Thursday, July 22, 2010

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.



  1. where can i get a statistics on the NYSE daily trading volume? i am using scottrade by that is no supported from the chart. thank you

  2. all 10 major sectors advanced. Most had heady gains. That helped the S&P 500 sprint past its 50-day moving average, but stocks struggled to push the move to within reach of the 1100 line.

    Once again, trading volume wasn’t very impressive. It came short of 1.2 billion shares on the NYSE, which has averaged almost 1.4 billion shares per session during the past 50 trading days

  3. has all that and much more.

  4. Agreed.
    But as i stated in my article, trend is dictated by the larger time frame and not by lower one. In this case, weekly/monthly we are done with the rally started in 09. All 3X ETF's have been in a very tight trading range over the past 2 months. Vix has broken out of it's declining channel and is testing certain key support levels.

    I can actually go on. But the point here is, without taking any "bias", i'd say i need much more than just a one day 200 point rally to prove that we have resumed a new uptrend.

    I still stand with our initial assessment that ALL of the 3X etfs will double and treble from here before the year ends. There's no way we are in a BULL market. Govt, FED, HFT's, you name it. All of them could detach equities from the reality, only upto certain point. After that, reality has to sink in.

    How on earth a whole index SPY (with the largest and the most respected companies) trades at less than already reduced anemic volumes and yet climbs up nearly 3%?

    Have patience, if your risk appetite is good enough. Else, play accordingly.


  5. Agree Jason. WIth countries/states on the verge of default, we have a powder keg ready to explode at any moment. Equities are currently well entrenched in the slope of hope which is inching the markets higher as final bullish correction plays out drawing more bulls into the trap and reversing the negative sentiment.

    Once this correction completes the next major leg down will begin - and you'll know it as it will make the front pages.

  6. You are more than 100% correct here. I have much stronger opinion that what you have stated with regards to the overall health of the economy.

    However, stocks have NOT been trading either on fundamentals or TA or macro-economic issues. They are purely being pumped on literally zero volume.

    If you were to remain solvent in this kind of atmosphere, you ought to have either a) lots and lots of patience or b) literally know which way they are going to pump the markets the next day so that you prepare yourself accordingly.

    Take denninger for example, he FIRST turned short @ 900 and has been adding shorts all the way until 1220. We are getting closer to his original 900 level and he probably is already sitting on profits. Because he knows this can't go on forever and it will go down harder than anyone can think of.

    I can cite many more examples, but i will rest here...

    GL and have a great weekend all.

  7. I have an issue with getting short at 900 and waiting all the way to 1200.... it does not smell right in my corner... But as long as it works with someone it is cool....

    Anyway I have run away from some discussion on macro recently, and will try to say a word or two...

    1. USD currently in rather violent move down, this type of moves are supportive of USD denominated securities. In general this move is much stronger than I have anticipated, and as such can be indication of much stronger reaction to the upside on SP.

    2. Bonds are quite expensive here, any sell of there could provide good old liquidity for stocks to advance.

    3. Fundamental backdrop is quite ominous, that could translate into current rally fizzling in weeks ahead to make a road to the scenario you favor, but if USD will continue to plunge I doubt we will go much lower than 950 on SPX...

    this is my simplistic view here...

  8. Interesting irony, as I typed previous message GBP decided to gave in and dropped along with SP... it seems that short risk could be a good trade for next several days... cheers

  9. I think USD sellof is almost done for now and correction is either about to begin or under way. that could put headwinds in equities. We might still have some upside in SPX, but I think market is getting ready for risk correction. cheers....

  10. Learn to follow the trends!