As of Monday Aug 17, 2009 4:15PM ET, these levels are:
AAPL – $155
RIMM – $75
GS – $155
QQQQ – $38 (massive massive OI in puts at $38 level)
IWM – $53 –> difficult to see this happening
SPY – $98
GOOG – $440
I have been using print-screen key to capture the charts, then paste and edit them in MS Paint – doing things the stone age way. Finally got over my “new technology phobia” and installed Jing. Here is my first chart that I have captured and annotated using JING. Turns out it is so much easier and faster and charts turn out to be much more beautiful.
Anyway the chart I show below is QQQQ daily chart. It is at a very critical juncture. It is yet to fill the gap left at the beginning of June. Also, the line that marked the May highs might be a natural bounce back point. OR if this level is breached, then QQQQs will go all the way down to $33 mark (7% below where we are). This could mean a visit to 850 region by SPX. It is make-or-break time for the QQQQs. As has been the case, the currency action will determine which way the dice rolls.
Flashback: Nov 2008 – Feb 2009: From Nov 10, 2008, SPX formed a technical pattern, what is known as Penant OR the Symmetric Triangle. This technical pattern is a CONTINUATION pattern. It resolves in the direction in which the penant was enetered.
In Nov 2008, the penant was entered going down. As a result the expected outcome was that the penant will resolve to the downside – which is exactly what happened on Feb 16, 2009 (in hindsight, the fate was sealed on Feb 10th, even before our much adored Timmy (Geithner) opened his mouth to speak about the “Bank Plan”. I still remember “tape gazing” that morning and watched the indices plummed 2 to 3% as the CNBC anchors laid out of the summary of the plan. Those were the day – right 
Fast Forward to May 29, 2009: What was bestowed upon was YAP (Yet Another Penant). The difference being that the penant was entered going up. So, the expected resolution was to the upside.
Which is exactly what happened in the last few minutes of May 29, 2009 – S&P futures ripped through the upside of the penant, spiking more than 20 handles in matter of minutes. The markets gapped open big time on Monday June 1, 2009 and left a gaping wide gap that is yet to be filled.
Fast Forward to June 14, 2009: What has happened since the penant resolution is quite bullish IMO.
SPX has consolidated nicely in a more or less sideways fashion putting in higher lows and higher highs. In fact the leading index for this rally, QQQQs have also put in higher lows and higher highs.
Coming Attractions: More upside! SPX should test 975-980 this coming week. What is an even exciting prospect is that if 1000 level on SPX is taken out, then there is a region of 100 points to the upside where there is virtually no resistance and whenever we get there “WE WILL RIP THROUGH THAT 100 POINT REGION IN LESS THAN A WEEK”. I am not suggesting that we will get there because it is some ways out in the future and it will be arrogant of me to even try and think that I can predict that. However, what I feel comfortable predicting and putting my money on is that we have more upside in this coming week – we will, in all probability see new highs for this rally on SPX. As always, if you got something out of what you read, please do share some love. Also, I have enabled DISQUS here – so additionally feel free to leave any thoughts/comments/criticism (always welcome)/suggestions/contrary ideas – whatever – everything welcome
The currency markets have been used to explain what is going on in the markets lately. The principle that underlies the currency markets and ultimately everything else is supply and demand. Last year in the fall, the indicies plummeted like most of us had never seen before in our lives. We all watched that in amazement, but what happened then has serious implications now. The ease with which indices fell last fall seemed like slicing butter with red hot knife. The thing that most of us forget is that once we have sliced butter with hot knife, pulling the knife out is EVEN MORE easier. What this means is that if indices were to enter that free fall zone of last fall, then we will rip through that region. The move up through that region will be pretty much the way we moved up in mid to late March… in a blink of an the move would be over.
Posted below are the charts that highlight these regions for SPY, IWM, QQQQ, XLF, IYR and OIH highlight some interesting supply and demand regions. For your convenience I have typed up the name of the concerned security in big bold font on each chart.
Also, instead of typing up my conclusions at the bottom of these charts, I am writing it here in case you get fed up of the charts and don’t get to the bottom of the post: IMO, I would even say I strongly believe that the downside is very very limited. The QQQQs will power us up and then IWM and OIH (along with other commodities) will quickly pull SPY through to $100 which will power it to $110 mark… by end of July. That is where we will see any meaningful retracement, possibly down to $92.5 on SPY…
The way I WILL PLAY this is to go long QQQQs now and then move to small caps and commodities. Finally as SPY is nearing $110, depending upon how we move up (supply-demand) will determine which sector is the best to ride the 20 odd percent move down. That IMO will be the B leg of this A-B-C primary {2}.
As always, if you like what you see, please do share some love
QQQQ: We are already in the “NO” resistance region and we should keep powering up with minor retracements. This is what tells me that we keep going up from here.
IWM: We are 3% away from the “NO” resistance region. A decent up day will get us there and the small caps will just power through to $65.
SPY: This one is a bit tricky. The region shaded in yellow tells us why we have been range bound for almost month. Going back to late last year and early this year, there was a LOT of supply in this region. Having broken through 92.5 on SPY, we are now in a region of far less supply. However, whenever we get up to $100 on SPY, we will get to $110 in NO time… may be 4 to 5 days at max.
XLF: This chart best summarizes why FAZ has been going nowhere for a month. Lots of supply from late last year being burnt through. Even if XLF breaks through $13 mark, there is still a lot of supply to contend with. Given this FAS will not be a good play even if we are moving to the upside. There will be a lot of chop chop which will kill a lot of gains in the FAS. Shorting SKF might be a very good idea. The only region of relatively low resistance on XLF is $16.5 to $18.5. But I don’t think we will ever get there.
IYR: Pretty much like XLF – lots of supply all the way up. SRS is going to get murdered through the summer. I had called for $3 by end of year. I am revising that to $3 by late July or August.
OIH: NO resistance all the way up to 145. And we are just bordering that region.
