Nothing has changed from my March 28 update. I still expect this ST rally to end in the SPX 1390 area. Based on the thrust we got yesterday, we could see the 1390 projection slightly overshot into the SPX 1400-1410 area.
In the VST, expect weakness over the next 2-3 days as i have a VST sell signal. The next dynamic support comes in the SPX 1335-45 area. Given the uptrend is pretty strong, shorting for VST is only for the nimble players here, as the market could turn back up sharply anytime.
On March 25, i wrote here that we should see softness over the next couple of sessions with a target of SPX 1320. So far we have tagged 1325. I still think the SPX 1315-20 area will be tested sometime today, before the next upleg begins. To make it short, not surprised by the VST weakness and no change in my ST view that we should begin another leg towards 1385-90. If the SPX 1315-20 area holds, i will be a buyer.
Count me out of the pissing contests, trading competitions etc. This is not a game, but a business.
ST, i expect a choppy uptrend to continue towards SPX 1385-90 area.
VST, i have a 30-min sell at the close, which means some softness over the next couple of sessions. ES 1340 is the first level of dynamic support for tommorow. If that cracks on a hourly closing basis, we should head into the ES 1320 area.
LT - sell. IT - sell. Still a bear market.
We broke the ST DTL that i showed in my blog yesterday. So the ST trend is up, no matter how you slice it or dice it. Unless the market had a mission, it would not have broken the ST trendline. First resistance comes around SPX 1370, the LT bull-bear battle line. That should produce a traedable reaction to the downside. After that i expect another rally into the mid-line of the weekly BB around SPX 1390. My vision blurs after that.
Some are looking for slingshots into ATHs on SPX. It's newton's third law baby. If you get a washout, then you see a moonshot. Since we never witnessed any washout or climactic action, rather a low volatile engineered bottom, we are more likely to witness a jerky choppy uptrend. It's gonna be fun, with a lot of pissing contests along the way. Either way, congrats if you are long and enjoy the rally, until the ST momo exhausts.
For the first time, we have a setup where the NYSE vol MCO has showed positive divergences. In this case we have positively diverged against the 3/10 bottom. That's a bullish setup at least from a ST standpoint. The trend remains down and there is still a potential for a bear attack here. Any close above SPX 1348 on a daily closing basis i.e above the declining tops line will put the bulls in control over the ST targettting SPX 1400+.
For now i remain bearish and i will attempt one last "short the bounce" in the SPX 1340-45 area. If that fails, i will join the bull party.
Something to ponder - The bad news could not drive the market down. The system was perhaps clogged with shorts. Now the shorts are cleaned out pretty much. The good news, which was the Fed rate cuts, which was pretty much baked in, is now out. There's no more good news to drive this market. The only thing remaining is the bad news that is to hit market over the next few weeks to months to come. Now if the character of the market has changed, then the market will start rallying on bad news. That would be a bullish tape. The market's on its own now. We'll see what it can do.
Anyway the bearish setup remains intact for now. It could all change tommorow. If it does, i will update.
The various contributing factors to trading success, in the long run, IMHO and in my experience.
1) Technical Analysis/ Market timing - 40%
2) Money management (risk control, stops, position sizing etc) - 25%
3) Emotional control and trade management - 25%
This is the most difficult area of trading IMO, which seperates the "Cream" from the rest.
Imagine you are in a trade. You know your risk/reward for the trade.
Let's say the markets starts moving in your direction and hits your reward objective. Now the TA promises higher rewards to come. Do you now close the entire position at the reward objective ? Or do you close the entire position at the TA obejctive, which is higher ?
Or do you take partial profits at the reward objective and let the other half run to your TA objective ?
What if the market comes close to the reward objective and retraces. Would you still hold the position or close it for suboptimal profits ?
What if the market come close to the reward objective and retraces back into a loss territory. Would you let a winning position turn into a losing position ?
What if the TA objective is acheived, but the reward objective is higher ?
What if the market keeps hovering around the reward objective for a long time. How would you feel emotionally ? Would you hold it for reward objective to be met or get out for "near reward objective profits"
What if your TA stays on a buy, but your stops get taken out ? Would you honor your stops or lower your stops ?
Lets say the market comes close to your stop objecive, hovers around it for a long time and then bounces back to breakeven level. Would you get out at breakeven level or let the market take out your hard stops ?
I can go on....
4) Luck - 5%
5) Vision, Prophecy, crystal ball, Delusion, Hallucinations, Dreams, "I told ya so", "You guys did not listen to me", "I called the turn" - 5%
But most discussions on the board are centered around 1) and 5). 2) and 3) are boring topics. That's why we rarely see real-time trades posted on this board or trade management aspects discussed.
Forget the tape. The only thing we need to know is how foolish our fellow trader buddies are a.k.a SENTIMENT.
The Vol and Breadth Osc breakdown below the lows all the way back to Aug 07 lows means, we are not going to test the Jan lows. That's right. We are gonna crash thru it. And that won't be the end of it. After that we would need another leg down to create divergence. In the end, trend trumps everything.
Unless the futures recover dramatically by the open (currently trading at ES 1292), then the reflex rally is done.
I have been talking about the 30-40 SPX points reflex rally based on oversold MCO, the last couple of days on this blog. I thought the rally would never come given the horrible tape over the last couple of days. But our friendly Fed did what they have done over the last 6 months - being transparent, pass the rumors to the whole world, get the world markets rallying and act on the rumors. And voila, you get a gap-up in the wee hours of the morning.
But this rally is destined to fail just like all the Fed interventions at key technical points. I am not basing this on any subjective stuff. The Vol and breadth MCO took out all the lows going back to Aug 2007. These oscillators making lower lows and price making higher lows is not exactly positive divergence. It's the case of "internals leading the price".
I must have been one of the weird guys who shorted today morning and made some money. A move above ES 1301 in the post-lunch session, it was evident they were going to test higher resistances, which i posted in one of the threads. I was waiting for my second short based on a failure at SPX 1314 and it never happened. To the contrary, it showed some susprising strength into the close and turned my hourly model into a buy. I can blindfoldedly short the market hitting resistances when the hourly is down. Not so, when the hourly turns up.
Now i will let the momentum behind the move work off. It could happen right tommorow or it could take a few more days. I will buy any shallow pullback tommorow if it keeps the hourly buy on my system intact. When my hourly model turns down, i will wear my bear hat again.
This is by no means a bullish chart. Short term bounces aside, the path of least resistance continues to be down and the surprises will continue to come on the downside. Except the surprise of an emergency rate cut of course (which i doubt will happen in the face of this commodity meltup, we are witnessing). So, i will continue with my strategy of selling short the bounces....
That breadth and vol MCO spike following the Fed intervention around Jan 22 could not even generate a new weekly swing high on SPX, let alone a major IT rally. During the bull run, that spike would have been a kickoff to a new IT uptrend and new recovery highs. But it ain't so now, cuz it's a bear market ! That MCO spike was nothing more than a temporary buying panic. How many times do we see these spectacular intraday breadth numbers in the morning, only to crap out by the EOD. Those are characteristics of a bear. The only semi-technical tool that bulls can hang there hat on at this point is the extreme in sentiment. But until the tape responds, that means nothing.
is what i will be doing for the next couple of weeks. Simply because that's the path of least resistance. Let the countertrenders do the heavylifting and try to pick a bottom here. There's no indication whatsoever here of a bottom and downtrends like this don't end with a whimper. There's gonna be a spike low with some multi-swing action before it bottoms. The NYSE MCO closed below -200, which typically lead to reflex rallies of 30-40 SPX points. We got a couple of 25 point rallies on friday, both of which failed. At this point, i am not sure if a reflex rally will occur or not. Even if it does, it will be of a quick intraday variety which fails by the end of the day. The market is very weak and is in a strong downtrend. The measured move target for the ST is around SPX 1236 and for the IT/LT is around SPX 1170 +/- 20 points (a target which i published after we broke 1370, when my system issued a LT sell). No need to overanalyze here.
There is nothing bullish about this market structure
nor or the internals like the NYSE breadth/vol MCOs conveying any bullish message.