Another counter trend bull run coming?

Today's strong market action favors another counter trend bull run, which may last as short as 2 days (if this Friday's July job report coming in with well above 100k losses), or as long as a few weeks. But it will not be a smooth one for sure as it will run into heavy resistances almost every steps up.

In anticipating such move, I would overweight the tech sector on the long side, while shorting commodity/energy/metal materials related sectors (oil,coal,agriculture,fertilizers and steel) if those leaking ships also get lifted up near their recent highs or important resistance zones.

Just found out the ELN went down over 30% in AH, and was really upset because about 2-weeks ago, I had plan to create a strangle play in anticipation of the month-end drug study news. Got too busy lately, and got lost....

Good luck all, and share your views if they are very different.

Melt up!

Oh, boy, can it get more bullish than this? Almost every piece of crappy ER turned out to be a good buying opportunities. The funny thing is, believe it or not, Big Ben is probably the most bearish person walking around. With now concrete evidences of worsening consumer spending and no signs of housing bottom whatsoever, I have no doubt that the beatings the bears have been taken in the past few days will be returned soon.

I will keep my eyes on:
RKH (S1, ez=112-120, stop just above MA200, IT=95).
SKF(L1, ez=100-110, stop just below 100, IT=135).
BAC (S1, ez=34-38, stop just above MA200, IT=28).

Got different views, share with me!

What's your conviction?

Wow, take a look at the AH drops of AAPL, SNDK, AXP, and TXN, all well over 10% on pretty heavy volumes, and together, they are sending one loud and clear message: consumers are crapping their pants. I could imagine that many of you probably feel missed-out last week's dramatic rally and are anxiously waiting for a pullback so that you get in from the long side, it sure looks like that you will get exactly that tomorrow. So the questions I have for you all is that if you have the conviction of the bottom and the balls to buy the pullback? Please take a stab on the survey on the left side of this post.

If you ask me, FA wise, the bottom is not in yet, but TA wise, a tradeble bottom could be in once NASDAQ follows DOW/SP500 to successfully test its Jan/Mar'08 lows, which may well happen in coming days.

I have to say that AAPL's outlook surprised me a bit here, I would not be shocked if it tests a key support around 140 tomorrow morning, which would at least a good DT long setup.

On hold...

Sorry for not posting anything lately. Got a raise last week along with a couple of projects that would get my hands full in coming weeks, as the result, I won't be able to post as much for a while, but will certainly do my best.

As for the market, while I have already seen lots of commentaries claiming that the bottom is in, I am far from being convinced. While the market will have a upside bias for the next few days, the volatility could through anyone off the wagon. ERs may significantly shape up the path for the major indicies this week, particularly tomorrow's BAC and AAPL's ERs. If both of them coming in worse than expected, I would expect NASDAQ lead the market to re-test the lows.

One more thing: AAPL, AMZN, ISRG, BIDU, and NFLX may offer pretty good ER straddle plays this week.

Bulls skating on the thin ice!

Dreaming of a re-run of the Mid-March post Bear Stearns bailout rally, the (retailer) bulls jumped in at the open today on the news of Fed's rescue of F2, only to fall right into a swirling water fall as the smart money dumped what they loaded up last Friday in anticipation of the over-the-weekend Fed's rescue. You got to admire the big boys, who learned from the BSC event and executed the play to the perfection. Today's gap-and-crap action also made it clear that the market has lost faith in the Fed. Speaking of the Fed, it is probably down to the last bullet (rate cute) in its gun, which if used would be suicidal at this point.

Bears still did not show any killer instinct, which ironically may not matter much right now as bulls started to show real hesitation and fear today. As the major indices are drifting down through the 2-week mid-point consolidation zone, bulls better hope that there will be some real good news and soon or we could see the second leg down in next day or two.

Just went through my list and could not find any good swing long setups, rather, I will look for swing short setups from the following stocks: APA, DVN, JRCC, MEE, ANR, OIH, PCX, WLT.

I will also keep an eye on GS, which is on the verge of completing a head-n-shoulder formation on the daily chart. I may scale in if it spikes towards 166-168 in the early going tomorrow, with intra-day stop just above 171, closing stop around 168 and initial target around 150.

The Feds strikes back, again!

I am going to be brief for this weekend’s notes on the market. Instead of going through detailed TA examinations of the major indices, I am going to just present some distilled observations and thoughts on the current market conditions and near-term outlooks:

1. Despite of the oversold conditions on all major time frame, the weekly momentum/candle/volume patterns still favor further downside in coming days. VIX chart also favors such scenarios. There are, however, some developing bullish divergences on the daily/60 min charts.

2. The losing streak is now at 6 straight weeks, the longest since September 2002. As the overall volumes shoot up to multi-month high, the fear is growing, but it is far from panic.

3. Despite of having all the winds behind them, bears are having troubles to finish the bulls off. On the contrary, bulls have been buying in their orderly retreat as if they are convinced that the bottom is very near. If the bears continue to show such lack of killer instinct by failing to push the major indices breaking down through the 2-week trading range (by close), they will be gored by the bulls very soon.

4. I have been waiting for a big downside move to initiate some long SW positions, however, I am now start to consider the possibility that if the major indices do break down the 2-week consolidation range, they could incur another quick 5-10% loss in a week or two time frame. In such scenario, building up SW long positions at the end of the first breaking-down day may not be such a good idea.

5. On the same topic, all major European stock markets broke through their week and half long consolidation range on the Friday, and I will keep a keen eye on them to see if the size of the second leg down is comparable to the first leg.

6. The Q2 ER season kicks into high gear next week, bulls have high hopes, especially for the tech sector, that it will provide positive catalyst to at least stop the ongoing slide. I have serious doubts on such notion, considering recent movement in MSFT, CSCO, INTC, NVDA.

7. This Friday’s takeover of IndyMac by the Fed could mark the beginning of a string of high profile bank failures in coming weeks. This, together with dire distresses in Freddy and Fanny, makes the hill much steeper for bulls to climb.

As I am finishing this, the news of the Fed rescue of Fannie and Freddie just came out, and the indices futures point to a big jump tomorrow. I am pretty sure that bulls are hoping that is will be a re-run of the March counter trend rally that started with the BSC bailout and lasted over 2 months, we will see how things play out this time around.

Getting dizzy....

Wow! The bulls and bears were fighting nail and tooth today, just look at the intra-day charts of AAPL/QQQQ/SPY, certainly a great day for day-trader (I had to just watch). I have to say that I am impressed by the bulls: they were overall unfazed by increasingly dire headlines and breaking down of many stocks and just kept buying. In fact, the volume patterns on daily/60min charts are bullish. The way it is going now, either bulls or bears will run out of the ammunitions soon, I mean, something got to give.

Tomorrow morning GE ER will be crucial. My gut feeling is unless GE misses big and breaks down to new low, bulls could rally tomorrow and get on the track to destroy all the puts leading to next week's OE. On that note, if GE misses a bit and the market gaps down on low volumes in the early going, it could present a good buying opportunity for anyone who has the guts to catch some short-lived gains from the long side.

Too many bears AND bulls!

I am going to be brief here:

On trading:
The Monday was fine, and Tuesday was dandy until I put MA and lost control as it shot up violently. Being ball-less, I closed in the end with a nice hole on my pocket and put my ongoing winning streak in serious jeopardy, and promptly got spanked by my girl, which believe it or not was not fun at all! And she made me to swear not DT again, which I did to shorten the spanking binge. So there you go, I am out of DT business now! And I promptly gave up put opportunity in AAPL and X today, well, hope it is all worth it in the end.

On the market:
There are just too many bears and bulls right now! FA favors bears, TA wise it is a toss up but the ball in is bulls court. One thing is pretty sure, the longer the market stays in the current range (about 4 days now), the more violent the next move will be when the range is breaking. Before that occurs, DT is pretty much the only game in the town. Since I cannot DT now, I plan to sit down for the next few evenings to come up with a buy list in case the crash does come in the end.

Let me know if you are eying any stocks for post-crash buying.

No fear, no bottom?

The relentless advance of oil price and un-abating negative headlines about the economy around the world squashed bulls hope to stop the nose-diving as the US stock market posted yet another losing week, the fifth in a roll. Despite of the precipitous and mounting losses, the bottom searching market may be teetering on the edge of a collapse as the herd is far from panicking.

On Weekly Charts:
The momentum of ALL major indices not only flipped to the negative side but on the early stage of acceleration; MACD in solid down trend formation for all major indices; both candle formation and volume pattern remain bearish; RSI2 in oversold for all major indices but stochastic yet to become oversold except for DOW; technical indicators overwhelmingly favor further weakness in next week or two.

On Daily Charts:
The negative momentum unabating for all major indices as they accelerated to the downside; DOW is now 350 points south of its Jan’08 intra-day low, while SP500 broke its March’08 intra-day low and closed at new multi-year low, and NASDAQ now only about 90 points above its March’08 low; all major indices continue lingering in deeply oversold territory; candle formations remain bearish across the board.

On VIX Charts:
VIX finally broke its 4-week trading range last week; on its weekly chart, the momentum finally flipped to the positive side for the first time since the end of March, this along with the crossed and turning up MACD formation strongly suggest an overall uptrend for the coming weeks; daily chart also shows a clear short-term uptrend in the making.

Thoughts and observations about the current market conditions and near-term outlook:

1. Technically speaking, while the market has been deeply oversold for a while now and a technical rebound is overdue, there are virtually NO bullish divergences on any charts of the major indices. On the contrary, the weekly charts strongly favor more near-term downside movement, and major indices might need another week or two of declining to reach the kind of oversold levels that were seen in the previous bottoms.

2. While fears started to grow last week, VIX is still way below the levels associated with the previous bottoms. The VIX charts clearly favor more upside on VIX, which in turns suggest lower market.

3. The global market is turning very gloomy now:
** The current 5-weeks long losing streak, the longest since September 2002.
** The Japanese stock market is on a 12-day losing streak, the second longest ever on the record.
** The China stock market is on a 7-week losing streak as it continues to break down.
** Check out the charts on EWZ and FXI and you know the leaders of the emerging economy are in deep trouble.

4. Fundamentally speaking, the evidences and signs of a full-blown global recession are growing. I am not quite sure if the US stock market has now even fully priced in a prolonged and severe US recession, let along a serious global recession.

5. Despite of the continuously advancing oil price, the energy and related sectors (such as the coal sector) showed clear signs of the ending of their parabolic movement this past week. Other commodity sectors are also cracking up. All these may reflect the view that the tremendous growth and current high levels of many commodities cannot be sustained/support in the face of a global recession.

6. With the market entrenched in deeply oversold territory, a violent technical rebound could come anytime, but if you look around, as the Fed now practically irrelevant, there are NOT many potential catalysts out there, well, except the oil. As long as oil keeps advancing (I suspect it will touch 150 in coming days before a big pullback), I doubt bulls can muster any meaningful rally. With that said, overall speaking, aggressively open new short positions could be extremely dangerous at this conjuncture.

7. Cash is the king.


The overall trading strategy for the upcoming week:

1. Sit tight on the sideline and be prepared for all scenarios. The all-time high spread between the Lowrys selling and buying pressure is just one of the signs that a market crash is becoming a real possibility. I will be watching the market intensively to see if the major indices would be able to reach a tradable bottom around the key support zones: DOW 10750-11000, SP500 1170-1220, NASDAQ 2150-2200. I will start nibbling from the long side (swing) if the market crashes or spikes down to those key zones.

2. Only DT long with small position size for any non oil driven technical rebound.

3. Consider full position-sized, multi-day holding long plays IF oil pulls back significantly.

4. Actively seek short setups in the coal, steel, and other energy related sectors.

Happy 4th of July

It has been some tough weeks for many traders, I hope you all will be able to relax and enjoy the life a bit through this holiday weekend.

Trading update:

1. AAPL calls from Thursday: go out with a tiny profit in the opening minutes, have to say that I was lucky that the Market opened high as the June job report not shockingly bad.

2. AAPL puts: accidentally bought the puts when it rebounded to 170, got out when it broke 172, which turned out to be a head fake.

3. MOS puts: bought when it rebounded and stalled just below 133 and exited when it broke 129, the profit evened out the AAPL puts loss and then some.

Will hit the road shortly to visit our friends in San Diego, and between beers and scotch, we will have a good laugh (hopefully) on what trading has done to our lives.

Will post a weekend analysis if I get time.

Hopeless!

I felt sad all day long. You all know that I have been calling tops on the coal sectors in the past few days, and on Monday, I finally picked PCX and bought 10 puts@$8 when it was around 154 as a SW trade. But yesterday, in the first concrete sign of breaking down, I once again could not resist the temptation and exited at $8.8. Well, it got destroyed today with the puts closed at $19.7. In other words, I made $800 on a potentially $11700 movement and maybe counting, and that is not even 10% of the move. I have never known what a demoralizing victory is until today. Even though I made over $1000 today and on my way to 13th consecutive winning week, I felt low and blue because I see the cold reality: I just never learn from my mistake. I will take the upcoming weekend to think what I need to do here, maybe I should stop trading for a while, I don't know.

Trading update:

1. APA: bought puts when it was around 144 and exited when it was testing 137.

2. AAPL: bought puts when it was around 176.3 after saw the intra-day top, exited around 174.5, another poor execution.

3. Things did not get any better as the day went on, bought AAPL calls in the closing moments, and still trying to figure out why I did that.

On tomorrow's trading:

The market showed real fear late in today's session, and with jittery already spreading through the tech sector thanks to NVDA's ER warning in AH, a much worse than expected June job report tomorrow morning could really trigger a capitulation. I suppose that if we see a 2%+ drop in major indices, we could start nibbling a bit from the long side. My focus will be primarily on ag/fertilizers tomorrow, and I will avoid coals from the long side despite of the huge losses in those names today, they will rebound for sure, but could drop another 10-20% before that occurs.

Bottom watching, day 2....

Things got a bit interesting as bulls finally put together a rebound, well, sort of considering very heavy volumes and relatively small gains. Technical conditions could drive the rebound a bit higher, but fundamental conditions remain quite bleak and cloudy, and the June job report could improve the visibility on this regard. Once again, I will refrain from establishing any significant positions until I am clear about the market reactions to the job report.

Trading update:

Got out of PCX puts when it sliced through 150 in the early going, once again, captured not even 40% of the entire move. It is becoming quite obvious to all now that the main reason wabbit runs fast is because I ain't got no balls!

Trading Ideas for tomorrow:

Will focus on DT except may take a few speculative positions using Aug. dated options.

Long list: AAPL, ENER, MON
Short list: ABX, AKS, CF, RIMM, PCX, WFR, X
Speculative short list: APA, DVN, JRCC

Bottom watching

Trapped bulls hope that the bottom is in while the side-lined bulls and bears are hoping for a capitulation. I have already seen a few articles today talking about bottom-fishing here, however, I won't do any SW from the long side until we see the June employment report, which potentially could be a capitulation trigger.

Trading update:

1. BIDU calls: exited in the early moments when it spiked towards 320, only a small loss.

2. CTRP: exited when it broke 46 again, and lost around 15% instead of last Friday's 20% gain. Originally I planned to exit if it breaks 45, but the accelerating time decay somehow soured the whole thing.

3. PCX: Bought July150 Puts when it was around 154, but oddly enough, by the time it closed just above 153, the price actually drop a bit. A risky trade here, we'll see how this turns out.

Market will attempt another rebound tomorrow, which might gain some tractions if oil/energy sectors pullback somewhat here. Went through my list, and did not see any compelling long setups, and a few half-assed short setups. I think the most sensible thing to do right now is bottom watching.

The arrival of the Bear Kingdom?

The breaking-out oil, rising inflation, the bambling from the toothless Fed, and the disappointing ER from several key tech leaders delivered a devastating blow to the bulls as the market suffered huge losses last week. By the end of last Friday, DOW became the first major indices to smash through the Fed-engineered double bottom of Jan/Mar’08 with SP500 only a spiting distance away its bottom. By doing so, DOW is now about 20% off of its last year’s high, thus formally kicked the door to the Bear Kingdom wide open.

On Weekly Charts:
DOW continued to lead the market to the downside as it closed below MA200 along with SP500 for the first time in over 6 years. For both DOW/SP500, the momentum has now firmly flipped to the negative side, while declining for the 5th straight week for NASDAQ/Russell2000; MACD in solid down trend formation for both DOW/SP500; volumes rose for all major indices as the losing streak now at four straight weeks; overall candle formation became increasingly bearish; DOW is entering oversold territory, for other major indices, only RSI2 is now in oversold territory while stochastic still has distance to go.

On Daily Charts:
The negative momentum kept rising for all major indices as they accelerated to the downside; DOW is now 300 points south of its Jan’08 intra-day low, while SP500 only 22 points north of its Mar’08 intra-day low, but NASDAQ still about 160 points above its Mar’08 low; all major indices have been lingering in deeply oversold territory with several failed attempts of technical rebounds.

On 60 min Charts:
Just want to point out that there are signs of a nascent oversold rebound for all major indices.

Thoughts and observations about the current market conditions and near-term outlook:

1. Technically speaking, if the market was at a crossroad last week, it is now taking the path to the bear country. The weekly charts suggest that it is likely to take another 2-3 week decline before all major indices would reach the oversold levels that were associated with the previous bottoms in Aug’07, Jan’08, and March’08. Given that, other major indices are now very likely to follow DOW’s footsteps and break their previous lows in next 2-3 weeks.

2. Even though VIX is up for the week and now on the verge of resuming its uptrend on the weekly chart, it continues to diverge from the market movement and currently at a level that is around 1/3 lower than those associated with the previous bottoms. While arguments that the muted VIX is largely due to the lack of any significant single-event have some merits, it is rather obvious that relatively speaking, there are still too much complacement in the market. Once again, you won’t see a real bottom or at least a tradable bottom until the fear turns into panic and the Wall Street is soaked in blood.

3. It is worth to point out that all major indices and many key sector indices have now completed the 1-2-3 trend reversal, and their primary down trend, which started last November, has now resumed following the 3 month low-volume counter-trend rally. I would also like to point out that if the previous decline was largely due to the self-doubting and discouraging bulls, bears really took their glove off this week as the Lowrys selling pressure reached multi-year high last week.

4. Here is another alarming bearish signal: according to the latest COT report, the commercials have dramatically reduced their long positions this week. In the past, such re-positioning by the big boys were often followed by a 2-3 weeks of major market decline.

5. Perhaps the most important and fundamental changes in recent days are the raging inflation AROUND THE WORLD with many central banks have embarked a rate-hike campaign (with ECB likely to join the list next Thursday) hoping to reign in the inflation before it is out of control. I would like to point out two things: first, this rate-hike campaign has just started with a LONG WAY TO GO; second, the rate-hike will significantly dampen the economic growth around the world if not triggering an outright global recession. On this regard, the US is far behind, and we may pay a much bigger price down the road.

6. Contrary to my expectation, oil broke out a 3-week trading range to the upside this week despite of some bearish divergences on its daily chart. Other commodity sectors, especially energy related ones such as coals, are poised to resume their parabolic ascending. Even though the US dollar may weaken further and thus drive oil/commodities higher in near-term, the increasing possibility of a global recession could ultimately pull the carpet underneath them. When that occurs, we would likely see an equally parabolic descending, if not more dramatic.

7. The market is on a 4-week losing streak, but since Sept./2002, no losing streak has been longer than 4 weeks. That, along with other factors, might favor yet another technical rebound attempt next week. However, I doubt the size and sustainability of any rally under the current market conditions. Right now, I am leaning to an overall “sell all rally” strategy until the major indices reach a tradable bottom, my guess is: DOW 10750-11000, SP500 1170-1220, NASDAQ 2150-2200.

I welcome any comments!

Drowning in the oil tsunami?

Considering the fact that oil broke yet another record and that the rising negative momentum and fear, bulls should be content that SP500's previous bottoms are intact by the end of today's close and that there were many many doji/hammer candles ending this free-fall week.

Trading update:

1. Bought puts on PCX when it spiked towards 153 and showed signs of intra-day topping, closed near the close when it spliced through 50, felt good about the plan/execution/profit.

2. CTRP July45 calls: about 20% profit and still holding, its action in the last several days have been quite bullish, or more properly, suggesting a tradable bottom to say the least. We will see if my sitting tight is going to be rewarded.

3. BIDU July330 calls: under water and still holding, feel that it will have a good jump if the market rallies on Monday. So far the paper loss bit a chuck off my profit for the week. I totally screwed up this trade:
** Got in unplanned AND when it was far from oversold on 60 min chart (that point would be today when it was around 306-308).
** Failed to re-adjust the bullish expectation especially in yesterday's near-crashing market, had 3 chances to book as much as $1000+ profits, did not do so, and turned it into a losing position and distraction.
The lesson here? when you bottom fish, especially in the current down-turn, make sure that the stocks are oversold both on daily AND 60 min charts, given that other conditions also met.

Will I learn my lessons? Well, I will see about that after a few rounds of beer/Junmai sake in a few hours...

I hope you all survived the week without much hurt!