Monday, May 19, 2008
Soybeans - Remain Short!
Soybeans sent a double negative today with a crossing of the slow stochastics and also a trend termination and reversal candlestick pattern.
I continue to look for the beans to fall out of bed and the set up for sharply lower prices seems to be right on the front door step.
Keep your shorts in place with a flat $750 stop loss from your entry price.
I continue to look for the beans to fall out of bed and the set up for sharply lower prices seems to be right on the front door step.
Keep your shorts in place with a flat $750 stop loss from your entry price.
Daily Equity Market Comment - 5/19/2008
The daily pattern today was pretty much dead on with a slightly lower open and mildly lower prices followed by a very strong rally into the 1:00PM time frame. While the consolidation period was a bit more than I had expected, the 3:40 low came right in on time and made a nice 7 point rally in the futures.
The pattern for tomorrow calls for a flat open and mildly higher prices for the first 15 minutes to half hour. This should be followed by a sharp move lower into the 11am to 11:15am time frame.
From here we should look for a consolidation of the losses and a sideways pattern that leads into another sharp move lower starting at 12:45pm. This move lower should continue until 3:00pm at which time the market should stage a very nice come back rally of roughly 50% of its daily decline.
Short term traders can use the above template for prices as they see fit.
On the intermediate term front, the chart below continues to show a slowing of upside momentum and quite possibly the start of a very steep sell off starting tomorrow. We have a very negative stochastics pattern that still needs confirmation by turning lower and we also have a very negative two day trading pattern with 2 polar opposite days.
Remember also that Monday had the greatest odds of being the ONLY up day this week so a negative tone may be set for the week. Remain very defensive in your equity holdings with no more than 45% invested into stocks.
The pattern for tomorrow calls for a flat open and mildly higher prices for the first 15 minutes to half hour. This should be followed by a sharp move lower into the 11am to 11:15am time frame.
From here we should look for a consolidation of the losses and a sideways pattern that leads into another sharp move lower starting at 12:45pm. This move lower should continue until 3:00pm at which time the market should stage a very nice come back rally of roughly 50% of its daily decline.
Short term traders can use the above template for prices as they see fit.
On the intermediate term front, the chart below continues to show a slowing of upside momentum and quite possibly the start of a very steep sell off starting tomorrow. We have a very negative stochastics pattern that still needs confirmation by turning lower and we also have a very negative two day trading pattern with 2 polar opposite days.
Remember also that Monday had the greatest odds of being the ONLY up day this week so a negative tone may be set for the week. Remain very defensive in your equity holdings with no more than 45% invested into stocks.
Saturday, May 17, 2008
Weekend Market Outlook - 5/18/2008
The weekly chart of the SPY which is a stock traded to mirror the returns of the S&P 500 continues its bearish volume pattern as shares trading hands continue to dry up more and more the higher we go. This is NOT the sign of a healthy market and is a very genuine concern for me.
This development alone has about 70% input into my current bearish 45% equity allocation, and until this trend makes an attempt to shift into a positive direction I will continue to scale back my exposure to stocks.
As much as I am trying to remain optimistic about the future course of stock prices, I am really starting to see some credible signs that this rally off the lows is nothing more than a counter trend rally in a bear market.
This development alone has about 70% input into my current bearish 45% equity allocation, and until this trend makes an attempt to shift into a positive direction I will continue to scale back my exposure to stocks.
As much as I am trying to remain optimistic about the future course of stock prices, I am really starting to see some credible signs that this rally off the lows is nothing more than a counter trend rally in a bear market.
Next week bring us the post option expiration week and as you can see by the chart below, it tends to have a negative trend with the exception of Wednesday.
However, based upon the market pattern on Friday, the odds favor a fairly strong rally on Monday that should quickly be followed by lower prices. You will notice on the chart below that Monday carries with it a very minimal negative return and recently the daily patterns have been very accurate.
On the subject of the daily patterns, the pattern on Friday Inverted in the Morning, but almost on the nose in the 1:08pm time frame, the market began a fairly decent sell off. Unfortunately there was not enough downward pressure to keep pushing prices lower and buyers came into the market and sent the futures higher. This led to a break even trade on selling the 1pm time frame and we remained flat the rest of the day as option expiration day can be very unpredictable and I did not want to get caught on the wrong side of the market and turn a break even day into a losing day.
These daily patterns that I have been following as I said, have been quite accurate and a fairly good guide for those of you who want to grab a slice of the intra-day Price movements.
Monday calls for higher prices.
The ideal pattern for Monday is a flat opening followed by some very modest weakness for the first 5 to 10 minutes. This should be followed by a nice upward move into the 1:15pm time frame at which time the market could enter a consolidation zone and chop around at these higher prices until about 3:40pm at which time the rally should resume into the close. Monday is slated to close at the very high end of its trading range so aggressive short term traders should be looking to establish long positions on any type of weakness we may encounter.
The chart below illustrates both the probability of an up or down close as well as an average return. Next week covers day 13, 14, 15, 16, and 17 and the chart explains the rest quite clearly, showing Monday being a decent up day, but soon to be followed by weakness for the rest of the week.
By the way, these charts were taken off the www. SentimenTrader.com website and I encourage all of you to take a look at it. It is a very good site that has much to offer that is hard to find anywhere else.
First Marblehead - Fire Sale Prices
Our economic cycles are filled with Boom and Bust cycles and spread across different industries at different times. This has been going on since the start of capitalism and will continue into the future as well. The only change we have really seen in this cycle is the length of time in between cycles has increased and the recovery time has decreased, both factors are a net plus for investors.
With this in mind, I bring to your attention First Marblehead Corporation which is the largest
issuing agent of student loans.
Now I realize that currently any company with anything to do with the credit markets is considered taboo and as you can plainly see by the stock chart, the investors feel the same way. However, this to shall pass and FMD will survive both the current credit crisis as well as the class action lawsuit that investors have filed based upon the stock plummeting. With this recovery will come a stock price that will very easily increase 10 fold and investors who really see the value in this company will be very handsomely rewarded.
Is there risk involved with this purchase? Of course there is risk, there is always risk, but with the companies finances and the stock price hovering just above $3 per share, the potential rewards far out weigh the risk and as far as I am concerned warrant a very aggressive accumulation phase in portfolios.
With this in mind, I bring to your attention First Marblehead Corporation which is the largest
issuing agent of student loans.
Now I realize that currently any company with anything to do with the credit markets is considered taboo and as you can plainly see by the stock chart, the investors feel the same way. However, this to shall pass and FMD will survive both the current credit crisis as well as the class action lawsuit that investors have filed based upon the stock plummeting. With this recovery will come a stock price that will very easily increase 10 fold and investors who really see the value in this company will be very handsomely rewarded.
Is there risk involved with this purchase? Of course there is risk, there is always risk, but with the companies finances and the stock price hovering just above $3 per share, the potential rewards far out weigh the risk and as far as I am concerned warrant a very aggressive accumulation phase in portfolios.
Friday, May 16, 2008
LXU - Up Up and Away
LXU continues it rally out of the Wedge break.
I continue to await a pullback in order to determine whether or not a re-purchase would be prudent.
For those of you that took 1/2 your position off the table at 17 1/4 and let the other half ride, you might entertain tightening your stop probably to 18 1/2. This will lock in a very nice 34% return for you.
I am keeping tabs on the stock and should another purchase warrant consideration I will alert all of you to the action.
I continue to await a pullback in order to determine whether or not a re-purchase would be prudent.
For those of you that took 1/2 your position off the table at 17 1/4 and let the other half ride, you might entertain tightening your stop probably to 18 1/2. This will lock in a very nice 34% return for you.
I am keeping tabs on the stock and should another purchase warrant consideration I will alert all of you to the action.
Interesting Correlation
Below are 2 weekly charts of the NASDAQ cash index.
The first chart is the major low that was put into place in 2003 and the second chart is the current low and subsequent rally.
You will notice quite a few similarities of the two patterns all the way down to both of them being 9 weeks long from ultimate low to ultimate high and both rallies being stalled out by the upper Bollinger Band.
If the market were to follow this current pattern on a weekly basis, then we could expect a sizable pullback from here. The bullish tone to this pattern is that once the pullback of 62% was completed we entered into a very strong rally phase that carried stock prices markedly higher.
One thing at a time though as we need first to see if indeed the market stalls at the current Bollinger band which held the market back this week and we are brushing up against as of this Friday.
I will be posting my Weekend Commentary later, I just thought there was an interesting correlation here and I wanted to bring it to your attention.
The first chart is the major low that was put into place in 2003 and the second chart is the current low and subsequent rally.
You will notice quite a few similarities of the two patterns all the way down to both of them being 9 weeks long from ultimate low to ultimate high and both rallies being stalled out by the upper Bollinger Band.
If the market were to follow this current pattern on a weekly basis, then we could expect a sizable pullback from here. The bullish tone to this pattern is that once the pullback of 62% was completed we entered into a very strong rally phase that carried stock prices markedly higher.
One thing at a time though as we need first to see if indeed the market stalls at the current Bollinger band which held the market back this week and we are brushing up against as of this Friday.
I will be posting my Weekend Commentary later, I just thought there was an interesting correlation here and I wanted to bring it to your attention.
Thursday, May 15, 2008
Remain Short Soybeans, New Positions Can Be Opened On The Short Side
I continue to hold Soybeans short with a very modest paper loss.
The beans continue no look and act, like a bad accident just waiting to happen.
I have a $750 flat stop per contract on a closing basis only.
If you did not take the short trade before, then the beans are offering you yet another opportunity to get on board and at a better price I may add.
As always don't forget to put a stop loss in place to protect your capital should things go terrible wrong.
The beans continue no look and act, like a bad accident just waiting to happen.
I have a $750 flat stop per contract on a closing basis only.
If you did not take the short trade before, then the beans are offering you yet another opportunity to get on board and at a better price I may add.
As always don't forget to put a stop loss in place to protect your capital should things go terrible wrong.
Equity Market Comment - 5/15/2008
Todays market action was quite the contrary to what I had anticipated and once again the stop loss on my short positions and put options save me from a much larger loss on the day.
All of this volatility this week is no doubt relating to option expiration with the sharp reversal near the end of the day Wednesday and the breakout higher today.
I must admit, it is a fairly bullish sign with the S&P 500 futures closing above 1421.50 which was the breakout point. The question now is can we get any follow through from this breakout. The bullish indications with the close above 1421.50 will be quickly reversed should we close back below 1421.50 in the next couple of days.
The day to day sequencing pattern for short term traders calls for a flat to lower open followed by early weakness in the first hour. This may be followed by a general firming of prices from 10:30AM to 1:00PM. After 1pm however I will be looking to be a very aggressive seller of this market, especially if we start to see some technical breakdowns at that time. So for Friday, aggressive traders would best be served to wait for the last half of the day and see if in fact a large decline is in the making.
On the intermediate term front I continue to allocate a bearish 45% to equities and I continue to expect a decline of sorts in the very near future.
Remain defensive!!!!!
All of this volatility this week is no doubt relating to option expiration with the sharp reversal near the end of the day Wednesday and the breakout higher today.
I must admit, it is a fairly bullish sign with the S&P 500 futures closing above 1421.50 which was the breakout point. The question now is can we get any follow through from this breakout. The bullish indications with the close above 1421.50 will be quickly reversed should we close back below 1421.50 in the next couple of days.
The day to day sequencing pattern for short term traders calls for a flat to lower open followed by early weakness in the first hour. This may be followed by a general firming of prices from 10:30AM to 1:00PM. After 1pm however I will be looking to be a very aggressive seller of this market, especially if we start to see some technical breakdowns at that time. So for Friday, aggressive traders would best be served to wait for the last half of the day and see if in fact a large decline is in the making.
On the intermediate term front I continue to allocate a bearish 45% to equities and I continue to expect a decline of sorts in the very near future.
Remain defensive!!!!!
Wednesday, May 14, 2008
Equity Market Comment - May 14, 2008
The market is nice enough to send us clues along its journey, it is simply up to us to find them and capitalize on them.
While the breakdown has taken more time than I had anticipated, the rally and then failure today has changed nothing. As a matter of fact, in a way it has strengthened the outlook for lower prices as a day of very strong buying early (Small Investors) turned into some very strong late day (Institutional Investors) selling.
Actually yet another good lesson here that many of you might not be aware of.
The first part of the day 9:30 to 11:30 is mostly comprised of small investors trading their portfolios so as a general rule we can look at early trading as a counter move to what the future could hold. 2:00 to 4:15 pm is the time of the Big Boys and the smart money as they unwind their positions that they either bought from or sold to the early morning small investors. Take a look at a 5 minute chart sometime and you will see this pattern occur over and over again.
Today was yet another banner day for call buyers as the put/call ratio continues to decline into an area that is quite indicative of market peaks.
Intermediate and Long Term investors need to remain very cautious here and short term traders can look for short selling candidates and index put options.
Tuesday, May 13, 2008
EQUITY MARKET COMMENT - 5/13/08
The call buying continues as a furious pace as the small investors continue to get on board what they see as "The New Bull Market". As I mentioned yesterday, this process continues to send a negative message about the underlying health of equity prices and you need to adjust your portfolio accordingly.
It seems as though everyday we are given yet another piece of evidence as to the true underlying trend of the market. Take a look at the Hourly chart below and you will see a market that currently teeters on the brink of what may perhaps be a very steep correction, if not a steep new leg lower in a bear market.
Nothing new here.
Just the same message to remain very defensive in your equity exposure.
Remember also that if the daily stochastics on the S&P 500 cash turn down in the next day or two that it should be an excellent opportunity to get on board with put options.
The market today did not really follow the pattern my work has indicated, but obviously it is the work that is incorrect and NOT the market, the market is ALWAYS right!
It seems as though everyday we are given yet another piece of evidence as to the true underlying trend of the market. Take a look at the Hourly chart below and you will see a market that currently teeters on the brink of what may perhaps be a very steep correction, if not a steep new leg lower in a bear market.
Nothing new here.
Just the same message to remain very defensive in your equity exposure.
Remember also that if the daily stochastics on the S&P 500 cash turn down in the next day or two that it should be an excellent opportunity to get on board with put options.
The market today did not really follow the pattern my work has indicated, but obviously it is the work that is incorrect and NOT the market, the market is ALWAYS right!
Even though the seasonal prediction got a bit off track today it still does not change the current bearish outlook for stock prices. With this in mind, Aggressive Short Term Option traders can continue to look at entering SPY put options. As of early today, all of your call options should have been sold and if you did not have the opportunity to purchase puts we will have another opportunity tomorrow. I will post the specifics for short term traders later this evening.
I WELCOME THE COMPETITIVE NATURE DEVELOPING IN BLOG ELITES
Well once again I need your help in securing the number 2 spot in the Blog Elites Rankings.
It has really become quite competitive with quite a few of the tracked blogs springing to life and moving up the rankings.
So if you could please click on the BlogElites link just to the right of this post, enter and vote for Trend Analysis LLC I would greatly appreciate it.
The higher my ranking the greater my exposure.
The greater my exposure the more ideas I get from readers.
The more ideas I get from readers the more cutting edge our trading becomes.
The more cutting edge our trading becomes the more money we make.
I think you get the idea!
So please take a few minutes and throw a vote my way and if you get these updates via email, please take the time to visit the blog each day and cast your vote.
As always I appreciate your readership and thank you for your vote!
It has really become quite competitive with quite a few of the tracked blogs springing to life and moving up the rankings.
So if you could please click on the BlogElites link just to the right of this post, enter and vote for Trend Analysis LLC I would greatly appreciate it.
The higher my ranking the greater my exposure.
The greater my exposure the more ideas I get from readers.
The more ideas I get from readers the more cutting edge our trading becomes.
The more cutting edge our trading becomes the more money we make.
I think you get the idea!
So please take a few minutes and throw a vote my way and if you get these updates via email, please take the time to visit the blog each day and cast your vote.
As always I appreciate your readership and thank you for your vote!
Simply More Evidence As To Why A Light Allocation To Equities Is The Prudent Thing To Do
Below is a chart of the 10 Year Note yield with the S&P 500 cash index placed over it.
Equity prices are represented by the dotted blue line and yields are the candlestick chart.
What I want you to get out of this visual is the clear linking of interest rates to stock prices at the current time.
It is abundantly clear that as go interest rates so go stock prices and the yield on the 10 year note from a technical standpoint is looking to work lower and in all likelihood will bring stock prices along with it. The question remains as to whether or not this will be a corrective mode from the low at 1260, which would keep 1260 in tact or if this decline may be the start of a new leg lower.
I am taking no chances either way, as I currently recommend a very bearish 45% allocation to equities and a finger on the trigger to hedge 100% of stock portfolios with options should we get a confirmation that we are in fact in a new leg lower. Either way we are very well protected from a move lower in stock prices. There are simply to many investors out there who firmly believe that the worst is over and have begun if not already moved their allocations to 85% stocks in hopes that the bear market is over and we are in the first leg higher of a new bull market. It is precisely this type of psychology that makes me reluctant to believe that the ultimate lows in the equity indexes have been seen. It would be a different story if these sentiment readings did not get so bullish so quickly, but they have and we MUST adhere to what history has taught us over and over again. THE MASSES ARE WRONG AT MAJOR TURNING POINTS IN STOCK PRICES!
Equity prices are represented by the dotted blue line and yields are the candlestick chart.
What I want you to get out of this visual is the clear linking of interest rates to stock prices at the current time.
It is abundantly clear that as go interest rates so go stock prices and the yield on the 10 year note from a technical standpoint is looking to work lower and in all likelihood will bring stock prices along with it. The question remains as to whether or not this will be a corrective mode from the low at 1260, which would keep 1260 in tact or if this decline may be the start of a new leg lower.
I am taking no chances either way, as I currently recommend a very bearish 45% allocation to equities and a finger on the trigger to hedge 100% of stock portfolios with options should we get a confirmation that we are in fact in a new leg lower. Either way we are very well protected from a move lower in stock prices. There are simply to many investors out there who firmly believe that the worst is over and have begun if not already moved their allocations to 85% stocks in hopes that the bear market is over and we are in the first leg higher of a new bull market. It is precisely this type of psychology that makes me reluctant to believe that the ultimate lows in the equity indexes have been seen. It would be a different story if these sentiment readings did not get so bullish so quickly, but they have and we MUST adhere to what history has taught us over and over again. THE MASSES ARE WRONG AT MAJOR TURNING POINTS IN STOCK PRICES!
Blackstone - A Solid Short and A Solid Buy
The title sounds a bit confusing I know, but it really sums up the position the stock is currently in.
BX offers a solid candidate to sell short or buy puts and after the soon to come decline will offer a solid buy for a strong move higher.
Take a look at the chart below and see what I am referring to.
For those who want to trade put options on BX, you need to give yourself enough time for the stock to reach its downside target. This means going out to June at least as May options are in their final week of life and should be avoided unless a day trade is the point of order.
Currently the June 20 Puts are trading at 1.85/1.90 and offer the best buy based on risk reward.
Remember to always use a protective stop on all of your option trades. There may be times that you have to use a mental stop because the options could be open to manipulation by market makers and they are well know for looking for stops and moving the Bid/Ask down to those levels whether the stock moves or not. I realize that this is something that seems a bit on the shady side, but it is part of the options game and a part that you need to be aware of.
BX offers a solid candidate to sell short or buy puts and after the soon to come decline will offer a solid buy for a strong move higher.
Take a look at the chart below and see what I am referring to.
For those who want to trade put options on BX, you need to give yourself enough time for the stock to reach its downside target. This means going out to June at least as May options are in their final week of life and should be avoided unless a day trade is the point of order.
Currently the June 20 Puts are trading at 1.85/1.90 and offer the best buy based on risk reward.
Remember to always use a protective stop on all of your option trades. There may be times that you have to use a mental stop because the options could be open to manipulation by market makers and they are well know for looking for stops and moving the Bid/Ask down to those levels whether the stock moves or not. I realize that this is something that seems a bit on the shady side, but it is part of the options game and a part that you need to be aware of.
Monday, May 12, 2008
AN UPDATE FOR SHORT TERM TRADERS AND ALSO AN EXCELLENT LESSON IN THE MAKING
Now that I have my trusty notebook I can give a more detailed outlook on what the probabilities tells us about Tuesday.
It was much as I expected, except there is a bit more urgency involved.
If you have decided to carry your call options overnight then you need to release yourself of them no later than 9:45am est.
9:45 is also the time that we will want to purchase in the money SPY put options and I stress in the money. Not at the money or just out of the money, but IN THE MONEY. You are going to pay a little more for these options, but the reduction in risk will more than offset the increased price you will pay.
From 9:45am we should work our way lower finding some support in the 11:15 to 11:30 time frame. This should lead to a consolidation until 12:30 - 12:45 when we should break lower once again and not find the days low until 3:00pm. From there I would expect a small rally of sorts that could retrace close to 50% of whatever downside damage we have been subjected to up to this point. With this in mind, it would be appropriate for buyer of the PUT options to exit 3/4 of their position in the 3pm time frame and let the remaining 1/4 of the position stay in place with a break even stop loss. This will allow us to capitalize on a market that may in fact not even have the strength to put together a rally of any consequence.
Don't forget also that we have the Monday/Tuesday reversal pattern on our side for tomorrow so any strength that Tuesday brings can be sold or shorted with low risk.
Make sure you take a look at the chart below as it gives and excellent real time example of what may be going on in the intermediate term. This certainly does not guarantee that this is what will come to pass, but it is a very good time to watch and see if the pattern completes.
It was much as I expected, except there is a bit more urgency involved.
If you have decided to carry your call options overnight then you need to release yourself of them no later than 9:45am est.
9:45 is also the time that we will want to purchase in the money SPY put options and I stress in the money. Not at the money or just out of the money, but IN THE MONEY. You are going to pay a little more for these options, but the reduction in risk will more than offset the increased price you will pay.
From 9:45am we should work our way lower finding some support in the 11:15 to 11:30 time frame. This should lead to a consolidation until 12:30 - 12:45 when we should break lower once again and not find the days low until 3:00pm. From there I would expect a small rally of sorts that could retrace close to 50% of whatever downside damage we have been subjected to up to this point. With this in mind, it would be appropriate for buyer of the PUT options to exit 3/4 of their position in the 3pm time frame and let the remaining 1/4 of the position stay in place with a break even stop loss. This will allow us to capitalize on a market that may in fact not even have the strength to put together a rally of any consequence.
Don't forget also that we have the Monday/Tuesday reversal pattern on our side for tomorrow so any strength that Tuesday brings can be sold or shorted with low risk.
Make sure you take a look at the chart below as it gives and excellent real time example of what may be going on in the intermediate term. This certainly does not guarantee that this is what will come to pass, but it is a very good time to watch and see if the pattern completes.
Equity Market Comment
The market action we saw today was pretty much in line with expectations and those who purchased call options were rightfully rewarded.
The markets ability to follow the patterns we have mentioned over the last few days lends some confidence to the outlook we have been seeing.
If we are to remain in this stage of price action, then Tuesday should bring early strength into the 1407-1408 SPX level followed quite quickly by weakness and a full blown continuation of the correction we have seen.
I do not have my seasonal notebook with me so for short term traders I cannot give specifics other than early strength followed by fairly strong weakness, so if you still have your call options try and take your profits in the first half hour of the day. I will give the more specific seasonal pattern once I have a look at my notebook.
Intermediate and Long Term traders are holding fast with a light 45% allocation to equities until the dust settles and we have a better idea about whether or not the worst is behind us or the next leg down (which could be a killer) is right around the corner.
The small investor continues their ways of bullish persuasion with the non stop call buying routine.
From an intermediate term perspective this is a very bearish precursor to lower prices and should be decline in value as I see over the next couple of weeks and not see the small investor shed themselves of these call buying ways, then the road could get very bumpy before it gets better.
The markets ability to follow the patterns we have mentioned over the last few days lends some confidence to the outlook we have been seeing.
If we are to remain in this stage of price action, then Tuesday should bring early strength into the 1407-1408 SPX level followed quite quickly by weakness and a full blown continuation of the correction we have seen.
I do not have my seasonal notebook with me so for short term traders I cannot give specifics other than early strength followed by fairly strong weakness, so if you still have your call options try and take your profits in the first half hour of the day. I will give the more specific seasonal pattern once I have a look at my notebook.
Intermediate and Long Term traders are holding fast with a light 45% allocation to equities until the dust settles and we have a better idea about whether or not the worst is behind us or the next leg down (which could be a killer) is right around the corner.
The small investor continues their ways of bullish persuasion with the non stop call buying routine.
From an intermediate term perspective this is a very bearish precursor to lower prices and should be decline in value as I see over the next couple of weeks and not see the small investor shed themselves of these call buying ways, then the road could get very bumpy before it gets better.
Sunday, May 11, 2008
Equity Market Comment
The market continued lower on Friday, but was able to attract buyers into sell programs that had the opportunity to send prices sharply lower. Friday was also the best day of last week to subject the market to sharply lower prices.
Monday begins a new week and also Monday brings into light the potentially strongest day of the week. With this in mind and also based upon the 1/2 hour chart, we can expect a very short term rally from here that should retrace about 50% of the decline we have had so far which should bring the S&P 500 just back above the 1400 level. However, from here we would expect the correction in prices to continue to the downside.
Long term traders should remain 45% invested in stocks with the potential to hedge positions further should the need arise.
Short term traders can look to play the counter trend rally with call options. Keep in mind that the counter trend rally should only cover 18 - 20 S&P points so purchase your call options accordingly.
Monday begins a new week and also Monday brings into light the potentially strongest day of the week. With this in mind and also based upon the 1/2 hour chart, we can expect a very short term rally from here that should retrace about 50% of the decline we have had so far which should bring the S&P 500 just back above the 1400 level. However, from here we would expect the correction in prices to continue to the downside.
Long term traders should remain 45% invested in stocks with the potential to hedge positions further should the need arise.
Short term traders can look to play the counter trend rally with call options. Keep in mind that the counter trend rally should only cover 18 - 20 S&P points so purchase your call options accordingly.
Thursday, May 8, 2008
Equity Market Comment - 5/8/2008
The market had begun to tip its hand and show its weakness as a high probability day of potential strength was met with selling at every attempt to bid prices higher.
This along with the pattern that it has created for Friday leads to a possible meltdown tomorrow or at the very least a fairly strong day of declining prices.
There is a clear warning here when the cash S&P 500 manages a better than 5 point gain, yet the smart money in the S&P 500 futures pit were sellers and finished the day to the downside.
Directly below you will also see the tick by tick display of the put/call ratio and as we have seen all this week, the small investor continues to pour money into the call side expecting sharply higher prices in the near term. This is a very negative connotation and one that typically comes before the fall.
The NASDAQ, much like the S&P 500, formed a pattern today that has some very high odds of producing sharply lower prices the next day.
The Day to Day sequencing pattern calls for lower prices from start to finish tomorrow with a real possibility of a very hard down day. It should prove to be very interesting.
I remain in a very defensive posture with only a 45% allocation to equities and a very keen eye on how this potential decline unfolds.
Aggressive traders can look to get into some SPY puts tomorrow morning providing we do not have a steep gap opening lower. In the event of a lower gap opening, wait for at least half the gap to be filled and ideally all of the gap before purchasing put options. One strategy will be to purchase half your lot on the half gap fill and the remaining if and when we fully recover the lower gap opening.
It is shaping up to be a very interesting day tomorrow, so stay tuned, the party might just be getting started!
This along with the pattern that it has created for Friday leads to a possible meltdown tomorrow or at the very least a fairly strong day of declining prices.
There is a clear warning here when the cash S&P 500 manages a better than 5 point gain, yet the smart money in the S&P 500 futures pit were sellers and finished the day to the downside.
Directly below you will also see the tick by tick display of the put/call ratio and as we have seen all this week, the small investor continues to pour money into the call side expecting sharply higher prices in the near term. This is a very negative connotation and one that typically comes before the fall.
The NASDAQ, much like the S&P 500, formed a pattern today that has some very high odds of producing sharply lower prices the next day.
The Day to Day sequencing pattern calls for lower prices from start to finish tomorrow with a real possibility of a very hard down day. It should prove to be very interesting.
I remain in a very defensive posture with only a 45% allocation to equities and a very keen eye on how this potential decline unfolds.
Aggressive traders can look to get into some SPY puts tomorrow morning providing we do not have a steep gap opening lower. In the event of a lower gap opening, wait for at least half the gap to be filled and ideally all of the gap before purchasing put options. One strategy will be to purchase half your lot on the half gap fill and the remaining if and when we fully recover the lower gap opening.
It is shaping up to be a very interesting day tomorrow, so stay tuned, the party might just be getting started!
SEND A VOTE OF CONFIDENCE
PLEASE TAKE A FEW SECONDS TO SEND A VOTE MY WAY VIA THE BLOG ELITES
LINK ON THIS BLOG.
SIMPLY DO THE FOLLOWING:
1. CLICK ON THE BLOGELITES LINK
2. CLICK ON THE ENTER AND VOTE ICON
3. SCROLL DOWN TO TREND ANALYSIS LLC
4. CLICK ON THE TREND ANALYSIS NAME
5. THAT'S ALL THERE IS TO IT! YOU WILL BE BROUGHT RIGHT BACK TO THE BLOG AFTER VOTING.
THOSE WHO ARE REGULAR READERS OF THE BLOG VIA EMAIL, PLEASE TAKE A MOMENT EACH TIME AND SEND A VOTE MY WAY.
THANKS TO EVERYBODY WHO HAVE MADE THIS BLOG A SUCCESS.
I APPRECIATE YOUR READERSHIP AND CONFIDENCE IN MY ABILITIES.
LINK ON THIS BLOG.
SIMPLY DO THE FOLLOWING:
1. CLICK ON THE BLOGELITES LINK
2. CLICK ON THE ENTER AND VOTE ICON
3. SCROLL DOWN TO TREND ANALYSIS LLC
4. CLICK ON THE TREND ANALYSIS NAME
5. THAT'S ALL THERE IS TO IT! YOU WILL BE BROUGHT RIGHT BACK TO THE BLOG AFTER VOTING.
THOSE WHO ARE REGULAR READERS OF THE BLOG VIA EMAIL, PLEASE TAKE A MOMENT EACH TIME AND SEND A VOTE MY WAY.
THANKS TO EVERYBODY WHO HAVE MADE THIS BLOG A SUCCESS.
I APPRECIATE YOUR READERSHIP AND CONFIDENCE IN MY ABILITIES.
Wednesday, May 7, 2008
FORD - Corrective Wave In Force
Ford stock appears to have just completed a very strong first leg higher and today confirmed that a corrective wave is in process.
This should only be a corrective pattern and we will be looking for 7.33, 6.87 and 6.42 for possible downside targets. Upon completion of this corrective pattern the stock should make an even stronger push higher.
This should only be a corrective pattern and we will be looking for 7.33, 6.87 and 6.42 for possible downside targets. Upon completion of this corrective pattern the stock should make an even stronger push higher.
LXU - Take Profits
Exit any remaining position you may currently have in LXU.
It has rewarded us very nicely in a short period of time and today formed an exhaustion
pattern with an attempted push sharply higher only to have strong selling pressure push it lower, but up on the day. We also got a sell signal on the stochastics.
The price pattern we saw today may very well give one more push higher in the morning, so use this to your advantage.
Based upon what the price does from here we may very well get back into the stock. In the meantime take your profits.
It has rewarded us very nicely in a short period of time and today formed an exhaustion
pattern with an attempted push sharply higher only to have strong selling pressure push it lower, but up on the day. We also got a sell signal on the stochastics.
The price pattern we saw today may very well give one more push higher in the morning, so use this to your advantage.
Based upon what the price does from here we may very well get back into the stock. In the meantime take your profits.
Equity Market Comment - 5/7/2008
The market action today seems to add yet more credence to our outlook for lower prices over the next couple of weeks.
The SPY 142 puts that were purchased yesterday gave us a clean double today, much sooner than I had imagined I must add. I remain in the puts with a stop loss in place that will capture a 75% return. The reason I did not take them off the table today was the fact that the market seems poised for yet more follow through tomorrow. The daily pattern calls for a continuation of lower prices into the 11:00 to 11:30am time frame tomorrow and at this time I will be selling the entire lot of put options.
For the truly aggressive who have been amply rewarded by these puts, there is yet another opportunity if we do in fact see a low put into place in the 11:00 to 11:30am time frame then it will be time to not only exit the put options, but enter into in the money call options. What we will be looking for is a counter trend rally back up to retrace 50% of this decline, but I will be giving targets if this pattern occurs.
On the intermediate term front we are closely monitoring the wedge pattern that I have drawn on the chart below. If we close below the lower line of the wedge pattern then the minimum downside target is 1280 on the S&P 500. The main question that we will try to answer in a timely manner is if in fact this possible next move lower is simply going to be a test of the lows or the start of a new leg lower.
As it stands, remain in the highly defensive 45% allocation and be prepared to hedge the remaining positions with options should the market call for this action.
The SPY 142 puts that were purchased yesterday gave us a clean double today, much sooner than I had imagined I must add. I remain in the puts with a stop loss in place that will capture a 75% return. The reason I did not take them off the table today was the fact that the market seems poised for yet more follow through tomorrow. The daily pattern calls for a continuation of lower prices into the 11:00 to 11:30am time frame tomorrow and at this time I will be selling the entire lot of put options.
For the truly aggressive who have been amply rewarded by these puts, there is yet another opportunity if we do in fact see a low put into place in the 11:00 to 11:30am time frame then it will be time to not only exit the put options, but enter into in the money call options. What we will be looking for is a counter trend rally back up to retrace 50% of this decline, but I will be giving targets if this pattern occurs.
On the intermediate term front we are closely monitoring the wedge pattern that I have drawn on the chart below. If we close below the lower line of the wedge pattern then the minimum downside target is 1280 on the S&P 500. The main question that we will try to answer in a timely manner is if in fact this possible next move lower is simply going to be a test of the lows or the start of a new leg lower.
As it stands, remain in the highly defensive 45% allocation and be prepared to hedge the remaining positions with options should the market call for this action.
Soybeans Update - Do or Die Time
Time is not on our side here with the Soybean trade as they seem to have hit a strong floor of support.
In order for the short position to remain in tact, the beans need to break to new lows withing the next 2 trading sessions otherwise we will exit the trade with a small profit and await yet another potential set up trade.
In order for the short position to remain in tact, the beans need to break to new lows withing the next 2 trading sessions otherwise we will exit the trade with a small profit and await yet another potential set up trade.
LXU Update
LXU continues to make headway towards its minimum breakout target of 17.50.
Upon reaching the minimum target at 17.50 sell half the position and let the other half continue on the board with a stop at break-even.
So far we have taken 12% out of the stock in just over 1 trading week with what looks to be a possible 20% return at the lower target.
Upon reaching the minimum target at 17.50 sell half the position and let the other half continue on the board with a stop at break-even.
So far we have taken 12% out of the stock in just over 1 trading week with what looks to be a possible 20% return at the lower target.
Tuesday, May 6, 2008
Equity Market Comment - 5/6/2008
The market held true to form today with the Monday/Tuesday reversal pattern that has been around as long as I have been involved in the markets. This pattern is not always present, but when you have a situation like today with early weakness and the Tuesday pattern calls for a higher close, then you are presented with an excellent trading opportunity.
As I mentioned yesterday, if we were to get strength today then it was to be used to sell into and aggressive traders could sell the futures short or buy SPY put options near or at the close. I opted for both!
We are long the May SPY 142 puts from 1.44.
The reason I picked these options in particular is their very real potential to double in price over the next 3-5 days.
The bearish evening star pattern from yesterday remains in force and the sentiment as measured by the CBOE Put/Call ratio continues to run in an area that typically sees market corrections. As a matter of fact, the small investor was gobbling up as many calls as they could get their hands on this morning on the weakness which is yet another bearish precursor of things to come.
As I mentioned yesterday, if we were to get strength today then it was to be used to sell into and aggressive traders could sell the futures short or buy SPY put options near or at the close. I opted for both!
We are long the May SPY 142 puts from 1.44.
The reason I picked these options in particular is their very real potential to double in price over the next 3-5 days.
The bearish evening star pattern from yesterday remains in force and the sentiment as measured by the CBOE Put/Call ratio continues to run in an area that typically sees market corrections. As a matter of fact, the small investor was gobbling up as many calls as they could get their hands on this morning on the weakness which is yet another bearish precursor of things to come.
Monday, May 5, 2008
Equity Market Comment For Tuesdays Trading
The market today made one of the more reliable candlestick patterns of the bearish nature.
Take a look at the last three days of market action and you will see an Evening Star pattern that just barely confirmed itself today. This pattern typically is of the intermediate term basis so it tends to confirm my outlook for lower prices in here.
The put/call ratio was also on the bearish side today as it appears that the small investor does not think these lower prices will last and they are positioning themselves for a move higher with call options. At the very least, the put call ratio should have been above 1.00 today considering the fact that the market was almost down 1/2 percent, but it closed at .90 which is more relative to an up day then a down day.
While we do have the possibility of a Monday/Tuesday reversal tomorrow, it would appear that it would be a good time to either reduce your equity exposure and for the more aggressive, purchase some in the money SPY put options.
We are getting some fairly strong confirmations that we have entered into a period of selling strength as the prudent course and although the final tally is not in the evidence weighs heavily on the lower prices scenario.
Keep in mind also that we have achieved the 50% retracement level on the S&P 500 of the decline from 1580 to 1260 and if we are in fact still in a bear market, then the next leg down could be a hummer. It is because of this possibility that I have reduced my equity exposure markedly and upon a confirmed stochastics cross on the daily chart I will also be purchasing put options against my equity holdings for portfolio protection.
It is definitely time to stay very close to the market as we are at a very critical juncture that should portend the next 15-20% move one way or the other.
Take a look at the last three days of market action and you will see an Evening Star pattern that just barely confirmed itself today. This pattern typically is of the intermediate term basis so it tends to confirm my outlook for lower prices in here.
The put/call ratio was also on the bearish side today as it appears that the small investor does not think these lower prices will last and they are positioning themselves for a move higher with call options. At the very least, the put call ratio should have been above 1.00 today considering the fact that the market was almost down 1/2 percent, but it closed at .90 which is more relative to an up day then a down day.
While we do have the possibility of a Monday/Tuesday reversal tomorrow, it would appear that it would be a good time to either reduce your equity exposure and for the more aggressive, purchase some in the money SPY put options.
We are getting some fairly strong confirmations that we have entered into a period of selling strength as the prudent course and although the final tally is not in the evidence weighs heavily on the lower prices scenario.
Keep in mind also that we have achieved the 50% retracement level on the S&P 500 of the decline from 1580 to 1260 and if we are in fact still in a bear market, then the next leg down could be a hummer. It is because of this possibility that I have reduced my equity exposure markedly and upon a confirmed stochastics cross on the daily chart I will also be purchasing put options against my equity holdings for portfolio protection.
It is definitely time to stay very close to the market as we are at a very critical juncture that should portend the next 15-20% move one way or the other.
Friday, May 2, 2008
S&P 500 - Long Term Investors Take Notice
The high achieved by the S&P 500 today sent it into the 50% retrace level and placed it in the potential Danger Zone.
The reason I make mention of this is the clear fact that in many many instances the 50% retrace level is a point of very strong resistance and in this current market environment could be construed as the termination point of a bear market rally.
This is not to say that the party is over! What it dictates is that all investors need to watch this price level with some intensity because odds favor prices to head south from here. If the market can close above the 50% level and move on to the 62% retrace level it would have some very bullish implications for the long term health of the stock market.
As I have also been saying, the next corrective force in the market needs to be monitored closely for a clue to the next major long term move in stock prices. First and foremost, the S&P 500 must be able to hold its most recent major lows in the 1260 area. This is a minimum requirement. The ideal situation will be for the market to hold the 50% retrace level of this entire rally from 1260 to current prices. I will be supplying targets very soon.
Because of the 50% level being achieved on the potential counter-trend rally, I am advising a reduction of equity exposure from the current 60-75% stock allocation down to a 40 to 50% allocation to stocks, just to be on the safe side. For those of you who have considerable capital gains in your stocks you can go to the option market and hedge your positions with put options and put a synthetic sell into place.
I will have more information on the Weekend analysis, but I thought I would get the preliminary outlook out in plain view.
The reason I make mention of this is the clear fact that in many many instances the 50% retrace level is a point of very strong resistance and in this current market environment could be construed as the termination point of a bear market rally.
This is not to say that the party is over! What it dictates is that all investors need to watch this price level with some intensity because odds favor prices to head south from here. If the market can close above the 50% level and move on to the 62% retrace level it would have some very bullish implications for the long term health of the stock market.
As I have also been saying, the next corrective force in the market needs to be monitored closely for a clue to the next major long term move in stock prices. First and foremost, the S&P 500 must be able to hold its most recent major lows in the 1260 area. This is a minimum requirement. The ideal situation will be for the market to hold the 50% retrace level of this entire rally from 1260 to current prices. I will be supplying targets very soon.
Because of the 50% level being achieved on the potential counter-trend rally, I am advising a reduction of equity exposure from the current 60-75% stock allocation down to a 40 to 50% allocation to stocks, just to be on the safe side. For those of you who have considerable capital gains in your stocks you can go to the option market and hedge your positions with put options and put a synthetic sell into place.
I will have more information on the Weekend analysis, but I thought I would get the preliminary outlook out in plain view.
Thursday, May 1, 2008
Equity Market Comment - 5/1/2008
Today was a very lucrative day for both the day traders and option traders who took the late night alert towards the typical May 1st trading pattern. Although you may have missed the first 6 points of the rally in the S&P 500, the pattern held true with the 11:00 to 11:30 am acceleration in prices and while the market moved 16 points higher from this point, I was content with 12 and made the exit.
I still believe that this was a one day wonder and the market should see the corrective pattern return Friday. Friday is the worst day of the week both for return and also odds of being an up day. Being as the seasonal day of the week pattern has been so hot recently I thought I would run by the pattern for Friday for those who wish to once again capitalize on selling futures short or buying puts.
Friday, if it follows the typical pattern should see the market trade sideways to higher for most of the day with the days high coming in near the 1pm est mark. From there we should see the market fall apart and decline quite sharply. Therefore look to this time of the day to establish SPY put option positions or sell the futures short. Remember to always use a protective stop on all short term trades to protect yourself from unexpected events.
I still believe that this was a one day wonder and the market should see the corrective pattern return Friday. Friday is the worst day of the week both for return and also odds of being an up day. Being as the seasonal day of the week pattern has been so hot recently I thought I would run by the pattern for Friday for those who wish to once again capitalize on selling futures short or buying puts.
Friday, if it follows the typical pattern should see the market trade sideways to higher for most of the day with the days high coming in near the 1pm est mark. From there we should see the market fall apart and decline quite sharply. Therefore look to this time of the day to establish SPY put option positions or sell the futures short. Remember to always use a protective stop on all short term trades to protect yourself from unexpected events.
Soybeans Make A Nice Move Lower
The first full day of holding the short position in the July Beans and we were given a very nice move lower that quickly put us in a decent profit.
This being the case, the protective stop can be moved down to the breakeven level, effectively making this now a risk free trade. Risk free trades are the first and foremost type of trade we look for and we were fortunate enough to be given one so soon.
The decline in prices should continue and quite violently at that so move your stop to your breakeven level and get ready for a move lower that could possibly take your breath away!
This being the case, the protective stop can be moved down to the breakeven level, effectively making this now a risk free trade. Risk free trades are the first and foremost type of trade we look for and we were fortunate enough to be given one so soon.
The decline in prices should continue and quite violently at that so move your stop to your breakeven level and get ready for a move lower that could possibly take your breath away!
Wednesday, April 30, 2008
New Information For Position and Day Traders
I just happened to be thumbing through my seasonal pattern notebook and I came across the Last Trading Day of April's pattern and also the first trading day of May.
The pattern for the last day of April was right on the mark, which increases the probability that the seasonal model for the first day of May should be fairly close as well.
This pattern for Thursday is also confirmed by the typical Thursday pattern as well.
The reason I bring this really only to the attention of Day Traders is that The odds favor this pattern to be a one day event.
The pattern calls for some follow through of the weakness we had today in the morning half of the day, with the days low being put into place in the 11:15 to 11:30 AM EST time frame.
Therefore, should we see some stabilization in this time frame tomorrow and a crossing of the 3 or 5 minute stochastics near this time it could be a very lucrative day trade for call options or going long the S&P 500 futures.
Remember that if you choose the SPY options to make sure you buy an in the money strike of at least 1 point and ideally an in the money of 2 points or more. Being as this will be a day trade only you need not spend the extra money on going out past May on the expiration.
This is a very high risk trade that will be going counter to the down trend that was confirmed today so keep a very close stop in place and make sure you only look to buy the calls in the time frame I mentioned above.
The pattern for the last day of April was right on the mark, which increases the probability that the seasonal model for the first day of May should be fairly close as well.
This pattern for Thursday is also confirmed by the typical Thursday pattern as well.
The reason I bring this really only to the attention of Day Traders is that The odds favor this pattern to be a one day event.
The pattern calls for some follow through of the weakness we had today in the morning half of the day, with the days low being put into place in the 11:15 to 11:30 AM EST time frame.
Therefore, should we see some stabilization in this time frame tomorrow and a crossing of the 3 or 5 minute stochastics near this time it could be a very lucrative day trade for call options or going long the S&P 500 futures.
Remember that if you choose the SPY options to make sure you buy an in the money strike of at least 1 point and ideally an in the money of 2 points or more. Being as this will be a day trade only you need not spend the extra money on going out past May on the expiration.
This is a very high risk trade that will be going counter to the down trend that was confirmed today so keep a very close stop in place and make sure you only look to buy the calls in the time frame I mentioned above.
SOYBEANS - Short July Beans
We were waiting for a small rally in the July Soybeans somewhere in the neighborhood of a 50% retrace and intra-day today we got just that.
We are now short the July Beans from 13.30 4/8 with a tight close only stop loss at 1365 even.
If in fact my analysis of the Soybean Market is correct then we should see and almost immediate decline from here and also in a rather dramatic fashion. This will allow us to know right away if I was correct and if the trade should continue to be held or not.
LXU - Breakout!
LXU made its breakout move today moving above the upper line of the wedge pattern.
The stock has also been following the historical model to a tee and should it continue down this path then we should see an extremely sharp rally on Thursday and Friday as the chrt below demonstrates.
The stock has also been following the historical model to a tee and should it continue down this path then we should see an extremely sharp rally on Thursday and Friday as the chrt below demonstrates.
Equity Market Comment - 4/30/2008
The market today broke out of its ascending wedge pattern to the downside on increasing volume which is a bearish pre-cursor to lower stock prices.
We also had an outside day with a down close which is also a bearish pattern.
With these two occurrences on the same day seems to give some credence to the possibility that a corrective mode is starting.
It is this corrective pattern that is going to give us a very good idea of what the equity markets may be facing over the intermediate to long term.
I continue to believe that this move lower should be very limited and the lows at 1260 not being violated, but the market will have the final say so on all of these theories.
We also had an outside day with a down close which is also a bearish pattern.
With these two occurrences on the same day seems to give some credence to the possibility that a corrective mode is starting.
It is this corrective pattern that is going to give us a very good idea of what the equity markets may be facing over the intermediate to long term.
I continue to believe that this move lower should be very limited and the lows at 1260 not being violated, but the market will have the final say so on all of these theories.
Tuesday, April 29, 2008
LXU - UPDATE
LXU attempted a break-out move through the top of the wedge, but was unable to sustain the momentum to get a close outside the pattern.
The last 3 days are looking quite bullish for the stock with each day seeing an uptick in volume.
Aggressive traders are already long the stock or call options.
Conservative traders should wait for the breakout and the ability of the stock to close outside the pattern.
The last 3 days are looking quite bullish for the stock with each day seeing an uptick in volume.
Aggressive traders are already long the stock or call options.
Conservative traders should wait for the breakout and the ability of the stock to close outside the pattern.
Equity Market Comment 4/29/2008
Todays market action was yet again more of the same narrow range non trending prices.
The market continues to await the Federal Reserves Policy decision tomorrow and also the non farm payroll data that is due out Friday. Therefore any type of short term positions you may have could be vulnerable to the events of the days to come. It is times like these that the best action for short term traders is no action at all at least until the market has an opportunity to digest the forthcoming items.
The technical picture continues to point to a corrective phase just around the corner, but I will not take any such position given the current pending market news. Of course you could very well score big if you happen to be on the right side of the market when the news is announced, but this amounts to nothing more than a crap shoot and I learned along time ago to steer clear of just such opportunities.
If you simply must play then the only logical strategy is to put a straddle on (Long Puts and Long Calls) and once the news is out and the market begins to react then keep the position showing you a profit and dump the one showing you a loss. This is a more expensive way to trade, but a much safer way also.
The market continues to await the Federal Reserves Policy decision tomorrow and also the non farm payroll data that is due out Friday. Therefore any type of short term positions you may have could be vulnerable to the events of the days to come. It is times like these that the best action for short term traders is no action at all at least until the market has an opportunity to digest the forthcoming items.
The technical picture continues to point to a corrective phase just around the corner, but I will not take any such position given the current pending market news. Of course you could very well score big if you happen to be on the right side of the market when the news is announced, but this amounts to nothing more than a crap shoot and I learned along time ago to steer clear of just such opportunities.
If you simply must play then the only logical strategy is to put a straddle on (Long Puts and Long Calls) and once the news is out and the market begins to react then keep the position showing you a profit and dump the one showing you a loss. This is a more expensive way to trade, but a much safer way also.
Monday, April 28, 2008
LXU - Offering a Potentially Explosive Move
Take a look at the daily chart of LXU and take notice of the notes on the chart.
The stock currently offers a fairly low risk opportunity and a potentially huge reward.
Make sure to check out the last chart also which is a historical chart with the current price data (BLUE) placed over it. The chart pattern follows the current move by 94% so there is very good odds that LXU is in a very strong position.
Take note of the possible upcoming move in LXU.
The stock currently offers a fairly low risk opportunity and a potentially huge reward.
Make sure to check out the last chart also which is a historical chart with the current price data (BLUE) placed over it. The chart pattern follows the current move by 94% so there is very good odds that LXU is in a very strong position.
Take note of the possible upcoming move in LXU.
Soybeans - Low Risk Opportunity
Currently the Soybean market offers an extremely low risk shorting opportunity with some serious profit potential on the downside.
Typically a set up such as this comes along once a year in each of the grains and this looks to be the time for Soybeans low risk set up.
The Commercial Traders are very heavy sellers of the Soybeans right now as they recognize an overvalued market that has been fueled by the Ethanol craze in Corn.
The downside potential for the beans is at least the length of the first decline, which was $4.61 per bushel. This would bring the Beans down to $9.54 per bushel, which is a much more realistic price based upon the current supply and demand factors.
We will be looking to short the July Soybeans upon a counter trend rally from current levels.
Look for the 13.30 to 13.45 area on the July contract to sell short with a stop loss just above the most recent highs.
Typically a set up such as this comes along once a year in each of the grains and this looks to be the time for Soybeans low risk set up.
The Commercial Traders are very heavy sellers of the Soybeans right now as they recognize an overvalued market that has been fueled by the Ethanol craze in Corn.
The downside potential for the beans is at least the length of the first decline, which was $4.61 per bushel. This would bring the Beans down to $9.54 per bushel, which is a much more realistic price based upon the current supply and demand factors.
We will be looking to short the July Soybeans upon a counter trend rally from current levels.
Look for the 13.30 to 13.45 area on the July contract to sell short with a stop loss just above the most recent highs.
PLEASE TAKE A SECOND AND SEND ME YOUR THUMBS UP
DROP ON BY AND SEND ME A VOTE THROUGH BLOGELITES.
I REALIZE I HAVE FALLEN IN THE RANKS OF BLOGELITES RECENTLY, BUT
THIS IS NOT OF ANY FAULT BUT MY OWN AS MY TIME HAS BEEN ONE OF A VALUABLE COMMODITY RECENTLY AND THE BLOG HAS NOT BEEN UPDATED IN A TIMELY MANNER AS I WOULD LIKE.
I AM MAKING EVERY EFFORT POSSIBLE TO UPDATE THE BLOG ON A DAILY BASIS, BUT REST ASSURED SHOULD ANYTHING OF SUBSTANCE NEED TO BE ADDRESSED I WILL MAKE EVERY EFFORT TO CONVEY MY THOUGHTS ABOUT IT TO ALL OF YOU.
WHEW, THAT WAS A MOUTHFUL!
WITH THAT BEING SAID, I WOULD APPRECIATE ANY AND ALL OF YOU WHO TAKE THE TIME TO READ THIS BLOG TO CLICK ON THE BLOGELITES LINK AT THE UPPER RIGHT HAND SIDE AND CAST YOUR VOTE FOR TREND ANALYSIS LLC. ONCE YOU CLICK ON THE LINK YOU SIMPLY SCROLL DOWN UNTIL YOU SEE TREND ANALYSIS LLC AND CLICK ON IT. IT IS THAT EASY!
THANKS TO MY MANY READERS WHO CONTINUE TO MAKE THIS BLOG MORE AND MORE POPULAR WITH EACH PASSING DAY. MY HOPE IS THAT THE INFORMATION CONTAINED HEREIN HAS AND WILL CONTINUE TO BE A VALUABLE ASSET TO YOUR INVESTMENT PERFORMANCE.
Current State of the Equity Markets - 4/28/2008
The market continues its potential consolidation just above the breakout point of the wedge on the daily chart. The problem being, is that during the consolidation, the market has been unable to work off its overbought condition and until it does this we can not expect much more on the rally side.
At this point the best thing the market can do in order to remain in a healthy position is to decline anywhere from 50% to 62% of the entire rally we have seen from the 1260 low on the S&P 500 cash index. This would actually aid the market in its quest for higher prices. The longer we sit in this area and go nowhere, the higher the odds that the big money will come in and be net sellers driving prices much lower than the 1260 low that currently stands as an intermediate term bottom.
I would not expect very much from the market Tuesday in terms of making a choice which way it wants to go as we continue to wait on some very big economic data and also the Federal Reserves almighty take on interest rates.
I continue to wait for a corrective mode of this rally in order to get a long term feel for the next major move in the markets. I still lean in favor of a correction followed by a move all the way back to the mid 1500's on the S&P 500 cash, perhaps even challenging all time highs.
Until then, the market action is very reminiscent of watching paint dry, but don't fall asleep just yet. periods of low volatility are followed by periods of very heavy volatility as sure as sunset follows sunrise.
At this point the best thing the market can do in order to remain in a healthy position is to decline anywhere from 50% to 62% of the entire rally we have seen from the 1260 low on the S&P 500 cash index. This would actually aid the market in its quest for higher prices. The longer we sit in this area and go nowhere, the higher the odds that the big money will come in and be net sellers driving prices much lower than the 1260 low that currently stands as an intermediate term bottom.
I would not expect very much from the market Tuesday in terms of making a choice which way it wants to go as we continue to wait on some very big economic data and also the Federal Reserves almighty take on interest rates.
I continue to wait for a corrective mode of this rally in order to get a long term feel for the next major move in the markets. I still lean in favor of a correction followed by a move all the way back to the mid 1500's on the S&P 500 cash, perhaps even challenging all time highs.
Until then, the market action is very reminiscent of watching paint dry, but don't fall asleep just yet. periods of low volatility are followed by periods of very heavy volatility as sure as sunset follows sunrise.
One final note on the seasonal aspect of the current market.
We are currently in the Month End/New Month period that typically offers some pretty positive returns. We are also leaving April which historically has been a very good month for the market and this year is proving true to form with this month being up 5.57% so far, a very respectable number.
The last trading day of April tends to be quite a volatile day with strength in the morning followed by weakness in the afternoon. The last day also happens to be the Fed's Decision day, so for short term traders it could be a boon for volatility.
Tuesday, April 22, 2008
First Confirmation - Red Flag
This model gave us a confirmation of today being the first day of an impending correction in price.
Although the hourly chart is calling for some type of snap back rally on Wednesday, this strength should be used by short and intermediate term traders to lighten their speculative positions put in place to capitalize on the most recent rally.
Any strength from here should also be used to either sell some speculative issues short or purchase put options on the SPY.
For those who remain nervous about the health of this market you might want to consider purchasing puts against your long stock positions in order to synthetically decrease your allocation to equities.
This potential correction is going to tell us much about what phase the market is currently in.
Even if the market remains in a bear market I do not believe that we have seen all of the counter trend rally with this most recent move higher. There simply remains far to much bearishness to expect another leg down of magnitude.
Monday, April 21, 2008
Ford Stock - Take Action!
After an extremely powerful 57% rally in Ford stock, it begins to send a message that it is getting tired and needs to consolidate these gains.
A typical consolidation of 50% of the advance should be the norm so the prudent action at this point is to take these profits and await another buying opportunity.
More impressive than the 57% advance in the stock price is the technical confirmation that $4.95 is the secular low for the stock and from here we should see a very impressive advance in the stock price with a potential $15-$16 target for 2008 alone.
A typical consolidation of 50% of the advance should be the norm so the prudent action at this point is to take these profits and await another buying opportunity.
More impressive than the 57% advance in the stock price is the technical confirmation that $4.95 is the secular low for the stock and from here we should see a very impressive advance in the stock price with a potential $15-$16 target for 2008 alone.
Equity Market Comment - Something For All Time Frames!!
A very non typical day today in the markets, as Monday usually exhibits the highest volatility out of all the days of the week and today was very quiet indeed.
The market continues to exhibit signs of putting in a short term high as both of the charts below will illustrate. Short and Intermediate term swing traders should be flat at this point and upon a confirmation (Stochastics Cross) of a change in trend should look to begin their short selling operations.
Very much like the NASDAQ, the SPY is even more so showing signs of a rally that is very tired and in need of some consolidation. The tight range today, especially on a Monday is a precursor to a possible stretch of higher volatility and most likely to the downside.
Aggressive traders can look to purchase SPY Put options with the intention of a short holding period, therefore it will not be necessary to pay the extra premium for June puts, the May puts should serve our purpose just fine.
The possible decline that is on the horizon is also going to be very important for long term traders as well, as the nature of this market move is going to send a very clear message as to whether or not a new leg of the bear market is underway or if what we just completed on the upside is just the first up leg of two.
The market continues to exhibit signs of putting in a short term high as both of the charts below will illustrate. Short and Intermediate term swing traders should be flat at this point and upon a confirmation (Stochastics Cross) of a change in trend should look to begin their short selling operations.
Very much like the NASDAQ, the SPY is even more so showing signs of a rally that is very tired and in need of some consolidation. The tight range today, especially on a Monday is a precursor to a possible stretch of higher volatility and most likely to the downside.
Aggressive traders can look to purchase SPY Put options with the intention of a short holding period, therefore it will not be necessary to pay the extra premium for June puts, the May puts should serve our purpose just fine.
The possible decline that is on the horizon is also going to be very important for long term traders as well, as the nature of this market move is going to send a very clear message as to whether or not a new leg of the bear market is underway or if what we just completed on the upside is just the first up leg of two.Friday, April 18, 2008
Short Term Traders Alert.
For those who swing trade, there is some early evidence of a potential short term top being put into place on the NASDAQ and the same would hold true for the S&P 500 cash index as well.
The Hourly chart below shows the markets reaction to the MACD indicator moving above 20 and then turning down. This is illustrated by the blue lines I have placed on the chart. Currently the MACD is above 20, but has yet to turn down so we have not been given a full sell signal on this model, but it is in an area that is close enough to warrant attention.
The second item to notice on this chart is the last of the downside gaps that has yet to be filled.
2590 is the Gap Fill, and this gives us a heads up as to the last level before the market will be back in balance and a major trend can find its course.
The Hourly chart below shows the markets reaction to the MACD indicator moving above 20 and then turning down. This is illustrated by the blue lines I have placed on the chart. Currently the MACD is above 20, but has yet to turn down so we have not been given a full sell signal on this model, but it is in an area that is close enough to warrant attention.
The second item to notice on this chart is the last of the downside gaps that has yet to be filled.2590 is the Gap Fill, and this gives us a heads up as to the last level before the market will be back in balance and a major trend can find its course.
LETS TAKE A LOOK AT THE LONG TERM FOR EQUITY PRICES
BELOW IS A CLOSE-UP OF THE CHART I WILL BE DISCUSSING. AS YOU CAN SEE, WE CLEARLY ARE AT AN AREA OF MAJOR RESISTANCE.
We have reached a fairly critical juncture in the potential for stock prices to continue higher or perhaps falter and continue what continues to look like a bear market.
The rally thus far off the most recent lows has surpassed my first counter-trend rally target of 1380 and is making its way towards perhaps the most logical point for a bear market rally to conclude, the 50% retrace level at 1417. It is this level that we need to watch very closely as 50% in any market or stock is a very powerful number.
You can see also that we are testing the resistance of the 90 week moving average with has been quite an essential point of support and resistance dating all the way back to the start of the major secular bull market in 1982.
With these two key levels in hand there is no question that the market is at or very near a make or break level and while the action has looked very reassuring on the daily charts, the weekly charts show us we are at a price level that we could see a complete reversal or at least some type of correction or consolidation. Odds do favor a move to 1417 on the S&P 500 so it really is at this point that we need to pay very close attention to detail.
I remain 65% invested in equities until such a time that we either get clear cut evidence that a new leg in the bear market is about to begin, or that after a pull back of sorts, stock prices will continue to move higher. I do favor a push up to 1415-1425 on the S&P 500 followed quite quickly be a sizable decline, but able to keep the most recent lows at 1260 in tact. From there I would be looking for one final push higher going as far as or near new highs in the upper 1500's.
We have reached a fairly critical juncture in the potential for stock prices to continue higher or perhaps falter and continue what continues to look like a bear market.
The rally thus far off the most recent lows has surpassed my first counter-trend rally target of 1380 and is making its way towards perhaps the most logical point for a bear market rally to conclude, the 50% retrace level at 1417. It is this level that we need to watch very closely as 50% in any market or stock is a very powerful number.
You can see also that we are testing the resistance of the 90 week moving average with has been quite an essential point of support and resistance dating all the way back to the start of the major secular bull market in 1982.
With these two key levels in hand there is no question that the market is at or very near a make or break level and while the action has looked very reassuring on the daily charts, the weekly charts show us we are at a price level that we could see a complete reversal or at least some type of correction or consolidation. Odds do favor a move to 1417 on the S&P 500 so it really is at this point that we need to pay very close attention to detail.
I remain 65% invested in equities until such a time that we either get clear cut evidence that a new leg in the bear market is about to begin, or that after a pull back of sorts, stock prices will continue to move higher. I do favor a push up to 1415-1425 on the S&P 500 followed quite quickly be a sizable decline, but able to keep the most recent lows at 1260 in tact. From there I would be looking for one final push higher going as far as or near new highs in the upper 1500's.****
The main reason I favor a pullback followed by another thrust higher is the simple fact that there simply remains far to much pessimism in the market place as the % of Bears continues to out number the % of Bulls and this bodes well for a continuation of higher stock prices.
****
It will be the developments over the next few weeks that will dictate our market posture probably for the next 12 to 18 months, so for long term investors especially, this is a very crucial time in protecting their gains.
Lapse In Coverage
My apologies for the lapse in coverage of the financial markets over the last week or so.
I have been concentrating my efforts on the new Day Trading Model and it has eaten up much
of the time that I have devoted to the blog.
The model is just about complete however so I will be updating the blog this weekend and also into the foreseeable future.
Thanks very much for your understanding.
I have been concentrating my efforts on the new Day Trading Model and it has eaten up much
of the time that I have devoted to the blog.
The model is just about complete however so I will be updating the blog this weekend and also into the foreseeable future.
Thanks very much for your understanding.
Subscribe to:
Posts (Atom)
