Friday, April 3, 2009


I will be leaving for Cancun in a few hours and I will be gone for an entire week, so just use your imagination here for the next few days. I went long several stocks for a swing trade, obviously not as a day trade. This is more of a test to see the effectiveness of high probability technical patterns. I added a few wave 1 symmetrical triangles, such as TSL, SIRI, FEED, and JASO. I also added MI and HBAN, both financials, showing ascending triangles. Immediate support levels are marked in orange, and targets are marked in purple.

As an emergency precaution, I have a direct line to my institutional broker if any of the patterns fail, in addition to wider stop losses in case all of Mexico goes out of power. This will be the first time that I leave open positions without daily intraday observation. Only technical analysis, and no fundamentals, have been used to select these stocks and the results will be marked the day I get back. I don't recommend people to do this, even though I'm the hypocrite doing it.

See you in a few.


Yesterday was very interesting for me. I spent all of last night packing and preparing for my trip to Cancun (I will be leaving later this evening, and no, I'm not finished with preparing). Around 2PM, I fell asleep at my desk and woke up at 4:20PM - right after the market closed. It's great to see that FAZ didn't go to hell at the end of the day, but I made a fatal mistake. Don't trade when you're too tired to function, since it's like trading when you're drunk, maybe worse. In any case, I still hold the remainder of my FAZ and I'm willing to play it out as the market consolidates its gains.

There is significant overhead resistance as the market and most sectors are riding along the upper long-term multi-month channel trend line. The line also marks where the 100-day MA is located. We will consolidate here in the 50/100-day MA box until the market makes it's decision. I'm surprised by how some people "know for sure" what's going to happen. If that's the case, go ahead and draw on your credit lines, mortgage your house to the hilt, max out your credit cards, and go make your bet.

The future is uncertain, and I took a poll to see what people think regarding how long the rally would last, and here are the results:

How long does the rally last? [175 votes total]

1 day (45) 26%
2 days (26) 15%
3-4 days (13) 7%
1 week (17) 10%
2 weeks (13) 7%
3 weeks (13) 7%
1 month (20) 11%
2 months (9) 5%
3 months (7) 4%
Longer... (12) 7%

Thursday, April 2, 2009


There has been a lot of rising/falling wedges and funnels as they can be seen most clearly on the 5-day chart. They are typically followed by a spike. Today's action suggests the market has an equal chance of going in either direction, diminishing any edge that once was present. As a result, I removed more than half my positions and hold onto a majority cash position until this resolved. The market has flagged the past 3 days, within a larger flag.

(Note: Futures indicate a large spike to the upside).

World indices are not breaking down as expected, with the FTSE leading the european markets with the DAX, and CAC following. The NIKKEI is leading the Asian markets. Not only that, almost all sectors negated their reversal patterns. Patterns do fail, so be aware of that.

My thinking is not "bullish", but rather neutral for the time being, just as the market is neutral. The market rebounded from the 50-day MA, but remains in a larger multi-day consolidation. The 5-month charts are drawn with a bullish bias, and I can clearly see the multi-day flag forming. I will have to see another 50-day MA failure to re-initiate committed short positions. It was definitely fun and very interesting while it lasted.

The M2M FASB meeting is scheduled for 8:00AM EST with approx. 5 hours of discussion. In addition, jobless claims will be reported at the usual 8:30AM EST. The consensus is 655K with a range of 630K to 672K, the previous reading being 652K. The employment situation report will be released tomorrow at 8:30AM EST. The consensus is -650K with a range of -711K to -525K, the previous reading being -651K. Shortly after, the ISM non-mfg report comes out at 10:00AM EST. The consensus is 42 with a range of 40 to 44, the previous reading being 41.6. Lots of news ahead folks, strap on those seat belts.

With the present allocation, I can take about a 40% loss on the current FAZ position before my March gains are entirely wiped out. As much as I would hate to see that happen, I am willing to hold if the market runs and tops out in the short-term. If you are short, daytrade long to recover as much of your losses as you can.


Wednesday, April 1, 2009


Today was the perfect example of a day where you had to stand firm if you were short. There was no reason to cover despite the market killing most of your gains. You must know that, statistically, only 1% of breakaway gaps fill within the first 5 days. We marched to the high of the first opening gap's bar and quickly failed, unable to fill, unless you were the Nasdaq (COMP). Right now, it's a fight for the 50-day MA for the SPX, DJIA, and RUT. The COMP formed a shooting star, a 'warning from above'.

Yesterday's action confirmed the breakaway gap in several sectors, most notably in energy, cons. staples, and industrials. Further, the cons. disc. and materials sectors formed a 2nd consecutive doji, signaling major indecision. Health care formed a black filled candle at it's uppermost resistance and we can see shooting stars in tech and utilities. All are potential reversal patterns. The financial sector is actually the strongest sector, but I'm not concerned at this time.