Quick Update

So here is my plan; if tomorrow is a small to medium up day, I will be looking to go short Friday. If tomorrow is flat, I will be looking to short Friday. If tomorrow is down -50 or more, I will be a little hesitant to go short Friday, and may actually look for a bounce.

I think that there will be some optimism tomorrow, as the shock of the news wears off and the reports of good earnings and the PALM merger encourage buyers. So I will be looking for scenario 1, a medium to semi – large up day, and then shorting on Friday going into the weekend.

All the supports I posted yesterday held, but note that the NAS and RUT, the rally leaders were both flat to negative today, unlike the SPX and INDU. Only the NAS was able to stay above the 20 ma, and it did have a hammer type of candle today, but I stick to my thesis. No charts tonight as it is late here. Trade well and prosper. AKOT

Lite Weekly Video 9-13-09

I am on the road this week trading and blogging from my two laptops. It is difficult at best, but I managed to get a lite video up for your perusal. I suspect we will see a volume spike this week, and I also suspect that we will see some selling with that spike. We made some nice bearish engulfing candles and spinning tops and the like this week. If they hold, we should see at least a couple days of selling. I really thought that the credit numbers from Tuesday last week would cause us some consternation last week, it was not to be. I was shocked to see how the mkt. just shrugged it off as if it meant nothing. This week we have retail numbers coming out, and I suspect they may be a little wte, and if so, we could see some follow through selling. Monday looks like it will be a down day, but I will be watching to see if the bulls step in again near the end of the day. Now onto the lite video for the week.

is it TIME?

Today started with tons of volatility, and then ended with a resounding thud. There was still no real volume along with some up movement. Things were not as bullish as they seem however. The VIX was up on the day, and as we will see tonight, there was some real selling in the spiders. Further, at around 3pm consumer confidence came out way, way worse than expected. This means that the consumer has less money to spend. I have a sneaky suspicion we are going to pay that piper, possibly as soon as tomorrow. This was a pretty bearish number that was shrugged of and ignored. But I suspect not for long. If we see a big down day in the next day or two, I submit that it will emanate from today’s consumer confidence number.

Further I read an article from one of my tweet buddies on Time’s site, TIME , which actually originated from Trim Tabs site, trimtabs, regarding insider selling. Basically, there is a lot of it. Biderman tracks the ratio of insider buying to selling and has since 2004. The normal number is 7:1, the highest he has ever seen is 24:1 in November of 2007, right now it is at 30:1. We had a pretty big down move that originated in Nov of 2007, not straight down, but down none-the-less. The part of all this that scares me is that TIME printed this article! Now onto the charts:

We are watching for higher lows, today we maintained a higher low. We will keep watching for higher lows and higher highs. It is that simple.

Not much to say on the DOW. The v was not great or even good for that matter. This is not a true three white soldiers or flag formation, but we did break and stay above that August congestion zone which coincides with a very long term support. In all honesty, I could see this moving up to the latest highs, or dropping form right here. I think if we see a v spike we drop.

I watch the SPX & ES and most of my charts during the day on 20 min. candles for buying entry points. I noticed we have formed a nice pennant inside a pennant with a gap waiting to be filled. I will be watching for a break down to fill this gap, and to look for this lower high to hold. If it breaks, I must go long.

I have highlighted two areas which may give us some insight into what is next. You see how we tested the fib line, dropped rallied and tested or approached the fib again? Obviously the first one was much more pronounced. But I am wondering if this long term down trend and fib will once again push us down a little and then we rally back up and blow through both those lines. I forgot to draw the bottom up trend which would be obvious support somewhere around the 1990 area. I think this scenario makes sense, especially after this nice hanging man on resistance from today. If it holds true to form, we will take out the recent lows on this next down move and take out that 1990 I spoke of and end up near 1900 or perhaps all the way down to fill the gap at 1800 before bouncing. I know, a lot to watch for, sorry.

On days like today, when I don’t trade too much, I like to play with fib lines and new indicators etc. I find fib fans fascinating, and I am surely no expert on using them. But when they make sense they make sense. Here on the XLE they seem to designate points of support and resistance quite often. You can see we are very close to one of those points right now.

Same chart a little closer. Notice today’s candle. Unlike in June, it did not blow through the resistance line then sell off, it touched then sold off. Pretty much everything on this chart looks bearish to me right now. Yes it is in an up trend, but I think it is setting up for some selling.

The XRT should get dealt a blow with today’s credit number, and it looks very poised to drop. I may play some puts on this tomorrow, I like it that much. However, I don’t like that the support line is so close, so it will be a quick play which is perfect in this mkt. I love the clear stop level at $32.85.

I thought this would rally to the top resistance, but it looks like the move is petering out to me here. Nice gap up hanging man, if followed with gap down tomorrow is pretty bearish with room to drop.

Here is another fib fan I tinkered with and liked. Now, this is a strong up trend, so it must be respected but the last fib line led to its testing and perhaps this is the one that leads to its break.

This is a 10 year chart on the XLI. We are at a resistance area that we just tested on 8/28 and again today. We gapped up into it today and it looks like it wants to hold. I would expect a drop to $24. But if it moves  up, then look for stronger resistance at $26.90. Again, nice ez stop.

Finally a little triple top action on teh XLB. Technically it is an ascending pennant which is a bearish formation, so we should see a breakdown with increased v.

In closing: I expected an up day, I did not expect such bearish news with no action. I think it caught the whole mkt. by surprise once it was lulled asleep by the days inaction. I think we will see the fallout of today’s number soon.

I will be out-of-town from Thursday on. I do not know if I will have internet access, but if I do I will post, even if it is short posts. I don’t know if I will be able to do Sunday’s video or not, again it depends on internet access. I will tweet some more charts as I can, and I will tweet a few others tonight. I will be back in town week after next. Trade well and prosper and you can always follow me on twitter @akoptiontrader. Trade well and prosper. AKOT

Weekly Video

Well it appears that bank news I posted on Thursday will be postponed, as the Fed has been granted a stay until September 30. So what does that mean? Who knows, maybe they will never have to reveal what banks have borrowed money under the emergency loan programs. Meanwhile, they took over three more banks in Maryland and and Ventura California. Yet, I bet you didn’t read about this did you? I guess it is no big deal, but here is one of the many blurbs on it banks.

Meanwhile, I still think we are toppy, but I am beginning to think this isn’t going to be the big down move I have been anticipating. Instead, I think we may have one more rally in us. I encourage you to dig into the news and read behind the headlines, things are not well out there. This blog is mostly about charts, not news, so I won’t go into it too much. Besides, there are tons of them out there. Check out market ticker for some really great insight. Next week we have some mkt. moving news, but mostly on Friday and then before the open. I’ll be curious to watch the auto sales numbers the next few months. Who wants to bet they are going to be weak from next month until….? Who else wants to bet that consumer spending will be weak? Now onto the video.

from briefing.com

overbought and poised for a turn

It almost feels like I am starting all over again; it’s new and exciting, the charts are beaming with new information. Yet they are not pointing to direct moves, just giving us little clues. One of the clues, this market is really overbought. Also I tweeted earlier this week about the Newsweek headline, the recession is over. That my friends is a huge clue. Onto the charts:

The VIX did pop up over the long term up trend line. This should, and I emphasize should now offer support. Also note the VIX has move up three days in a row. It did, however, form a nice tombstone doji today which could signify a bit of a down move from here. But the fact that it is inching up shows me that fear is slowly returning.

The DOW is in a big divergence, a v to price divergence. V has steadily been decreasing into this up move, and look at how steep of a climb this last move has been. Also note the bb are separating, this often signifies a significant move is imminent, and just looking at this chart, I would say the move could easily be down. Also note though, that we have a very large inverted head and shoulders, the neckline of which we are now above. I think that will definitely offer support if we do drop, around the 8750 level.

Much of the same on the S&P. BB widening, lots of sideways to slightly down movement, lots of indecision. I think this could easily fall to the up trend line, where it will likely find support.

The NAS is really perplexing me. This is still the most bearish of the indicies to me, hence my reason for buying puts on the Qs. If I had bot puts on the SPY that same day, I would be doing Okay, but with my Q puts I am down a little right now. I really thought this gap would offer strong resistance and be the catalyst causing our down move. I guess that’s why I never go “all in”, always using contract management. We still have a nice gap to fill and I still think this chart is massively bearish and needs to retrace.

I picked all of today’s stocks off of earnings, so some of them will be very thinly traded. Be cautious when trading thinly traded stocks, they can have quick amazing moves, or just be flat. I find UAM interesting. I like the move up into the huge dip, then it is moving down, at about the same rate after the dip. I think I will name this the seagull formation. You heard it here first! Anyway, it guided higher so even though it formed a nice bearish harami today, I think it may pop to the upside, maybe even to the 200ma. This is a think stock and a bit of a risky play, so I would play the stock not the option. It is only an $8 stock so very playable.

TGI, another thin one. This one missed on earnings and guided lower. This should lead to a pretty good drop, probably to at least the neckline that I think is forming.

NTRI actually did bte on e, but it guided lower and it has been in a nice up trend. I think it will drop to the bottom of the wedge from here.

FMC missed and guided lower. Very bad news for this stock. You can see the great retest of the neckline, one of my favorite trades that I completely missed. We may not be able to play this as it may move down too quickly tomorrow morning, but if it bounces a little, I think this could be a great short trade.

I offer this to show how important knowing e dates are. This is TSO. looking at this chart I would say we should expect more down movement from here. But, it had e today and did bte and did not offer guidance; further it often pops after e in August. BUT the oil numbers were very bearish today. So if I go strictly by the chart I say short, if I go by earnings I say buy, if I go by oil numbers ( which don’t mean tons right now) I say sell. I say we see a pop in TSO tomorrow, and that goes against my tech. analysis.

In closing: This last few days have been a tough mkt. It starts very bearish and continues that way before rallying all day long. The second half of the days have definitely belonged to the bulls, which generally means we have a bullish mkt. But I still think we are truly overbought and due for another sell off soon, I will be watching for it and I am already trading for it. Trade well and prosper. AKOT

200 ma is in play

We have a lot of charts to look at tonight, but if you watched the video I really thought this could have been a big down week for the mkt. Today was a good start, but so far every down move like this has been followed by a just as strong or even stronger up move. Not a ton of news this week to move things, just Opt. exp week, which, in the past has always been more than enough. Onto the charts:

On Sunday I thought the VIX looked like it was going to bounce and it did. But since it could not maintain the up move, it does not look as bullish, in fact it looks a little more bearish than bullish.

The DOW closed slightly, ever so slightly beneath our up trend line. The v was a little lower than the last couple of days. Support is still right beneath us, and it looks like we will head towards it.

So I haven’t done the pullback in a while so here it is. This is the DOW on a 10 yr. Tell me if you think this is bullish or bearish? Notice that we are still beneath the 200ma and there is still a lot of space between the 50, 100, 150 moving averages. This is still a bearish chart, actually I would call it very bearish.

Note the S&P is rallying right up to the 200ma, but will it make it? It is not looking to hopeful right now, but if it does, I am shorting.

S&P on the 10 yr. chart with just ma’s. Again, the 200ma is still aways a away, the 50 is starting to curl up but there is still seperation which signals the continuation of the down trend. Look at the reversal of 03, that bottom is what I am looking for.

The 200ma has definitely been key on the NAS, and so far it has not broken through. I will assume the pattern holds.

Forgive my lovely handwriting, but I work with computers and sign bills, that is the extent of my handwriting. This is the NAS on the 20 yr. chart. Notice the 50ma (orange line) it seems to be the key here and it is still pointing straight down. I am expecting AT LEAST a 50% retracement or 250 point drop from here, but that is the minimum. I hope all these charts help you to see why I am still bearish on this mkt.

Now onto some plays, check out IVN, on of Cramer’s old favorites. It has had a phenomenal rally, absolutely amazing since Nov. of 08. But check out this stall out, looks to me like it will drop a little here before moving up of the trend line.

This is FSYS, very speculative, but looks to be setting up for a drop. This would be risky at this point, without confirmation, so be very cautious.

This is AET, it has formed a shooting star, watch for a turn south from here. 

In closing: Long term this mkt. still looks very bearish and I still think it is due for a major retracement. However, I am still not convinced we will not break through our last lows. There is so much bad $$ out there still and it is trying to be brushed over and ignored. There are a lot of shoes to drop. The mess we got in is an octopus of a mess with a lot of shoes to drop. Hmmm, that’s a little odd, but so am I. The bad debt, the bad banks, the bad economy it will not be ignored Dan! We will have to pay, and those of you ready to short, you will be rewarded. 

Bully Pulpit

Well that was a good ole fashioned bear smack down, and I felt it. That housing news came out as a surprise, but that wasn’t the only catalyst. In fact, the mkt. was already up over 1oo points, even 150 before, so either someone knew something or I am missing something. I heard one analyst say that this rally is still short covering. I find that incredible and hard to believe, but it does have legs and we did close above some key levels today. 

The VIX was quite puzzling today. I tweeted about it early on. I noticed it was not moving down, even though the mkt. rallied up 150 pts. the VIX still stayed positive. Then after the bte housing announcement, it finally started dropping. It did not break beneath our support line and that could serve as support and cause a bounce, especially after how it was acting early in the day today. It truly made me cautious about getting into a trade.

This is 5 yrs. of the DOW. Note we broke above a pretty strong long term fib. If, and I mean “if”, we hold above, that would be extremely bullish. I show this chart also for the pretty little yellow circles. Notice that for the last 3 April-May/June we have stayed up in the overbought area of the RSI. In the bull mkt. of 07, we had a quick small drop June 5. Last year, May 20 we started our free fall. I like to look at history and keep it in my mind when I trade because in the mkt. because sometimes it repeats itself. Keep this in mind.

The SP has rallied hard into our down trend line, which should offer resistance. It too has been in the overbought area for a lenghty period of time. It blew right through that fib, and I really thought we would see a drop here. Not so much.

The NAS has just reached a key point in its life, the 200ma. Look at this rally, it is like a sell off in reverse. You just don’t see rallies like this, point wise, or especially percentage wise. It looks much more like a sell off than a rally. That is one reason why I have a hard time believing we have put in our true bottom. We may have, but I think it will have to be re-tested, we just rallied way too fast. 

Hi ho, hi ho off to TMO we go.I throw this one on here because we have had a strong post e up move and know we have formed a bit of a doji cross, and if we have a black candle tomorrow then an evening star, which is a strong reversal signal.

This is one of my brokerage accounts, OXPS, so I give em a glance once in a while. Low and behold, e came out and it gapped up, but the gap appears tired. It wanted to drop today but rallied with the rest of the mkt. So I dug a little deeper and saw that 3 of the last 4 years this stock gapped up after e and then sold off, sometimes pretty strong. Could be a good one to throw some speculative $$ into. One caution, the 200 ma is on the bottom of the gap, probably strong support there.

KMP is one I have been watching for a while. I haven”t traded this yet, but we may be in a good spot to try some puts. It is in 6 month channel looking to move down. It hit the 200 ma and is falling off. I would look for the bbb to offer a little support before it really drops.

This is another channel type of play. ABC has rallied right into our 200 ma after dropping hard off the top channel. I say it doesn’t bust above it, but heads south from here.

Finally, given the current mkt. trend I figured we would end on an up play, how novel of me, EMC. A pretty basic play here, a bullish engulfing candle with support beneath it. Also it has bounced strong off the 50 ma and it is in an up trend.

In closing: I was caught off guard by today’s strength and cautious because of the way the VIX acted, but I did get into a play today right at the close. I bought puts on $BZH, I know crazy huh? Puts right after bte housing news what was I thinking? We will see and I will keep you posted on that one.

Video of some possible money making trades

Well it has been a weird market to say the least. Everything in me tells me to not trust this rally, yet rally on it does. I still see a lot of unsure money in this market and I still feel that we will retest our lows, the big question is when. I had to cut the very end of this video off due to it going a little long, but all the content is there. I apologize for the abrupt ending.

The dentist is in

Today I was on the road for all but the first hour of trading. I must admit, I was a wee bit perplexed prior to leaving with the way the mkt. was acting. But now that I have made it home and had time to mull over the happenings of the day, I think I see what is going on…. we filled some cavities or gaps as they are known in the trading world. I saw a lot of evidence of this looking through today’s charts. Speaking of charts….

(VIX) You may notice today that I took some stuff off of the charts, mostly the studies. I do this once in a while to clean off the noise and to see things in a different light. When I looked at this two things struck me right of the bat. 1. We just about perfectly filled the gap we created yesterday, with a pullback. 2. The low today was almost the exact high of the last two days prior to the gap, forming new support. 3. ( I know this is a bonus) We only lost 3% of the 10% gain from yesterday. IMHO, this points to some more up move in the VIX.

The DOW formed a base right on our support, the 7500 area as expected. It may play around this area even more, but  I would not be surprised to see some strong selling tomorrow in reaction to hard we sold off the last part of the day today.

The SP moved above our support, then ended up closing right beneath it. It’s gap was not filled, but it was attempted. Every time it does not close above the 800 line it makes it stronger resistance.

Now the NAS, the NAS knows how to fill a gap. Look the beautiful up move with a nice sell off leaving yesterdays’ gap filled. I thought it would take a month to fill that gap, but it took 1 day, amazing. I definitely feel today’s tape lends itself to bearishness.

Now look at the Qs in relation to the NAS, its tracking stock. Not quite as evident of a down trend, but check out this triple top, that is bearish, especially since this last one did not reach the 31.60 line. It also filled the gap from yesterday very nicely. I would not be surprised to see a move down to the 26 area again.

XLV, health-care sector, I just put this up because it looks like it has been banging its head against resistance. It looks like it wanted to move up, but I just don’t think it has the support it needs to break through, and I think that it will have to sell off and make another run at 24.50 to break it.

XLU, utilities, very similar to the XLV, except even a little more bearish. It is in an actual down trend already and sold off strong today. Again, a filled gap is apparent, I see more down move coming.

Here is BKE, which has had a great move up, and I think eventually it will continue, but for now it seems we must fall a little. You can see the strong resistance 33 is giving us and a great bear engulfing candle and a fib, all great signs of an imminent down move. This stock split recently so I expect in the long run it will continue up, but for now down is in play.

ATVI has been in an up trend channel and I look for it to continue. It filled a gap today and could move down a little before the next up move, maybe around the 9.75 area. This too recently split so keep it in your watch list.

Finally a chart in all its glory, DRI. The reason I show you this one is I saw it this morning prior to my road trip and I liked it for a put play. But I wanted to wait until the mkt. started selling off, if and when it did. So I kept checking it on my iphone until about 45 minutes prior to the close. It was difficult to trade without seeing a chart, but I knew what I wanted and I entered the trade with a very tight limit order. A tight limit order is an order below the ask. It was filled right away. I am up a little on the trade already and I will use today’s high as my stop. I choose this trade for the following reasons, huge open gap, bearish engulfing candle, close beneath fib, magnetic pull of the up trend line. My target is 30. 

In closing: It seems to me when we are in a bear mkt. and a bull move gap gets filled so quickly, that is a good place to go short. AKOT

Lee Iococca, you’re fired!!!

So the catalyst for this down move was the firing of Wagoner from GM, and the govt. essentially taking over a couple of our car companies. That’s it, that’s all it takes? (heavy sarcasm) Actually, this mkt. did not move down as much as I thought it should, as you saw in my tweet, from the events that caused the move. Most of the move occurred prior to the open, with what I thought was going to be a big sell off about an hour before the close. Instead we rallied into the close shaving about 50 points off our losses. We do have some support coming up that could make things interesting, and we have loads of economic information forth coming. Onto the charts:

Let’s start with a little perspective. Here is the VIX 5 year chart, still seems high no? Also, you can see a bit of  a wedge forming from the beginning of the year. Now, I think it is possible we are consolidating for a move, and I think it may be ultimately to the upside. It is above the 200 ma, the SRSI is low with room to rise, and it is near the bottom bb.

Now here is our close up of the same chart. You can see we gapped up near some minor resistance, and we closed off the highs of the day. Still we were up over 10% which is big. You can clearly see the consolidating occurring right before your very eyes. 

I found this very interesting, the DOW closed right on our support. It dipped beneath it briefly and rallied to sit right on it. Now I still have both of the possible down trend lines on the chart and they both are still in play. We are still over bought, and we had more v than Friday, another bearish day. I would say our next support is near 7250, but would not at all be surprised to see a bounce after today’s sell off. However, remember economic data will likely rule the day tomorrow.

The S&P looks similar with a little less of a sell off, as it was designed to do. You can see it closed right on our down trend line, and we have some pretty good support at 750, I would expect at the very least a stall out there, or a possible reversal.

The NAS has thrown a really nasty gap to deal with. The good news, it is right beneath a fib, the bad news, it closed right on the down trend line. Now if we look back to the Feb gap, you can see it took us a little over a month to fill that one, and like this one, it too was to the down side. We have definite support at 1440-1460 area and I look for support there. 

I did not throw any stocks in here because all of my put calls look genius and my two call calls are still in play. It is gap city out there baby and we will have to deal with the consequences. 

In closing: We did not make higher highs as I kept harping on last week, which if it holds is definitely bearish. If we continue this down move, I think that we may make a new low in the next couple months. If the support serves as a turning point and we make a new high, then we be bullish, it is that simple. In the meantime, trade treading those gaps, support, and resistance. AKOT