Warning: Following my trades may be hazardous to your financial health. See Disclaimer.

Wednesday, February 29, 2012

Alas, The Bears Claimed Victory!

It's pathetic really, but the bears finally had something to cheer about.  For the first time since last December when the 200 day EMA support failed, this is the first time the bull failed to defend a major support: 137.18, the old 52 week high.  In addition, the buy-the-dip failed.  But the 50 MA on the SPY 60 minute chart did hold.

We have a marginal bearish engulfing candle today. A small inside day started with a gap up to correct the closing dip may be in order for tomorrow.  For the bulls, nothing was broken today, but for the bears, today could be a start.

Short Individual Stocks

I had a post on How To Short The Market the other day.  The truth is, you're much better off shorting individual stocks.  It's more scary than shorting the market but you have better odds.  As the post mentioned, there are a slew of reasons why you shouldn't short the market but some of these reasons are not applicable for individual stocks.  Among other things, individual stocks are not subject to "sector rotation" where the market is kept afloat in overbought conditions by hyping different sectors in turn.   And the president doesn't care about individual stocks, he only cares about the overall market.

SODA had earnings announcement this morning, resulting a red gap and subsequent run, pretty much erased the last 4 days' stellar run.  This type of action, and even recent past's "reversion to the mean" (which traders like me love) up and down actions hardly exist in the market chart a la SPY.

Just don't short AAPL!!!

Tuesday, February 28, 2012

CEF Targets

Gold and silver related issues have been my saving grace. They are something I don't mind holding longer term in this overbought market.  So far I have flipped CEF in a luckily timely manner, and now riding the breakout.  It looks like it may run out of gas around 24.60, and then 26.  But if all goes well, the eventual target would be 27.30, where the rectangle target and the 76.4 Fib extension meet.

RENN Target

RENN has earnings next week.  It came up on my scan yesterday, but I missed the initial pop as it broke out of  the flag today.  I chased with just token shares.  It has > 47% short float, certainly a candidate for a short squeeze.  Full target of the flag is 7.91 if it pops on earnings.

Market Has Made Up Its Mind

Market has made up its mind to screw all, bulls and bears alike.  Bulls on the surface look like they are sitting pretty.  The reality is, aside from their 401K/IRA accounts, most hate this relentless grind higher.  They have taken profits earlier and been waiting to reload at lower prices.  As for the bears, they've been taken to the woodshed many times over and are on the verge of capitulation, speaking for myself.

The market has plenty of opportunity to have a proper correction (e.g. > 1%) before continuing higher, but it refused.  This can only mean one thing-- it wants the last bear to resign and the last bull to chase, then it is light out.  The market would dive down big, not in a fashion of a correction, but down and not looking back.  This time around, the bears would chase, and the bulls would be taken to the slaughter house.

The market has made its intention clear.

Monday, February 27, 2012

Bears Beaten But Not Out

Bears beaten but not out.  I should add "yet".  It was a demoralizing day to say the least.  What else is new?!  A nice red gap that I knew would be bought to some degree, but not THIS much!   I sold some bear funds soon after the open near the market low, but I bought them all back because I'd have thought the low would at least be tested.  The market never look back even as the gap got quickly filled.  It wasn't until the old high of 137.18 was taken out that the market started to take a respite.

The negative divergence on the SPY 60 minutes didn't play out as hoped.  But the new high didn't hold and we have another mini negative divergence.  The action in VXX, the volatility index, is a bit more promising. TZA, the triple small cap bear, is also not as bad.  Tomorrow is crucial as we see how the negative divergence gets resolved.  But guess what?  As if the bears had enough breaks, the end of the month window dressing is upon us!  Bears need to pray hard!

Friday, February 24, 2012

Could This Time Be Different?

While the ADX or trend is too strong on the daily chart of SPY, the 60 minute is not.  ADX is at modest level of 14.74.  So oscillators such as MACD can be taken a bit more seriously.  As pointed out yesterday, MACD is setting up for negative divergence.  Today it's closer to fruition.  So far this year we've had two other times of possible tops with negative divergence (see circled areas), but low volume grinds eventually negate the setup.  We're at it once again.  This time at SPY 137.   I don't want to jinx it, but could this time be different?  Or is it too good to be true?   February isn't supposed to be this strong.

Thursday, February 23, 2012

How To Short The Market

Over the years, I've fallen victims of bears being devoured by the market.  The dot com era was particularly painful.  No short positions survived to see the subsequent bear market correction.  Here we are again, no double dip for the 2009 bear market.  As a matter of fact, the Dow Jones Industrial index has exactly doubled from the 2009 low.  Even with the Euro on the verge of collapsing, the market simply padded its knees and continued climbing.  The Greece bailouts were simply gimmicks to trap the bears.  I never learn.  You can do better.  Learn from my costly lessons!

Don't SHORT the market!

  • If the market goes up most of the time, why play the odds that's against you?
  • It's unpatriotic.  All the presidents want the market to go up, especially for his re-election. It's just short of treason to fade our president.
  • Until it's time to bust the market, the financial elites, with their insatiable greed, want the market to keep booming and increase their wealth indefinitely.  How many time have you seen the market busted?
  • Don't go against the Fed.  Just like no politicians want to stick his neck out and increase income taxes, no Fed chairman wants to stick his neck out and let the market take its natural course.  
  • It's plain harder to short than to long.  Just look at any paid services or ask any professional money manager. I can guarantee their winning percentages when going short are a mere fraction of their winning percentages when going long.
  • It's the naughty thing to do.  Like a tot, the more the rule says don't, the more he wants to do it.  The market is trending up, but the naughty ones just want to fade it.  Naughtiness is in our blood.
  • Even without the injected liquidity by the administration, the market has a trick called sector rotation.  Sectors are hyped up to boost the indexes; when they got too hot, simply rotate to other sectors. And so forth. In the process, the market grinds higher even as individual sectors correct.
  • A longer term "scam" is index rebalancing.  The S&P 500 (or any other index) will replace a stale declining company with a prospering company.  Tell me this favors the bulls over the long run!

If you cannot resist being a glutton for punishment (see Bears Are Meant to Suffer), follow the following guidelines religiously and you may get lucky.  Note: Day trading is the exception to the following guidelines.

  • Always scale in, recognizing that that topping is a process and may take weeks if not months.
  • When scaling in, do it in very small sizes and over a long period of time.  For some reason, I tended to be more aggressive in number of shares when I shorted, and I got run over by the market almost without exception.
  • Sell naked puts on a inverse ETF if available. (e.g. SH for short S&P500. The volatility is low now but you can still sell ATM put for $.50 that expires 3 weeks away.) Chances are you'll be assigned shares at expiration; if not, at least you walk away with the premiums in the pocket.  Build up your positions slowly this way is even better.  Just make sure you have you enough funds to buy these shares at the strike price, should they be assigned.
  • Buying puts may seem safer, but it's deceiving because although your losses are limited, your contracts will most likely expire worthless.  Essentially prepare to lose 100% of relatively smaller amount of capital if you plan to buy puts.  Time works against you.   
  • Avoid leveraged ETF's as many have to settle daily and will lose value over time even if the market stays flat.  Especially if you are prepared for a longer term swing trade, these would not be the best vehicles.
  • Take profit quickly -- unlike longs where taking quick profits may be a cardinal sin.  Being short is like fishing; you have to be in to catch the market dips. You line the baits and wait; once baits are taken, you wheel the fish in right away.  Fear is a stronger emotion, when it comes, it come strong and quick. Don't get greedy and overstay your welcome.
  • Be late at your timing.  If you think now is a good time to add to short, delay it by a day or even just a few hours will do you some good.  Remember, people (the bulls) are almost never tired of being greedy, and the market tends to grind higher.
  • In light of sector rotations, may be you have a little more edge if you short sector funds instead.
  • Oh, don't forget to hedge with token shares of spec longs.  You'll need them for the much needed psychotherapy during your grueling conquest.
Please feel free to add any other advice.

MACD Not Comforming

May be it's through my bear tinted lens, but the MACD on the 60 minutes SPY chart is not conforming to the price action.  Price went up impulsively, but not MACD.    Either a big rally is coming, or the market is running out of steam.

Market Is So Easy

It's so easy for me to lose money in the market when jinx is with me the whole time.  The proprietary leading indicator I subscribe to has been advising to short the market since May 2011 and still is.  So I lose while everyone who doesn't watch the market gets a free ride.  Professional money managers like Dr. Fly reaped 20% during just the first month and a half of this year so far going long the frothy stocks.  Now that he's in cash and holding just some VXX.  I followed suit with VXX because that's in line with my gut and my technical analysis up till yesterday.  It all changed today.  VXX so far down 5.40% with the market (SPY) up only .28%.   Going VXX is worse than averaging down on the leveraged index ETF (SPXU), and I am in it!!!  Talk about jinx.  Now Dr. Fly has 20% cushion to burn, but not me.  For me it's been just one direction -- down.   The market is so easy:  until I overcome the jinx, just follow me and do the exact opposite!

IBM First Target

IBM broke out to new high.  First target 198.75 (rectangle) or 198.93 (123.40 Fib extension).

Wednesday, February 22, 2012

Keyboard Shortcuts - Gmail and Twitter

I use Gmail and Twitter extensively, like 14 hours a day.  Any shortcut to get the same thing done with less effort would go a long way.  Avoiding mouse clicks would also make me less susceptible to carpal tunnel syndrome. Fortunately there are some useful ones available.

For Gmail:

  • 'g' + 'p': Go make a phone call
  • 'g' + 'k': Go to Tasks
  • 'c'      : Compose 
  • 'j'      : Move cursor up in the list
  • 'k'      : Move cursor down in the list
  • <Enter>  : Open the message at current cursor location
  • '#'      : Hash/delete message and return to list
  • 'r'      : Reply
  • 'a'      : Reply to all
  • 'f'      : Forward
  • 'u'      : Back to list
  • '?'      : Show all keyboard shortcuts
Unfortunately, there is no short cut to "mark all as read" for junk mails.  For that one, if I want to avoid the mouse, I'd have to do a '.' + <down arrow> + <enter>,  borderline useful but that lets my fingers stay on the keyboard.

As you can see, I use Google product extensively.  Gmail is my landline phone.  Google Tasks are useful because it can sync with my Android phone.  The only thing I loath about Google is Google Calendar, whose Search feature is retarded (excuse my language, can't think of a better word).

For Twitter:

  • '.'      : Load new tweets 
  • 'n'      : New tweet

That is all I need, really.  Stocktwits automatically loads new tweets, but I actually like the twitter implementation better: that I get an indication automatically that there are new tweets without loading them automatically, lest it is quite stressful to read an existing tweet while the new ones keep pushing it down.

The rest of the twitter shortcuts can also be accessed by typing '?'.   I paste the list here since it's short and I could get a screen shot of it.

Finally, to switch between Gmail and twitter (or cycle through any other tabs currently open in the browser), simply do <Ctrl> and <Tab> at the same time.

NFLX Targets

NFLX is unexpectedly weak and is very oversold.  After some consolidation and dead cat bounce, the 107 area represent the 23.6 Fib extension target, with 106.55 50 day EMA just below.

104.44 is the gap support.

91 is the full target wih 91.48 horizontal support nearby, marking the area of confluence of support.

Bears Finally See Some Potential for a Break

It may be almost time for the bears to get some break.

  • Sentiment spread was nearly 30 (though today's it's back down to 25)
  • We've touched the SPY 137 target; many should take profit
  • AAPL has shown weakness and may be attempting a double top
  • Transport has broken down and other indexes likely to follow
  • The Greece's recurring bailout news is getting old; market may have priced to perfection
  • Buydontdhold.com issued a sell signal this week, ending its 2 month buy signal
  • Dr. Fly is 95% cash
  • The proprietary leading (PI) indicator has not changed it's bearish stance
What I really like to see is $BPCOMPQ to cross down on its 10 day MA.  That would be my all clear signal for the bears.  It'd be best for both bulls and bears if SPY can retrace 23.6% to the 133.00-133.50 area, and then restest the 137 top.

Update: Had to wait until market close to get the updated daily chart of $BPCOMPQ.  It's on the verge of crossing down, but not quite...

Tuesday, February 21, 2012

HK Negative Divergence

There is a big MACD negative divergence on the HK daily chart.  While ADX is at a hefty 44.24, meaning strong trend and we're supposed to ignore oscillators such as MACD, but it's been decreasing and the DMI- rising and DMI+ falling.   It seems it wants the 50 day EMA of 9.30, or even the Fib 50% area of 9.13, before possible resumption of up trend.


NFLX Supports

I was lucky to have sold NFLX on the morning gap. Midday news from Verizon caused some selloff.  The uptrend line was already broken and backtested by now.  The next support is the Fib 23.4 at 117, which also happens to be the 20 day EMA.  If this doesn't hold. The gap support at 112 would be next.

WMT Confluence of Support

WMT hit in pre-market by earnings announcement.   $59-60 area presents the middle of the long term up channel, the 50 week SMA, as well as my favorite Fib 76.4 retracement.

Friday, February 17, 2012

The Bulls Left Their Mark Once Again

Dips are bought.  The bulls leave the "V" marks after killing the bears.

CEF Long Setup

CEF, the Canadian gold and silver fund, is flagging and bouncing off the Fib 76.4 level and the 20 day MA.  Re-entered initial entry in my IRA.  Long term hold.

VXX 60 Minute

It's not good that the up-trend line was broken yesterday, but VXX found support today at the Fib 50 level and the 50 MA on the 60 minute chart.  The majority of the recent explosive volume was above the 25.75 area.  In addition, the fact that MACD is close to being reset and STO is close to being oversold, should 25.75 area gets visited, I will be buying with both hands.

UNG Target

UNG has so far escaped another lower low after January's bear flag played out.  Volume has also been unprecedentedly high.  So far today it has gapped up and held the 20 day EMA as well as the 50% Fib retracement level.   If this level can hold and consolidate,  6 area is the obvious first target.  It's way too early, but the eventual target would be the 7 area.

Thursday, February 16, 2012

SPY Breaks Intraday Channel

What a surprise by the bulls who pulled a reversal after yesterday's bearish candle and AAPL's 5% topping reversal.  I wonder if this is the last gasp by the bull.  Bears are speechless right now.  But I mean this is pushing a bit too hard.

We've just had a break of the intraday up channel.  Let's see what happens before the long weekend.  Oh shoot, Monday's President's Day.  To be patriotic, stocks are not allowed to go down.  Hmm... more odds against the bears.

Wednesday, February 15, 2012

SPY Big Picture

I wish I had this chart drawn back in the summer of 2011 -- drawing a parallel line of the highs of 2010 and 2011 and placing it at the 2009 low to form a channel.  The resulting lower channel line touches exactly the 2011 low.  I've seen this kind of price action numerous times in the intraday charts as well.  But one has to be prepared and place the limit order ahead of time because this often occurs during a stop run.

We can also see the current price, as well as the 2011 high are at the Fib 76.4% retracement level.

Mathematical precision rules in the madness of the stock market.  One just needs the discipline to plan the trades and the patience to wait for the trades to come to you.  But it is surely easier said than done.

In the big picture, the up trend is still intact.  MACD and RSI both are doing just fine. The fact that we're over bought and that we are at the crucial Fib level does warrant some sideways consolidation or preferably a correction down to the 70 week moving average  (green line).

The monthly chart which isn't shown does exhibit a severe MACD negative divergence, but the MACD is still rising.  We'll need to keep a close eye on that.

Tuesday, February 14, 2012

Reminiscent of Galileo Thermometers

The market started with a gap down, and was actually in a down trend all day through 3:30.  SPY was barely down .7% down from the multi-month top, but it surely felt like the sky was falling.  Why, because the market has been going up relentlessly for months.  All the dips have been bought.  Just look at the last 9 of of 9 candle sticks on the SPY daily chart.  How "buoyant" they are?!  They reminded me of Galileo thermometers (OK, I didn't know what they are called and  I had to look it up.)  The rare intraday down trend into late day felt like a rain drop in a prolonged drought.  The bears are so desperate that any hint of selling feel like the one overdue correction.  But all hope was lost in the last 30 minutes of trading. The bull came back with a vengence, and finished the day on HOD with volume.  This price action is usually a prelude for a green gap by the way.

I am beyond frustrated by now, being a bear since second half of last year.  I've been transcended.  I am in awe of the market manipulations by the Fed, the power of American politics, and the degree of ruthlessness without mercy in their MO.  In a way, though, it's a show of their insecurity.  They can't afford to give the bears any sign of hope, as any hint of market weakness will cascade down. The bears know the truth about the underlying troubles in the market, but any such hint must not be allowed during the presidential election year.

LPSN - The Jinx Ain't Over

Aside from exiting obscenely early during pre-market and missing out on the 20% pop, my day trade with LPSN also bumped into another fluke.  I had a stop order to short at 14.99, and it got filled at 14.76!  Off the bat I was down 1.5%!!  I had to do the damage control during the next hour.  Ugh!  I'd better sit on my hands for the rest of the day!  Meanwhile I need a lot of sympathy on this Valentine's Day.

How to Toss Away a 20% Profit?

I had previously sold LPSN for a profit at the upper trend line of the triangle, and held the remaining through earnings last night.  The strangest thing happened which I have never seen before:  the after hours trades showed little activity after earnings and it was down a bit.  Even the premarket this morning had very thin volume and up approximately 4%.  Meanwhile the futures were down for the broad market, and a red gap was a certainty.  I didn't see any bid, so I place an order to exit at the upper trend line of the triangle.  Oddly, it was filled immediately.  Minutes later, the market opened and the price shot up 6% with huge volume.  The volume and the rally was nonstop for the next 20 minutes and went as high as 21.92% !!

Needless to say, I felt sick in my stomach.  It is also embarrassing.  Nevertheless, I post the lesson here any way just for those who can benefit.

  1. Avoid off-hour trading; spend time with family instead. If you think market can be manipulated, it's even more treacherous during off hours. 
  2. Something divine, a.k.a. jinx, is definitely intervening with my trades.  This fluke was a perfect example.

GERN Setup

GERN is one of the small cap stocks in my IRA, along with CPST.  GERN is a biotech play with emphasis on cancer treatments.  It has recently broken the down channel after a double bottom in December.  The first target after the flagging is through is 2.39.  The next target is 2.60.  The down channel has not been backtested, so that is one concern longer term, especially with MACD crossing down on the daily.  Shorter term is still a possible play with MACD on the 60 minute being reset.   So this is one candidate where you get an initial entry for longer term holding, but potentially turned into a swing trade should it shot up first before backtest.

Monday, February 13, 2012

Topping Is A Process

Trend change or not, topping is usually a process, not an event.  It's impossible to catch the exact top. So even if we have a trend change occurring, it won't be easy for the bears.  May be we'll get sideways actions for a while if bears get lucky.

What is quite a bit of a damper is that just this morning I found out as of last Friday Moosistory has switched to IWM, small cap long!  Moosistory, as I understand, is a conservative, long term system.  It frequently switches to gold and bonds.  So its switching to IWM is very disconcerting to me, being bear biased.

So if the bears do get a break in the coming weeks, I wouldn't be surprised that it'd be short lived.

Trend Change

Okay, may be one day of trend change is all the bears are allowed.  Conventional wisdom says that if both VIX and the market go up, it's a possible signal for trend change. This happened 2 days ago where both SPY and VXX went up.  The next day, SPY went down .7% - very rare these days, and VXX went up 11%.  With another Greek decision pending over the weekend, the timing seemed fitting.

Well, over the weekend, aside from the Grammy Awards, Greek successfully passed the new austerity measures.  The politicians did, the people didn't, as evidence by the ensuing riots.  But that's all that mattered.  The futures shot up, and this morning we had a huge green gap.  This is crucial for bears because if the stars are all lined up, this can be a sell-the-news double top event.

Friday, February 10, 2012

Leading Indicator, or Not?!

What's wrong with this picture?

The proprietary leading indicator I paid for has prevented me from swinging long since last May.  In fact, I have been short.  It's amazing I am still hanging.  Without any discretion, I would have been wiped out by now having been in triple bear ETFs all this time. Mean while, the market has had its strongest October and January in years.  It's been taunting to say the least, not to mention opportunity cost.  Obviously SPY 137 is the last straw.

Mean while I've betrayed my long time trustworthy, albeit trailing, indicator, which has yet to show any sign of slowdown since December.  This is the simplest investment guideline:  Stay long as long as the 10 day EMA is above the current $BPCOMPQ reading.  I'd have done well had I stuck with this rule.  I tried to be cute, and surely it backfired, big time.   Learn from my mistakes.  All leading indicators are potentially hazardous to your financial health.

IRBT - Next Support

Amazing how the targets match between the 5 minute and daily charts of IRBT.  The 24.96 (or 25) target has been held for two days.  If given way, the next support, again, with confluence between the daily and 5 minute charts, would be 24.50.  I will add there.

SPY - No Man's Land

It would be better if SPY at least touch the previous gap support, and see how the oscillator look.  Right now it's at no man's land, hugging to the 50 MA on the 60 minute chart.   The bad news for bear is that the MACD is being reset to 0, and the STO is oversold.

CPST - Reload

Earnings disappointed.  I am still keeping my positions in IRA from 1.20.  Took profit for my swing trade at 1.50 target on 50 Fib.  Now, initiate another swing trade here at neckline, 200 day EMA, and 20 day EMA confluence of support.  Price may overshoot till the up-trend line or 200 day SMA, however.  So not aggressive here but want to be stay in play.

GSVC - Wash, Rinse, Repeat

GSVC invests many private companies that slate for IPO.  So far it's been boom-bust cycles.  Prices ran up on anticipation of GRPN IPO, and then on the day of IPO, stock sold off. Same with ZNGA.  Finally most recently, on FB filing IPO.  This time is a bit different as the sold off was related to secondary offering of 3 million shares, and that FB has not gone IPO.  I would anticipate another rounds of hype by March when FB makes noise again.

Price is now nearing the 23.6 Fib and the 200 day EMA area.  Too bad GSVC is not optionable, otherwise, it would be perfect to write a naked put as initial entry.  I initiated my token position at 15.05 this morning.

Thursday, February 09, 2012

IRBT - The Market Had No Idea

From this chart, we can conclude that the market itself had NO CLUE.  Frequently we hear people say, "they" know the numbers and that's why the price yesterday finished at the high.  Nothing can be further from the truth with IRBT.  See also: Earnings, They Know the Numbers - Or Not

LNG - Got Shaken Out and Missed Pop

I was informed that LNG had a huge short interest and was on the verge of breaking out.  Fundamentally, I also feel that natural gas being so cheap, it is good for its transport due to demand.  Unfortunately, I got shaken out yesterday and missed the rocket launch today.  Urghhhh...

50 Fib extension is 15.42, may be higher if I raise the neck line.  Full target is 18.

Catching a Falling Knife - IRBT

IRBT's earnings last night stablized around the previous triangle, but something happened this morning and it tanked way down.  Big surprise.  My premarket order of 29.20 was actually green right before the open.  Now it's in big red.

Looks like the 23.60% Fib level stopped the bleeding for now.   Next support would be the projected parallel channel line of 24.50.

I have to remind myself once again not to trade after hours and not to catch a falling knife, even though it is very tempting.

Ignore Negative Divergence When ADX Is High

My trading has been influenced by MACD for years.  It's great in sideway markets, but in a trending market it's a hazard.  Look at the AKAM 60 minute chart below:

You see a pronounced negative divergence as shown in magenta lines:  the price makes a new high while MACD makes a lower high.  A screaming sell?!  But look at DMI.   The ADX is a whopping 42.58, in other words, very strong trend!  Last night was the earnings report and the price is now up 15.30% in pre-market trading!!

When ADX is greater than 25, the oscillators should basically take the back seat!  Don't be fooled!

Wednesday, February 08, 2012

IRBT Support

IRBT took a dive after hours.  The previous triangle it broke out of should provide some support.  Around 29.20 (or 29.80 depending on how one draws the line) on the lower trend line.  

AKAM Target

Both the daily and intraday shows target around 37.30 area.  Let's see if it turns out to be a magnet during regular session tomorrow.

In a blow-out scenario, 39.15 area should put up some resistance based on the projected parallel channel line.

Intraday Top and Bottom - Perfect Price Action

1. The rectangle target from yesterday's closing range marked the intraday top.

2. The extrapolated upper parallel channel line confirmed the rectangle target.  Break of trend line followed by a perfect retest and a second entry.

3. The morning rectangle target marks the bottom.