Stock Market for April 2009

[pinetree]

Thanks for the update.  After finally finding some clarity after the confused state I was in yesterday I've decided that.... I'm still not sure.

I'm back to leaning bearish, which is what I was at the start of the week.  But pretty much everything I look at is showing me conflict and indecision though, so I can't really get behind either side.  It's like everything is teetering on the edge.

EDIT -
What was that about 9.62 being a breakpoint on XLF?  We touched it again today and turned back.

Going short into this afternoon strength may not be a bad idea if you buy into 3j's option theory.  Either we decline into early next week and then rally into options expiry, in which case you take your profits and flip over to long.  Or we rally into next week and then fall into options expiry, in which case you average into more shorts next week.  Yes, I know he just made that theory up and it may not work this time.

Gold looking like it might be heading back down to 800.

EDIT 2 - Looks like 9.62 has been cleared to the upside.  Guess we should be going long...

[jjj000]

3j....if you dont mind....what did you put your orders in at?

I think at this point you want to stay away from my advice    Every move I make is a wrong one.  If TZA and FAZ gap up on Monday... heh... well... I'm just a plain old sucker weak hand.

I'll send you a PM later once I can stomach looking back at my account.

[Bottomfeeder]

no worries 3j....I sold my remaining 300 shares of FAZ at 18.25, and bought a 100 shares early at 16.07, then the bottom fell out more.

Pinetree....the XLF closed at 9.69 which according to stockconsultant is a breakout, but it did have an earlier top of 9.70 just a few days back.

Will have to jump on an upmove just to hedge if that 9.70 holds and moves up, but I am going to try and accumulate shorts 100 at a time on weakness, looking to get to about a 1000 shares.  A big momentum move on FAZ will get more capital.

Commentary is way too bullish coming into earnings to go long.  Looks like I sold my longs a bit early and probably early on a short position...just going to take it slow and build it.


Maybe I am out of my mind.

[Peter518]

Today the market reversed at 11:25 AM.  However, I did not believe it at that time, and at 11:50 AM financials broke out, but I hesitated to chase it, and it finally developed into a good trend day for finanicals.

What a big mistake I did today! 

It seems GS leads the financials...If I used 10-min chart of GS, instead its 5-min chart, it would be much clearer that GS held up very well above 50 EMA, trended up all the day, actually from Tuesday to today.

-----

I have followed ISEE (call/put ratio) recently.  It seems this indicator now acts more often as a positive indicator than a counter indicator.  My explanation is that maybe option traders have become smarter and smarter.   

For example, ISEE reached a 52-W high value of 220 on March 9, 2009, we all knew that date was a bottom (DJI: 6547.05 ).  Moreover, ISEE hit 206 on Dec 29, 2008, when market hit a local low (8483.93).  On the other hand, ISEE hit a 52-w low (66) on Sept 19, 2008, when the market at a local top (DJI: 11388.44).

(ISEE hit 108 on 11/20/2008   DJI: 7552.29, ISEE indicates a neutral sentiment.)

Today, ISEE has a very low value of 93.  If this time the ISEE sentiment indicator is correct again, it suggests that market has reached a local top and the market would correct next week.

http://www.ise.com/WebForm/viewPage.aspx?categoryId=126&header3=true&menu0=true&link1=true

---------

Some good news for uranium bugs:

NUCLEAR POWER COULD PROVIDE JOBS, ENERGY

http://www.uraniuminvestingnews.com/1565/nuclear-power-could-provide-jobs-energy.html

US Senate votes to lift nuclear ban; local senators concur

http://news.postbulletin.com/newsmanager/templates/localnews_story.asp?z=16&a=392623

Have a nice weekend!

Peter
 

[Bottomfeeder]

Well back looking at some charts again...... this is what I have come away with from this weeks action.

Gap UP's are bearish for the days trend.  The gap ups this week closed down, huh?  Gap DOWNS, are bullish.....usually closing higher, exactly opposite.

So I am not saying ignore the gaps but maybe we need to look at them differently.

3j....no worries about your positions as noone can pick an absolute bottom.  But I would be selling on a gap up within the first hour or two, to get back in at a lower price thats all.
 
I am expecting a gap up on our shorts on Monday.  I will sell them and look to buy back in cheaper later in the day.

The lesson I learned from last month is back to an allocation issue and buying in pieces, more slowly this time, as I am usually early and these 3x'ers were built to churn anyway, so its about as Pinetree said picking a direction, and sticking with it.  Money can be made on the countertrend while the position is getting set.

I might revise my bearish postion on Monday if the market goes off to the races, with high volume because you cant fight a strong move.  But todays action volume wise was not that stong, being the weakest in a month.  Smart market longs will be taking profits I believe and new shorts should be entering.  FAZ volume up over the past couple weeks, and rising. If it makes you feel any better StockConsultant has SKF as 80% bullish, oversold, trading back at 10/07 levels.  A break below 79.90 is trouble.

Hey its supposed to be scary when you are going against the herd.  Slow allocation though I think.

Just my two cents, but as always WTFDIK.

[jjj000]

Peter - interesting note about the ISEE.  I'll have to look into that.  Perhaps now smarter money is in options since the volatility is so high.  Not sure if that makes sense, but maybe...?

BF - ya, I hear you.  I suspect the market was pushed up at the end of the day today just so it can be shorted back down on Monday or Tuesday.  That would line up perfectly with my options skew theory anyway

I should probably have taken my own advice and waited until next week to do anything, too.  Stupid to try and make a play on a Friday.  Stupid to try and pick a bottom.  Stupid to try and "time the market".  Stupid a bunch of things

Live and learn.  Sooner or later, if for no other reason than out of dumb luck, I'm going to get one of these right.  Heh...

Have some fun this weekend guys... get back at it on Monday....

[pinetree]

Thanks Peter, I've been keeping tabs on ISEE since you pointed it out here a while back.  I noticed the low value but didn't think much of it either way, there are some conflicting signals there.  We had some low values near tops as you pointed out (which is not what we're trained to expect) but I also notice cases where it worked in the more conventional way.  We had a 67 on 11/12 and then had an intraday 800 point upswing the next day.  Then 11/14 all the traders bought into it and thought a rally had begun and ISEE registered a 134 upon which we began the nasty decent into the Nov lows.  Then it scored a 78 the day before the Nov bottom.  So the option traders were totally wrong in that case.

EDIT- In any case I agree that we see downside next week and bought some BGZ into it's late day swoon.  If we have upside on Monday I may add.  Will post more later, getting too late... Damn...all this chart studying on a Friday night... I should be out meeting girls...

[Bottomfeeder]

Been reading on hedging strategies.....let the fun begin huh?

Hey looking at this market move, especially if you have other inflation supply constricted investments like metals/oil-Long......taking alternative short postions makes sense to me.  Not really anxious to go and give up good long term longs like DXO, to make .50 a share.

I am thinking going short, nothing would make me and my other investments happier than being wrong.

This makes alot more sense to me than chasing an upside move here, just can't bet the farm on it and gotta take it slow.  My problem is I usually take too big a bite instead of letting things develop and kind of come to me.  Impatience.

3j....your idea about taking a position both ways not a bad idea, try and churn and rebalance.

Just thinking out loud, trying to manage risk/reward, and putting it out there.

[sidewinder]

Gee guys I go away for a bit and return to gloom and doom amid the best market we have had in months.  Sorry some of you have been experiencing the “sting” of the trader.  Was going to throw up a few charts and such over the last couple weeks but don’t want to bore or offend anyone with the charts and T/A talk as was expressed a week or so ago by someone.

 Jjjooo, Pinetree and BF you guys should be making money in this market.  My main chart service is down for new build and maintenance right now but this chart below will do. 

One of the simplest things I know of to play the markets is just use the McClellan Summation index with a 10 day moving average.  If it’s above the 10 day you are generally long. If it’s below you are short.  You can practically throw a dart, hit a stock buy it on a pullback and take the ride.  Well not quite that simple but you get the picture.  Summary is, don’t over engineer the situation to the point where you find yourself dazed in the heat of battle.  If you find yourself sitting there saying “why am I in this trade” get OUT.  Have a plan.  Trade the plan.  If you don’t have a plan (which includes a stop) don’t enter the trade.  One thing I have learned post Dines is know why and where I will enter a trade, size of the position and where I expect the stock to go.  In addition I know that if the trade goes against me I am out without remorse and looking to re-enter if conditions dictate.  If not where is my next trade?
 
Started to go back and find the several post over the last few months where I said that this market is not for widows and orphans.  And, I don’t like to hold overnight.  That doesn’t mean I won’t if the indicators are good EOD but, in this environment I need excellent technical’s to stay in a trade past market close. 

Have a couple of things I would like to throw out for your thoughts and will as soon as I can get my charts up.  If you are sick of hearing the T/A stuff apology in advance but not fun beating up on uranium all the time, I am sort of getting over it LOL.  Anyway look at that McClellan chart below. 

[Bottomfeeder]

Sidewinder.....where u been?  Create a TA tread if your worried about offending.  I would love to see more of your trades and hear your calls to see more what your working on!

Plus you have the nicest charts, although I must confess I have NO IDEA what they are, just to sophisticated for me.

Not every trading day/week is perfect, and sometimes we all make wrong calls.  You know how it is.  I did fine this week and made a couple of bucks, while switching to a bearish sentiment in a big bull move.  I am trying ultimately to swing trade these guys for the big money as opposed to day trading them.

I would like to be in a position to take a bigger advantage of moves like those from 3/9 in FAS to current....300% in less than a month.  Thats what I'm talkin about.  I caught alot of it, in early out early.....trying to do better, not easy.  I've heard it takes 5 years as a trader to reach your full potential, I am about half way there.  Just keep trying to get better.

[Bottomfeeder]

Sidewinder....I have a question for you.

Are you only trading now.  Not trying to minimize the money to be made in trading, but your comments about being over the U's struck me.

Do you have a portion of your portolio allocated for investment on a longer term as well?

The U's got killed like most everything else, and there were alot of lessons to be learned there.  Mainly not being predisposed to a postion that failed to see the other side, in this case downside, and cutting losses early in downtrends.

But don't we also have to keep an open mind to the upside as well, to keep from making the same mistake again only this time to the upside?

Appreciate your thoughts.

[pinetree]

Dazed in the heat of battle - that describes my state last week.   At least I had the sense to recognize it and stop trading. 

I had totally forgotten about my theory on changing tactics depending on whether the market is trending or consolidating, with different rules for each case.  My way to play the choppy consolidating markets was to game the intraday overbought/oversold readings.   I was reminded of this in looking at the intraday VIX charts where the hourly RSI and others gave very timely warnings of trend reversals this past week.  Now it's approaching oversold, which unless the market is about to enter a trend move upward, would say that some downside is ahead.

Look how overbought it was on Mon afternoon 3/30, after the huge gap down.  Maybe try FAS at the close for $5, and you could have rode it up to $7.  Same thing on Friday 3/20, way overbought and you could have taken FAS for $5 at the close and sold it for $7 Mon afternoon.

It's not that easy, of course, but it's still a useful guide.  Where you have to be careful and manage risk is you dont know when the consolidation will end, eventually you will get an overbought/oversold reading that will be a false signal and the market will just keep going in that direction.  Also, in a trending market you can see oscillators going to their extremes repeatedly and those should not necessarily be taken as trend reversal signs. 

It's not wise to trade on these signals in a trending market.  On 3/18 the market was still in a strong upleg and SPX touched overbought and VIX touched oversold, so you would want to ignore that signal.  Buying FAZ at the close on 3/18 would have resulted in a big loss the next day when the market continued higher after a tiny morning pullback.  That also means the signal on 3/20 (which turned out to be good, FAZ gained 42% in 2 days) should have been ignored too, because for all I know the market is still in the uptrend and will continue higher.  Anyway, it's not perfect because it does require toggling between strategies depending on what the market is doing and also the willingness to take a loss when the market switches modes.  But it seems to have potential and I think it would generate more wins than losses but I probably need to do a more thorough testing of it.

Thanks for the tips SW, please post all you want about TA...  I don't think I could ever get bored with TA.  
I've been worrying that I've been overdoing it with the chart posts myself.  Maybe we can make a separate thread for it, I remember Depleted had done that to avoid taking over the board with his charts.

I also would prefer not to day trade, if possible.  Besides, you're required to have a 25k account balance if you make so many day trades a week.  Since I'm still new to trading I don't want to start throwing too much money at it.  Yeah, I could add funds but I promised myself I wouldn't do that until I started making money consistently and made back last years losses.

[Peter518]

Pinetree,  Thank you very much for your post.  In your post, you mentioned overbought/oversold several times.  However, it seems to me some overbought should be oversold, some oversold should be oversold.   Would you check and confirm it?

All the best. 

Dazed in the heat of battle - that describes my state last week.   At least I had the sense to recognize it and stop trading. 

I had totally forgotten about my theory on changing tactics depending on whether the market is trending or consolidating, with different rules for each case.  My way to play the choppy consolidating markets was to game the intraday overbought/oversold readings.   I was reminded of this in looking at the intraday VIX charts where the hourly RSI and others gave very timely warnings of trend reversals this past week.  Now it's approaching oversold, which unless the market is about to enter a trend move upward, would say that some downside is ahead.

Look how overbought it was on Mon afternoon 3/30, after the huge gap down.  Maybe try FAS at the close for $5, and you could have rode it up to $7.  Same thing on Friday 3/20, way overbought and you could have taken FAS for $5 at the close and sold it for $7 Mon afternoon.

It's not that easy, of course, but it's still a useful guide.  Where you have to be careful and manage risk is you dont know when the consolidation will end, eventually you will get an overbought/oversold reading that will be a false signal and the market will just keep going in that direction.  Also, in a trending market you can see oscillators going to their extremes repeatedly and those should not necessarily be taken as trend reversal signs. 

It's not wise to trade on these signals in a trending market.  On 3/18 the market was still in a strong upleg and SPX touched overbought and VIX touched oversold, so you would want to ignore that signal.  Buying FAZ at the close on 3/18 would have resulted in a big loss the next day when the market continued higher after a tiny morning pullback.  That also means the signal on 3/20 (which turned out to be good, FAZ gained 42% in 2 days) should have been ignored too, because for all I know the market is still in the uptrend and will continue higher.  Anyway, it's not perfect because it does require toggling between strategies depending on what the market is doing and also the willingness to take a loss when the market switches modes.  But it seems to have potential and I think it would generate more wins than losses but I probably need to do a more thorough testing of it.

Thanks for the tips SW, please post all you want about TA...  I don't think I could ever get bored with TA.  
I've been worrying that I've been overdoing it with the chart posts myself.  Maybe we can make a separate thread for it, I remember Depleted had done that to avoid taking over the board with his charts.

I also would prefer not to day trade, if possible.  Besides, you're required to have a 25k account balance if you make so many day trades a week.  Since I'm still new to trading I don't want to start throwing too much money at it.  Yeah, I could add funds but I promised myself I wouldn't do that until I started making money consistently and made back last years losses.

[pinetree]

Heh, it wouldn't surprise me if I screwed them up but they look right to me.

It gets confusing because I'm referring to ob/os on the VIX, which generally does the opposite of what the market does.  So on 3/20 and 3/30 the VIX was getting overbought and potentially due to correct, and a selloff in the VIX means a rally in the markets, so go long.  When VIX is oversold and due to rally, that means the market is due to correct.  But you can also apply it to ob/os readings in the indexes themselves, that way it might make more sense.  Does that sound right?

Bf, I hear ya about building a position if FAZ.  I've had the same thoughts, but I'd want to be averaging up in price.  Be careful averaging down into one of those 3x-ers.  Like Dennis Gartman says, never average down because prices can always go so much lower than you could ever imagine.  There were people who were buying FAZ at 60 because a popular blogger said so, and are still holding now.  Scary!

I was thinking that we're all on the right track here.  Seems like we're accumulating a lot of good info and eventually it will start paying some good dividends.  I like the idea of everyone else chasing newsletters and the next hot guru, meanwhile a group of guys on some obscure uranium message board all figure out a way to get rich.  Sooner or later it should happen.

[Peter518]

Pinetree, Thank you very much for your explanation.  Now it is much clearer to me.  Thanks again.  Peter