Slope of Hope Blog Posts

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In-between Days and Two Rectangles

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I don't think anything of great interest will happen today as we
wait for the next interim top to be made. However we pinocchioed through the the lower channel on ES (June) shortly before the open this morning, and it looks considerably weaker now as a result.

100311-I1 ESM 60min Rising Channel

The lower trendline on the rising wedge on the SPX 60min was broken before the open, and for this reason as well the rest of this week now looks much less bullish than it did before :

100311-I1 SPX 60min Rising Wedge Broken

Gold was very interesting yesterday and broke the first rising
trendline support. Overnight it has approached the second support
trendline and if that breaks too we may well see a retest of the recent
lows under 1050:

100311 Gold 60min Rising Wedge
I think that we are approaching a very significant interim top in
equities, but I don't think we'll make it today, and I'm doubtful about
making it on Friday. I think that there is a very good chance indeed
that this top will be signalled by two key indicators. The first is
$BPNYA, the NYSE Bullish Percent Index, which has been in a gently
declining channel since September. Since then it has been signalling
the key interim tops and bottoms very well. It is close to the top of
the channel now, but still looks at least one push up away from hitting

100311 BPNYA Daily Channel

The other indicator is EURUSD, which has been in a steep declining
channel since December. It isn't the strong positive indicator for
equities that it used to be, nowadays when it trends down strongly then
equities still tend to follow, but when it is trading sideways, as it
has been over the last few weeks, equities have been rallying strongly.

Nonetheless, the last bottom on equities was signalled by EURUSD
touching the bottom of the declining channel, and I think that there is
a very good chance that the next interim top will be signalled by a
touch of the top of the channel. EURUSD has been trading sideways for
so long now that the top channel trendline has fallen to meet it, and
it is now within easy striking distance at 1.376 and falling:

100311 EURUSD 60min Declining Channel
My favorite trading setups are trading channels with the channel trend.
EURUSD in recent weeks is a good example of why counter-trend channel
plays are much riskier propositions. I chart and trade patterns as
well, rectangles, triangles and wedges mostly. I am watching two
interesting rectangles at the moment, and one is the very longstanding
weekly rectangle on XLF, which is testing the top border of the
rectangle at the moment. I am expecting this to pull back within the
rectangle for the close on Friday and will be concerned about the
bullish implications if it doesn't:

100311 XLF Weekly Rectangle
The other rectangle that I am watching with great interest is the daily
rectangle on TLT, which is approaching the lower trendline at the
moment. It looks like a strong buy at 88.25 with a stop at 87.25. A
daily close at or below 88 would be a signal to exit the trade as it
would be a close below the rectangle, indicating to a target at 84.5.
Long setups on rectangles are safer than short setups as they are
mostly a bullish pattern, breaking upwards 69% of the time:

100311 TLT Daily Rectangle 

RIP Corey Haim (by Nathaniel Goodwin)

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I'm still settling into my new apartment and while moving things around I found an old stack of 1980's Hustler magazines. The stack toppled over and hidden in between were Ziploc bags full of some sort of dried herbs/spices and a couple of ninja-stars. I was admiring the reading material and shurikens when the Colonel walked in and went crazy on me.

"Those are deadly weapons, Cuz! You could kill yourself, don't ever go through my shit again!" he said.


I was like, "slow down dude, I'm cool with the ninja-stars." I pulled out some shurikens from my waistband, and I could see my "rep"  had gone up a notch in his eyes.


He then told me that he was a blackbelt in Sudoku fighting and would teach me if I had something to offer him. I told him I like looking at stock charts and could teach him a bit of Technical Analysis. The Colonel said that the Internet was for losers and nerds, and refused to look at my charts online unless I printed them out on paper. So now I'm trying to think of some other skill I have that the Colonel might be interested in so he can teach me Sudoku.


Anyway; here is a chart of the SPX I was trying to impress him with. Wednesday looked like a great day to short the SPX, and that is exactly what I did with some SDS. This chart is very similar to the RUT chart I posted the other day. Short the top, place stops somewhere above the old top and wait to see what happens. Good old TA, you couldn't ask for a better risk/reward setup. (After such a beating I've taken as a bear the past year, my feeling is that we will go up more from here. I have to leave emotion out though and trust the chart, it's still a good risk/reward setup.)