Saturday, June 14, 2008
Equity Market Comment - 6/14/2008
Friday seems to have some very high odds of a short term low put into place with the move into the 1330 area on the cash S&P 500. The weekly chart below also shows a fairly decent reversal in prices and we closed the week out basically where we began which is quite a feat considering the heavy selling we experienced.
Now, as bullish as all this may seem, we need to keep all this in perspective and continue to treat all rallies as highly suspect and nothing more than a rally in a bear market. With this mindset in place, we need to watch the 1385 to 1400 area on the S&P 500 for a possible termination of a bear market rally.
Continue to use all rallies as a place to hedge your long term positions as we remain in the sell strength mode. Aggressive traders can look to purchase SPY call options at or near the open on Monday as long as we do not get a large gap up at the open. If we get this type of open then speculators will be looking to simply sell short or buy puts at the upside targets I mentioned earlier.
Now, as bullish as all this may seem, we need to keep all this in perspective and continue to treat all rallies as highly suspect and nothing more than a rally in a bear market. With this mindset in place, we need to watch the 1385 to 1400 area on the S&P 500 for a possible termination of a bear market rally.
Continue to use all rallies as a place to hedge your long term positions as we remain in the sell strength mode. Aggressive traders can look to purchase SPY call options at or near the open on Monday as long as we do not get a large gap up at the open. If we get this type of open then speculators will be looking to simply sell short or buy puts at the upside targets I mentioned earlier.
Thursday, June 12, 2008
Equity Market Comment - 6/12/2008
It continues to appear as if the market is attempting to put some type of short term low into place but seems to be a bit more difficult that it usually is. We need more confirmation of this low before aggressive traders can even think about playing the possible rally which could be 30 to 40 points on the S&P 500.
Short term traders should currently be 75% flat in their trading account and still be holding a 25% short or put option position. The reason I continue to hold onto this 25% on the short side is the fact that Fridays have become the most negative day of the week and there is also an outside chance that this leg down we are currently in will be a 1.618 ratio and not just an equal length.
Short term traders should currently be 75% flat in their trading account and still be holding a 25% short or put option position. The reason I continue to hold onto this 25% on the short side is the fact that Fridays have become the most negative day of the week and there is also an outside chance that this leg down we are currently in will be a 1.618 ratio and not just an equal length.
Wednesday, June 11, 2008
WHEAT - Capture Some Profits
Wheat continues its very sharp rally off of the break out of the wedge pattern we discussed last week.
Today saw a huge move, enough so to warrant taking half the long position off the table and letting the second half ride. This type of trade is the absolute best as it offers a no risk proposition.
Wheat looks a bit over extended here and may be in need of a pullback before it can continue the current rally phase. If you went long on the buy signal, then look to exit half your position and move the stop loss up to break even on the last half. This will guarantee you a very handsome profit even if wheat works its way lower to your entry point.
I am looking for a pullback to the 8-8.50 level before we have another leg higher so keep these numbers in mind going forward.
Don't forget also that Wheat is not only producing nice profits for us but it also managed to tell us to exit our short positions in soybeans at break even so we owe quite a bit of gratitude to the grain.
Today saw a huge move, enough so to warrant taking half the long position off the table and letting the second half ride. This type of trade is the absolute best as it offers a no risk proposition.
Wheat looks a bit over extended here and may be in need of a pullback before it can continue the current rally phase. If you went long on the buy signal, then look to exit half your position and move the stop loss up to break even on the last half. This will guarantee you a very handsome profit even if wheat works its way lower to your entry point.
I am looking for a pullback to the 8-8.50 level before we have another leg higher so keep these numbers in mind going forward.
Don't forget also that Wheat is not only producing nice profits for us but it also managed to tell us to exit our short positions in soybeans at break even so we owe quite a bit of gratitude to the grain.
Ford follows the market today and closes a bit lower, but still remains in a very close proximity to a short term low. Aggressive traders can purchase call options and traders who have rode the stock lower on puts or short sales should definitely look to take their profits on their entire position.
USU now looks like it needs one final push lower below $6.10 before it can complete its first leg down. From that point, I would look for a counter trend rally to retrace 50 to 62% of the decline.
USU will become another shorting opportunity once a counter trend rally has been exhausted.
Oracle has finally started to move nicely with a very sharp move lower today.
The ultimate downside target remains 21.50, but taking 1/2 your position off the table with some nice profits would not be a bad idea.
First Bancorp is rapidly turning into a very nice short sale.
Yet again, another recommendation that you may want to take 1/2 to 3/4 of your position off the table with some excellent profits.
The chart shows the ultimate downside target.
USU now looks like it needs one final push lower below $6.10 before it can complete its first leg down. From that point, I would look for a counter trend rally to retrace 50 to 62% of the decline.
USU will become another shorting opportunity once a counter trend rally has been exhausted.
Oracle has finally started to move nicely with a very sharp move lower today.
The ultimate downside target remains 21.50, but taking 1/2 your position off the table with some nice profits would not be a bad idea.
First Bancorp is rapidly turning into a very nice short sale.
Yet again, another recommendation that you may want to take 1/2 to 3/4 of your position off the table with some excellent profits.
The chart shows the ultimate downside target.
Equity Market Comment - 6/11/2008
Today is a clear cut example of the dangers of trying to capitalize on the long side during a bear market. Although we had some fairly strong signals that today should be an up day, the power of a secular bear market is the deciding factor. It is this type of environment that requires a selling of strength and adding to short positions as the prudent course of action.
The chart below is the wedge pattern I had spoken about last week and it looks like the S&P 500 cash index is getting quite close to the wedge target of 1315.
We also have a 1.618 ratio target of 1300 even for a downside target as well, so it would appear that we may very well be getting close to some type of short term low that could lead to a trade able rally. However, as I stated in the first paragraph, during a bear market we need solid evidence that a counter trend rally is indeed a higher probability and from this point we can look to establish some type of long positions to capitalize on such a move.
At the very least, these signals warrant our short and put positions to be reduced and/or closed out in waiting for a point to re-short the market after a counter trend rally. Our short positions have paid off very nicely and it looks like there should be just a bit more on the downside before we exit these positions. I anticipate exiting 2/3's of my positions on any early weakness Thursday as the daily trading pattern calls for a continuation of lower prices early Thursday with the final low being put into place in the 11:00am to 12:00 Noon time frame. Should we see the 1315 to 1300 price level during this time then I will exit all of my speculative shorts and remain neutral until I get strong confirmation that in fact a short term low has been put into place.
Intermediate term traders should continue to hold their hedged positions as should longer term investors. This decline in full could very well be a long ways from being over. Caution remains the most prudent word for equity allocation at this time.
The chart below is the wedge pattern I had spoken about last week and it looks like the S&P 500 cash index is getting quite close to the wedge target of 1315.
We also have a 1.618 ratio target of 1300 even for a downside target as well, so it would appear that we may very well be getting close to some type of short term low that could lead to a trade able rally. However, as I stated in the first paragraph, during a bear market we need solid evidence that a counter trend rally is indeed a higher probability and from this point we can look to establish some type of long positions to capitalize on such a move.
At the very least, these signals warrant our short and put positions to be reduced and/or closed out in waiting for a point to re-short the market after a counter trend rally. Our short positions have paid off very nicely and it looks like there should be just a bit more on the downside before we exit these positions. I anticipate exiting 2/3's of my positions on any early weakness Thursday as the daily trading pattern calls for a continuation of lower prices early Thursday with the final low being put into place in the 11:00am to 12:00 Noon time frame. Should we see the 1315 to 1300 price level during this time then I will exit all of my speculative shorts and remain neutral until I get strong confirmation that in fact a short term low has been put into place.
Intermediate term traders should continue to hold their hedged positions as should longer term investors. This decline in full could very well be a long ways from being over. Caution remains the most prudent word for equity allocation at this time.
Tuesday, June 10, 2008
Wheat - Possible Sharp Move Higher In the Cards
After breaking out of its wedge consolidation, wheat has struggled to move further in the direction of its break higher.
Today was one of the first signs that it may want to work higher as it managed to find some resting support off the 50 period moving average.
With this new formation I am going to initiate a 50% long position in wheat with a tight stop loss just below the 50 day moving average.
Today was one of the first signs that it may want to work higher as it managed to find some resting support off the 50 period moving average.
With this new formation I am going to initiate a 50% long position in wheat with a tight stop loss just below the 50 day moving average.
Stock Selections Update
FBP continues to work lower and increase our profit on both the put options and also the short sales.
I am still looking for a minimum downside target of 8 1/4, but there certainly no law agains taking half your profits at current levels and letting the other half ride.
I am still looking for a minimum downside target of 8 1/4, but there certainly no law agains taking half your profits at current levels and letting the other half ride.
Ford has reached a very low risk entry point on the long side as we clearly have 5 waves down which typically is a pre-cursor to a short term low.
While I was a little early in the original buy signal at $6.40, we have reached a point that can safely be used to purchase another block of stock and/or purchase call options.
Oracle has not declines as quickly as I had anticipated, but it remains clearly in a downtrend an has yet to reach its minimum target level which I have marked on the chart.
LXU has made a move higher, but has yet to reach its downside target and seems to be setting up for a symmetrical move lower to my initial target of $16.
USU has retreated a full 10% since the initial sell signal, but appears to be mustering up some energy for its first counter trend rally of this decline. If you are short or have purchased put options then now may be a good time to take those profits and wait for another point in price to enter the short side again.
While I was a little early in the original buy signal at $6.40, we have reached a point that can safely be used to purchase another block of stock and/or purchase call options.
Oracle has not declines as quickly as I had anticipated, but it remains clearly in a downtrend an has yet to reach its minimum target level which I have marked on the chart.
LXU has made a move higher, but has yet to reach its downside target and seems to be setting up for a symmetrical move lower to my initial target of $16.
USU has retreated a full 10% since the initial sell signal, but appears to be mustering up some energy for its first counter trend rally of this decline. If you are short or have purchased put options then now may be a good time to take those profits and wait for another point in price to enter the short side again.
Equity Market Comment - 6/10/2008
I will continue to use this trading pattern which has been extremely accurate until it begins to break down in its accuracy.
The last two days of market action have shown exactly how indecisive current market participants are with both the Open and Close for the day being very close in price. These patterns are known as a Doji and are clear examples of a market that is stuck in a battle of bulls and bears, each fairly evenly matched.
Today also saw and inside day with a down close on the S&P 500 cash index, which should lead to a rally on Wednesday. However, this rally should be used as a selling point or an area to purchase put options as the current decline has not come even close to showing any sign of exhaustion.
The trading pattern that I have posted over the last couple of weeks on the Wilshire 5000 remains very much in play and as I have marked on the chart above, you can plainly see where we currently are in the sequence and also how accurate the pattern remains.
In a nutshell, we remain in a sell strength trading mode and continue to look for small rallies along the way to add to our short positions. Your equity allocation should be extremely defensive.
Today also saw and inside day with a down close on the S&P 500 cash index, which should lead to a rally on Wednesday. However, this rally should be used as a selling point or an area to purchase put options as the current decline has not come even close to showing any sign of exhaustion.
The trading pattern that I have posted over the last couple of weeks on the Wilshire 5000 remains very much in play and as I have marked on the chart above, you can plainly see where we currently are in the sequence and also how accurate the pattern remains.
In a nutshell, we remain in a sell strength trading mode and continue to look for small rallies along the way to add to our short positions. Your equity allocation should be extremely defensive.
Monday, June 9, 2008
Equity Market Comment For Closing of 6/9/2008
The Indecision that the market displayed today sends us a message that indeed we are in the midst of a new leg down in an ongoing bear market, but also that on a very short term basis we may be nearing a short term low.
I have targets in the 1345 area basis the S&P 500 cash index that should present some type of support for the market. This however should prove to be nothing more than a point of a small counter trend rally before the decline pushes lower once again.
The 1345 area is a good target for those who have been holding SPY put options to exit their positions and await a point to sell any strength once again.
The NASDAQ has finally broken down with a penetration of its lower channel.
The OTC market had been one of the slight glimmers of hope that in fact the market could rebound in a more aggressive manner, but all this has been dashed with the breaking of the lower trend channel.
As stated above, we may be nearing a very short term low after we see one more push lower in stock prices. Use this potential strength however to sell short, hedge or buy SPY put options as sharply lower prices seem to be in the cards over the intermediate term.
I have targets in the 1345 area basis the S&P 500 cash index that should present some type of support for the market. This however should prove to be nothing more than a point of a small counter trend rally before the decline pushes lower once again.
The 1345 area is a good target for those who have been holding SPY put options to exit their positions and await a point to sell any strength once again.
The NASDAQ has finally broken down with a penetration of its lower channel.
The OTC market had been one of the slight glimmers of hope that in fact the market could rebound in a more aggressive manner, but all this has been dashed with the breaking of the lower trend channel.
As stated above, we may be nearing a very short term low after we see one more push lower in stock prices. Use this potential strength however to sell short, hedge or buy SPY put options as sharply lower prices seem to be in the cards over the intermediate term.
Thursday, June 5, 2008
Wheat - Saves Us From Loss
We have to give a hats off to Wheat which gave us an early warning signal on our short position in Soybeans.
This is exactly why it is important to follow the entire complex and not simply the one commodity you are interested in trading.
Currently the Beans have broken out of their wedge pattern and should continue to move higher. I have not entered into a long position as of yet as I am going to await a small pullback to the upper line on the wedge pattern. Take a look at the chart.
This is exactly why it is important to follow the entire complex and not simply the one commodity you are interested in trading.
Currently the Beans have broken out of their wedge pattern and should continue to move higher. I have not entered into a long position as of yet as I am going to await a small pullback to the upper line on the wedge pattern. Take a look at the chart.
Pattern For Fridays Trading
I did want to touch on the projected trend for Friday for those short term traders that utilize this data.
The pattern calls for a choppy, but higher morning session with the days high being made in the 1pm est. time frame.
From this high, there should be a very extensive decline that will catch many unaware as they participate in what they deem to be a follow through day of Thursday.
So, for those who did not get short near the close today, use any strength we may see in the morning as an opportunity to establish a position. This will be especially true if we see a run up in prices because of a good Jobs Report number which is due out at 8:30am est. Lately, this has been an excellent point to take advantage of either emotional buying or emotional selling as the market has had a very strong tendency to move counter to the morning move for the rest of the day.
So, you have a double barrel to look for here.
1. Strength into 1pm - Buy Puts
2. Strength off the Jobs Report - Buy Puts
The pattern calls for a choppy, but higher morning session with the days high being made in the 1pm est. time frame.
From this high, there should be a very extensive decline that will catch many unaware as they participate in what they deem to be a follow through day of Thursday.
So, for those who did not get short near the close today, use any strength we may see in the morning as an opportunity to establish a position. This will be especially true if we see a run up in prices because of a good Jobs Report number which is due out at 8:30am est. Lately, this has been an excellent point to take advantage of either emotional buying or emotional selling as the market has had a very strong tendency to move counter to the morning move for the rest of the day.
So, you have a double barrel to look for here.
1. Strength into 1pm - Buy Puts
2. Strength off the Jobs Report - Buy Puts
NASDAQ - Defying Gravity
There are always two sides to every story and I would be amiss if I did not give the NASDAQ the attention that it deserves.
While I remain intermediate and long term bearish at this point, we simply cannot just look the other way as far as the strength the NASDAQ has been showing over the intermediate term.
The uptrend channel has been held in tact and continues to call for higher prices, although we did have a quick double test of the lower channel line in a very short period of time, which is typically the first sign of a market losing its upward momentum. Regardless of this, there is no doubt that the NASDAQ remains in a bullish pattern and also that the 2591 level is going to be key to the OTC stocks potentially breaking away from the bear market.
Until that time however, with all of the other negatives I am seeing, I cannot in all clarity begin an allocation any higher into equities then the very conservative stance I currently have.
A close above 2591 will be very bullish and may in fact bring the broader market along for the ride, but we have to make it to that level first.
I remain very defensive on stocks and continue to swing in the direction of a new leg lower in a continuing bear market.
While I remain intermediate and long term bearish at this point, we simply cannot just look the other way as far as the strength the NASDAQ has been showing over the intermediate term.
The uptrend channel has been held in tact and continues to call for higher prices, although we did have a quick double test of the lower channel line in a very short period of time, which is typically the first sign of a market losing its upward momentum. Regardless of this, there is no doubt that the NASDAQ remains in a bullish pattern and also that the 2591 level is going to be key to the OTC stocks potentially breaking away from the bear market.
Until that time however, with all of the other negatives I am seeing, I cannot in all clarity begin an allocation any higher into equities then the very conservative stance I currently have.
A close above 2591 will be very bullish and may in fact bring the broader market along for the ride, but we have to make it to that level first.
I remain very defensive on stocks and continue to swing in the direction of a new leg lower in a continuing bear market.
Sugar
Once again I call your attention to Sugar as it makes its way ever so much closer to my 9.17 target.
We have reached a point where if we get some type of solid reversal pattern then I will be putting on a long position as it seems fairly close to its downside target even at current levels.
We have reached a point where if we get some type of solid reversal pattern then I will be putting on a long position as it seems fairly close to its downside target even at current levels.
Equity Market Comment - 6/5/2008
A rather pleasant surprise for our call options and long positions today as the market made a 1.618 move today instead of equal length. It actually came just 15 cents shy of this target on the S&P 500 cash.
This should have been a one day event however as the pattern calls for immediate decline after the relief rally. With this in mind we can safely call Friday a good test day as to whether or not the pattern will continue.
I exited my call options near the close today and entered put options as I fully expect the decline to continue. I only put on half of my put position however as I never like to hold a full line overnight. There are simply to many things that can happen.
Lets see what Friday brings us and we should be fairly clear as to what to expect over the next 2 weeks after tomorrow is out of the way.
This should have been a one day event however as the pattern calls for immediate decline after the relief rally. With this in mind we can safely call Friday a good test day as to whether or not the pattern will continue.
I exited my call options near the close today and entered put options as I fully expect the decline to continue. I only put on half of my put position however as I never like to hold a full line overnight. There are simply to many things that can happen.
Lets see what Friday brings us and we should be fairly clear as to what to expect over the next 2 weeks after tomorrow is out of the way.
Stock Recommendation Update
USU continues to mark time before it ultimately crumbles.
The stock remains in a position that warrants short selling and put buying.
Be careful with the put options though and make sure you purchase contracts that
have enough open interest to prevent large and manipulative spreads.
STAR is a new short sale or put buying recommendation.
The stock formed a very reliable bearish Evening Star pattern, has unconfirmed upside progress and has its stochastics in sell mode.
Oracle continues to squeeze its way through its wedge pattern.
The stock remains in a position that warrants short selling and put buying.
Be careful with the put options though and make sure you purchase contracts that
have enough open interest to prevent large and manipulative spreads.
STAR is a new short sale or put buying recommendation.The stock formed a very reliable bearish Evening Star pattern, has unconfirmed upside progress and has its stochastics in sell mode.
Oracle continues to squeeze its way through its wedge pattern.
If and when it does break lower, it should be a sight to behold.
Ford made a some what bullish reversal pattern today, although as you can see the candle was still on the negative side so it was not a textbook reversal.
Ford made a some what bullish reversal pattern today, although as you can see the candle was still on the negative side so it was not a textbook reversal.
However, there remains enough evidence of an intermediate term low in place to warrant purchase and call buying.
LXU is starting to look more and more bearish as the chart indicates.
LXU is starting to look more and more bearish as the chart indicates.I continue to look for a safe entry point in the $16 range, but should this bearish pattern play out, we could be looking at prices in the $12-$14 range.
Wednesday, June 4, 2008
FORD REACHES ITS DOWNSIDE OBJECTIVES
More to come on this, but I have allocated 50% of my total position into Ford stock.
Upon further confirmation of an intermediate term low being put in place, I will move my allocation to a full 100% of my designated allocation.
I also will be purchasing call options tomorrow morning.
Upon further confirmation of an intermediate term low being put in place, I will move my allocation to a full 100% of my designated allocation.
I also will be purchasing call options tomorrow morning.
Equity Market Comment - 6/4/2008
The market continues to demonstrate exactly how weak is has become as even the slightest amount of buying is met quickly by selling and does not allow anything to hold on the rally side.
Odds favor a decent rally Thursday as on the ultra short term basis the market has become quite oversold and in need of some type of relief rally. After this rally has terminated however we can expect more of the same as the market moves ever so closer to its lows at 1260 on the S&P 500.
Aggressive traders can look to buy calls for this counter trend rally as it should be in the neighborhood of 20 or so S&P 500 points. I am looking for a target of 1390 on the cash S&P 500 before we swing back into selling mode. This play on the long side is very aggressive so care needs to be taken should you decide to go this way.
More conservative short term traders can wait for the 1390 target area on the S&P 500 cash and then get back in on the short side for what could prove to be a very dynamic move lower.
Intermediate and Long term traders need to remain very cautious with a very low allocation to stocks and a very defensive posture. We will know more on this time frame once we see what the market does when it approaches the lows. For now, treat this market as a bear market and use strength to sell into.
Odds favor a decent rally Thursday as on the ultra short term basis the market has become quite oversold and in need of some type of relief rally. After this rally has terminated however we can expect more of the same as the market moves ever so closer to its lows at 1260 on the S&P 500.
Aggressive traders can look to buy calls for this counter trend rally as it should be in the neighborhood of 20 or so S&P 500 points. I am looking for a target of 1390 on the cash S&P 500 before we swing back into selling mode. This play on the long side is very aggressive so care needs to be taken should you decide to go this way.
More conservative short term traders can wait for the 1390 target area on the S&P 500 cash and then get back in on the short side for what could prove to be a very dynamic move lower.
Intermediate and Long term traders need to remain very cautious with a very low allocation to stocks and a very defensive posture. We will know more on this time frame once we see what the market does when it approaches the lows. For now, treat this market as a bear market and use strength to sell into.
Stock Reccomendations Update
Oracle has reached the breaking point as it gets squeezed inside the wedge.
Look for the stock to break sharply lower.
USU made its early morning rally today and continues to offer a modest play in put options or short selling. The stock is poised to follow the general market lower.
Ford made its final push lower and found support in the 62% retrace level.
LUX continues to trace out its consolidation pattern and I am still looking for the $16 area to buy the stock back.
Look for the stock to break sharply lower.
USU made its early morning rally today and continues to offer a modest play in put options or short selling. The stock is poised to follow the general market lower.
Ford made its final push lower and found support in the 62% retrace level.
I have allocated 50% of my designated funds to the stock and I will be purchasing
call options in the morning Thursday.
LUX continues to trace out its consolidation pattern and I am still looking for the $16 area to buy the stock back.We may have to be careful here though as a questionable wedge pattern is forming and should it break lower out of this wedge then the targets go lower than the $16 I am looking for.
Take a look at the wedge pattern below and ask yourself why this wedge pattern is questionable and not a pure pattern.
Tuesday, June 3, 2008
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