DISCLAIMER: Nothing contained anywhere on this site constitutes any investing advice or recommendation. Any purchases or sales of securities are solely at the discretion of the reader.
Overnight spike told me that we are going to see some strength. Best to get out when in green – will get better opportunities to reload later.
Out for 5.7% profit
UPDATE Jun 25, 2009 2PM PT: Sometimes it is important to take the small profit and get out. I am glad that I sold these right at market open for a measly profit of 5.7%. At the end of the day, these same puts were only $0.87, which would have been a loss of 47% – OUCH !!!
DISCLAIMER: Nothing contained anywhere on this site constitutes any investing advice or recommendation. Any purchases or sales of securities are solely at the discretion of the reader.
Picked this up in AH – expected a ramp up in first 15 minutes AH – did not really happen. But I am happy with the fill I got.
MMs pushed SPX above 900 to create a big gap down tomorrow IMO. At the same time, 875-880 region (May lows) should provide a strong support this week. I will look to get out of all my short positions at that point.
NOTE: This might not be for the advanced traders amongst you. So, feel free to skip. If you feel like going ahead and reading it, it will take no more than 2 minutes.
Here is the daily chart of SPY (as of Jun 19, 2009). Let us dial the time back to March 19, 2009 the day on which the stochastic looks like rolling over OR may be even a week later, when all three, the stochastic, MACD and the RSI were looking to roll over. What most of the bearish minded thought was that… we have had a 150 point rally on SPX from the bottom … more like a “big dead cat bounce”. It is time to go short this market again.
Now below is the weekly chart of SPY. The day on which the daily oscillators were looking to roll over, the weekly ones had just cross the 25% line and were just gathering speed and momentum.
The million dollar question then becomes, what the hell do I do? Do I go short or Do I go long on March 19, 2009. Well, the good thing is that we have had 2 full months pass by since then and we have the answer in front of us.
Those who are short term trades, should have looked at the daily oscillators and gone short… but keeping the weekly oscillators in mind, they should have known that the downside is limited. Instead what a lot of us did was to go short (indeed it was a good entry to go short), but did not listen to what the weekly oscillators were telling us and kept insisting that the market will go down to new lows and test the March lows. I will admit there in front of every one that I was one of them and missed a good chunk of this long rally to the upside. But I have learnt my lesson and am here to share it with you:
Those who are intermediate term trades should have looked at the weekly and said that we will go long, but should have waited for a good entry by looking at the daily chart.
The next question in your mind is WHY AM I POSTING THIS ARTICLE? The answer is “we are again at the same crossroads today”. Look what the oscillators on the daily and the weekly SPY charts above are saying. The daily is saying that there might be a small bounce here, where as the weekly is saying “short”. The lesson here is two-fold:
For my intermediate term trades, I will look at the weekly chart to tell me the direction of the trend and will use daily chart to get good entries
For my short term trades, I will look at the daily chart to enter and exit. But I will keep the weekly chart in mind to remind me that the trend is down. So, I will play it small when playing in a direction opposite to the weekly chart trend.
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.
