Friday, July 31, 2009

A Shooting Star was formed

The market defied the odds yesterday. It gapped up and reached a new high since Mar 09. However, it closed about the same price as the opening price - forming a shooting star. I would have preferred a longer shadow, but it is still a shooting star.

At 8:30 EST, the Advanced AGP results would be out. AGP is the broadest measure of economic activity and the primary gauge of the economy's health. It could move the market. For the market to reverse, it would be good if the today's market open much lower (gapped down) and closed below yesterday's close. It should then be followed by a series of lower lows.

If for whatever reason, the market continues its climb upwards, then we have to be prepared for a drastic reversal one day (perhaps in Oct 09) - another black October?

We shall see.

Cheers !

PersianCat (Millionaire-in-progress)

Tuesday, July 28, 2009

Shorting the SPY

[Click on the image to zoom it. ]
At the live trading session yesterday, we potentially have a winning explosive trade.
Prior to the market open, we discussed the market trend. I mentioned that my view of the market is that the market is at the tail end of the recent rally. It have to retrace soon. How soon we are not sure.
As the SPY gapped down on the intraday chart (5 mins candle) at the open, I mentioned during the session that the perfect set-up would be: the SPY fill the gap, hit Monday's high (which is the high of the recent rally since March), fill the buy stop orders of the other traders then retrace downwards. We would then want to short the SPY.
We watched. SPY did fill the day's gap but did not manage to break Monday's high. It then started to retrace. The participants shorted when the SPY was around 98.07. They bought the Sep 98 Put. The stop loss is 10cts above Monday's high. The SPY went down further. It happened that the SPY closed near our entry.
Theoretically, it was a good trade as the risk is extremely small but the SPY has the potential to drop by more than $10 in one month.
If the participants stick to the plan, they should not be stopped out yet. What they have lost so far is the time-value which is minimal for September options. However, what they have got if it goes according to plan, is a good entry point especially when the market gapped down and closed lower today, forming a potential confirmation candle (for a retracement - downtrend in this case).
My advice to the participants, once they have a good entry and they are correct about the trend, just ride the trend. When to exit? There are many ways depending on the situation, risk tolerance and trading objectives.
In the meantime, enjoy the ride when it comes to you..... Weeeeeee...........
Cheers !
PersianCat (Millionaire-in-progress)

Monday, July 27, 2009

The Major Indexes broke resistance but it is tired

The DOW30, S&P500 and Nasdaq Composite indexes all broke the resistance level. DOW30 also broke the 9000 level. Now, analysts are saying that S&P500 could target for 1,000 level (Current level is 979.26). The volume for indexes are not significantly high or even lower than average volume. Somehow, the US dollar did not follow the stock market pattern last week.

The current rally started 12 market days ago. It has gone up too fast too furious. In such market environment, I am looking for signs of retracement. The candlesticks are not showing much. The oscillators are showing signs of losing momentum - the market is now tired.

Basically, the technicals are showing that the market is losing its "steam". It is tired. If there is any buying left at this juncture, it could basically comes from retail traders and unenlightened institutional traders.

The negative effects from the total solar eclipse did not seem to materialise. However, proponents of such views said that the effects may not be immediate.

Bottomline, it is too late to enter the market now. I shall wait for the market to retrace and "short" as the market retrace downwards. It could happen very soon.

Cheers !

Rafee

Tuesday, July 21, 2009

Total Solar Eclipse

The market failed to continue with its Head and Shoulders pattern. The Dow Jones 30 and S&P500 index are now testing the June high level. Nasdaq Composite Index has already broke the June high. The June high for Dow Jones 30 and S&P500 index are now the natural resistance. I would love to see the market drops from this level. The Stochastics and RSI are at a level showing an overbought position. The market euphoria is still high and retail traders (not necessarily the big players) expect to push the market further.

Interestingly, the chart pattern for GBP/USD and EUR/USD are somewhat similar to the major equity index.

While the market wants to test the June high and perhaps for Dow to test the 9000 level, I am not sure if the currrent rally can sustain, at least for now. I expect the market to pause and drop perhaps from this week onwards.

On the natural phenomena front, the total solar eclipse is due to happen tommorrow morning. At six minutes 39 seconds, it is the longest solar eclispse in this century. Some scientists expect more natural calamities to happen due to greater movements of the earth tectonic plates. Already, a few earthquakes had happened around the world over the last few weeks. Soothsayers and astrologers are shouting more dangers and calamities during the total solar eclipse. Whether they are to be believed is another story. My concern is whether there is a big swing in the market pyschology (the market is made up of humans) should any of the calamities happens. If it is, the market would then react accordingly and drop without any warning. How convenient can it be - dropping from the resistance level !

Cheers !

PersianCat (Millionaire-in-progress)

Tuesday, July 07, 2009

Head and Shoulder pattern forming?

On the personal health front, I have not been tip-top condition being affected by the flu bug - not the H1N1 type ! I have been feeling lethargic lately too. I supposed it could be due to an inconsistent sleeping pattern. I have been busy though. I shall take positive steps to boost my physical, mental and spiritual well-being.

On the trading front, the market will start to release the last quarter's earnings results with Alcoa (AA) on Wed (ET). I expect the market to be volatile.

I have not been taking any swing position for the past few weeks. I have been playing intraday, playing the ES (S&P500 Index futures) and SPY options (On last Tuesday's handholding class, I played the SPY "live". I profited about US$215 on five contracts in 30mins - that is a return of more than 50% - my capital exposed was US$400).

The major indices are now looking to form a Head and Shoulder pattern. The Right Shoulder is now being formed. Whether the S&P500 hit 9,000 is not important for now. I am looking for a confirmation that the market will drop by the end of July. I am looking forward to play the Bear Call spread and/or long Sep Put on SPY. We shall see......

In the Singapore market, I have still 2 lots of SPC - waiting for PetroChina to buy over my shares at S$6.25. I bought 5 lots at S$2.40 (average price) sometime in Feb 2009 using my CPF funds. Sold 3 lots at S$6.07 (a profit of more than 150% over less than 3 months). The remaining 2 lots are now free money as I already got back my capital.

Cheers !

PersianCat (Millionaire-in-progress)