Monday, April 20, 2009

On to a shock therapy....

The pigs did get slaughtered, but your stinking wabbit did not fare much better: violated the money management rules and went literally all-in on SKF last Friday afternoon near 59 (long) with no stop-loss, then ignored lady wabbit's warning this morning and closed all out around 65, thus adding another demoralizing victory to my long list of woeful trades.

Lady wabbit just ordered a shock-therapy: absolutely no trading, no chart-reading and no blogging until I get my mental mess sorted out and my shit cleaned up, and this time, I just ran out of the excuse not to comply with that.

So that is it, folks, either I'll come back as a brand-new wabbit, or I shall be locked in the cage while worshiping the wisdom and glamor of my lady wabbit and dreaming how I could've masterfully flown high above the battle field of the bulls and bears all these times.

One last take on the market: it will bounce back as early as tomorrow, but if bulls cannot take it to a higher high within a week or two, watch out below.

Best luck to all!

Friday, April 10, 2009

To be a bull or a bear, that is the question!

Before I start, just want folks to know that we are moving locally and I may not be able to post much in next 2-3 weeks.

The raging bulls kept the rally going for the 5th straight week and almost recouped all the steep losses occurred in Feb. While the bulls become more assertive, bears are seemingly on life-support now. Some observations and thoughts:

On overall TA pictures of major indices

1. Weekly charts:
While the intermediate trend is poised to turn up, the overall picture still looks like a spectacular bear market rally, at least till this point. The growing positive momentum suggest that the overall trend could continue go up for another 1-4 weeks. But as they get into the overbought region, further upside movement may become increasing difficult to sustain.

2. Daily charts:
Solid uptrend, but the bearish divergences start to emerge (momentum, volume, candle body, etc.). The over-stretched price over the still declining (flat for NASDAQ) MA50 in persistent overbought region makes market increasingly vulnerable to pullbacks.

Some thoughts:

1. Next week features lots of bank ERs, and just like WFC, I suspect they are going to a lot of "positive surprises ". However, judging from what the big boys did yesterday (huge negative money flows on major bank stocks), I also suspect that the big boys will use these spiking-up as the opportunity to sneak out the back doors.

2. With M2M and short-sell rules all nicely re-written for the financial bulls, the only big remaining event is the stress-test results in 2 weeks. Ever since the Fed went all in, I have little doubt that the results will be overall favorable.

3. After 5 weeks' of fiece rally, I suspect that the easy money on the long side has been made, and the risk/reward ratio is becoming very unfavorable for initiating any new long positions from this point further.

4. While I won't be surprised that the MM may stage some sizable drops in the OE week to protect their call-selling premiums, I feel that bears need to be patient for at least another week or two to start aggressive SW short positions.

On trading plan for next week:

I will focus on the finanicals by using SKF as the handler. I will consider aggressively shorting April SKF OTM puts (50 or below) if banks spike higher on their all good ERs. I will also gradually build up May SKF OTM puts (40-60, ideally) short positions. SKF is obviously in a tremendous run away down spiral, but the chance that it will at least revisit the 80/100 zone in next 1-2 months is pretty good, IMHO.

The bottom line? Things are looking up and rosy for bulls, and the market has pretty much priced in a nice economic recovery in the 2H of this year, the problem? No one knows for sure if that bullish scenario will pan out, and if not, watch out below.

Thanks for reading all the trash talking by the Easter Bunny, now enjoy your weekend!