Market Indices at the crossroads




S&P500 Index

 




Dow Jones 30 Index

 


NASDAQ Composite Index

 

The 3 major indices (Dow Jones 30, NASDAQ Composite and S&P500) are all near the Aug 2010 High. A close above the Aug 2010 High will symbolise the end of the current downtrend since April 2010. Whether that happens remains to be seen. What's important is that the markets are near its strong resistance level and itself presents a good trading opportunity.

Note that the current earnings season is ending and a new season starts in Oct.

Cheers !

PersianCat

Jewish Holidays in September

In September, there are a number of Jewish holidays with "no work is permitted" ruling. On these days, the market volume for equities, futures and forex are expected to be significantly lower. The "no work is permitted" days are:

• Rosh Hashanah - Sunset of September 8 through nightfall of September 10
• Yom Kippur - Sunset of September 17 through nightfall of September 18
• Sukkot - No work permitted on Sep. 23 - 25
• Shemini Atzeret -  Sunset of September 29 through nightfall of September 30
• Simchat Torah - Nightfall of September 30 through nightfall of October 1

Trade with care.

Cheers !

PersianCat

SPY - Commentary 23 Jul 2010

SPY broke and more importantly closed above the mid-July high. If it remains above that level on Monday, I will abandon my bear position for now.

Cheers !

PersianCat

Citibank Play

I like the new Citibank - a bank which has promised not to be involved in proprietary trading and resume its role as a traditional bank. A traditional bank would not make humongous profits (and can lose humongous money too!) but it should make good profit and minimise itself from future financial meltdown. I have not invested in Citibank yet as I am closely monitoring the US govt sales of its shares in Citibank. Here are the current statistics (as at 23 July 2010):

• US govt received 7.7 billion shares of Citigroup common stock in 2009 when the Treasury exchanged the $25 billion in preferred stock it received in connection with Citigroup's participation in the TARP Capital Purchase Program. The exchange rate used in the conversion puts the government's cost at $3.25 per common share.
• The Treasury has already sold 2.6 billion Citigroup shares in two separate trading programs, grossing $10.5 billion in proceeds. The sales have brought the Treasury's stake in the bank down to 18% from a prior 27% level.
• The Treasury has authorized Morgan Stanley (MS), its sales agent, to sell an additional 1.5 billion Citigroup common shares.

Market participants have speculated that the U.S. Treasury would like to be fully exited from its stake in Citigroup by the end of the year.

Based on the US government's cost at $3.25 per common share, I believe that it would not sell below that price. That price (slightly above) is now my benchmark for consideration for investing (not trading). They are 3 good ways to play this game:

1. Buy the shares around $3.25 (around 50% Fibonacci level) or $3.65 (around 38.2% Fibonacci level)
2. Sell the $4 Put (a few months away). The idea is to collect the shares at $4 minus the Put option premium collected. If the options expires worthless, then collect the premium fully. This is one of Warren Buffet favourite strategies.
3. Buy the Call (preferably leaps)

Of the 3 ways above, I am more inclined for now, to play the Sell Put strategy.

[Update! - 8 Dec 2010. The government announced late on Monday that it was selling its remaining stake of 2.4 billion Citigroup shares, at a price of $4.35 per share, and booking a total profit of $12 billion. ]

Cheers !

PersianCat

SPY - Commentary 16 Jul 2010

The DOW, Nasdaq Composite and the S&P500 indices are all showing lower highs and lower lows since April 2010 highs. All three are showing a Head and Shoulder formation.

Since I like to play SPY (S&P500 ETF), I would like to discuss more of this. The major indices have somewhat similar pattern as SPY.

• Interestingly, SPY bounced off the 38.2% correction level (taken from the March 2009 Low to the April 2010 High) in its attempts to rally from that level.
• However, the rally tapered off and formed a new lower High last week.
• A Head and Shoulder formation is also formed. If this HnS formation run its full course, then the target would around $87.00, which also happened to be around the 68.2% Fibonacci Level. That is a massive $20 or so off its current price.

I have been shorting SPY on the rallies.

For the coming week, I am also monitoring the earnings results for GS and AAPL on Tuesday. They performance is likely to be market moving.

Cheers !

PersianCat

World Cup and Trading Volume

Be mindful, that the trading volume during World Cup matches would be significantly lower. It would be worst during some matches that happened to be a "must watch" event.

Cheers !
PersianCat

Market at the Critical Support

The DOW 30 Index and the S&P500 Index are both near the critical support level.

• Both are near the May 2010 Low (which happened to be slightly lower than the Feb 2010 Low).
  
• Both are also near the 50% Fibonacci retracement - drawn from the July 2009 Low to April 2010 High.
• Both are way below the SMA 200 (critical for long-term investors)

The Nasdaq composite Index is somewhat similar.

Should the major indices break and close below the May 2010 Low, it may spells more trouble for the Bulls. The Bears will. have a good time and bring the markets lower. Attached is the SPY (S&P ETF) chart for reference. It closely follows the S&P 500 Index.



Cheers !

PersianCat

AAPL's iPad & iPhone Statistics

The following are the statistics on AAPL products:

iPad (as released by Steve Jobs at theWWDC 2010 7 Jun 2010)

• One iPad sold every 3 seconds, 2 million iPads first 59 days. iPad’s in 10 countries today. 19 countries by end July. There are now 8500 native iPad apps. Downloaded over 35m times, 17 apps per purchased iPad average.
• iBooks: 5m downloads in first 65 days. 2.5 books per iPad. Has 5 of 6 biggest publishers in US, and iBooks’ market share for them is 22% in just 8 weeks. Biggest request - iBooks will read PDFs.
• App Store is a curated platform with 225,000 apps. App approval process: we get about 15,000 apps submitted per week. New, updated apps, everything totaling 15,000 and they come in in 30 different languages. 95% of all the apps are approved within 7 days.
• 5 billion downloads now. 70% of revenue paid to developers: $1b so far

iPhone

• Two pieces of data re: market share. First is Nielsen: Q1 US Smartphone Market Share - RIM #1 with 35%, iPhone 28%, WinMo - 19%, Android - 9%. 9% other. Another study, U.S. mobile browser usage from May shows iPhone at 58.2% of entire category. Android at 22.7%. Rim 12.7% (as released by Steve Jobs at theWWDC 2010 7 Jun 2010)
• iPhone 4 - Three million iPhone 4 units were sold in first three weeks

Cheers !

PersianCat

What more to expect?

I have been asked many times, what more can we expect. Will the market now drop further?

Briefly, the problems arising from the Greece debt crisis do not seem to be over. The problems in Greece worsened because its citizens did not take kindly (e.g. riots) to the austerity measures undertaken by its government to reduce its debt (in order to be able to borrow from its lenders). Portugal and Spain seems to be next in line - in terms of debt crisis.

The Chinese property bubble does not seems to burst just yet. But the Shanghai Stock market had apparently corrected more than 9%. I believe the Chinese property market is just too speculative and might just burst soon. If it does, I would think the repercussion would be felt worldwide.

Most governments/countries are easing on its economic stimulus package. Whatever impact of the stimulus package would have been felt by now. Once the package is withdrawn, we might see a drop in key economic indicators unless the current growth in economy is sustainable on its own (as in without the stimulus package).

Be mindful that the markets just need an excuse to retrace itself.

As for me, I am preparing to invest in good Singapore stocks (by identifying the stocks). I have liquidated most of my portofio months back. Once the correction is almost over, I will come back with vengence and invest most of my funds identified for investment.

Cheers !

PersianCat

What a Week - DOW drops 1,000 points intraday.

Woohh ! What a day it had been on last Thursday. The DOW 30 just dropped more than 1,000 points in an intraday low. The NASDAQ Composite index and S&P 500 also dropped accordingly. Though the markets recovered most of its loses, it still ended significantly negative. Friday's close continues with the downtrend.

There are many reasons (or excuses) as to why the market dropped in such a way. To me, it didn't matter anymore. What is more important is that we have been expecting a major retracement from the major uptrend (starting from its March Lows). This could be it. However, we need to monitor closely the various critical levels identified in the above 3 majors (see the attached charts).

A study of the daily charts for the 3 majors since the 2007 High shows some interesting developments.

• The last Thursday Lows break below the SMA 200.
• The 2008 breakdown level becomes a resistance level.
  

Somehow, I do much better in a downtrend. I suppose I will just have to be more thankful during this period.

Cheers !

PersianCat

Goldman Sachs or Goldman Sucks!

Goldman Sachs (GS) was very kind to me. It turned a discomforting paper loss to a very comfortable real profits on last Friday. I have no position in GS for now. Since GS did not rest from its downtrend on last Friday, it is very likely that GS opens positive today.

I would love to short GS again - possibly today. The next target could be around $137.30 (38.2% Fibonacci level).

The big questions are:

1. Would criminal charges be made on GS and/or its employees ? Not sure


2. Would there be any civil suits against GS and and/or its employees ? Very likely


3. Would Goldman settle the matter out of court? Possibly


4. Would the whole fiasco significantly affect GS's earnings? I think so

Cheers!

PersianCat

The SPY Who Love Me?

The 3 major indices (Dow30, S&P500 and Nasdaq Composite) are showing potential reversal (towards the south) since the last 5 trading days. Potential short plays could be considered if the market drops the low of the last 5 trading days.

As for SPY (S&P500 ETF), the potential short plays could be made if the SPY drops below the Low of last Tuesday. Since the market did not pause from its downtrend on last Friday, it is highly likely that SPY opens positive today. Whether it remains positive at closing time remains to be seen.

Cheers !

PersianCat

Apple iPad - Info & Stats (last updated on 6 April)

The sale of Apple iPads started last weekend. The following are some information and statistics to take note of:

• Price of iPads starts from US$499 (for a 16GB model)
• Current iPad features: 9.7-inch color display, weighs 1.5 pounds and is a half-inch thick. Can get 10 hours of battery life. Single tasking. WiFi enabled. Surf Internet. Read ebooks. Watch videos. Play games. No camera. No support for Adobe Flash software.
  
• 3G version is due later in April 2010.
• Piper Jaffray expects Apple to sell 200,000 to 300,000 iPads over the weekend. Updated its expectation to 700,000 iPads (including pre-orders) over the weekend.Updated its projection for 2010 to 5 million units from 2.8 million units.
  
• iSuppli Corporation expects full year sale may reach 7.1 million iPads
• Sanford C Bernstein and Company expects 300,00 to 400,000 iPads sold over the weekend and 5 million iPads sold in the first 12 months.
• For comparion, 270,000 iPhones sold on its weekend debut in 2007 and 6.1 million iPhones in its first year in the market
• Apple announced 300,000 iPads sold as of the start of Sunday (midnite).
• Apple said that more than one million applications from its app store and more than 250,000 e-books were downloaded by users (as of 4 April).
• iPad components include A4 processor from Apple, NAND flash memory from Samsung Electronics, LCD display from LG Display, microchips from Broadcom, Texas Instruments and NXP Semiconductor.
• Apple typically do not rely on one supplier for the same type of components.

Cheers !

PersianCat (Millionaire-in-progress)

S&P 500 Elliot Wave

I had a discussion with some Elliot Wave practioners. The following are their interpretation of the Elliot Waves in the current S&P500 index.

Elliot Wave has 5 typical waves in the major trend (Wave 1, 2, 3, 4 and 5) followed by 3 waves (Waves A, B and C) in the countertrend.

In the bigger picture, the Wave 1 started in the 1970's and ended in 1987. Wave 3 started in 1987 and ended in 2000. Wave 5 started in 2002 and ended in 2007. Wave started in 2007 and ended in Mar 2009. Wave B is being formed and may be in the final stages. If Wave C is formed, it may break below Mar 2009 Low.

Cheers !

PersianCat (Millionaire-in progress)

Major Indices Testing Jan 2010 High

The NASDAQ Composite Index already tested Jan 2010 High. The Dow Jones 30 Index and S&P500 Index are on the way towards testing the Jan 2010 High. This High is an important milestone as a break above the Jan 2010 High dispels the hypothesis that the market is starting its major downtrend starting from Jan 2010.

However, there is still a possibility of a double top formation. We shall see what happens next.

Cheers !

PersianCat (Millionaire-in-progress)

61.8% Fibonacci Retracement Fulfilled

The recent rally since the hammer on 5 Feb 2010 had fulfilled a 61.8% Fibonacci retracement (more than the requred 50% retracement) for the Dow and Nasdaq Composite Index. For S&P500 index, the retracement is almost 61.8%. The major index is now free to continue with its downtrend (assumption is that the Jan 2010 high is the start of the big correction).



For SPY, we need to look for a confirmation candle before we can short the SPY. The target is way below the Feb 2010 Low.

Cheers !

PersianCat (Millionaire-in-progress)

A Great Hammer is Formed

[Opps ! Made a typo error - Supposed to be a Hammer (not a Hanging Man)]

It has been 2 horrifying days (Thursday & Friday) for some and profitable for others. For some others, it is best to stay in the sideline.

As for me, I was caught in the wrong footing on Thursday. My trading psychology was not even average. I've got burnt somewhat. But I make it up with a strong showing yesterday - playing ES (S&P500 e-mini futures). I played the market until 2pm EST. Thereafter, I was too exhausted and shutdown my PC. I do not want to return my profits to the market.

Looking at the SPY chart today, the market actually took 4.5 hrs for SPY to drop about $2 but took the next 2 hrs to rise up and ends positive. It thus created a Hammer in the daily chart.

What does it mean then? To me, it might give me the opportunity to long the market (at least on the Intraday basis, once the SPY breaks Friday's high. I will try to keep the Stop Loss small - have to look at the Intraday chart on that day.

Based on the current behaviour of the market, general market can still drop further. However, for the market to be healthy, the current drop needs a short rest and create a short rally of least 50% Fibonacci retracement. The question is, where will the short rally starts. (I am looking at a basic ABC wave.)

The Hammer with an extremely long shadow but small body looks like a very good reversal candle. It looks like a good place to start the short rally. If indeed, it is, then the rally will reach at least at 109.85 before continuing with its downtrend.

If the market breaks the last Friday's Low and stay below, the market is then signalling that the current downtrend from Jan 2010 High is still on track.

Cheers !

PersianCat (Millionaire-in-progress)

Could have been a Great Intraday Play on SPY

Last Tuesday night (SG 11pm), I mentioned to my handholding class, a possible set-up to play the Intraday trade on SPY. Unfortunately, at that time, we are all about to call it a day (leave for home). So we just watch the market for a while and did not put in any live trades.

However, I have documented how I would have played if I am at home, trading comfortably from my study room.

The SPY (S&P500 ETF) was trading in a range after the market open on 2 Feb 2010. Traders are waiting for the Pending Home Sales figures at 10am EST. It turned out that the figures are better than expected. As I mentioned in my previous posting, the major indices are expected to have a short rally of at least a 50% Fibonacci level. This news just give SPY a perfect excuse to go up.

At the handholding session, after the slight false break (after 10am EST), I mentioned to the class that I would have long the market at 109.00 level for an intraday play. My stop loss would have been 108.85 (very small). My first target would have been 109.80 (one of the resistance level). I would have played either a Feb or Mar 109 Call, or played ES (e-mini futures).

They are many levels where one could take profit. One way to take profit is when SPY closed below the EMA 13 (at 109.97). That is US$97 for every 100 shares of SPY or about US$48 for every 1 contract of options or about US$450 for every contract of ES e-mini futures. It would also mean that you have to stay up until 2.10am SG time or 1:105pm EST.

Cheers !

PersianCat (Millionaire-in-progress)

Next Target for SPY

When we forecast the (possible) directions of a stock, index, etc, we do it based on certain assumptions. When that assumptions are proven wrong, we have to be flexible enough to change our views of the market.

Last Tuesday (about 8pm SG time) handholding session, I updated the group that, provided that the 29 Jan 2010 Low is not broken, I am expecting the major indices to experience a very short rally of at least a 50% Fibonacci retracement from the Jan 2010 Low to Jan 2010 High. Thereafter, provided that the Jan 2010 High is not broken, the market will then continue with its down trend breaking the Jan 2010 Low. If the current short rally broke the Jan 2010 High, then the assumption that the market is heading downward do not hold water anymore.

For SPY (S&P500 ETF), one can then expect it to move up to at least the 50% Fibonacci retracement (around 114.14) before contunuing with its downtrend breaking the Jan 2010 Low.

What does it mean then to me? I would short the market again when the market is closer to the Jan 2010 High.

Cheers !

PersianCat (Millionaire-in-progress)

Is this The Correction?

The general market gave 3 red candles over the last 3 days (the last 2 are great long candles). It had been 3 great trading days for me. I started playing ES (S&P 500 e-mini futures) again 2 days ago after a long break. Many indicators are already showing at least a short term correction is in process.

The market is long due for correction and is just finding an excuse to correct itself. The excuse for now are the tightening of bank lending in China and U.S. President Obama's reform of the US financial markets.

The big question is whether this is the big correction of at least 38.2% Fibonacci level. That will bring the DOW to around 9,100 or below. A great correction will bring the DOW to at least 61.8% Fibonacci level at 8,100 or below.

Currently, the DOW 30, S&P 500 and NASDAQ Composite indices are resting near or at the support line (see the trendline drawn on the charts above) - around the October high. The next milestone is for the major indices to break and stay below November 2009 low. Following that, we should then track the swing lows and the Fibonacci levels of 50%, 61.8% ....... If this is the Correction, we could expect the Correction to last for at least 2 mths - depending on how low the market wants to correct itself.

Cheers !

PersianCat (Millionaire-in-progress)