Sunday, March 29, 2009

The March Madness, marching on?

With the winning streak extended to the third week, bulls have recovered around 2/3 of the huge losses during bears' February rampage. A steady stream of better-than-expected economic news greatly bolstered bulls strength, and the resulting V-shaped powerful rebound has many now believing that "the bottom" is in and a new bull market could be in the working.

Personally, I feel that a tradeble bottom (good for at least a couple of months) is likely in. At this stage, the market has also priced in the optimistic views that (1) US economy will see recovery in the second half of the year and (2)thanks to the all-in efforts by the Fed, the US financial system is stabilized if not building a solid footing for recovery. However, the burden is on the bulls side to substantiate those rosy views, and they must come out on the top on major reality-checks, such as this week's March job report and the upcoming of Q1 ER season.

TA wise, all major indices' primary down trend remains intact despite of the sharp rally as they are yet to even make a higher-high rebound (NASDAQ is pretty close). The dramatic V-shaped rally is looking tired and vulnerable for pullbacks if bulls cannot find new fuel this week. Considering these factors, I will once again focus on DT/ST from both sides. I intend to gradually build up some SW long positions IF the major indices can have some decent pullbacks (around their weekly MA10).

Had another winning week. Tried to be more patient and it paid out well on my BIDU short play (waited for days and finally shorted around 196 with intended stop just above 200, and covered the next day around 184), but the patience left me empty-handed as I refrained from going short on Thursday closing, hoping for a Friday gap-up at the open, which did not happen.

1. AAPL: ST/MT-CTT: long from 97-100 (stop just below 94), short from 112-120 (CS just above 120). bullish bias.

2. AMZN: ST/MT-CTT: long from 60-65 (stop below 60), short from 75-85 (CS above 85).
bullish bias.

3. BBY: LT/ST-S1 from 41.5-48, CS just above 46, IDS just above 48, IT around 34.

4. BIDU: LT-S2 from 197-220, CS just above 215, IDS just above 220, IT around 175.

5. COH: LT-S1 from 20-22.5, CS just above 21.5, IDS just above 23, IT around 16.

6. FAZ: speculative QT-L2 from 18-19, CS just below 18, IDS below 17, IT around 25; or speculative ST/MT-L1 around 10-15, stop just below 10, IT around 25.

7. FCX: LT-S1 from 46-53, stop just above 53, IT around 38/40.

8. FSLR: QT-CTT between 130/135 and 165/180.

9. GS: ST/MT-L1 from 92-101, IT around 115;

10. MON: ST/MT-L1 from 78-84, stop just below 78, IT around 95.

11. NFLX: QT/ST-S2 from 41-43, IT around 37.

12. SKF: speculative LT-L1 from 68-81, CS just below 70, IT around 120.

13. EDU: MT-S1 from 53-57, CS just above 58, IDS above 60, IT around 45.

14. ESRX: ST/MT-S1 from 45-51, stop just above 51, IT around 36.

15. KSS: LT-S2 from 48-52, CS just above 52, IT around 40.

16. LMT: MT-S2 from 75-82, stop just above 82.5, IT around 70.

Saturday, March 21, 2009

When the Fed goes all in, what should you do?

Last week's FOMC's decision shocked the crowd as the Fed literately went all in. To me personally, the real shock is that I now realize that the economy/financial system are in much worse shape than most people thought.

While the long-term negative consequence of the Fed's aggressive move seems relatively straightforward, I see no one has a clear idea or certain about its short- and intermediate term "positive" impact on both economy and stock markets, which I think is one of the major reason why the market acted pretty weak after the FOMC decision, especially on the Friday. Until that part of the picture gets clearer, I will refrain from actively initiating sizable swing positions from the long side. On the other hand, swing-shorting the market at this stage is also very dangerous undertaking, considering some of the remarkable strengths of the latest rally, AND the fact that there are a few more tricks up the sleeve of the US government (next week's bank rescue plan, the final actions on M2M and uptick rules, etc.). You don't fight the Fed, when it is turning into a crazy, red-eyed, and mouth-foaming bull. A prudent bear should patiently wait until the bulls exhaust all their ammunition and exuberance.

TA wise, both long- and intermediate term trends (monthly and weekly charts) for all major index are still solidly down, their short-term trend (daily charts), on the other hand, is mildly bullish. If the market continues to pullback early next week, I will build up some long positions for the second leg of the rally, but I will be quick on taking profits if the major indices fail to break last week's highs, which are some very important resistances. Another miserably failed attempt to overtake those key technical levels could spell big trouble for bulls.

1. AAPL: ST-L1 if it breaks 104 with volume, IT around 110, stop just below 100; ST-S1 from 112-122, stop just above 122, IT=105; DT-S1 if it breaks 99.5 with volume, IT around 96.

2. BIDU: LT-S1 if it spikes towards 190/200, stop just above 200, IT around 160.

3. FAZ: ST-S1=40-47, stop just above 50, IT below 30.

4. GS: ST/MT-L1=85-93, CS just below 86, IT=100/105.

5. POT: ST-CTT between 71/73 and 80/82, tight stop just cross the boundaries.

Saturday, March 14, 2009

Why does history repeat itself?

It is likely NOT anything original, but it hit me yesterday as I was pondering on my own miserable performance last week: you know why history repeats itself? because people never change, or can you say that human nature never change? After another big win last Monday, I stumbled through the rest of the week, along the way, gave back a major chuck of the profits from the week before. It could've been another best week had I not exited too early of my GS calls on the Tuesday (bought when GS around 76) or curtailed the bloating confidence and refrained from shorting overbought but trending stocks. One thing becomes crystal clear: if I don't want the history repeat on me, the only solution is a real change of myself.

Do you think you can really change yourself?

Now on to the market:

While I was right on the overall direction, I obviously underestimated bulls' strength in my last weekend's post. In just 4 days, the major indices recouped over 50% of what they had lost in the previous 4 weeks, and convincingly reclaimed some key technical levels (especially SP500 around 740/750). Also noticeable is that for the first time in weeks, there are finally some better than expected economic news. The way-better-than expected earning news at Citi and BAC could be potentially very significant as they might signal the deceleration of the worsening fundamentals of the financial sector. However, I am yet to be convinced that things are really turning around for good, and I suspect that most of the G20 participants this weekend feel the same, otherwise they probably won't bother to get together for a group therapy and vow together loudly so that they can hide the sinking feelings for now.

I expect the market will overall continue to climb next week or two. However, the further advance is likely to be choppy as the major indices have to fight through lots of overhead resistance in the face of overbought conditions. Before the major indices reach their next key resistance zones (NASDAQ-1470 to 1500, SP500-780 to 840, DOW: 7500-7900), I will generally refrain from opening short positions that meant to be held more than 2-3 days. On the other hand, I will consider SW from long side on decent pullbacks of the market.

To sum all this up: The long and intermediate down trends are intact, but the short-term trend is bullish and could turn into something more substantial than a typical bear market rally, in other words, I don't really know what the heck will happen, you?

1. AAPL: SW-MT-L2 from 89-92, CS below 90, IDS below 88, IT=97; Q-S2 from 99-103, stop just above 103, IT=95.

2. FAZ: speculative L2 if it spikes down towards 32/33, CS below 32, IDS below 30, IT around 50.

3. FSLR: SW-MT-S2 from 139-150, CS just above 150, ITS above 155, IT around 120.

4. GS: SW-MT-L1 from 85-92, CS below 87.5, IDS below 85, IT=98; Q-S2 from 105-110, CS just above 110, IT=95.

5. ICE: Q-CTT between MA50 and MA200 with stops just below/above.

6. JPM: SW-MT if it spikes towards 28, CS just above 28, IT=22

7. MON: ST/MT-L2 from 74-77, stop just below 74, IT=82

8. NUE: MT-S2 from 40-45, stop just above 45, IT=35.

9. RKH: MT-S1 from 50-56, stop just above 56.5, IT=40.

10. SKF: speculative MT-L3 (calls) from 100-120, stop just below 100, IT around 150/160.

11. WFC: MT-S2 from 15.5-20, stop just above 20, IT=12.

Sunday, March 08, 2009

No rally no bottom?

Last Friday's Feb job report was in very sense the climax of the month long bad news flood, yet the market's reaction was nothing but an anticlimax. This may not be surprising as the major indices extended their losing streak to 4 weeks with a cumulative losses near 20%, a dramatic and lengthy drop that could well exhaust bears' fuel tank for now. With relatively light economic reports/earning events on the plate for this coming week, it is very likely that bears will pause to catch their breath so they can gather the strength for the final push.

The 60 min charts suggest a likely initial rebound of 2-3% in all major indices, possibly occurring in the early part of the week. However, I have serious doubts that the major indices will be able to challenge the key technical levels that they lost lately: SP500-- 740/750, DOW-- 7100/7400, NASDAQ--1350-1390 as the weekly charts show no signs that the slide is ending. For that matter, I won't look for a tradeble intermediate bottom until the weekly stochastic dips into oversold area, which likely needs at least another week or two. With that in mind, for next week, besides more day trading from both long/short side, I will consider short-term positions on the short side once the major indices approach those key resistances or when their 60 min charts become overbought.

Last week ended as the best week I have ever had, which actually triggers a grave concern: will the triumph leads to a sense of euphoria that in the past inevitably leads to serious drawbacks if not outright debacles? Wabbit might be a natural-born runner, but can he really fly high like an eagle without breaking all the natural laws? May God have mercy on me!

1. AAPL: ST-CTT between 80-83 (IDS below 78, CS below 80) and 90-93 (IDS above 93, CS above 91).

2. AMZN: MT-L1=52-58, CS<54, IT around 66.

3. AXE: MT-L1=24-25.5, stop just below 24, IT=30/33

4. BIDU: MT/ST-L1=140-148, CS just below 140, IDS just below 136, IT=180.

5. CME: MT/ST-L1=172-177, stop just below 170, IT around 220.

6. DHI: MT-L2 if it spikes towards 6, stop just below 5.7, IT around 8.

7. FCX: MT/ST-L1=28-33, stop just below 28, IT=37/40

8. FDX: speculative L3=30-33, stop just below 30, IT around 44

9. GOOG: MT-L2=280-300, stop just below 280, IT around 330.

10. GS: MT-L2=60-70, stop just below 60, IT around 87; ST-S3=85-90, stop just above 90, IT=78/80.

11. LEAP: MT/ST-L1=26-29, IT=35, CS just below 26.

12. MA: MT-L2=130-141, CS below 135, IDS below 128, IT=165.

13. MON: MT-L2=65-70, stop just below 63, IT=80.

14. NTRS: speculative L2=39-44, stop just below 39, IT around 54.

15. POT: CTT between 54/64 and 78/80,

16. SKF: speculative S1=280-350, stop above 360, IT=180/200. the possible strategies include shorting March 350-400 calls, or bear put spread, or alright puts (May strike).

17. SQNM: MT-L1=10-12.5, stop just below 10, IT=18/20

18. USO: ST-L1=23.5-26.5, IT=31/34

Good luck all!

Thursday, March 05, 2009

The bulls: down and out?

Certainly a bloody week for the bulls this week thus far.

As planned , I have pretty much just day traded GS, POT and AAPL since this Monday and some how am having one of the best week in my entire freaking trading life.

The market so far has been acting pretty much like what I wrote in last weekend's post, and we will see if it keeps that way tomorrow. Bought in some April calls in GS (when it was around 80.6) and AAPL (when it was around 88.5) late in today's session because I feel that with such a precipitous drop, the market has priced in a very very bad Feb job report tomorrow, and I might lay down a few small chips just for fun. On the other hand, should the market have a bloody Friday, I will start to move my retirement account back into SPY500 index fund, 15-25% a time, starting at SP500 around 660 all the way down to 500, hehe.

Oh, I have been keeping eyes on SKF, may start to build puts between 250-300 range.

best to all,

Sunday, March 01, 2009

Is the hell about to break loose?

Well, the monthly, weekly and daily charts favor such trending scenario, especially for SP500 and DOW. There is little doubt that after the 3.5 month of consolidation, the market is once again in the bottom-searching mode.

This coming week is crucial for bulls: if SP500 fails to close above 750 by the end of the week, it will be extremely hard from the TA point of view that the market can halt another precipitous leg down. The scary thing is that if you look at the SP500 20 year monthly chart, there are not much meaningful support until the 420-480 area. There is a little bit of support between 600-660, which could serve as an initial target for the first pause. On the other hand, all major indicies may reach a rare multi-time frame oversold (monthly, weekly, daily) conditions in next 2-4 weeks, depending on the speed of dropping, and it seems worthwhile to position for an oversold rebound some point during the mid/late March. However, at this stage, I am unsure how long the March bottom could hold.

One theme that is becoming very clear lately is that while we all expect more bad macro-economical news, the actual news have been overall worse than even the most gloomy estimates, and I suspect that this Friday's Feb employment report is no exception. The bottom line is that as long as the global economy continues to deteriorate at a faster-than-expected rate, hoping a sustainable bottom in the stock markets is nothing more than a pipe dream.

Speaking of this Friday's Feb employment, my gut feeling is that if it comes in with less than 700k job loss and below 8% unemployment rate, the market may have a relief rally IF it goes down hard in the early part of the week. We shall see.

Given the current TA picture, I will once again try to avoid initiating any long positions that are meant for mid term (1-8 weeks) or long term (1-12 months) holding, in other words, I will once again focus on DT instead. However, I might consider some short term (1-10 days) long setups when the risk/reward ratios become very attractive.

1. AAPL: ST-L2=79-85, CS just below 80, IDS just below 78, IT=90.

2. AEM: MT-S1=32-35, CS just above 36, IT=26

3. AMLN: MT-L2=6-7.5, CS just below 6, IT=12

4. AXE: MT-L2=26-28.2, CS just below 26, IT=33

5. BIDU: MT-L2=130-141, CS just below 130, IT=165/180

6. FCX: MT-L2=26-28.5, CS just below 26, IT=37/40

7. FSLR: MT-S1=110-125, CS just above 125 with a bullish candle, IT around 95.

8. GS: MT/ST-L1=80-85, CS just below 80, IDS below 78, IT=93, OR when it closes above 93 with a bullish candle, IT=98/100, stop just below 90.

9. MA: MT-L1=140-147, CS just below 140, IT=170/180; DT-L2 if it spikes towards 150, stop just below, IT=160/165.

10. POT: MT-L2=76-80, CS just below 77, IDS below 76, IT=86/95

11. SNDA: MT-ST-L1=28-31.5, stop just below 28, IT=37/40

12. SQNM: LT-L1=10-12.5, stop just below 10, IT=18/20

13. USO: ST-L2=23-25.2, stop just below 23, IT=28/30

I know, I know, there are quite a few MT or LT long setups here despite what I said earlier, I don't know, the charts are making me calling them.