THE CIRCUS IS BACK!!!

Yes, folks. The circus is back, and amazingly, I see a lot of great setups. I will remove all of my iETFs in the morning, with the exception of one of them, regardless of what the market does, and I will raid these dollar stocks once again. Not surprisingly, I took a -2% hit today. I will bank at least +5% today, regardless of what happens in the general market. Mark my words.

In the military, there are a variety of terrestrial recon scouts that gather intelligence, observe enemy positions, conduct patrols, etc. Today, SGTs FAZ and TZA, along with PVTs SRS and QID, got captured deep behind communist enemy lines and well outside of my Area of Influence. I lost radio contact with them, and they are presumed to be dead.

Back in the day, long time ago, Jesse Livermore used to send out "feelers", or small positions, to "test" out the market. If they got killed, then he know something was wrong. Well, FAZ, TZA, SRS, and QID got the bitch slapped out of them. I consider them dead weight in my portfolio and acceptable casualties. I will sacrifice the -2% (and the -5% I took last Thursday) as acceptable losses in this war. Make no mistake, we are fighting a battle every single day in the markets. You are the commander of your own army.

In more delighting news, get ready to make some fucking money with the circus coming back to town. I have a list of picks, but I do not know which ones will breakout until they set up intraday.

You can refer to my Exception blog on GreenFaucet for real-time trades: http://www.greenfaucet.com/blogs/the-exception.

Anyway, pay close attention. This circus is not over yet. I will post imminent breakout picks. Most will be day trades. If they keep up momentum throughout the day, consider them to be swing trades.

I will attack one last time.

WEEKEND OBSERVATIONS

First, I am 25% short (QID, TZA, FAZ, SRS) and 8% long (MRGE). I am net short with a neutral-bearish bias. Once/If I get to the 50% short level, then I am "committed" to the dark short side.


I would like to note the New Highs-New Lows Index and the VIX. The ones below are for the NYSE and the NASDAQ. Do you see a problem on the chart? I do. We had the biggest rally (+30.5% so far) since the bear market started yet we can't get a noticeable uptick in new highs. This, among other things, tells me that the bear market is not over yet. There is no improvement here if we look at the 2-year picture.



The VIX is forming a bullish wedge and I am expecting a breakout to the upside or at least to the top of the wedge's channel. Obviously, this correlates with my bearish stance. The VIX also found support at the July 2008 high yesterday (Friday).


Now, the COMP, RUT, and SPX. All three have broken their uptrends. As the COMP was the first one to reach the 200-day, so shall it be the first to lead the decline, and it has. Some people say that the lack of volume has been an issue. If you noticed, we didn't get high bursts of volume in the beginning of any of the previous declines. We did get larger volume towards the end of the capitulation/exhaustion stages.

The most important market volume indicator is the COMP. Take a look at May 7th (red highlighted volume bar). This is the day that the COMP failed the 200-day MA, and it is also the biggest volume for the COMP in all of 2009. You may also notice that volume remained weak during previous declines. Price action should be your most important criteria when determining direction.


The RUT also has a pronounced breakdown, and it is very obvious. Currently flagging between 470-485, the RUT has the potential to reach the 50-day MA which should be above 450 in the coming days. There is major support at 470, so I do expect a lot of whipsaw on the daily.


Both indices are below both the 15- and 20-day SMA's, which is short-term bearish and serve as trend break confirmation.

Did you notice the "stick sandwich" 3-candle formations on the COMP and RUT? The textbook will tell you that it is a bullish pattern, but it is wrong. It's all about the location of it. The R-W-R (Red-White-Red) stick sandwich in my book is a continuation pattern to the downside (or if the candles were W-R-W, then bullish). If you need more examples of a stick sandwich, then let me know.

Finally, we come to the SPX, which is testing the 20-day. Of course, there is strong support at 875, a level which has acted as a barrier for months. So far, it is holding extremely well. The SPX's strength is the reason why I am not committed short. If we close below 875, then we could see a move to 840. We'll know if/when we get there.


As always, don't forget to exercise caution when shorting stocks.

CAPTURED: MOLESTA THE MAGNIFICENT (ASSHAT)

U.S. Marshals captured Molesta the Magnificent at approximately 11:32AM EST today.

He/she/"it" was seen walking between 58th & 3rd in New York City where marshals quickly apprehended him after robbing an individual only known as "S.B.".

Molesta is currently under quarantine at the NYC Metropolitan Detention Center due to an unknown new strain of "swine flu". The CDC has dubbed the new strain as the "Asshat Flu".

Developing...

MARKET COMMENTARY (5-14-09)

I am not sure what to expect today. We may continue trading in the approx. 884-898 range on the SPX, also within a secondary range between 880-905. I am currently 20% Short/15% Long/65% cash. Long positions are in ABCW, MRGE, and AHD and short positions are in QID, FAZ, SRS, and TZA.


As for the dollar stocks, some stocks still look good, so I may add them. Everything depends on today's action, primarily the close as I continue to rebalance the portfolio.