Market Overview - Pre-Christmas Week

The market is still technically on the uptrend. However, the major indices are currently in consolidation since early November.

The volume on 18 Dec 2009 - a quadruple witching day (expiration of options and futures of both the index and stocks), for Dow Jones 30 Index was more than twice the average. Despite the high volume, the major market did not really budge from the previous day price. Based on such volume, one could expect a major move soon.

It is important to note that there are reports about major fund managers locking-in their profits as they are also protecting their potential bonus - after the market had rally since March this year. Should we then expect the market to correct soon. We shall see.

The major indices needs to break the following levels to convince us that the uptrend for the equities market is broken:

• Dow Jones 30 index needs to close below 9679 level
• S&P500 index needs to close below 1029 level
• Nasdaq Composite index needs to close below 2024 level

Cheers !

PersianCat (Millionaire-in-progress)

Jewish Holidays in 2010

Just a reminder. During the "no work permitted" Jewish holidays, the market for equities, forex and others will significantly drop in volume. Significant drop in volume could dramatically skewed price movement.The Jewish holidays for 2010 could be found in:

http://www.chabad.org/calendar/holidays_cdo/aid/672022/jewish/2010-Holidays.htm

Cheers !

PersianCat (Millionaire-in-progress)

2010 U.S. Market Holidays

January 1 - New Year's Day
January 18 - Martin Luther King, Jr. Day
February 15 - Washington's Birthday/Presidents' Day (3rd Mon. of Feb)
April 2 - Good Friday
May 31 - Memorial Day
July 5 - Independence Day (observed)
September 6 - Labor Day
November 25 - Thanksgiving Day
November 26 - Half-day due to Thanksgiving Day
December 24 - Christmas (observed)

- extracted from http://www.nyse.com/

Cheers !
PersianCat (Millionaire-in-progress)

The Wait Worth Waiting For

The Market moved as expected starting a retracement from the last two weeks of October. Based on the price movement of the equities market and the US$, it seemed that the retracement is for real this time. However, the major indices needs to break the following levels to confirm that the uptrend for the equities market is broken:

• Dow Jones 30 index needs to close below 9430 level
• S&P500 index needs to close below 1020 level
• Nasdaq Composite index needs to close below 2041 level

The Nasdaq Composite Index which tends to lead the market is closer to the critical levels than the other 2 major indices.

Once the critical levels are broken, the downtrend could last till Mar to Jun next year.

My position:

I have locked in my profits and open new positions with a set of Jan 2010 104 Put for SPY and a Bear Call spread 104/109 for SPY on last Friday. For SPY, the stock needs to close below 102 to confirm that the uptrend is broken.

With the downtrend in the U.S. equities market, the U.S. $ is expected to strengthen. Some would argue that the strengthening of the US$ leads the downfall in U.S. equities market. It does not matter who leads who for now as long as we know, as the US$ strengthen, the commodities (e.g. metals, oil, coal) prices could fall.

Cheers !

PersianCat (Millionaire-in-progress)

The Big One This Week?

Since my last posting, the market pushed further upwards. I have been playing intraday strategies, shorting at the intraday rally and closing my position when market shows signs of reversal - thus making small profits here and there. My mindset till the end of the month is that I am not willing to long the market when I feel that the market is overbought and can drop at anytime.

This week is critical. It's the last week of October. Normally, if any drastic things were to happen, it tends to happen in October. Currently, I think that the market is just looking for an excuse to retrace downwards.

The EUR/USD currency pair makes a new high 1-year high today. GBP/USD pair has started its divergence from the EUR/USD pair. It seems that it is starting its way down in Aug while EUR/USD is still creeping up. Normally, EUR/USD and GBP/USD pair move up and down in tandem. And as the EUR/USD and GBP/USD pair goes up, the U.S. stock market goes up, i.e. the value of US$ goes down. Is the GBP/USD then leading the pack?

So what's next? If there is any major retracement in October, it tends to happen unexpectedly. The big problem that has been happening is that "short squeeze" had occurred 3 times since August this year. "Short-squeeze" happens when those with short positions may be forced to liquidate and cover their position by purchasing the stock. If enough short sellers buy back the stock, the price is pushed even higher.

Will another short squeeze happen this week or two or will the market finally make a breakdown and move south for the next 6 months or so? We shall see.

In the meantime, I have bought 108 Puts and sold Bear Call Credit spreads (108/113) on SPY with a tight stop loss. The initial target is 104. Then the target will be moved to 102 with a timeframe of three weeks if the 104 level is breached.

Cheers !

PersianCat (Millionaire-in-progress)

Double Top Forming?

The Week In Review

The major indexes (DOW, S&P500 and Nasdaq Composite) are now attempting to test the September High. If it breaks the High, it will test the resolves of those who shorted the market. I would love to see a double top formation, where the September High is one of the double top.

My own view is that the market might see a correction towards the end of October. Someone asked me, what if I am wrong. I said to him, so be it. At the current stock price, I am not willing to long the market anyway. Let the bubble grow bigger and explode. If I am right, I would want to be ready to short the market. Depending on how the market moves, I might short the market by end this week or early next week.

My Trading Position:
Last Tuesday, I updated my handholdees that I have closed all my Put positions on last Monday (lock-in my profits). I am back to playing ES futures and intraday SPY options (and Forex in the day).

Cheers !

PersianCat (Millionaire-in-progress)

Jewish Holidays over the next few weeks

Take note of the "No work permitted" during some of the Jewish holidays over the next few weeks. Market volume can be expected to drop significantly on that day.

Yom Kippur No work is permitted.	Sunset of September 27 through nightfall of September 28
Sukkot No work permitted on Oct. 3-4. Work is permitted on Oct. 5-9 with certain restrictions.	Sunset of October 2 through sunset of October 9
Hoshanah Rabbah Work permitted with certain restrictions.	October 9
Shemini Atzeret No work is permitted.	Sunset of October 9 through nightfall of October 10
Simchat Torah No work is permitted.	Nightfall of October 10 through nightfall of October 11

Cheers !
PersianCat (Millionaire-in-progress)

September Peak?

Last Wednesday, I shared in my handholding class that I have placed (on Tues, 22 Sep) a Mar 2010 107 Put on SPY when SPY was around 107.30. At that point of time, the highest point since March low was 17 Sep 2009 (at around 107.55). My hypothesis is that the market is likely to have reached its Top in Sep. Then a retracement will follow. The market will then try to test its September High and fail. An October big drop might then follow.

At the point of entry, the risk is minimal while the reward is huge. Whether I am right or wrong, it does not matter. What matters most is whether the decision was correct at that point of time. Refer to my presentation slides to the Options Traders Club Meeting at http://persiancat04.blogspot.com/2009/09/v-shaped-or-w-shaped-recovery.html for some of the reasons.

My decision was reinforced by the price actions that took place after the FOMC meeting on 23 Sep.


The price tested and break the 17 September high but the price could not hold. It then broke the session low and went much lower. It represented the beginning of the recent slide. My intraday trades for both the SPY options and Forex were great on that day. My swing trade for the SPY Mar 2010 107 Put was of course doing well. My losing credit spread on SPY is also now back in the black.

The question is now, would SPY repeat the pattern of having a short retracement as in circle A, B and C in the chart below.


Or would it break the Low in Circle C and B to mark the break of the recent uptrend. We shall see. While some others would ride on the bigger trend until proven otherwise (it is the right strategy most of the time), for now, I am testing my hypothesis and it is raking $$$ for now. I might lock-in my profits if proven wrong.

Cheers !

PersianCat (Millionaire-in-progress)

OptionQuestSM Online Game

I was alerted to this game by a friend. Thought it might interest some readers of my blog.

OptionQuest^SM Online Game
http://www.cboe.com/LearnCenter/OptionQuest/Default.aspx

It states "The options strategy game that will challenge your knowledge and help sharpen your trading skills. Whether you have just set sail to explore the world of options or conquered the “Greeks” in the jungles of option pricing, OptionQuest will be a daring adventure for you.".

Have fun!

Cheers!

PersianCat (Millionaire-in-progress)

V-shaped or W-shaped recovery

The slides presented at the OTCS Club Meeting on 19 Sep 2009 could be downloaded at:
http://www.mediafire.com/?tzomdzjzmhj

Cheers!

PersianCat (Millionaire-in-progress)

80-year cycle or 60-year Cycle ?

As traders, we always like to look for patterns in the charts - as patterns do repeat itself sometimes. When it do, we want to be ready to capture the moment and ride on the trend/wave.

At this juncture, we are now almost at the crossroads. The U.S. market is now going through either a 80-year cycle or a 60-year cycle.

The pattern for the 80-year cycle is similar to the 1929 October crash with its peak in 3rd September 1929. The market then went into depression for almost 3 years. It bottomed in mid 1932. If we are drawing a parallel, it would then be year 2012.


On the other hand, the market could enter a 60 year cycle. In 1949, the world economy comes out of the ashes after World War 2. The market actually bottomed in 1942. After the war, most if not all countries, flooded the market with liquidity even though they cannot afford to do it. In 1949, the market bottomed in Jun and thereafter the market is very bullish.


So which pattern would it be? Either one of the two or none at all. I will elaborate more in my presentation at the Online Traders Club (Singapore) meeting on Sat, 19 September 2009. Among the stuff I will touch would be the relationship between US$, U.S. equities market and commodities. Registration to the talk can be done at www.eoptionsclub.com.

PersianCat (Millionaire-in-progress)

Major Levels Broken - What Now?

The major indexes already broken the major levels.

• DOW broke 9000
• S&P500 broke 1000
• Nasdaq Composite Index broke 2000

The various indicators are showing that the market is tired and needed a rest. However, the market seems to be very resilient.

I practiced Scenario Planning in my previous profession. Therefore, I could not help but develop the possible scenarios for trading.

Scenario 1:
From here, the market could retrace a little, may be just at 23.8% Fibonacci level (measured from its recent high to the March Low) and then continue its climb. It may even break recent high. If this happens, the market might get a bigger fall in October. The fall could then be near the March Low or break below March Low. We could possibly see a last bottom before the market creep up from that bottom. For investors, it could be the best time to pick up stocks (Singapore, U.S. or elsewhere) - maybe in November.

Scenario 2:
A healthy retracement from the current position would be at the 50% or even 61.8% Fibonacci level. The market will then continue its climb. However, I still expect another retracement in October. The retracement would not be as great then. It would not break below March Low. The market will then tends creep upwards.

Scenario 3:
The market retraced all the way near March Low from its current position. The market then climb upwards before breaking down below March Low in October. From there, it starts to creep upwards.

In all scenarios, it would not be a V-shape recovery.

Cheers !

PersianCat (Millionaire-in-progress)

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)

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)

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

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)

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)

DOW To Touch 9,000 and Reverse?

The DOW, S&P500 and the Nasdaq Composite Indices were all overbought. The Nasdaq Composite Index had been leading the other 2 indices in the recent rally since March 9.

I stand by my previous posting that there is a high probability that the DOW will attempt to touch 9,000. Whether the DOW will retrace or continue with the rally is another matter.

What I am looking for is a nice setup:

• Long shadow on a daily candle for DOW. The shadow would have then have crossed 9,000 level.
• Volume spike

I would then short the market.

Cheers !

PersianCat (Millionaire-in-progress)

Market Outlook

The market has been creeping upwards since Mar 9, 2009 and it seems unstoppable as fresh traders are trying to enter the market afraid of missing the rally. More and more analysts are now looking for a correction. My sentiments happen to be likewise. I am looking for a correction but it is elusive for now. As mentioned in the last posting, the market are just over-optimistic. As such, even if there is a dip in the market, it is deemed to be temporary.

For now, I am just playing intraday until the market showed me something to play on the downside for a swing trade.

The Dow Jones 30 Index is now close to the Jan 09 high of 9088. Likewise, the S&P500 index is also close to its Jan 09 high of 944. There is a good probability that the market will attempt to touch or break the Jan high before any retracement downwards.

Cheers !

PersianCat (Millionaire-in-progress)

Swine Flu vs Over-optimistic market

The market had been generally positive for the past 7th weeks. Though it may seemed that the market is overbought, the RSI and the Stochastics are showing that the market managed to let off the "steam". It seem that the general public are afraid of losing out in the market, entering at the time when the market is supposed to correct itself. Each time the market dropped, it only ended negative for one or two days before closing higher the following days.

Last night (SG time), news of swine flu pandemic in Mexico gave me the gitters as it reminded me of the SARS crisis in Asia a few years back. Today, we have confirmation that the swine flu had reached U.S., Europe and other countries. The Asian markets generally closed lower today. One can expect the European markets to also end lower today. The U.S. market is already showing negative during the pre-market session.

The big question is, will the U.S. market just drop for one or two days, or will it represent the continuation of the bigger downtrend. More bad news needed to be released over the next few days before the market is convinced that they need to continue with the major downtrend.

When Asia had its SARS crisis, the Asian economies were in tatters. The swine flu could be worse than SARS and it now occured when the world economies are slowing down / already in recession, etc. If things are really bad, we can expect the U.S. market to break the March lows. The great losers could be the airlines as travelling would be greatly affected. Viral vaccines manufacturers such as Roche would be one of the greatest winners. When Singapore was hit with SARS, the sales transactions in NTUC Fairprice increased significantly as many families bought more groceries to eat at home instead of eating out. The same consumer behaviour pattern could repeat itself in U.S. and elsewhere.

Cheers !

PersianCat (Millionaire-in-progress)