Well all I can say is this hs been one crazy week! I am so glad it’s Friday I can’t even tell you…..:-) I am going to make this short and sweet, as I expect we bounce either today or Monday, most likely today I have serious support @ SPX 1050. They are trying to tank the $ to keep up the stock market (GOV) and buy the EUR. So far it has not be working for the last 3 days. There has been serious divergence from the EUR/USD and the SPX.
I expect a test of 1050 and then we might bounce from there so if you’re short look to book some profits. I have a mix of both longs and shorts to play both sides (hedged)
Gold is just getting killed again and the cup and handle is the only reason I am still somewhat long, but covered some of it yesterday! Good luck trading today and I do think the bounce is only that and can be sold. The problems with the oil spill has me greatly concerned, along with the problems in Greece!
Good weekend and OXOXOXO ANNA]]>
Well so far as I write this the Mini’s are really taking it on the chin. As the pictures of Greece start coming across the screen the traders get quite rattled. And understandably so. The recent Flash Crash doesn’t help the bulls picture at all, I was thinking yesterday that we would see some type of relief rally today, or tomorrow. Next week at the latest. But so far that hasn’t been the case. Where will this end I don’t know because when panic sets in it is stronger than greed. So if you long, you need to be hedged and hang on to your hat/butt.
If there really is a crash traders/folks will go to gold hence my long gold position, and long Vix calls.. Alway always hedge your portfolio as that keeps you in the game, for those of you who have options held they will rock today when the VIX rockets up. So that is when you want to sell not buy them.
Jobless claims coming up shortly but I don’t think it will have too much of an effect on the markets at this point. I do feel an underlying feeling that is not good about the whole planet right now and pray I am wrong as things feel very very shaky.
I was long the EUR yesterday expecting a bounce and profited almost 400 pips and the stock market was completely diverged from it. That was a bit disconcerting. Will someone come in and try to sell down the dollar again or make an announcement to stop collapse as in trading you always have to be prepared.
Now for a chart of the SPY to see where we are on the 30 minute charts.
Now as you can see there are a number of False prints to 116 area and 115 area and the lower indicators are screaming to be bought, now that being said they can be that way for a bit but remember all those Open interest put holders for May. So we shall see how this plays out.
Now let’s take a look @ the 60 minute chart
Good luck to all and trade well xoxox Anna]]>
I am re-doing the site and will bring the chat live lounge here as well and we will be under one roof soon. (again) I just want to start out by saying that I most likely didn’t handle the move as I should have when I started with Optionsblackboard but it was a new thing for me and I really was green at how to handle the move. So in foreword please accept my humble apology for leaving so many great folks when we had such a special place. I hope you will post and post often.
Now that being said off to the markets. We have had some very bearish action the last week. And We have seen some extreme volatility! I don’t expect that to end any time soon, now for us option holders that is very nice, we can buy low and sell high I.V. This should continue as the Eurozone, Gulf oil spill (which I think might turn out to be the worst event) and Thailand and the rest of the world is imploding! Germany yesterday halted naked short selling which so far has stabilized the EUR of which I was long overnight and up on that position.
Now that being said I am neither bull or bear but a chameleon and will do whatever I believe the market wants to do. So far it appears that the path is bearish but we are at a critical level as I speak, /ES 1105 and 1095 strong support areas. Gold has retraced but is close to it’s all time high. I am long call calls and the reason being if things continue to deteriorate then there is 2 places folks will flock, and that’s the $ and GOLD.
I do feel that we are close to an interim bottom and we are do for a bounce soon, most of the lower indicator are oversold are about to be soon. Will it happen to day I don’t know for sure, but I do know there is a huge number of open put holders 115 and under that the market makers will most likely not want to have to fill. Now here is a chart of the hourly SPY, (btw I do my own charts) the stochs are oversold, the macd is oversold and the RSI is oversold and pointing up. I think we either have one more day or could turn today very quickly.
Also here is a video I did from yesterday morning and we had a great day in chat room…I closed all calls yesterday morning and saw that we were rolling over.
Trade carefully always be hedged and have a wonderful day, pet a critter!
Now on to the markets short term, allot of bearish activity happened the last couple of days,.. On Wednesday when the ran up with no real reason behind it, I called for us to go short in the Optionsblackboard.com chat lounge. Well needless to say we had a fabulous week. Some examples BP July puts @ average of .60 closed out yesterday for 1.18 in 24 hours, Apple 200 puts .93 closed yesterday in one day for 1.95!! Gold Gold Gold calls 3.30 2 days closed @ 5.70
Now Gold sold off yesterday after making a new high, pure profit taking. I closed 1/2 calls @ the open and after it got back to around 1226 (my retracement target was 1225) I reloaded to the hilt and that turned out to be a fabulous call. There is a cup and handle on Gold so I do expect more upside. I have a video below.
We were short the EUR since 126.38 and yesterday closed for about 300 pips this week time 3!! I have one lot going into this weekend, not knowing for sure what will happen over the weekend in Europe. EUR hit my target of 125 and 123 area, next stop below is 120, then 115 and I do see the EUR at par with the Dollar!! Possibly to 90!
For next week, I do expect more Volatility and have a VIX call spread still on I put on Thursday that I expect will continue to do well. The VIX popped nicely yesterday to 33.24 and finally settled after a late day pop to 31.24.
Gold is en fuego! Now that being said normally I would shy away from this precious metal due the fact that it’s all over the news, CNBC, and even spoken about at dinner parties , ect. Now the reason is when everyone is on the same page it’s time to get off, now that being said there is a bit of a different scenario here, the Eurozone is completely unstable, which will affect the rest of the globe. So being long the GLD or long gold in some form or silver is always a good thing. I have included Gold in my video this week, I have been long and been in and out but still have some positions in my book . We made some crazy money in the Chat room @ OBB on Gold and a bunch of other things. So I hope you enjoy the video and just an update we are in the process of moving the chat lounge into HOB and having a free blog as well as the chat lounge. It will have a bold new look and totally cool with lots of features.
So enjoy God bless and have a great weekend!! oxoxox Anna]]>
That doesn’t mean that it wasn’t significant of course. One very sharp eyed chartist noticed that Thursday’s low exactly hit the main rising trendline on SPX over the last 20 years, which was very interesting:
The first pattern to look at on equities is the huge IHS on ES and other indices, indicating to 1230 ES if you take Friday’s low as the bottom of the head, and 1257 if you take Thursday’s low instead. I’d be inclined to use Thursday’s low as it fits my perception of overhead resistance better:
I’m not expecting the IHS to play out immediately though, if it plays out at all. There have been too many crosses of the neckline since it broke for my liking and I’m looking at another pattern that I think looks stronger at the moment. If we break up from the current short term resistance trendline that is the top of that second pattern though, the IHS would most likely play out.
I’m thinking that we might see a zigzag on ES for much of the rest of May. Partly that’s based on Alex Grant’s ES forecast, and here’s the one from a couple of days ago:
This, like all market forecasting tools, has to be used with caution, as it sometimes reverses or breaks away altogether, but over the last year it has been a fairly reliable forecaster of market action, and I generally bear it in mind. He’s been on holiday in recent weeks and hasn’t updated his blog since early April, but he usually updates his forecast there every few days, and I’m assuming that he will resume doing so soon.
The ES forecast for May fits the second pattern that I’m looking at very well, and that is a right angled and ascending broadening formation on ES:
I have sketched in a forecast of how this might play out in the remainder of May. I have it breaking up at the end, though 66% of the time these break down, and that’s because I think we are nearing an important interim bottom on EURUSD. I’ve been hearing a lot of talk about how EURUSD is doomed, that we’ll be seeing parity with USD soon and so on, and that is the sort of talk that you often hear before significant reversals. We were hearing similar talk about USD last November for instance.
The correlation between EURUSD and ES has been following the same pattern in the last two weeks as we have seen since EURUSD topped late last year. The strong spike down in EURUSD was accompanied by a correction in equities, as it was in January, but as EURUSD has traded sideways over the last week, equities have been trending up. If EURUSD starts trending up too, then the rise in equities should accelerate.
I think there may be a bit more downside to come on EURUSD in the very short term however. The obvious H&S pattern on EURUSD in the chart below should be ignored as it would be a continuation pattern, and head and shoulders patterns are classically reversal patterns, but having made a significant floor just above 1.26 over the last week, EURUSD has broken down through that floor this morning. If we go on to make a new low, then we might drop another couple of cents over the next day or two and ES should fall with it.
GBPUSD also looks weak in the very short term. We have a fairly classical symmetrical triangle on GBPUSD, with what looks like a classical break for this sort of triangle, with an initial false break up, followed by the real break down. If this triangle reaches target, we should see GBPUSD below 1.46 again in the next couple of days:
So in the short term I’m expecting to see ES and EURUSD break down, with an ES target just above 1140 and then a sharp reversal up on both.
If we see a break above the recent overhead resistance trendline on ES though, then I would expect to see both ES and EURUSD rise strongly, with a new high on ES in the next week or two.]]>
This is the fourth buy signal issued over the last year and the others were all superficially fairly successful but looking at them closely I doubt that these signals mean anything significant.
The conventional wisdom is that you should see a major reversal up within a week or so of the signal, but that isn’t the case in recent months, and I suspect that it is rarely the case. The way that the signal is generated makes that inherently unlikely because if it is anything, the Vix Buy Signal is a signal that after a significant dip, the reversal has already started.
The way that the signal is generated is that after the Vix breaks up out of the bollinger band for whatever period, when it then closes back within the bollinger band, a second subsequent lower close will give the buy signal. In effect, after a significant correction, two consecutive days of rally will issue the buy signal. Given that reversals have been short and sharp affairs over the last year, you would expect that any such signals would mark the beginning of a significant rally, and the signals in September, October and November all did that, as did the failed buy signal in August for that matter. What appears to have been only confirmed Vix Sell Signal in May also immediately preceded a sharp rally, and the failed Vix Sell Signal in January was shortly before the major top then.
The Vix Buy Signal in late January marked a reversal that lasted a couple of days, but was then followed by two significant further falls before the bottom ten days later.
In effect all of these signals tell us that after a move significant enough to cause the Vix to trade outside the bollinger band, a significant reversal in the other direction is likely, and the buy or sell signal will tell you when it has most likely already started. In a market that is strongly trending up though, the best signal that a sharp rally may be coming is that any significant dip has taken place. I can’t see that this signal is adding anything useful to that.
What is more significant for me is the equities action this week. Last week we broke through the lower support trendline on the main SPX rising channel, and then the lower trendline of the large rising wedge as well, but we closed back above both on Monday, and traded with the broken SPX rising channel lower trendline marking support and the LOD yesterday:
Here it is in closeup:
Now that looks more significant. Once we have broken back above them, both broken trendlines are support again until rebroken, and while we have a strong sign of potential weakness, there are no strong sell signals unless we trade back below them, and stay underneath. The potential head and shoulder pattern is still very much in play, but given that the left shoulder took over three months to form, if a right shoulder forms then we should expect that it may take several weeks to do so. If we do trade in the 1120 – 1190ish range for the next few weeks then it may be significant, but like any head and shoulders pattern, until it is fully formed and the neckline broken it is just lines on a chart.
We need to see some closes below the main SPX support trendline to provide some evidence that the bears are still in this game. If it is broken again, and then acts as effective resistance, we would be seeing a significant development.
There is a good illustration of a broken channel, with a recovery and where the broken trendline resumed acting as support, on the silver daily chart. Here we see the channel lower trendline, marked with the thin blue line, broken twice in February, and then marking the lows in both March and May. It is still a significant trendline, even though the most significant pattern on silver is obviously the broadening ascending wedge:
The high yesterday just under 1169 ES was potentially significant. I’m expecting that yesterday’s high should remain unbroken today and that we’ll see a break back through yesterdays low at 1140 ES. If we do see that and a close below it, then the bear case is still very much in play here. If we don’t see that this week, then I’ll be doubtful about it.
I’m concerned about the EURUSD action as well. After last week’s low, a floor seems to have been established just above 1.26. That needs to be broken, or there is a risk that a significant EURUSD relief rally may be starting. Such a rally has invariably been accompanied by a rally in equities in recent months, and watching the way that equities have continued to outperform EURUSD this week, that is something to watch.]]>
Just another note, we not only do options in the optionsblackboard.com chat lounge, but stocks, forext and all over market direction. We have a new format that is fun, easy and just a blast to use. Everyone is thrilled. No lag time and there is also a chat archive that if you are busy, you can go back and read. I can’t wait for the markets to open this week.
I do feel the mentality is now sell the rips for a while instead of buy the dips and may last for a few months. Well here is an intro video of my education and a video on last weeks fun! GLTA and have a great week!!
With that in mind, there are several Elliott interpretations of the current equity markets. The most popular in the blogosphere is the “P3″ scenario. In that analysis, a major decades (or centuries) long bull market topped at the highs in 2007. At that point we embarked on a multi-year bear market. Wave 1 (P1) of the bear market bottomed at the Mar ‘09 lows and Wave 2 (P2) has been in progress since, with Wave 3 (the famous P3) either having started this week or in the near future. If this analysis is true and with today’s panic selling it’s hard not to argue that P3 isn’t in progress as of this week. The P3 scenario envisions an eventual total collapse of equity markets, and, by the way, the entire financial system. There’s a lot to be said for that viewpoint, there’s no doubt that our current economic situation is a “house on sand”. Daneric (danericselliottwaves.blogspot.com) calls it a giant Ponzi scheme, and he’s correct. If P3 started this week it’s interesting to note that P2 retraced an almost exact 61.8 of P1.
Another interpretation is that forwarded by Tony Caldaro (caldaroew.spaces.live.com). He agrees that a very long term bull market ended at the 2007 highs, but it’s his position (at least it was before today’s action) that the bear market was over as of the Mar ‘09 lows, and that we’ve had successive 1-2’s of a major Wave 1 of a new bull market since that time. Tony has been around for a long time and his analysis is due a lot of respect for a lot of reasons, not least of which is the fact that he and his group track and analyze equity, debt, currency and metals markets worldwide, so he has a global perspective. He’s been commenting that the major global equity markets are pretty much all in strong uptrends. The problem I have with his US equity wave count is the difficulty of making a 5 wave count out of the three major legs we’ve had up from the Mar’09 lows. This is especially the case for the rally that started last July and topped a few months ago in January. Another thing that argues against his count is market volume over that period, which has steadily declined on average and only shows spikes during sell-offs. Here’s what his count looks like:
There’s one final way to look at things which may be of interest. This view also agrees that a major top was made in recent years, but the top was at the highs in 2000, with an A-B-C flat type of correction terminating at the Mar’09 lows. The move since then is anticipated to be an “X” wave, with the A wave either just completed or soon to end. Again, with this week’s action it looks like that “A” wave is over and we’ve started the “B” leg. The X wave should eventually meet or slightly exceed the 2007 highs, and will be followed by another sustained bear market pattern.
Why an “X” wave? Call me a cynic, but it is an election year, and the last thing that those in power want is more severe economic dislocation. However, the party is bound to end badly as the worldwide Ponzi scheme eventually comes crashing down.
If this scenario is accurate and we have in fact started the B leg, SPX retracement levels are 1008.55 (.382), 943.30 (.500) and 878.04 (.618). We blew through the .236 level today (1089.29) but closed above it.
SPX on the daily has not yet met the obvious target at 1150, which would have satisfied both the large H&S patterns on ES, Dow & Nasdaq, and met the main SPX support trendline from March 2009:
This Nasdaq 60min chart shows the head and shoulder pattern and target. As you can see it is close, but no cigar as yet:
When I went to bed EURUSD and DX were well short of my targets, but they came close overnight, without actually hitting them. Here’s EURUSD on the daily chart falling short of the lower wedge trendline, which would be at 1.271 for a hit today:
Here’s DX on the daily chart falling just short of the top trendline on the main rising channel, at 84.79 today:
I was reviewing some of my favorite indicators last night for clues and it looks as though we may have already peaked on my Vix weekly fan chart:
On my SPX:VIX daily wedges chart we don’t look as though as though we have quite reached target, but it sometimes falls a little short. On the weekly chart it has reached target already:
On my CPCE daily chart we don’t seem to have reached a significant peak yet, but then both peaks and troughs have been trending lower on it since the beginning of 2008. Nonetheless this looks unusually low for a significant bottom:
On my indicators charts particularly though, I am looking at them with an underlying assumption that the wave up from March 2009 has not yet peaked on SPX, though I’m expecting it to peak in the next few weeks. The SPX:VIX daily wedge particularly,, as well as the Vix itself will break out once it has done so. I’m basing that assumption in large part on USD, as it is very close to the top of a steep rising channel which it seems unlikely to break up from, and while a sharp rise on USD has been accompanied by either flat to down trading in equities in recent months, a sharp fall in USD has invariably been accompanied by strongly rising equities.
When the trend in equities changes, I am expecting that this will reverse, with equities trending down strongly as USD rises, and trading sideways to up as USD falls, but what we’ve been seeing over the last two weeks looks fairly typical for the last few months.
It may be that we have made a significant low now, and that my swing targets will not be hit. Equally, we may just see a bounce here before coming back to make a real swing low. If this is just a bounce, I would not expect to see a significantly higher bounce on equities than the necklines of the large head and shoulder patterns, which are at 1180 on ES, 10918 on Dow futures, and 1995 on Nasdaq futures. A break higher would invalidate those patterns and weaken the case for a further fall considerably.
For today though, ES broke my short term declining channel on the ES 5min chart, and has now broken through a significant declining resistance trendline after making two higher lows over the last days. On that basis I’m leaning towards the long side for today at least:
Alright next up you can see where I got the larger zones.
Here they are on the daily, easier to see how well they performed.
As for which way we are headed, well with Greece being bailed out just around the corner, I’d say up. Jack posted a beautiful chart of a broadening top the other day, I’ll show the other side of that pattern just for the sake of a bullish argument. Could be interpreted as a bullish flag.
fwiw, The chart of a broadening top looks clean and personally I like it, but with Greece around the corner, it depends what you believe will be the outcome. How the COTS report unfolds this week should be telling as well.
Good trading everyone, make some bank. Next post I do will be on flushes and profit taking points.]]>