July 22 EOD Update

Short and sweet (or bitter... )

Rally today did cause a major dent in bear camp. But i really wouldn't give it 100 points yet. Since we are still more or less close to our entry prices or a barely negative, we did NOT close our positions yet. We will watch the next few days and see how it shapes up. 1105 is the key level we are watching. Well, 1100 is ahead of it. Unless we break through both and stay comfortably for at least 4 hours, we will continue to hold onto our shorts.

It was definitely a brutal day for shorts. But again, you just accept it and move on.

Here's the trade...

Monthly Trend - Down
Weekly Trend - Down
Daily Trend - Today it turned to neutral-to-bullish
Hourly Trend - extremely bullish with extreme overbought conditions with NO divergence created since we shot up from 1050's.

Since our time frames are NOT intraday or a few days, we will go with what the higher time frames are telling us.

Regardless, risk management is important and hence we won't fight the tape if things get nasty for the bears.

Also, i have been extremely busy lately and hence would be only updating if our stance changes.

GLTA

Observation on SPX movement

A very simple chart with very simple notations.

There are two zones here... One before the plunge in early may and the one we are currently in.

Zone 1 is in BLUE and Zone 2 is marked in brown.

Similarity in pattern between zone 1 and zone 2 CANNOT be a coincidence. This chart is much more scarier than it looks. Chart pattern we are currently in, looks horrifically similar to what we saw before the early may decline that wiped out 210 points.

However what we see now is that the size of that consolidation/distribution has increased by almost 4 folds. And the coincidence just doesn't end there. The actual numbers too match up just fine...

2nd trough from zone 1
1218.26-1183.71 = ~2.8%

2nd trough from zone 2
1130.89-1014.39 = ~10.3% (~4 times)

3rd trough from zone 1
1208.57 - 1183.71 = ~2%

3rd trough from zone 2
1097.66 - 1014.39 = ~8.2% (~4 times)

4th trough from zone 1
1204 - 1188 = ~1.5%

4th trough from zone 2
1083.49 - 1062.13 = ~2% (~ the same)

Basically we have 2 exact troughs and one minor one which didn't even make it as much as the previous one.

What followed was a massive 210 points down. Does this mean we will get something like ~4X210 = 840 points down on SPX? That cannot and will NOT happen. Not at least practical. And since i am NOT a big proponent of "gloom and doom" and "crash theories", the only thing that i can say is that the above chart is too coincidental to be ignored. This suggests we are going to see BIG moves to the downside.

Now, whether this actually happens or not is a different story.

PS: The above article is NOT related to our investment/trading methodology and charting. It is merely an observation that was just too much to be ignored and hence i thought of putting it up for others to grab.

GLTA

July 21 EOD Update

Breadth and Breadth. Guys, this is what i have been repeatedly stating for a while now. Market is a TOAST, Literally. What you are seeing is just exhuastion plays by MM's to chicken out as many as they can. If you were long or short in the last 3 weeks, you would have probably wiped out your account had you been trading heavily the 3X etf's. A/c wiping out in 3 weeks???

Yes, this is what they did. Nothing changed and as you can see from the above chart. All of the Trendlines are pretty much intact and doing pretty good. All those who were able to double down or add more shorts to their existing position, you were one of the extremely lucky folks i'd say. :-)

If you look at ANY 3X Bear ETF, you'd see that they are almost all in a HUGE consolidation within a tight range for the past 2 months. They are ALL ready to breakout. Once they do. I can almost guarantee you that they will DOUBLE within NO time and will actually consolidate at those prices before making any further moves.

Hold onto your precious shorts guys. You will be handsomely rewarded.

PS: Do NOT play options unless you know what you are dealing in. These whipsaws, ups/downs remove any profits that you would have otherwise had.

GLTA

Breadth Trading - ONLY thing you would ever need

What is breadth trading?

If you just follow one single stock or a sector, it is extremely likely that you will be whipsawed. Because at any given point in time there will be "some" sector or "some stock" that is going against the entire market trend. Hence, to reduce further whipsaws, you should inculcate "breadth trading".

Instead of just following one stock or sector, follow the bullish/bearish signs across ALL the sectors. One single stock or sector can never move the entire market. It needs some company. Hence, the bottom line is that there ought to be at least 2-4 sectors that are "outperforming" other sectors.

How do you figure out breadth? You can always just monitor ALL the sectoral ETF's on a carpet. OR, you could use Bullish percentage index on StockCharts.com.

BP as it is referred, is a culmination of ALL the bullish Point and Figure charts for a specific sector/index.

For example, $BPSPX is S&P 500 Bullish percentage index. What that means is, it shows how many stocks in S&P 500 are showing bullish Point and figure charts. Point and figure charting is completely different from candlesticks and you can read more about it on stockcharts.com itself. What we are trying to address here is "breadth".

If BP rises and continues to do so, it is undoubtedly a confirmation that the trend is UP. If BP is NOT rising or struggling hard, that literally means MORE stocks in that umbrella are broken beyond repair and are unable to reverse their course.

Always check BP for confirmation of whether a specific move is being supported by the entire market participants or not. Market markers can pump ES/futures/spy and move the market if they like, but if there is NO support behind them, then market will go nowhere but where the majority is.

Put it in simple terms. Just because you have the BEST soccer player in the world in your team doesn't mean you will always win. Why? At the end of the day you would need support from ALL the other players to make it happen. Likewise, just because one stock or sector makes new highs doesn't mean it will take the entire market to new highs.

Breadth trading is something that i learned the hard way. And am very comfortable sticking to it.

Very simple explanation of BP, can be found Here.

GLTA

July 20 EOD Update

In all our earlier updates, we have been showing this inverse chart and stating how bearish things are. Today, we thought let us for once hear out our friend Bulls and use the Bullish case instead.

The above is a "go long" chart and is inverse to what we present all the time.

As you can see, we are just making lower highs and lower lows here. Indicators are mostly balanced out as there are divergences on both sides of the coin. Negative as well as positive.

Since today's action was "extreme", we do expect some sort of follow through tomorrow. But we still are sticking to our theory of 1000 and below before we even try any attempt at 1100. Stocks do NOT just rocket higher without first creating a) divergence and/or b) higher highs (if it were to move even higher).

In our case, we have NEITHER at this time. Hence, our case of 1000 and 950 still stays strong. Today was a "dream come true" for all those who either wanted to go short or were able to play the "massive" swing by closing shorts early in the day and then going short again at EOD. :-)

Not ignore the "bulls", most of our indicators have turned neutral now, as opposed to extremely bearish. What follows through in the coming days will dictate which way we end up.

GLTA

July 19th EOD Update

Once again, a very lackluster day. Nothing really changed as you can see from the above chart. Still short and strong. All we did was cycle back some of the extreme oversold conditions on hourly charts. As you can see from the above chart, we even have not yet BEGUN diverging. Which means there is a Looooooooooooooong way to go (down that is).

Stay put. Unless something changes on the above chart, and explicitly stated on this blog, it is safe to assume we are still LONG all of our portfolio of ES short (1088), FAZ, DRV, SDS and TZA. All of them bought between 12 and 14th of July.

PS: Stay tuned guys, a BIG move is coming to the downside. We will take out 1000 and even 950 shortly.

GLTA

How is our Indicator doing?

We have been SHORT since ES 1070 and 1098. Just browse through our blog and you will see each and every day we have been strongly advocating Shorting for the last 4 days. 12th morning is when we started shorting and are currently sitting on a neat profit on all of our holdings, namely, ES, FAZ, DRV, SDS and TZA.

Is this story over yet? Without going into the technicals or macro-economics, just simply look at the above chart. We are clearly making Higher Highs and Higher Lows on this chart. Which means we are going to make a lower low than what we recently did on SPX.

Also note that the PACE of this advance/decline has been on the rise. Look at the angle of the first higher high line and the second one. BOTH, the duration AND Pace has increased. This is owing to the underlying volatility.

Bottom line is, We are going to make a NEW high and that NEW high will probably be dictated by the upper TL from the recent high that is parallel to the new lower TL with higher degree.

Things will clear out sometime in the next 7-15 days.

PS: I see a lot of folks saying that we are oversold and that things just don't go straight in a line and that we will see some upside moves. Since i just go with the above chart, all the ups/downs is noise to us. Unless the above chart tells us, we don't trade otherwise. The above chart has successfully tracked the Last to up/down moves ranging from 7-10% moves.
Adding to the above. A great analogy is "Climbing Stairs". When you are climbing, it takes a whole lot of effort for you to climb up. Climbing down the stairs is always with lesser effort and MUCH faster. Likewise, for all those who believe that we won't go down faster, please at a minimum have Strict Stop loss in place.

GLTA
Have a nice weekend

Investing is nothing more than going to Las Vegas?

Yes, it is NOT just limited to US equity markets. I mean, what story could possibly fit in this chart? In just 3 trading sessions, investors thought an entire Japanese market was great place to park their hard earned money into. And within that timeframe itself, they decided to pull out of it???

And yes, this is NOT just one single stock with 1% move. This is an entire index we are talking about and that has risen nearly 3.5% and LOST ALL of it, within 2 trading sessions.

Welcome to the BIGGEST Ponzi scheme this world has ever seen.

How you trade in this kind of a market, go figure...

Did i mention. Nobody on this planet can trade this through any kind of study, fundamental/technical/TL's etc.

Good luck with that...

Captain America for the rescue... Yeehaa

What else can i say...

Just one thing...

If you are short... Continue to be. Check out "Our Chart". Nothing really changed. We just hit a minor resistance. We will continue our descent faster and sooner than anyone can think of.




Stay put.

GLTA

How is our Indicator doing?

It's been a while we posted our indicator. This is the SAME indicator that suggested to go LONG on the 2nd july.

This SAME indicator is NOW clearly flashing SELL signals. As you know, this indicator is an Inverse and hence if it is a BUY, you short and vice versa.

As stated in our earlier post, we are either already in the next leg down or very close to beginning one. Looking at our divergence charts, we are now clearly in one. So, a confirmation is in place.

Divergence chart that we mentioned earlier is doing just great as you can see below. Pretty much self-explanatory.



GLTA

Long DRV/FAZ/SDS

Closed all of my earlier positions (SPY/FAS/DRN) yesterday before the close for a huge profit and went long with the shorties.

Looking good already.

Captain has turned on the seatbelt sign as lot of turbulence is expected in the next 2 weeks. Hold on tight. :-)

GLTA

Commercial Hedgers expecting Market Crash?

OK, the title may be upsetting. But is it even remotely true?

If you look at the above chart. Commercial Hedgers are the players who invest big chunks of money into the market. Since early 2007 until late 2008, these players were quietly hedging against BIG drop. S&P dropped over 50% after that.

Late 2008/early 2009, these same players were un-hedging and their hedges were at the lowest level seen in a while. And what you saw was massive rally of nearly 80%+.

Since early 2010 you see that these same players are Hedging BIG time again. In fact we are very close to the same levels last seen just before the crash of 2008.

Does this indicate, we are about to fall off the cliff? Time will tell.

GLTA

Current Scenario - Still short since ES 1070.5

Nothing really changed as you can see from the chart above, even with today's rally attempt. We in fact have even more confirmation on the next move down. A clear negative divergence. Also, if you see, spx is just trying to test the broken TL on the sub-chart above.
We either go down today or at most start the down cycle tomorrow.

GLTA

SHORT ES 1070.5

Short /ES @ 1070.5 around 1055AM EST, 12th July 10.

How is our Indicator doing? - II

So there. I have been calling for a bottom since last week and eventually we see the RALLY today. Is this it? Hell No. We will definitely be down tomorrow after these overbought conditions. How much and for how long will depend on the moves tomorrow.

Does this mean, we are NOW in an uptrend.
Yes. For now, the uptrend has resumed. The above indicator will be updated with the latest. Be wary of the fact that this indicator has already gone into oversold zone and there is a potential that it reverses tomorrow and in the subsequent days.

For now, LONG is the right trade.

PS: There is a chance that we develop a solid positive divergence on the above chart and which means the market will tank even harder than it went up. However, there is NO such evidence right now though.

How is our Indicator doing?

Let us check this intraday, around 2PM EST. This is how it looks.





Need i say more? We are pretty close to either rallying from here today or will do early next week.

Will keep you guys posted with the latest.

PS: The above chart is an inverse chart, hence go long the market if it goes down and vice-versa.

GLTA
Happy 4th.

LONG - SPY/FAS/DRN

Hello All,

I have been extremely busy lately. However, i will try and do a catch-up game now.

This week has been brutal and there is one more day to go. Tomorrow is a big day with Payroll data coming in. However, current setup clearly shows which way market is going to go. Market has bottomed today with a LONG hammer.

Few reasons market will go up from here.

1. Long hammer.
2. Positive divergence on NYMO, NAMO and host of breadth indicators. If we go up tomorrow, they will all be confirmed.
3. High yield bonds have barely budged and are actually starting to go up now.
   
4. Though SPX made a lower low from Feb, certain sectors did NOT even come close. Take RE for example.
5. Market is extremely oversold.
6. TNX is already showing positive divergence. TLT is extremely overbought right now.
7. Gold to spx ratio is at weekly extremes. So, either GLD drops dead or SPX rallies. It is possible that both happens. But it is highly likely that SPX rallies harder than GLD dropping. GLD started dropping already a copule days back.
8. Some of the international indices, namely India is still hovering near 52 week highs. If US goes down, everything will go down. This shows divergence and a much more bullish case than anything else.
9. NYSI weekly is still heading up as you can see from stochastics.
10. Less than 5% stocks are above 50DMA. That tells we will see rally of historic proportions as equity market is all about buy and sell. If the balance is lost, then there is NO market. :-)
    

I could actually go on. But will rest here.

Looking for either a) A whole summer rally b) At least a retest of 1100-1150 area in the next 1-2 months.

GLTA
Jason

PS:


The above chart was created and posted yesterday. I asked a question, if you'd go long or short this chart. If your answer is Short, then you are right as you would have gone long today when market tanked. The above is a complicated inverse ratio chart. Today it reversed hard and confirmed the theory of why one should go long here.