Market Comment - 6/14/2008
Friday seems to have some very high odds of a short term low put into place with the move into the 1330 area on the cash S&P 500. The weekly chart below also shows a fairly decent reversal in prices and we closed the week out basically where we began which is quite a feat considering the heavy selling we experienced.
Now, as bullish as all this may seem, we need to keep all this in perspective and continue to treat all rallies as highly suspect and nothing more than a rally in a bear market. With this mindset in place, we need to watch the 1385 to 1400 area on the S&P 500 for a possible termination of a bear market rally.
Continue to use all rallies as a place to hedge your long term positions as we remain in the sell strength mode. Aggressive traders can look to purchase SPY call options at or near the open on Monday as long as we do not get a large gap up at the open. If we get this type of open then speculators will be looking to simply sell short or buy puts at the upside targets I mentioned earlier.
Now, as bullish as all this may seem, we need to keep all this in perspective and continue to treat all rallies as highly suspect and nothing more than a rally in a bear market. With this mindset in place, we need to watch the 1385 to 1400 area on the S&P 500 for a possible termination of a bear market rally.
Continue to use all rallies as a place to hedge your long term positions as we remain in the sell strength mode. Aggressive traders can look to purchase SPY call options at or near the open on Monday as long as we do not get a large gap up at the open. If we get this type of open then speculators will be looking to simply sell short or buy puts at the upside targets I mentioned earlier.
Thursday, June 12, 2008
Equity Market Comment - 6/12/2008
It continues to appear as if the market is attempting to put some type of short term low into place but seems to be a bit more difficult that it usually is. We need more confirmation of this low before aggressive traders can even think about playing the possible rally which could be 30 to 40 points on the S&P 500.
Short term traders should currently be 75% flat in their trading account and still be holding a 25% short or put option position. The reason I continue to hold onto this 25% on the short side is the fact that Fridays have become the most negative day of the week and there is also an outside chance that this leg down we are currently in will be a 1.618 ratio and not just an equal length.
Short term traders should currently be 75% flat in their trading account and still be holding a 25% short or put option position. The reason I continue to hold onto this 25% on the short side is the fact that Fridays have become the most negative day of the week and there is also an outside chance that this leg down we are currently in will be a 1.618 ratio and not just an equal length.
Wednesday, June 11, 2008
WHEAT - Capture Some Profits
Wheat continues its very sharp rally off of the break out of the wedge pattern we discussed last week.
Today saw a huge move, enough so to warrant taking half the long position off the table and letting the second half ride. This type of trade is the absolute best as it offers a no risk proposition.
Wheat looks a bit over extended here and may be in need of a pullback before it can continue the current rally phase. If you went long on the buy signal, then look to exit half your position and move the stop loss up to break even on the last half. This will guarantee you a very handsome profit even if wheat works its way lower to your entry point.
I am looking for a pullback to the 8-8.50 level before we have another leg higher so keep these numbers in mind going forward.
Don't forget also that Wheat is not only producing nice profits for us but it also managed to tell us to exit our short positions in soybeans at break even so we owe quite a bit of gratitude to the grain.
Today saw a huge move, enough so to warrant taking half the long position off the table and letting the second half ride. This type of trade is the absolute best as it offers a no risk proposition.
Wheat looks a bit over extended here and may be in need of a pullback before it can continue the current rally phase. If you went long on the buy signal, then look to exit half your position and move the stop loss up to break even on the last half. This will guarantee you a very handsome profit even if wheat works its way lower to your entry point.
I am looking for a pullback to the 8-8.50 level before we have another leg higher so keep these numbers in mind going forward.
Don't forget also that Wheat is not only producing nice profits for us but it also managed to tell us to exit our short positions in soybeans at break even so we owe quite a bit of gratitude to the grain.
Ford follows the market today and closes a bit lower, but still remains in a very close proximity to a short term low. Aggressive traders can purchase call options and traders who have rode the stock lower on puts or short sales should definitely look to take their profits on their entire position.
USU now looks like it needs one final push lower below $6.10 before it can complete its first leg down. From that point, I would look for a counter trend rally to retrace 50 to 62% of the decline.
USU will become another shorting opportunity once a counter trend rally has been exhausted.
Oracle has finally started to move nicely with a very sharp move lower today.
The ultimate downside target remains 21.50, but taking 1/2 your position off the table with some nice profits would not be a bad idea.
First Bancorp is rapidly turning into a very nice short sale.
Yet again, another recommendation that you may want to take 1/2 to 3/4 of your position off the table with some excellent profits.
The chart shows the ultimate downside target.
USU now looks like it needs one final push lower below $6.10 before it can complete its first leg down. From that point, I would look for a counter trend rally to retrace 50 to 62% of the decline.
USU will become another shorting opportunity once a counter trend rally has been exhausted.
Oracle has finally started to move nicely with a very sharp move lower today.
The ultimate downside target remains 21.50, but taking 1/2 your position off the table with some nice profits would not be a bad idea.
First Bancorp is rapidly turning into a very nice short sale.
Yet again, another recommendation that you may want to take 1/2 to 3/4 of your position off the table with some excellent profits.
The chart shows the ultimate downside target.
Equity Market Comment - 6/11/2008
Today is a clear cut example of the dangers of trying to capitalize on the long side during a bear market. Although we had some fairly strong signals that today should be an up day, the power of a secular bear market is the deciding factor. It is this type of environment that requires a selling of strength and adding to short positions as the prudent course of action.
The chart below is the wedge pattern I had spoken about last week and it looks like the S&P 500 cash index is getting quite close to the wedge target of 1315.
We also have a 1.618 ratio target of 1300 even for a downside target as well, so it would appear that we may very well be getting close to some type of short term low that could lead to a trade able rally. However, as I stated in the first paragraph, during a bear market we need solid evidence that a counter trend rally is indeed a higher probability and from this point we can look to establish some type of long positions to capitalize on such a move.
At the very least, these signals warrant our short and put positions to be reduced and/or closed out in waiting for a point to re-short the market after a counter trend rally. Our short positions have paid off very nicely and it looks like there should be just a bit more on the downside before we exit these positions. I anticipate exiting 2/3's of my positions on any early weakness Thursday as the daily trading pattern calls for a continuation of lower prices early Thursday with the final low being put into place in the 11:00am to 12:00 Noon time frame. Should we see the 1315 to 1300 price level during this time then I will exit all of my speculative shorts and remain neutral until I get strong confirmation that in fact a short term low has been put into place.
Intermediate term traders should continue to hold their hedged positions as should longer term investors. This decline in full could very well be a long ways from being over. Caution remains the most prudent word for equity allocation at this time.
The chart below is the wedge pattern I had spoken about last week and it looks like the S&P 500 cash index is getting quite close to the wedge target of 1315.
We also have a 1.618 ratio target of 1300 even for a downside target as well, so it would appear that we may very well be getting close to some type of short term low that could lead to a trade able rally. However, as I stated in the first paragraph, during a bear market we need solid evidence that a counter trend rally is indeed a higher probability and from this point we can look to establish some type of long positions to capitalize on such a move.
At the very least, these signals warrant our short and put positions to be reduced and/or closed out in waiting for a point to re-short the market after a counter trend rally. Our short positions have paid off very nicely and it looks like there should be just a bit more on the downside before we exit these positions. I anticipate exiting 2/3's of my positions on any early weakness Thursday as the daily trading pattern calls for a continuation of lower prices early Thursday with the final low being put into place in the 11:00am to 12:00 Noon time frame. Should we see the 1315 to 1300 price level during this time then I will exit all of my speculative shorts and remain neutral until I get strong confirmation that in fact a short term low has been put into place.
Intermediate term traders should continue to hold their hedged positions as should longer term investors. This decline in full could very well be a long ways from being over. Caution remains the most prudent word for equity allocation at this time.
Tuesday, June 10, 2008
Wheat - Possible Sharp Move Higher In the Cards
After breaking out of its wedge consolidation, wheat has struggled to move further in the direction of its break higher.
Today was one of the first signs that it may want to work higher as it managed to find some resting support off the 50 period moving average.
With this new formation I am going to initiate a 50% long position in wheat with a tight stop loss just below the 50 day moving average.
Today was one of the first signs that it may want to work higher as it managed to find some resting support off the 50 period moving average.
With this new formation I am going to initiate a 50% long position in wheat with a tight stop loss just below the 50 day moving average.
Stock Selections Update
FBP continues to work lower and increase our profit on both the put options and also the short sales.
I am still looking for a minimum downside target of 8 1/4, but there certainly no law agains taking half your profits at current levels and letting the other half ride.
I am still looking for a minimum downside target of 8 1/4, but there certainly no law agains taking half your profits at current levels and letting the other half ride.
Ford has reached a very low risk entry point on the long side as we clearly have 5 waves down which typically is a pre-cursor to a short term low.
While I was a little early in the original buy signal at $6.40, we have reached a point that can safely be used to purchase another block of stock and/or purchase call options.
Oracle has not declines as quickly as I had anticipated, but it remains clearly in a downtrend an has yet to reach its minimum target level which I have marked on the chart.
LXU has made a move higher, but has yet to reach its downside target and seems to be setting up for a symmetrical move lower to my initial target of $16.
USU has retreated a full 10% since the initial sell signal, but appears to be mustering up some energy for its first counter trend rally of this decline. If you are short or have purchased put options then now may be a good time to take those profits and wait for another point in price to enter the short side again.
While I was a little early in the original buy signal at $6.40, we have reached a point that can safely be used to purchase another block of stock and/or purchase call options.
Oracle has not declines as quickly as I had anticipated, but it remains clearly in a downtrend an has yet to reach its minimum target level which I have marked on the chart.
LXU has made a move higher, but has yet to reach its downside target and seems to be setting up for a symmetrical move lower to my initial target of $16.
USU has retreated a full 10% since the initial sell signal, but appears to be mustering up some energy for its first counter trend rally of this decline. If you are short or have purchased put options then now may be a good time to take those profits and wait for another point in price to enter the short side again.
Equity Market Comment - 6/10/2008
I will continue to use this trading pattern which has been extremely accurate until it begins to break down in its accuracy.
The last two days of market action have shown exactly how indecisive current market participants are with both the Open and Close for the day being very close in price. These patterns are known as a Doji and are clear examples of a market that is stuck in a battle of bulls and bears, each fairly evenly matched.
Today also saw and inside day with a down close on the S&P 500 cash index, which should lead to a rally on Wednesday. However, this rally should be used as a selling point or an area to purchase put options as the current decline has not come even close to showing any sign of exhaustion.
The trading pattern that I have posted over the last couple of weeks on the Wilshire 5000 remains very much in play and as I have marked on the chart above, you can plainly see where we currently are in the sequence and also how accurate the pattern remains.
In a nutshell, we remain in a sell strength trading mode and continue to look for small rallies along the way to add to our short positions. Your equity allocation should be extremely defensive.
Today also saw and inside day with a down close on the S&P 500 cash index, which should lead to a rally on Wednesday. However, this rally should be used as a selling point or an area to purchase put options as the current decline has not come even close to showing any sign of exhaustion.
The trading pattern that I have posted over the last couple of weeks on the Wilshire 5000 remains very much in play and as I have marked on the chart above, you can plainly see where we currently are in the sequence and also how accurate the pattern remains.
In a nutshell, we remain in a sell strength trading mode and continue to look for small rallies along the way to add to our short positions. Your equity allocation should be extremely defensive.
Monday, June 9, 2008
Equity Market Comment For Closing of 6/9/2008
The Indecision that the market displayed today sends us a message that indeed we are in the midst of a new leg down in an ongoing bear market, but also that on a very short term basis we may be nearing a short term low.
I have targets in the 1345 area basis the S&P 500 cash index that should present some type of support for the market. This however should prove to be nothing more than a point of a small counter trend rally before the decline pushes lower once again.
The 1345 area is a good target for those who have been holding SPY put options to exit their positions and await a point to sell any strength once again.
The NASDAQ has finally broken down with a penetration of its lower channel.
The OTC market had been one of the slight glimmers of hope that in fact the market could rebound in a more aggressive manner, but all this has been dashed with the breaking of the lower trend channel.
As stated above, we may be nearing a very short term low after we see one more push lower in stock prices. Use this potential strength however to sell short, hedge or buy SPY put options as sharply lower prices seem to be in the cards over the intermediate term.
I have targets in the 1345 area basis the S&P 500 cash index that should present some type of support for the market. This however should prove to be nothing more than a point of a small counter trend rally before the decline pushes lower once again.
The 1345 area is a good target for those who have been holding SPY put options to exit their positions and await a point to sell any strength once again.
The NASDAQ has finally broken down with a penetration of its lower channel.
The OTC market had been one of the slight glimmers of hope that in fact the market could rebound in a more aggressive manner, but all this has been dashed with the breaking of the lower trend channel.
As stated above, we may be nearing a very short term low after we see one more push lower in stock prices. Use this potential strength however to sell short, hedge or buy SPY put options as sharply lower prices seem to be in the cards over the intermediate term.
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