Daily Archives: July 23, 2010

Is This Mike On?

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Hi Slopers,

Yuck; what a week. I guess I shouldn't be surprised that the market stopped being fun to trade the moment Goldman was off the hook. It's like someone flipped a light switch.

Anyway, that's not why I'm here. It's more than likely that I'll be replacing the comments system quite soon with one of my own design. I've quietly mentioned this deep, deep in the comments section of some recent posts, but now I'm going to give this mention more visibility as I'd like more people to bang on the system.

There are more features coming and bugs to debug, so don't expect cosmic perfection. But take the time to set up your account and leave a few test comments on this special test page. I'll check it out this weekend to see what feedback has been left.

I'm going to spend the rest of my afternoon charting (although this has been a huge waste of time for most of the past few weeks). Win or lose, I like to be prepared, so I'm going to get back to the task at hand.

Bears Getting Bludgeoned

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Sigh; July hasn't been kind at all to me or bears in general. I thought we'd get a "sell the news" drop today, but it seems the only "stress" going on right now is for those who are short the market.

I've hedged things somewhat with long positions in FXE and TBT, but I still have many shorts (a few dozen have been stopped out today, for obvious reasons). The 1103 level on the /ES is getting badly threatened.

0723-es

Volume by Price Bars Look: FNSR (by Leisa)

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I originally did a post, The Importance of Time Frames, on FNSR on my blog. I was considering it as a potential short due to weakness in that sector.   I thought this would have some short potential.  It looked toppy on a daily short term chart.  However, when I moved my time frame out, and I came up with this chart using three years and a weekly time frame.  Going through that process inspired the aforementioned post. 

Here's the chart, which has to my eye, a simply beautiful cup and handle formation.  There is also plenty of airspace above.  There is also the rocket fuel of a 25% short interest. That's generally too crowded for my taste.  As is my norm, I look at vital signs, and FNSR's look pretty decent.  You can conduct your own 10-point safety inspection in the span of less than 30 seconds by looking at FINVIZ's snapshot here.


Snap58
 

How this pattern plays out is dependent on the strength of the broader market.  I think that it is a decent long prospect.

Position:  Long FNSR Aug calls.

The Silence of the Bears (by Springheel Jack)

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That was an amazing recovery by the bulls yesterday and though 1099
wasn't broken, some very serious technical damage was done to the bear
case for the summer, to the extent that I am on the verge of dumping my
road map to 870 as my primary scenario.

Yesterday morning I described the indicators as mixed, but oil broke up
yesterday, and AUDUSD broke up through a key resistance level , and SPX
broke a key declining resistance level as well, so the indicators and
levels that I watch are looking decidedly less mixed today.

Still on the bear side in my view apart from the main bear patterns are
long bonds, the baltic dry index, and the 13/34 EMA weekly cross, as
well as the still unbroken resistance levels at 1099 SPX (trading hours)
and 1099 ES (after hours).

I've seen quite a few times an 'IHS' building on SPX posted by various
chartists. It is an ugly and unlikely looking pattern to my eye and I
haven't bothered to chart it here. Instead I've charted what I think is a
far more likely candidate IHS building, with the neckline at 1130 SPX
and the head still unfinished. The pattern would have a target at 1250
SPX:

100723 SPX Declining Resistance Failure

That target fits well with the diamond bottom on SPX that Pug posted
yesterday morning with a target at (ahem) 1250 SPX. That pattern broke
up yesterday and Pug's excellent write-up on it is well worth a look here.

In the short term we have a clear rising channel on ES, though we need
another hit of the lower trendline in order to firm up the exact angle
of the rising channel. The channel is unlikely to carry us through 1099
ES today, though as I've marked on the chart below, it is possible,
though not probable IMO, that the upper trendline of the rising channel
is an IHS neckline, with a target in the 1130 area:

100723_ES_60min_Rising_Channel

Of the key indicators and levels that remain bearish this point I am now
expecting the July highs on ES and SPX to be broken, and though there
is some resistance at the 200 SMA at 1113.16, the obvious next target is
the June high at 1131.23 SPX.

If we reach 1131.23 SPX, then the 13/34 EMAs on the weekly chart, which
crossed bearishly last week, may well recross bullishly, turning a
fairly strong bear indicator into a very strong bullish indicator.
Here's an SPX chart showing the last three crosses, including the last
failed bear bear cross in 2006:

100723_SPX_Weekly_13_34_Cross

On 30 year treasuries there was a sharp pullback yesterday off
Wednesday's high for the year, and we are within striking distance of
the rising support trendline at 126'11. That may the the lower trendline
of a rising wedge, and if so I have marked the wedge targets on a
break:

100723_30YrT_Daily_Rising_Support_Trendline

As I mentioned, I am not expecting to see a break of 1099 ES today,
though we could see a break of 1099 SPX. Unless there is a major bear
breakout, I am expecting action to be confined within the ES rising
channel I have posted, and if the lower trendline of that channel were
to be reached today then we could see an intraday move to just under
1070 ES

I'm on a sort of working holiday for the next ten days or so, and I'll
be trying to keep up my daily posts, but I may not manage it every day.