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!

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.

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.

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.

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.

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.

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.

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.

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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!

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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.

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.

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.

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.

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.

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.

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.

****

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.

NEW 3 DAY TRADER BUY SIGNAL

The 3 day cycle gave a buy signal at the close today.
The option account is long 4 April 135 SPY calls @ 2 1/4
Stop Loss - 1 5/8

The April 135 Calls should be your option of choice, if you are to follow
the 3 day cycle.

Currently these calls are 2 1/4 by 2 5/16.

There is some strong potential for quite a sharp rally here.

Remember to always use a stop loss for protection.

Equity Market Comment - 4/8/2008

The equity markets have gone virtually nowhere over the last 5 trading days and volume has been tapering off more and more each day.

If the market had continued to work its way higher with this decrease in volume then we would have a very bearish pre-cursor to some downside action, but being as we have been in a consolidation mode, it is nothing more than a neutral reading as the market continues to digest the most recent gains.

There continues to be a very large supply of put option buyers out there and this bodes well for a continuation of the rally we are currently in. Quite possibly we could see a breakout of sorts to the upside once this consolidation phase is over. Today was one of the narrowest ranges in a very long time and this is a sure indication that there is about to be a substantial move in the offing. However, it is difficult at this juncture to determine if this move will be upwards or downwards. If you held a gun to my head I would have to answer that the next move should be sharply higher and here are a few reasons why.

1. The quiet, low volume atmosphere is indicative of a consolidation phase and typically the market will continue in the direction it was going once the consolidation is over.

2. The 3 day cycle never really gave us much to put our teeth into on this last sell we had and were stopped out of, which indicates some underlying strength.

3. There remains a fairly large audience towards the short side of the market, especially in the option pits. This continues to warrant higher stock prices.

4. The old adage "Never Short A Quiet Market" has been proven to me over and over again and I simply cannot ignore this axiom. While most of the so called conventional wisdom on wall street is pure Bunk, this particular one has stood the test of time.

I remain 60% allocated towards equities pending more evidence of the health of this rally and until proven otherwise this rally is nothing more than a bear market rally at best. However as I have stated before, it still has potential to move back into the 1500's on the S&P 500.

Lets listen to the market and make our next move from there.

I will be updating the 3 cycle either tonight or early tomorrow morning.
We were stopped out of out last Put option position for a loss.
Currently we are right on the line for entering call options and this could come as early
as Wednesday Morning so stay tuned.

NEW TRADE FOR THE 3 DAY CYCLE

Equity Market Comment - 4/3/2008

A rather directionless day today in quite a tight range.

It really was not even a good day for daytrading as the moves were very hard to gague and the consolidations were very unpredictable.

I did get a signal to buy Put options for the 3 day cycle account and that was done at the close today. I purchased the April 138 puts at 2.80.

Take a look also at the hourly chart below and you can see that the odds are really starting to favor a pullback of some sorts.

Really no change in my equity market opinion as we continue to wait in order to increase our exposure to stocks.

Broker Dealers Look Like They Are On The Verge of A Monster Rally

Below is the predictive price model of the Broker Dealer index and as you can see by the black bars, the model is calling for a very hefty move higher over the next 3 months.

It is no secret that these stocks have been beaten to a bloody pulp and some of them to levels that simply were not justified. Well the market has ways of fixing these pricing discrepancies and in this case it should be higher prices.

I am trading this with call options and not the actual stock.
I am buying Merrill Lynch call options as it seems to have the best odds of performance.
I am looking at the July 45 calls, which are trading at 6.70 right now. Therefore it will cost you $670 to control 100 shares of the stock as opposed to $4500 to buy the stock outright.
I will be purchasing 10 contracts in order to control 1000 shares and based upon my fill price I will be placing a protective stop order at 25% under my execution.

With the 3 day cycle starting to roll over I may wait until a small corrective move takes place, but I will keep you informed.

Equity Market Comment - 4/2/2008

The lack of follow through today, while not exactly what I wanted to see, still was not a huge negative. This is because there really was not much downward pressure today and actually as I watched the futures trade today there was some fairly aggressive accumulation going on.

Now the chart pattern that we currently have is a crossroads pattern, in other words, the market could go one way or the other from here. I am favoring a small continuation of the rally for a couple of reasons.

First, the major momentum models actually ticked up today and kept the upside inertia in tact.

Secondly, Thursday is very typically a decent day for higher stock prices and even more so when Wednesday is a down day.

Remain with the conservative 60% allocation and for those of you who are trading the 3 day cycle with me, we can look for a place to buy in the money SPY puts tomorrow if we see higher stock prices.

Equity Market Comment - 4/1/2008

All you really can say about the price action today is WOW!
I had anticipated a counter trend rally, but I would be amiss if I was to say that I expected a move of such magnitude.

However, I wish I could say the same thing about the volume.
We remain in a period of slow volume and this, while not an all out negative factor is also
not one that we can chalk up into the plus column.

The pattern we have been getting into lately is finally what the norm is when the market is in a healthy phase and that is follow through in prices the next day after a move like this. We had this pattern over the last short term rally we had and if we can muster this same type of market action tomorrow then it will be a very optimistic sign for the intermediate term.

We have strong resistance on the S&P 500 at the following levels:
1379
1416/1415
1454
1482
1507

From here we need to see how the market behaves with the potential follow through and should we get this follow through then we can expect a consolidation of 1-2% over the next 3-5 days.

Remain 60% invested in stocks and after the next pullback we will assess if our allocation is going to increase or not.

Equity Market Comment - 3/31/2008 - End Of The Quarter

The ultra short term counter trend rally seems to be right on time as the market moved modestly higher today on once again diminished activity.

The movement today may have taken care of 2 out of the possible three legs of the move higher.
Therefore I will be looking for one more push higher somewhere in the area of 1336 to 1341.
From these levels I anticipate the final leg of the corrective phase and a return to the rally phase that quite possible could test the old S&P 500 highs in the Mid to Upper 1500's.

Currently I remain with a very cautious 60% allocation to equities and will begin to increase that exposure upwards should the market follow a general outline of health.

I did get a 3 Day Cycle Buy Signal today, but being this far into the cycle simply does not justify the risk when measured against the reward. This account remains flat and awaits the next Sell Signal which could come as soon as Tuesday.

Weekend Equity Market Comment - 3/29/08

The end to a fairly volatile week came to a close Friday with a very strange grinding down day that could not really be classified in any measurable.

It is days like these that many times are a pre-cursor to a shift in the short term trend.
Because of this market action on Friday, I took my profits on the put options we had purchased for a little better than a 20% return in 2 days. I have yet to get any type of signal to buy call options so I remain flat in that account.

So far, the decline we have seen is quite normal and nothing that would give the impression that the market is on the threshold of another sharp push lower. However, we need to get the complete picture of this correction in full and as of now we are about 1/3 through it.

It would not surprise me to see 2-3 days of higher prices followed by the ultimate low for the correction really not very far from the current levels.

I remain with a very defensive 50% allocation to equities, but should this correction turn out to show signs of another push higher after completion, I will be bumping my stock allocation up to 75% for quite possibly a counter trend rally that in essence could test the highs of the S&P 500 at the Mid to Upper 1500's.

Time is going to be the teller of the markets next move, but I am preparing to capitalize on what I feel is a high probability of a strong rally off these deeply oversold conditions we have just experienced.

Take Profit On 3 Day Cycle Put Option

We exited our SPY 134 Put Options at the close Friday for a 20% return in two days.

Not a bad return, but less than I thought would come our way.

The main reason I have decided to take profits on the puts, in what may seem like an early
exit is that the odds of a snap back rally have gotten very high and I would much rather sell out of the position and buy it back cheaper then watch it go back to breakeven.

Presently I do not see a trade with call options to play the snap back rally as the risk level remains too high to purchase call options. What I will be looking to do is to get back into the April 134 SPY call options on any strength we may see over the next 1-3 days.

Therefore, the 3 Day Cycle Option Account is Flat.

Keep The Analysis Coming Your Way

CAST YOUR VOTE!!

THANKS FOR STOPPING BY AND READING WHAT I HOPE IS INFORMATIVE AND ENLIGHTENING.IN RETURN, I WISH ONLY YOUR ASSISTANCE IN VOTING FOR THIS BLOG AT BLOG ELITES. NOTICE THE LINK AT THE TOP RIGHT OF THE BLOG. SIMPLY CLICK THE LINK, THEN CLICK ENTER AND VOTE AND CLICK ON THE TREND ANALYSIS LLC LINK.YOU HAVE NOW VOTED FOR MY BLOG AND ALSO HAVE BEEN BROUGHT BACK TO THE BLOG TO CONTINUE YOUR READING.THANKS VERY MUCH AND LETS SEE IF WE CAN BREAK BACK INTO THE TOP THREE SITES AGAIN

Equity Market Comment - 3/27/2008

Today gave us some confirmation on the shift of the short term trend from up to down.

The turn down of this model is just one of those confirmations.

The NASDAQ gave a short term sell signal today with the stochastics crossing.

Volume pick up a little as well which also shows some very short term weakness should be ahead of us.

Like the NASDAQ, the S&P 500 also confirmed the short term trend shift to down from up and as you can see on this chart the confirmation came from a multitude of time frames.

On the ultra short term, the action today looks like we may have completed the first leg of this trend shift and from here we might see a little temporary move up and then a final push lower.

As I have stated recently, This potential pullback is going to tell us much about the intermediate term health of this market and what we should be able to expect over the next few weeks.

I continue to support the idea that we have put in a major intermediate term low and upon the completion of this first pullback in prices, I will begin to bump the allocation up to 75% with good quality stocks that look priced to outperform the market over the intermediate term.

I also made the investment into the Chinese ETF's today, so I currently have a 25% stake of the funds segregated for foreign investments in the Chinese Market. I will also be bumping this allocation up also in the very near future.

Many Thanks

CAST YOUR VOTE!!

THANKS FOR STOPPING BY AND READING WHAT I HOPE IS INFORMATIVE AND ENLIGHTENING.IN RETURN, I WISH ONLY YOUR ASSISTANCE IN VOTING FOR THIS BLOG AT BLOG ELITES. NOTICE THE LINK AT THE TOP RIGHT OF THE BLOG. SIMPLY CLICK THE LINK, THEN CLICK ENTER AND VOTE AND CLICK ON THE TREND ANALYSIS LLC LINK.YOU HAVE NOW VOTED FOR MY BLOG AND ALSO HAVE BEEN BROUGHT BACK TO THE BLOG TO CONTINUE YOUR READING.THANKS VERY MUCH AND LETS SEE IF WE CAN BREAK BACK INTO THE TOP THREE SITES AGAIN

Brief Equity Market Update - 3/26/2008

My apologies for the update being so late this evening and how brief it is going to be as time is of the essence right now.

It appears that we have put in a short term high and we should be looking for some lower prices over the next 3 or so days. It is important to keep in mind that this correction we may be entering needs to be rather shallow in order for the market to remain intermediate term healthy.

I have exited all of my short term long positions and will await an erosion in prices before I bump the main equity allocation up to 75% from the current 50% level.

There are also some opportunities here for the Chinese market and some very strong ETF's are how I will play this sector. FXI and PGJ are two of the best to own. I will be putting 35% of my dollars allocated to foreign investments to work in these Chinese ETF's. Currently my foreign exposure is zero, so this will bring the total allocation up to 35%.

On another note, we are officially out of Gander Mountain with a 20% gain in less than a week, so I am quite happy about that. Also, for the aggressive minded, the Three Day Trend Just purchased put options at the close today so take a look at the sidebar for more details about which options I purchased.

So we wait to see exactly the personality of this potential correction and from there we will get a fairly strong idea as to what to do next.

Three Day Trader

The Three Day Trader purchased Put Options at the close of trading today.

Please look to the sidebar under Three Day Trader for specifics.

Vote For Me and I'll Make You Green!!!

CAST YOUR VOTE!!
THANKS FOR STOPPING BY AND READING WHAT I HOPE IS INFORMATIVE AND ENLIGHTENING.IN RETURN, I WISH ONLY YOUR ASSISTANCE IN VOTING FOR THIS BLOG AT BLOG ELITES. NOTICE THE LINK AT THE TOP RIGHT OF THE BLOG. SIMPLY CLICK THE LINK, THEN CLICK ENTER AND VOTE AND CLICK ON THE TREND ANALYSIS LLC LINK.YOU HAVE NOW VOTED FOR MY BLOG AND ALSO HAVE BEEN BROUGHT BACK TO THE BLOG TO CONTINUE YOUR READING.THANKS VERY MUCH AND LETS SEE IF WE CAN BREAK BACK INTO THE TOP THREE SITES AGAIN

The 3 Day Trader - New Feature

I have gotten quite a bit of feedback regarding the need for a more short term approach to the trading portion of the blog and in answer to these requests I added the 3 Day Trader.

The 3 Day Trader looks to capitalize on the ever present, but sometimes elusive 3 day cycle in the equity markets. If you look to the right on the sidebar you will see the 3 Day Trader and the instructions thereof.

The maiden voyage of this new section was very successful with a clean double in our option in just 4 days. Currently the model is flat, but is leaning towards the Buy Puts side. The model will work best if you use at the money or just in the money options. I trade the Diamonds and the SPY options. They are very liquid and have very small bid ask spreads.

Keep in mind that index option trading is a very aggressive undertaking and only true risk capital should be allocated to these signals. We carry a flat 25% stop loss on all the option trades, which means if you get filled on your options at $3 you will put a stop loss in at $2.25 in order to limit your potential risk.

I will also try my best to give intra-day price levels to look for in order to complete the trades, but more than likely these will come near the end of the cycle.

It is going to be your responsibility to determine which options you are going to trade, which as I said before should be right at the money or 1 to 2 strikes in the money.

I will start with a $10,000 account and allocate no more than 10% of the account value on each trade. With the most recent trade that was just completed, our account balance is now $11,000.

Lets see what we can do with this baby!

The Bear Market In The Grains

The first leg of the bear market in the grain complex looks to have completed last Thursday.

There is telling confirmation all over the place that this most recent decline was not simply a corrective move, but in fact the start of a major bear market with the hardest hit to be wheat.

The two largest signs of this being a blow off top in the grains is:
1. The Commercial Traders Have Been Massive and I Mean Massive Sellers of the Grains
2. The Small Investor is Jumping Into The Grains With Both Feet, Just In Time To Get Slaughtered.

So now we look at how to capitalize on this secular shift in these markets.

What I am going to do is let the grains rally from here and look to sell them short on the next indication of running out of gas.

Some prices of interest in the grains are as follows:

Wheat - Sell Short 11.63 , 12.07 with a stop loss at 12.75
Soybeans - Sell Short 13.96, 14.41 with a stop loss at 15.06
Corn - Sell Short 5.43, 5.52 with a stop loss at 5.66

Now obviously as these reach the preliminary targets (lower price targets), I will assess the market and determine if in fact the odds face a reversal in trend. I am not simply going to sell these short at the prices I have listed. The reason for this is quite simple also. With the power of the bull market the grains just went through and the always present possibility that anything can happen, we do not want to be sitting ducks for the bulls just in case they are not done running the prices.

So keep the grains on your watch list, because if in fact the bull is over, we stand to make a mountain of money in a very short period of time with the bear market. Bear markets in the grains, especially the Soybeans, have a tendency to get very ugly on the downside.

Gander Mountain - Tighten the Stop

Gander Mountain has made a very nice move of 30% from our entry at $5 based on the close today.

I am moving my stop up to 5 7/8 to lock in 20%, as we had a bearish close on the stock today.

Moving the stop up will do 2 things for us.
1. Lock in a very nice 20% return in a very short period of time.
2. Allow us to continue gaining on the stock should it prove to work even higher from here.

Equity Market Comment - 3/25/2008

Today could have been nothing more than a consolidation day after some very impressive gains in the market over the last few sessions.

However, with the declining volume as the market has moved sharply higher, coupled with the inside day and an up close, we are starting to get signals of a tired rally and a possible short term decline.

You will notice also that the 3 day cycle mode for option players went flat today from being long calls. We had a very nice double in the call options, but did not want to wear out our welcome and give any of that back. The model did not give a signal to enter puts just yet, but is very close to giving such a signal.

If we are to be greeted by some type of decline here, it is going to tell us quite a bit about the health of this market and whether or not we can label the most recent low as an intermediate term low. Right now all systems remain on green for this past low being a very trade able bottom and until I get a signal otherwise I will be moving the equity allocation up as the market retreats.

Right now, stay with the 50-60% allocation, but prepare your stock, ETF or LEAP option picks for a potential secondary low.

More Evidence Of An Upcoming Rally

The chart below is yet another example of why I believe the market has reached a major intermediate term low and why equities offer very little risk right here.

Gander Mountain - Move Stop

Gander Mountain made a large enough move Thursday to warrant us to move the stop to break even. This will in effect make it a risk free trade.

The other reason I want to move the stop to break even is the long black candle it made Thursday. The stock may have been up 6% at the close, but it was unable to sustain much better gains earlier in the day. This may be a warning signal and it may not be, but it is always better to be safe than sorry.

Weekend Equity Market Comment 3/21/08

This weekend, I wanted to focus on the large amounts of bearish sentiment that we currently are mired with and also typically calls for a major low being put into place.

The chart below is a net difference between the bull and bears using the Investors Intelligence survey as the benchmark. Investors Intelligence is my favorite survey, not just because they are one of the pioneers, but also the fact that their index seems very hard to move in one direction or the other. Therefore, when you do finally see an extreme on this index it has extremely high odds of telling you exactly what either bullish or bearish sentiment has the true hold on the market. If we are bullish and looking for a bottom, then we are looking for a large amount of bearish sentiment and this is exactly what we have here.

Keep in mind that the rally we will see should be nothing more than a bear market rally, but DO NOT underestimate the power of bear market rallies. They tend to offer some of the strongest returns in a brief amount of time. This is one of the reasons that we will be bumping our allocation up in the coming days as we get more confirmation of a major low being put in place.


The Predictive model for the NASDAQ continues to show some moderate rally in stock prices over the next 7-10 days, followed after a brief pull back by a potentially lethal rally. I don't typically like to look anymore than 2 weeks out, but we cannot ignore this model as it has been very accurate and it tells us that the major low has been put into place.

The M.O. model is also in very sold territory and has traveled far enough from its lows to confirm an intermediate term buy signal. This remains very bullish and at extremes such as this the M.O. is very accurate.

Our old Sentiment Friend the 3 line break has also confirmed an intermediate term low and actually has added some extra strength to its signal with a bullish divergence, much the way many of the models have been doing. This model also remains a big plus.

While we have gotten full confirmation that a Bear Market has indeed begun, we can take some solace in a couple of things.

1. We had a very bearish allocation to equities of only 50% to 60% and thus it has taken a considerable amount of sting out of this decline already.

2. We are getting very strong indications that the market has reached a point of major support and a potentially very strong rally is on the way. This is a plus in a couple of ways. It will afford us with some very nice short term trading opportunities and also, it will allow those who remain heavily allocated to equities of say 80% to 100% the chance to either lighten up on these positions or begin to hedge their equities for the next leg down.

Of course I will keep close tabs on the market to make sure that indeed the coming rally is a bear market rally or not. Because as we all know, with the financial markets, anything can happen and probably will. It is just up to us to try and find an edge of sorts and exploit that edge.

I wish all of you a great Easter Holiday and I will be back in the trenches bright and early Monday Morning.

CAST YOUR VOTE!!

THANKS FOR STOPPING BY AND READING WHAT I HOPE IS INFORMATIVE AND ENLIGHTENING.IN RETURN, I WISH ONLY YOUR ASSISTANCE IN VOTING FOR THIS BLOG AT BLOG ELITES. NOTICE THE LINK AT THE TOP RIGHT OF THE BLOG. SIMPLY CLICK THE LINK, THEN CLICK ENTER AND VOTE AND CLICK ON THE TREND ANALYSIS LLC LINK.YOU HAVE NOW VOTED FOR MY BLOG AND ALSO HAVE BEEN BROUGHT BACK TO THE BLOG TO CONTINUE YOUR READING.THANKS VERY MUCH AND LETS SEE IF WE CAN BREAK BACK INTO THE TOP THREE SITES AGAIN

Terra Nitrogen Breaks Down

We had talked earlier about TNH and how it was starting to look very weak.

The decline today put it into a breakdown phase on the weekly chart and a weekly close in this area will bring in a downside target of $50. This target while seeming quite a ways away is more logical than you might think, given the start of a major decline in commodity based companies.

If you own any Corn, Wheat, Coal, Oil or many of the other commodity based companies you may want to take a look at their positions and think about either hedging the position, scaling it back or selling completely out.

Gander Mountain (GMTN)

We have officially gone long Gander Mountain with our limit order being filled at $5.

Currently we are brushing up against the 39 day moving average which is strong overhead resistance. Closing over this level will be a big plus for the long side.

One concern I do have is that this breakout move has been on very light volume and typically it is hard for a stock to hold its higher levels with no volume behind it. Because of the light volume I am running a very tight stop on the trade at $4.70.

Equity Market Comment 3/19/2008

The action we saw today was nothing that took us by surprise as it seems to be a running trend now to have exceptionally strong days followed by periods of weakness. We also need to keep in mind that Futures and Option expiration is here and there certainly was some unwinding of those positions today.

The key at this point, in order for us to label the most recent lows as a major intermediate term low is for this trend of weakness following strong days to no longer occur. As I said previously, keeping these lows in place is key to confirmation of a potential monster rally in the offing.

So, we wait and see if in fact we can snap back from today's decline.

We have a few things on our side which include the strength in and around Easter and we are also nearing the end of the month bump up in stock prices.

So, remain with the very conservative 50% equity allocation I have recommended and we will wait and see if in fact these most recent lows can take hold. There certainly is an abundance of technical and psychological indications that a low of major proportions has been put into place.

Equity Market Comment - 3/18/2008

The turn up in the 9 day moving average of this momentum model is a real plus. Although it needs a bit more follow through to confirm an intermediate term bottom, a move higher in the model such as today is a good start.

The S&P 500 cash index found support at the lower channel line as we talked about yesterday. The move today also enabled the stochastics to not cross at such a low level and remain in an upward trend.

Sentiment on all of the major surveys is right at and in some cases below the 2003 levels when the major low of the tech bubble was finally put into place.

Things seem to be coming together for an intermediate term rally, but the lows on Monday must remain intact.



The NASDAQ produced the most bullish pattern an index or a stock can generate.
The chart below will explain the pattern.

Look for the NASDAQ to lead if we have indeed put in an intermediate term low.



While there still needs to be more confirmation of a major low being put into place, the rally today was very constructive and broad.

I remain with my conservative 50% allocation to equities until we get more constructive confirmations of the low being solid.

CAST A VOTE ON BLOG ELITES FOR MY BLOG

THANKS FOR STOPPING BY AND READING WHAT I HOPE IS INFORMATIVE AND ENLIGHTENING.

IN RETURN, I WISH ONLY YOUR ASSISTANCE IN VOTING FOR THIS BLOG AT BLOG ELITES. NOTICE THE LINK AT THE TOP RIGHT OF THE BLOG. SIMPLY CLICK THE LINK, THEN CLICK ENTER AND VOTE AND CLICK ON THE TREND ANALYSIS LLC LINK.

YOU HAVE NOW VOTED FOR MY BLOG AND ALSO HAVE BEEN BROUGHT BACK TO THE BLOG TO CONTINUE YOUR READING.

THANKS VERY MUCH AND LETS SEE IF WE CAN BREAK BACK INTO THE TOP THREE SITES AGAIN.

China....China......China.... Where Has The Luster Gone

Many of us have been so concerned with the developments in our stock market, that we have begun to overlook some of the opportunities that are beginning to take shape overseas.

Once such opportunity is the Chinese Stock Market, which is going through a major bear market, 40% and counting. If this had been our market, we would be looking at a DOW of 8400.

While there remains a decent amount of risk in Chinese Equities, there is certainly some fairly reliable technical signals that warrant the aggressive investor to begin an allocation process towards the better ETF's that invest in solid Chinese growth.

Currently I am only going to allocate 15% of the monies I have segregated for international investing to the Chinese market, but as we get more confirmation of a major low being put into place in China, this allocation will increase substantially.

It is definitely worth a look and perhaps even an investment.

10 Year Note Trend Shift

Today market the time and price objective for our forecast in the 10 year note.

Notice also that it happened to coincide with a touch on the lower end of the trading channel, which should signify at the very least a leveling off in interest rates, if not an increase of sorts.

The rally in the 10 year note has been quite impressive, as at the time of the forecast I myself thought it to be a bit of a stretch to reach the levels the market was indicating it may well achieve, but lo and behold, here we are.

This area, all the way down to 3% even, may well end the cyclical bull market in the bond market that has been living now since 1981, yes 1981! The bond market has enjoyed a 27 year bull market as rates have moved from a high in 1981 of 15.68% all the way down to present levels under 3.5%. No question that this bull move in bonds will go down in the record books as not only the longest, but quite possible the largest move we have ever seen. Granted, the bond market was caught in a long term trading range from 1993 to 1998 and their returns paled in comparison to that of equities, but it remains impressive just the same.

So, what to do now, with the bonds being at or very near their lows for the cycle.
Do nothing for now as the potential for a continuation in eroding stock prices continues to offer them as a safe have to whether the storm.

The only real reason that I make mention of this milestone and the fact that rates could begin to creep back up from here is the fact that it also coincides with a potential intermediate term low in stock prices. Therefore we could very easily see the monies that have sought the safety and liquidity of the bond market begin to make their way back towards equities. This of course will more than likely be a temporary shift, but one that you need to be made aware of just the same. As there are bound to be very violent rallies in stock prices during bear market rallies, this movement will also be felt in the bond market in the opposite direction.

This potential decline in bond prices as equities move higher will provide those who still have a strong allocation to stocks (80% or more) an opportunity to get into safety once the counter trend rally has run its course and bond prices have settled back a bit.

There is a lot going on right now as we see some serious money shifting from different sectors of the markets. With these shifts will come many opportunities including the collapse in oil prices that is not only a possibility, but a question of when and how far.

A Homebulder Stock That Has Confirmed it's Bottom

As we have been talking about the premise that both the NASDAQ and the S&P 500 have confirmed their transformation from bull to bear markets, it is important to remember that this certainly does not mean there will be no opportunities on the long side of the market.

As this bear market moves forward, there will be periods of counter trend rallies that typically can be very lucrative on the long side because they travel large distances higher in a very short period of time. This allows us to garner some fairly beefed up investment returns, but tie our capital up for a short period of time.

With this preface behind us, I wanted to bring to light a fairly aggressive play, but also one that has the probability edge on our side.

There are 3 very big positives to note on this weekly chart.

1. The price retraced 62% of the most recent advance and bounced.
2. The price is finding solid support on a previous down trending line. (Mega-Bullish)
3. The entire structure of this monster decline has completed a very reliable symmetrical pattern.

While I emphasise that this is a rather aggressive play, I should point out that through the use of risk management, we can turn a risk event into a conservative venture simply by limiting our risk.

Once we get further confirmation of the general market putting into place an intermediate term low, I will be looking at some call options on this particular issue.

Stay Tuned!!

GMTN - Keep it on your Radar

We continue to monitor Gander Mountain for a move back above its long term trend line, which on the second thrust should send the stock sharply higher.

We have out Limit Orders in to Buy at $5, which is about 3/8 above the break out point.
As the trend line moves lower and if the stock still has yet to make its move, we will adjust that limit price to stay 3/8 above the trend line.

Terra Nitrogen - TNH

TNH is on the verge of making a move one way or the other as it breaks out of the triangle pattern it has been tied up in for the last 9 months or so.

While patterns like this are hard to get a handle on which way price will break, the OBV sheds some clues as to what the odds of the break should be and that is down.

So we wait patiently for the stock to perhaps make a test of the lows at $62 and upon what technical shape the stock is in at that point will dictate whether we accumulate shares or not.

No question we have taken a mountain of money out of TNH with our original purchase at $17 and then selling a bit on the early side at $97. Another purchase was then made upon our $62 target being achieved and we scored another double when we parted company with the stock at $140. So we seem to be very in tune with this stocks behavior and another move lower should put us back into the long side.

Keep this one on your radar as when it moves, It Moves!

Equity Market Comment 03/17/2008

Don't even get me started on the Bear Sterns garbage can that was approved today.
I cannot believe how this situation is being handled and I don't even own any of the stock.
I know if I did I would be more irritated then I already am, which right now borders on a loss
of respect for not our markets, but the blatant disregard by the Federal Reserve to even think they had some type of say in the matter. Uncle Ben's respect meter for me has just reached a new low and the size of the negative number is not even measurable.

Wait a minute. Didn't I just say don't get me started and here I am getting myself started.

So lets leave all this behind us now and get into the nuts and bolts of things.
How to make money in the markets.

Today, as noted by the chart of the S&P 500 below, brought the index into the bear market camp with the NASDAQ as we clearly have 5 waves down now with the breaking of the 1272 level. Notice also that the stochastics were unable to reach even a respectable 50 on the last push higher which is yet another sign of a very negative market.

The silver lining here, other than our very light allocation to equities, is the signs of some type of bottom forming in here. We saw a fairly nice reversal today and Tuesday is going to be the tell tale sign as to whether or not we have reached an equilibrium point in equity prices.

If we do get this indication, then we will prepare for the inevitable counter trend rally, which could be quite extensive considering it will be the first counter rally since the inception of the bear market. This potential rally will afford us one lat hurrah in our equity positions, before we put on a 100% hedged position, so make sure you stay tuned.


The Put/Call ratio has reached a point where we typically can expect some type of snap back rally. While there is always the possibility of a back and filling motion over the next few days, this indicator is telling us that for the intermediate term, the worst should be behind us and we should be looking for some signs of a bottom to take advantage of a bear market rally.

Make no mistake.

We are in a bear market and the real blood bath may still be in the offing after the first counter trend rally has run its course.

History has shown us time and time again that with bear markets, we get the initial decline that gets the masses very worried, followed by a very impressive counter trend rally that causes the masses to proclaim the bear market dead. After this proclamation is clearly wide spread we will see typically another decline that is about 162% as large as the first decline. I don't have those numbers in front of me right now, but I am sure you can get some type of mental picture here.

So, for now, remain with the extremely light asset allocation and start to prepare for a potentially strong bear market rally. Don't start buying yet as we still do not have the all clear, but keep that powder dry.