MARKET COMMENTARY (8-07-09)

Alert: SPX just made a new high.

Here are the SPX charts, as usual.

THE AIG TRADE

First, the SPX is in a tight narrow range. That's it. Moving on...

Now, I've been asked by many, many people to detail my AIG trade, so that's what I will do. I didn't get the idea to do this until a reader by the name of Eric Weisgerber sent me a chart detailing my trades. I thought it was pretty cool, and here's what he sent me (with his permission to post, of course):



AIG accounted for about 70% of my day's gains. I am very close to hitting my +300% 2009 YTD mark and today, I am effectively increasing my 2009 goal to +400%. You heard it here first.

The first question is, "what made me venture outside of my $1-3 playing field"? It's simple. I was tracking the XLF and several financial components and realized that I had to abandon my dollar stock circus plays immediately. This rarely happens, but when it does, I will cut everything I have to focus on whatever I believe will be the best use of my capital.

I annotated my own Stockcharts.com chart using Eric's notes (and my twitter) simply because I love Stockcharts.com:


Then came AIG. AIG at $14 was already a base breakout on the daily, so it caught my attention immediately. My first purchase was at $14.46 as noted.

Now, as you may have noticed for the past few weeks, I do scale in and out of positions. This ensures that I keep the majority of my gains, while keeping any losses at a minimum (I did lose once on the AIG trade after 2PM for -2%, which was nothing to me). Scaling in and out is a primary strategy for me during momentum plays.

In the next few trades, you can see a multitude of symmetrical and ascending triangles. It is important to note the volume. Volume should be light during these consolidations. On the first spike, whether it's still inside or outside of the triangle, the volume should spike. This provides the "spark" that will keep a stock moving. This applies to all trades.

My first and only loss came when a double top formed on AIG. I sold near the first breakdown. A -2% loss at this point didn't even register in my mind. Following the complete breakdown, you can see that AIG was stabilizing. I bought at the first breakout of the base stabilization and I am still holding that 5% position.

In total, I made more in one day than what most people work to make in a year as a salaried employee.

My attention has now shifted to all financial stocks at this point, regardless of price, because they all have the capability to become Spikers RIGHT NOW.

So that's that. My CIT and FRE trades followed similar patterns, but not like AIG which went totally insane. It's important to trade what you see. Many people were confused that there was no news out. Who cares? Find out later. Your objective is to take advantage of what is present, and the present told me I was gonna bank serious coin.

So that's the AIG trade, the trade that became the decisive factor in my decision to increase my YTD goal to +400% YTD.

HOW'S THE REST OF THE WORLD DOING?

There's pretty much nothing going on in the market, and I'd rather not bore you with more charts of the S&P. Instead, let's take a look at 2-year/weekly charts of 13 world markets compare them to our SPX and COMP.

MARKET COMMENTARY (8-04-09)

Currently -35.9% since the bear market started on October 9, 2007 (17 months), but up 48.2% from the March low.


Below are the 2-day, 5-day, 10-day, 1-month, 5-month, and 11 month charts of SPX.