3/22/2011 Tuesday Morning

The short positions entered late yesterday afternoon, with very tight stops were stopped out near the close.  I knew that was a possibility but there was also a good possibility that there was a good profit potential.  Here is a chart of the 15 minute SPY.... showing how the market is having difficulty throwing over the downtrend line. 

 

 

 

 

 

 

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The Momentum Change indicator Sell signal is still in effect, but is in a neutral position and yesterday, intra day, the SPY and the RUT moved temporarily into the Buy position, but faded on the close.  So action today and tomorrow is very critical.  There is a very good possibility that the SPY can overthrow the downtrend line, while it is also possible that it can re-test the lows of last week.  As this is written, the SPY is falling away from the encounter with the downtrend line and the potential new Buy signal is fading away.  For Now!

Now that the earthquake related troubles in Japan are considered "old" news, it is possible for the markets to consider the problems in Europe, where we learn that Ireland has missed a coupon payment, that Portugal debt is again reaching new highs on political unrest regarding the austerity measures.  In the U.S, we learn that residential RE has resurfaced as a problem, with unit sales falling to new lows, 10% under last month at 466,000 annualized units, missing estimates of 510,000.  And all over the world, inflation is causing distress, with inflation measured in the UK at 4.4% and the misery index has hit a 20 year high.  In Libya, the U.S. Air Force lost a fighter due to mechanical failure, and the the Rebels seem to have re-gained momentum,  And the real hot spot may turn out to be in the Gaza Strip, where the Palestinians and the Israelis are throwing explosives at each other, with 3 being killed last night.

After being higher overnight, with a 4% gain in the Nikkei, U.S equities market opened mixed and as of this writting, the Dow is down 27, the SPX is down 4.22 and the rest of the major indexes are also down.  Oil is trading higher on the new problems in MENA, trading at 103.12 and Brent is trading higher at 115.4,  Gold is higher at 1427.4 and Silver is close to new highs at 36.39.  The Euro is soft, after reaching highs above 1.42, while the Dollar has caught a bid and is trading up at 75.54  Bonds are mixed, with the 10 Year trading off at 3.337 and the long Bond trading higher at 4.442%.

There are no trading ideas today....if the SPY runs back up to the down trend line with out flipping to a Buy signal, I will post a couple of new shorts, again with very tight stops.

Best to Your Trading!

Bill

3/18/2011 TGIF

After the UN voted to impose a "No Fly" zone in Libya, Oil shot back up from around 96 to over 103.  Then Libya announced that they welcomed the "No Fly" zone and that they would be happy to comply and start talking with the opposition groups.  Of course Oil then retreated back to 100 and the European markets all rallied.. even the Asian markets rallied.  Kinda gets you all teary-eyed doesn't it?.

After trading higher overnight, the Dow opened higher and traded up as much as 150 points.  as this is written at 10:30, the Dow is up 143, the SPX is up 13 and all the other major indexes are also higher. Oil is off, trading at 100.99, Gold is higher at 1421.9 and Silver is higher at 35.15.  The entire commodity comlex is also sharply higher this morning, with Corn leading the way with a  5% advance.  The Euro has blown through resistance at 1.405 and is trading at 1.413.  IN the meantime, the Dollar has continued its fall toward irrelevance, trading at 75.81.  After major central back support for the Dollar vs the Yen, the Dollar is back down to 81.06.

Here is a chart of the U.S. Dollar, the U.S. long Bond, the Euro and the SPX.  As you can see, when the Long bond is strong and the Euro is strong, and the Dollar is weak, that is not a good prescription for the SPX.  IN other words, Euro Up, Bond Up, Dollar Down equals SPX down.

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The Proprietary Momentum Change indicators are still working on the Sell signal last confirmed on 2/22.  We have no open trades, but I am looking for an opportunity to reenter the short side if the SPX can get back up to around 1295-1300.  Then we will see how the Momentum indicator is behaving.  Currently, the Momentum Change is Bearish, the longer term indicator are also Bearish.  But some of our timing signals are pointing to a direction change due shortly.  For the present, I have no suggestions except wait for the fat pitch to re-enter the market.

Best To Your Trading!

Bill

Friday Update,. Trading Alert

The Dow is down 160 points, the SPX is down 1583 and all the major indexes are off over 1%.  Oil is exploding, up over 2 at 104.14 and Brent is trading at 116.14.  Violence is increasing in Libya, disappointment here in the NFP jobs report and the 27 year low in the labor force.

The Momentum Change signals have been producing whipsaws for the past couple of months, even though they continue to be Bearish with out producing any Buy signals.  It is clear that distribution is going on in the markets, volume expands on the down side, but I have been unwilling to leave new positions exposed without protective stop loss points.  It is part of the discipline I encourage to prevent large losses and getting trapped on the wrong side of a move.

I have learned that each trade must stand on its own, although it is emotionally and psychologically abusive to keep entering a trade and quickly getting stopped out, then re-entering a trade at nearly the same price as the last entry..  But money management requires it.  I feel that the the overwhelming Bearish momentum requires that trades be entered again to participate in what could be a decline to the 1225-1250  level.. The SPX is again below the trend support line established since 8/25/2010 and is trading on the trend support line established since 3/9/2009.


It may be that the market can rally again off these support lines, but the risk reward ratios favor again taking a position to profit from a sharp decline that has been building cause for 2 months.  I am re-entering the same short levered ETF's that have been recommend previously.


Best To Your Trading!

Bill