Daily Archives: June 24, 2010

Muted Gains

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Hello Slopers…..

I apologize for being not-that-great-a-host today. Between family visitors and my imagined belief that Disqus was having trouble, on top of trying to manage a rather large portfolio, my attentions were severely diverted away from blog-land.

The market took another tumble today, and although I'm delighted to have another nice day of profits, I am disappointed that my gains (in percentage terms) fell short of the inverse of the S&P's loss. The S&P was down 1.68% today, whereas I was up about 1.21%. That isn't the kind of performance I'd like to see from my carefully-chosen selections.

The reason for this somewhat watered-down performance isn't because my picks aren't good, but instead because yesterday I scaled back my risk, and thus I wasn't fully invested. As an experiment, I loaded the spreadsheet of my portfolio from yesterday morning, and those gains knocked the socks off the market, because that portfolio was 140% invested.

Of course, I wouldn't be bellyaching like this if the market had pushed higher today, because my losses would have been subdued compared to the market's strength………..and in that event, I would have been patting myself on the back for reducing my exposure.

The frustration stems from the impetus to scale back, since it is partially driven by the end of the quarter. And by "end of the quarter", I do not mean the window-dressing that people are worried about by money managers, but instead my desire to retain a strong, profitable quarter for my own clients, and thus a fear about being too exposed in these final days. That isn't a technical analysis-based rationale, and since I'd like to exercise Spock-like rationality on a consistent basis, I am scolding myself for letting such impure thoughts even enter my head.

On a "bottoms-up" basis, I am still quite bearish, although I can't help but keep looking over my shoulder for some rally out of God-knows-where. We are in a gorgeous waterfall decline………….slow, steady, and tasty…..and the longer it goes, the better. As I mentioned earlier today, we got well into the "green tint" I had illustrated last night, and I think this tumble is ultimately going to take us to 925. As for when, I'm not sure. Next month? Maybe. As late as October? Perhaps.

I will close by saying that since "G-Day" (the day that our government announced its lawsuit against Goldman Sachs), the market has felt normal again. Maybe our good friends on Broad Street turned off their market manipulation machines out of fear. Who knows. But, through all the wiggles and waggles, both up and down, the market has been acting like my dance partner again, and I've stopped stepping on her toes.

Chart on Emini S&P (Mike Paulenoff)

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On Tuesday morning the emini S&P 500 was around 30 points higher than where it is now, which placed the index above the 200 and 20 DMA’s, a much stronger technical position. Now we notice that the e-SPU is attempting to tread water below all of its relevant trending moving averages — the 20, 50 and 200 — and the decline could be the formation of the “right shoulder” of a substantial 9-month head and shoulders top (see colored rectangles on the enclosed chart).

If the e-SPU continues to weaken and violates multi-month support at 1037/32, then the significant downside potential of the top pattern will be triggered. That said, such an obvious topping pattern usually requires a few knee-jerk, whipsaw headfakes in the opposite direction to confuse the most investors and to make sure that when the top pattern finally breaks down it will actually seem like a complete surprise.

If such a scenario is approaching, then we should expect possibly a couple of violent rallies that get everyone “twisted” into a positive frame of mind. From my technical perspective, the e-SPU needs to hold above 1070 to avert more immediate downside damage and to trigger near-term buying interest that can pop the index to 1100 or higher in the upcoming days.

Without a doubt, the index is at a crossroads. We might know in a matter of hours if the “right shoulder” construction will be a “simple affair,” as in straight down from current levels, or of a more complex nature that includes a couple of vicious short-covering rallies back towards the “yuan high.” Right now, my near-term work is telling me to expect the latter, but to be prepared for the former.

Originally published on MPTrader.com

Live from iPhone Ground Zero

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I took the requisite swing by the Palo Alto Apple Store, and as usual on intro days, there is a line going around the block of people dying to get the latest from Jobs.

Many of them are holding Apple umbrellas, since the sun is out (although it's a pleasant 72 degrees). This company is amazing; how many outfits could compel people to act in this manner? On the left side of this picture is the news van, which always shows up to gawk at the geeks.


EWI Target Met

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I had mentioned last night that the folks at Elliott Wave International had projected a drop into the tinted zone that I had drawn (shown below) before a partial push up and then – – – the big, fun plunge.

The tinted area has indeed been penetrated, satisfying the prediction. I had some nice gains going long IYR and IWM in day trades earlier today, and I'm pretty much totally short again. Looks like another fun day.


ES Declining Channel and Trading Ranges (by Springheel Jack)

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(Editor's Note: Umm, not sure if my computer is cursed, but I'm not able to see any comments, even though I see they are accumulating somehow; sorry for the lack of NEW POSTs today…….)

Everyone trading ES at the moment should have a look at this chart IMO:

100624 ES 60min Declining Channel and Ranges

I'm expecting that we may well see a rise on ES to range and channel resistance at 1084ish this afternoon. That will look like a solid short, and it that resistance is broken, it will then look like a solid long for a good bounce to at least 1101.5.

As an aside, among the strange things you very rarely see are a strong rising channel on EURUSD at the same time as a strong declining channel on ES, but it seems that pigs are growing wings today. This could be positive divergence, maybe, but I wouldn't put much faith in it after the bearish technical carnage this morning:

100624 EURUSD 60min Rising Channel

Disqus Wreck

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Hi Folks,

For the umpteenth time, it seems the Disqus system is down.

I've got something different coming. I'm not really going to talk about it now, but I assure you, Disqus isn't going to be a permanent solution here.

Anyway, I'm ungodly busy between trading and family members, so it's kind of a gummed-up day for me; I'm sorry the comment system is having trouble.