Monday, December 22, 2008


I'm sick of these last half-hour shenanigans, but this time it was different. I actually expected this it, because the market was at it's lower range during 12/12 - 12/16 when the market formed a double bottom. This is an example of how charts can provide some value in anticipating pullbacks and throwbacks and possibly, the dreaded "WTF pattern".

WTF Pattern (noun): A technical pattern that usually occurs during the last hour or last half-hour or even the last 5-mins of any trading day. It doesn't care if you're a bull or bear. It is non-biased and only causes extreme agony and stress for the overnight holder. Toward the end of the day, traders sit at their trading desks bewildered and confused as to what just happened prior to the closing bell. This creates a nationally coordinated, highly audible response to the unusual action which begins with a "WTF!!!" and may continue with creative vulgarity to express uncontrollable anger and dismay (see SPX 1-day).

Besides the WTF pattern that occurred around 3:40PM today, we had a series of bear flags that actually did what they were supposed to do -- breakdown, making today a very easy day to trade. The 880 breakdown was a key shorting level because the market declined below the 12/18 V-bottom and 12/16's pre-Fed flag level. After that, the market didn't have much short-term support.

In addition, I stated that the VIX was forming tails at the 100-day MA and it may reverse. The VIX fell as low as 42.75, went positive to 46.69, but backed off in the last 20 minutes (WTF). This is the 3rd tail on the VIX.

Right now, it looks like we are closer to forming a bearish wedge than an ascending triangle. It appears that both sellers and buyers are exhausting themselves (notice extremely low volume today). Many sellers sold a while ago and buyers don't really have the buying power (they can't even buy Christmas presents), therefore, we're stuck in this slow and boring tape which I'm sure is driving some people mad. The market will stay rather quiet this entire week as more people look forward to their Christmas festivities rather than risk losing more money. For most people, they'll be glad that 2008 is finally OVER.

Look at 10-day & 45-day charts of the SPX for support/resistance levels and actually write them down. It's easy to forget about them while you're on the battlefield. Knowing these key levels helps prevent panic selling or impulse buying. You'll also be aware of why and where bounces occur so you're not caught off guard. This is true, unless you get hit by the WTF pattern in which case you'll only have seconds to react to the idiotic program trading and/or manipulation.

I just realized that the ProFunds Group, parent of ProShares, is only 19 blocks away from where I am. Many people seem to be dissatisfied with their 2x ETFs. After I sell my holdings, if you'd like me to drive by and throw Molotov cocktails at the building, let me know.

Anyway, we're at the 12/12 - 12/16 lower range, but we're also sitting on top of the 30-day MA. The market could continue this rally for a short period of time until it hits 875 (20-day MA), 880, and maybe even 890 (50-day MA). After a bounce, if the SPX drops below 860, we would have formed a lower high which will confirm a bearish wedge pattern. For the market to burst through 920, it will probably require a catalyst greater than the Fed's rate cut, or maybe Santa coming to town would just do. In any case, the market is running out of time and it will soon make a decision with or without you.

SPX 1-day

SPX 3-day

SPX 5-day

SPX 10-day

SPX 45-day

SPX 3-month

DJIA 3-month

NASDAQ 3-month

Russell 2K 3-month

VIX 6-month

Don't forget to try the Free Trend Analysis. It's FREE, so give it a shot!


JWC4 said...

WTF is SDS doing down 10% when the S&P is down?!?! Did I miss something?

John C. Lee said...

yes. proshares ex-dividend day today.

JWC4 said...


Anonymous said...

What do the tails on the VIX chart mean? Looks a lot like the long term SP500 chart.

John C. Lee said...

tails are a bottoming out least for the short-term.