7 years ago
Friday, June 18, 2010
Options Expiration Friday
As pointed out by a reader, today is options expiration Friday with the largest open interest of SPY calls at $112. It will be interesting to see what happens, but expect there to be volatility in the area. Also I'm not sure I would take any break of $112 too seriously until Monday
Thursday, June 17, 2010
MEat Grinder keeps grinding away
Even intraday, this market is punishing anyone trying to navigate it. This is the most ridiculous manipulation I've seen in a top and truly it ought to be investigated by the SEC. With all their circuit breaker rules, why they allow this kind of senseless volatility to exist for the sole reason of stripping people of their accounts is beyond me, except for when I consider the fact that the government is complicit in these events or at least turns a blind eye to them. This is why we do not chase every 200 point day up or down. As I have recently pointed out, over the last 4 weeks, the market has gained no ground, yet we have seen the S&P rack up 29.13% up or down combined and 315.37 S&P points up or down and a net move over the period of +0.09% That's a lot of movement for not even 1%! That's what I call a meat grinder and that doesn't even take into account the intraday highs and lows-you could probably double those numbers!
Tonight I've taken some of the positions I posted about a week ago and updated them to reflect the market's move since then with new stops and entries, many can be entered now.
The end of day rally has me wondering what they intend to pull out of their hat in the a.m. Maybe a gap up and a bearish engulfing candle of that hanging man in most of the indices? That would be nice, at least we'd have some follow through and in our direction as well.
This is exactly the reason we have our core trending shorts at 50% and not 75 or 100%, the market needs to follow through and show us before we commit the rest of the position. Please consider not reacting to every shuck and jive of this market, that is exactly what they want you to do. Be patient and follow your risk management plan.
check out tonight's updated list. If this market does follow through on the negative divergence and hanging man, they should be in perfect position to make some money. This is not a market well suited to any kind of trading at this point, as today showed, even day traders can't hold a position more than a few hours without getting whipsawed. This is not by chance, it is by design.
Also check out the longs I put up last night in metals and mining, the momo crowd should be back and URRE that jumped 34%, was a long on 6/2's list. I hope someone got a pice of that one.
Look for an update in the a.m. I can't imagine the market will not have a reaction to the unemployment #'s that came out today, or at least that they won't use them to create even more volatility.
Tonight I've taken some of the positions I posted about a week ago and updated them to reflect the market's move since then with new stops and entries, many can be entered now.
The end of day rally has me wondering what they intend to pull out of their hat in the a.m. Maybe a gap up and a bearish engulfing candle of that hanging man in most of the indices? That would be nice, at least we'd have some follow through and in our direction as well.
This is exactly the reason we have our core trending shorts at 50% and not 75 or 100%, the market needs to follow through and show us before we commit the rest of the position. Please consider not reacting to every shuck and jive of this market, that is exactly what they want you to do. Be patient and follow your risk management plan.
check out tonight's updated list. If this market does follow through on the negative divergence and hanging man, they should be in perfect position to make some money. This is not a market well suited to any kind of trading at this point, as today showed, even day traders can't hold a position more than a few hours without getting whipsawed. This is not by chance, it is by design.
Also check out the longs I put up last night in metals and mining, the momo crowd should be back and URRE that jumped 34%, was a long on 6/2's list. I hope someone got a pice of that one.
Look for an update in the a.m. I can't imagine the market will not have a reaction to the unemployment #'s that came out today, or at least that they won't use them to create even more volatility.
Wednesday, June 16, 2010
Did you see that?
Last night I mentioned URRE and the momentum crowd seemingly getting ready to play this one. This is an elaborate type of trade in which the market maker is forced into a corner that actually causes the market maker to drive prices up. It's almost the opposite of the old time bear raids. In any case, it was up 34% in one day today. There was some room to make some money in it if you played it right. So the industry group has several more that could be potential targets.
Trade guild explains my view on the market, we know what we are going to do so long as we don't see upside follow through.
In the meantime, maybe you can make a quick buck in the Metals and Mining industry group that URRE was in. I listed a few long trades in the group as momentum breeds momentum. Take a look at the trades tonight, but remember that this is counter trend, a move like today's 34% should be taken immediately. These are also largely speculative so absolutely you must have risk management plans in place, but while the market is like the summer sea (flat, stinks to be a surfer), you might make something in one of these.
UPDATE Here's how momentum trades work. A market maker/specialist is the last resort, by law and for the privilege of making a market in a particular stock, these guys HAVE to take the other side of any trade that is at market if there are no other takers. So a group of traders or a black-box continually pounds away at the ask, the market maker raises the ask initially to discourage the buying which is diminishing his stock (actual supply), but he can go naked short unlike us. The momo traders keep hitting the ask driving price higher. At some point the market maker will run out of inventory and in effect be filling these market orders in a naked short position which he must cover. So the market maker tries to cover by buying which drives the market higher, and so on and so forth and it can last for days and even weeks. It is typically in low priced NASDAQ stocks that have memorable tickers like BOOM or CHINA (which is another one worth considering right now). I don't know why they choose these stocks, these tickers, maybe because the retail crowd remembers the name and gets involved, maybe coincidence. In any case, a market maker can be severely punished by these momo traders and it can take him a long time to work the bid and ask to get back to a flat or profitable position, that's if the momos don't show up again which they often do. So whatever is going on in the Metals and Mining group, it appears to have attracted their attention. The only thing with these trades is when they disappear, the stock can fall like a rock so you have to not be greedy and watch the volume for signs of them leaving the trade.
So now you know.
Trade guild explains my view on the market, we know what we are going to do so long as we don't see upside follow through.
In the meantime, maybe you can make a quick buck in the Metals and Mining industry group that URRE was in. I listed a few long trades in the group as momentum breeds momentum. Take a look at the trades tonight, but remember that this is counter trend, a move like today's 34% should be taken immediately. These are also largely speculative so absolutely you must have risk management plans in place, but while the market is like the summer sea (flat, stinks to be a surfer), you might make something in one of these.
UPDATE Here's how momentum trades work. A market maker/specialist is the last resort, by law and for the privilege of making a market in a particular stock, these guys HAVE to take the other side of any trade that is at market if there are no other takers. So a group of traders or a black-box continually pounds away at the ask, the market maker raises the ask initially to discourage the buying which is diminishing his stock (actual supply), but he can go naked short unlike us. The momo traders keep hitting the ask driving price higher. At some point the market maker will run out of inventory and in effect be filling these market orders in a naked short position which he must cover. So the market maker tries to cover by buying which drives the market higher, and so on and so forth and it can last for days and even weeks. It is typically in low priced NASDAQ stocks that have memorable tickers like BOOM or CHINA (which is another one worth considering right now). I don't know why they choose these stocks, these tickers, maybe because the retail crowd remembers the name and gets involved, maybe coincidence. In any case, a market maker can be severely punished by these momo traders and it can take him a long time to work the bid and ask to get back to a flat or profitable position, that's if the momos don't show up again which they often do. So whatever is going on in the Metals and Mining group, it appears to have attracted their attention. The only thing with these trades is when they disappear, the stock can fall like a rock so you have to not be greedy and watch the volume for signs of them leaving the trade.
So now you know.
Update 2
Update
OK, well last night's 3C charts of the Dow's negative divergences seem to be accurate meaning yesterday is likely to have been a false breakout. False moves create real and fast moves in the opposite direction. Lets see what we get today. If you are new, look t the core ETFs we are using to short the market and the limit shorts will start triggering if this continues down, so pay attention to them, put them on a watchlist if you can with an alert. TeleChart has this ability.
Lets see what this turns into, but you know my suspicions. As I was saying to newcomers, we want to be at about 50% short and the rest cash or a little in UNG long. Another 25% short will be added below SPY $104.40 and the remaining 25% stays in cash. If you don't have your positions, you should take any chance you can get (any intraday strength to short into). RISK MANAGEMENT before you place the order, not after!
Keep your arms and legs inside the vehicle, and put on your set belts, today is likely to be another volatile one.
Lets see what this turns into, but you know my suspicions. As I was saying to newcomers, we want to be at about 50% short and the rest cash or a little in UNG long. Another 25% short will be added below SPY $104.40 and the remaining 25% stays in cash. If you don't have your positions, you should take any chance you can get (any intraday strength to short into). RISK MANAGEMENT before you place the order, not after!
Keep your arms and legs inside the vehicle, and put on your set belts, today is likely to be another volatile one.
Tuesday, June 15, 2010
Read Trade Guild tonight
Last time we had the NASDAQ breakout and the S&P and Dow fail to follow I felt the same as I do now, except today we had the mirror opposite. 3C is showing significant divergences to the downside, my money is on false breakouts today in the Dow and S&P, but if they are not, we can look forward to another rally and a right shoulder to complete a H&S top. News is not driving this market, it is being used to drive volatility. Fundamentals are out the window. How can you have a valid argument for fundamentals/economics when an index is down nearly 300 points in a day or two and then up 200+ the next? This is one of the toughest trading environments I've seen since late 2008 when the Fed was the culprit in manipulating the market.
I'm hesitant to issue any trades until this situation resolves which could be as soon as tomorrow if the Dow/S&P fail and the NASDAQ and Russell fail to make any upside. At that point things will make a lot more sense and our plan will remain valid and intact. If not, then be prepared to hedge and raise cash. You are now trading in one of the most difficult environments I've seen in a few years. As I shout from the rooftops every night , "RISK MANAGEMENT!"
THE UNG TRADE IS WORKING SPECTACULARLY, STICK WITH IT!
WDC is approaching an area in which it would make for a high probability low risk short.
Watch LZB (S) for a break below $10
Watch the SPY for a break below $111, it could make for a quick profitable short.
Any move up in the Dollar index or UUP will be very bearish for the market. It traded in a fairly narrow range today suggesting that the downside pressure may have subsided, there are short term positive divergences as well.
URRE is a highly speculative play, but it looks like the momentum crowd may be sniffing around. You could try a long on the open and close it at the end of the day should it take any loss or make a new low. This would be a quick pop trade only. It is highly speculative.
The exact same applies for URZ.
If we do continue on an upward trajectory, I have a lot of long positions that should do well(in an upside environment), BUT, Wall Street is using extreme volatility, as noted 2/3 of the market days in the last month have seen triple digit moves up or down. I do not think it is wise to chase yesterday's big move considering the fact that the S&P 500 has had a net move of -.50% in the last 20 trading days (4 weeks). This is the meat grinder. For now, lets stick with the plan until we see something suggesting otherwise. Chasing yesterday's triple digit move is more than likely going to put you on the wrong side of the next day's triple digit move. As I've stated before, your greatest edge over Wall Street is your ability to wait. Patience isn't easy, but it is exactly what is called for right now.
If you have an interest in a specific stock, email me. If you are even a little unsure about risk management, email me immediately.
Tomorrow is another day.
I'm hesitant to issue any trades until this situation resolves which could be as soon as tomorrow if the Dow/S&P fail and the NASDAQ and Russell fail to make any upside. At that point things will make a lot more sense and our plan will remain valid and intact. If not, then be prepared to hedge and raise cash. You are now trading in one of the most difficult environments I've seen in a few years. As I shout from the rooftops every night , "RISK MANAGEMENT!"
THE UNG TRADE IS WORKING SPECTACULARLY, STICK WITH IT!
WDC is approaching an area in which it would make for a high probability low risk short.
Watch LZB (S) for a break below $10
Watch the SPY for a break below $111, it could make for a quick profitable short.
Any move up in the Dollar index or UUP will be very bearish for the market. It traded in a fairly narrow range today suggesting that the downside pressure may have subsided, there are short term positive divergences as well.
URRE is a highly speculative play, but it looks like the momentum crowd may be sniffing around. You could try a long on the open and close it at the end of the day should it take any loss or make a new low. This would be a quick pop trade only. It is highly speculative.
The exact same applies for URZ.
If we do continue on an upward trajectory, I have a lot of long positions that should do well(in an upside environment), BUT, Wall Street is using extreme volatility, as noted 2/3 of the market days in the last month have seen triple digit moves up or down. I do not think it is wise to chase yesterday's big move considering the fact that the S&P 500 has had a net move of -.50% in the last 20 trading days (4 weeks). This is the meat grinder. For now, lets stick with the plan until we see something suggesting otherwise. Chasing yesterday's triple digit move is more than likely going to put you on the wrong side of the next day's triple digit move. As I've stated before, your greatest edge over Wall Street is your ability to wait. Patience isn't easy, but it is exactly what is called for right now.
If you have an interest in a specific stock, email me. If you are even a little unsure about risk management, email me immediately.
Tomorrow is another day.
Update 3
This could be the false breakout attempt I mentioned last night, 3C remains in a deteriorating negative divergence
Update 2
The divergence to the downside is getting worse and prices on the SPY have broken the intraday uptrend
