Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

H&S, R.I.P.

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Well, this pattern had a lot of promise, but it's dead, Jim.

0715-spx1

So here is a broader view of the S&P cash market:

0715-spx2

The bulls own this market now. For the bears to take over, the S&P would have to blow below this month's lows (around 875). The odds of that happening went way down over the past few days. 875 is very strong support, we can plainly see.

The huge yellow zone shows that there is very little in the way of the bulls ultimately being able to push this market to about 1,150. They will have to get past about 975 first, though (circled above), since that is the underside of a major broken channel. It also seems that every attempt to make a higher high does succeed to get a little higher, but then it starts faltering again (June 11th being the most recent example).

A lot of people have been writing to me about sentiment. I respect the value of sentiment indicators, and I generally agree that until we get to the point where the public is absolutely convinced that Happy Days Are Here Again, it will be very tough (still) to be a bear.

I just read the Elliott Wave Short Term Update, and they've pretty much thrown up their arms and have said an S&P between 1,000 and 1,100 is in the cards. From a big picture perspective, as I've said repeatedly, having the S&P in the quadruple digits in September would be a marvelous opportunity. My problem is that, frankly, I had such a blast trading between October and February, I got used to cashing in heavily on downsweeps, and I've been looking for them ever since. It's been an uphill battle, and it's exhausting.

Although lottery longs are getting more and more sparse, they are still out there. My 401-k hit a new high today, and that was even after I saddled it down with a big DUG and TWM position in the middle of the day. Rinky-dinky stocks that can climb double digits in one day are still out there.

I got stopped out of dozens of positions today, but I still have plenty of shorts out there, as well as some puts. It seems that the slow process of clawing my way back up the mountain has started again. But successful traders don't quit when things are tough. I'm going to be right back in there tomorrow, ready for battle.

So What Happened?

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I first want to apologize to my readers for my dour nature today. I'm kind of a depressive chap to begin with, and three days of the bulls pushing their horns into my eyeballs doesn't help my already flimsy spirit. So that's probably seeped through quite a bit, particularly today. Take note of the new logo.

But I hope you can understand. This week has been the worst three days of my trading life so far. I've slipped down 8% of my overall portfolio, and it's more demoralizing than I can say to have multiple weeks' worth of extremely hard work destroyed in short a short amount of time. Climbing my way up Profit Mountain doesn't mean anything if I'm kicked down into the valley so quickly.

The only trade I'm really upset at myself about, of course, is TBT. That was a really good long play, and I blew it. I really hope others made good money on that idea, because it was solid. But otherwise, the simple fact of the matter is that I was on the wrong side of the market in a very big way. I loaded up on shorts and puts all over the place, and the 500 point rise in the Dow so far this week has been agonizing.

I don't think I'll feel like uttering the words "head" and "shoulders" any time in the near future. That was a massive fakeout, and it really hurt a lot of bears. I'll do a little post later, but you can understand how it's a little hard to get excited about discussing charts at the moment.

What We Learned: Zilch

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I really don't mean to be in whine mode, but that's how I'm feeling. Well, not so much "whine"; that's too high-pitched. Just ticked off. Sort of like I keep working on the same sand castle and the same goon keep coming around every couple of weeks and stomping on it. I'd like to shoot the goon in the head.

Thumbing through the Times, I've got to say even someone as cynical as me is stunned at how short this nation's memory is. A few short months ago, the investment banks were on their knees, begging for the country to bail them out. Well, they got bailed out. And now they're paying record bonuses again. They are engaging in precisely the same kind of behavior they did in 2007. They haven't changed one iota.

Well, one thing has changed. They've learned that they have the ultimate backstop: the entire country. Heads, they win; tails, we lose. Simple as that.

And now there's talk of a "super-rally" that is about to take place. I have trouble seeing that. What I do know is that I'm paying more attention to OIH now than just about anything else – even the /ES. It is still in the throes of what I consider a major topping formation. That could well lead the rest of the market down.

When I feel lost like this, I start fresh and look at all my charts. I'm going to do just that and try to get my head screwed on right. This week has erased all the hard work I put into July so far.

Contra Contra Contra

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Keeping one's morale up during a trio of days like this is not easy. Far from it. But we must keep our wits about us and see what the charts are telling us.

Looking at the MidCap 400 chart below (this is a minute bar chart), I draw a few general conclusions (a) we are still in the same downtrend that commenced June 11th (b) we have made a series of lower lows and lower highs (c) until and unless the market pushes above the circled area, this medium-term downturn remains in place, in spite of the massive strength we've seen so far this week.

0715-mid

The unfortunate thing is that a day like this may well be a great day to get aggressive on the short side, but the week has been so damaging so far that it's hard to put those trades out.

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