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.
Top-Down versus Bottoms-Up
I've got to say, I'm in a real quandary right now.
On the one hand, I've got a lot of faith in my WAG, which states that we've got another 40 or so points to the upside on the /ES from current levels. That's not the current environment in which I'm dying to be short.
On the other hand, on a chart-by-chart basis, I am finding virtually no stocks at all which are appealing longs, but I've already got (and am in place on) 106 charts that look like terrific shorts, and 300 in my Bounce House watch list, waiting for better prices.
Take DRQ, for instance, which one of the 106 shorts I've already got. It's down over 7.2% right now, and the chart looks utterly broken.
The concern here is that the right shoulder could keep forming, and the real break won't take place until we go beneath the neckline. For energy stocks, the chart above is replicated again and again and again.
I guess the sensible thing to do is to stay in the shorts that I feel make sense, but balance it with a large long position on something simple like the SPY. That will, of course, pretty much neuter any good gains to be had from a market slump until I'm more certain, but it will also protect me from upside.
SPX Retracement Targets (by Springheel Jack)
I got the reversal confirmation that I was looking for yesterday, albeit
not by much. We broke the declining channel I posted yesterday, cleared
the neckline of the IHS comfortably enough, though getting much past it
was a slow and painful business. The Vix closed under my channel
trendlines on the 60 min chart, just a little bit but enough, and the
RSI on the SPX daily chart broke up from the declining resistance
trendline of recent weeks. For my money, we're there, and the interim
low is in.
Even EURUSD has risen from the deathbed it has been
occupying in recent weeks and is showing some signs of life. I have a
retracement target if reached within two weeks of slightly over 1.30 for
EURUSD, and of slightly over 1.50 for GBPUSD over the same period.
My $SPX:$VIX indicator on the 60 min chart, one of my favorites as it
tends to trend and pattern well, broke up from the recent broadening
descending wedge, retested the broken trendline and broke upwards again.
Normally this wedge would indicate a return back to the highs and lows
of SPX and Vix respectively, but I don't tend to regard such targets as
firm for this sort of derived indicator:
Now some of the more bullish EW analysts have regarded this fall from
the high as an ABC correction and are regarding wave C as completed. If
so, we can expect that we would make a new high within the right angled
and ascending broadening formation on SPX in the 1250 area.
Possible, but unlikely I think. If they are right though, we'll find out
when EURUSD and GBPUSD reach their retracement targets and then break
upwards from their respective declining wedges. In the event that
happens, this will be worth another look.
In the interim however, I'm sticking with my primary EW count, which is
that we have just finished wave 1 down, and have now started wave 2.
That is important, as wave 2 retracements are often very deep, and can
retrace almost all of the preceding wave down in some cases, as we saw
with the first two waves after EURUSD peaked a few months ago. I don't
think that's likely, but it could happen, and I'll be looking for some
indicator and forex confirmations before I short the top of this too
heavily.
On the SPX 15min chart the IHS still looks pretty good, which is
reassuring as the right shoulder was beginning to look a bit of a mess
on ES yesterday afternoon. I'm expecting that the neckline at 1090 SPX
should be a firm floor for SPX in the next few days, and that any drops
below it will weaken or even invalidate the IHS, which has a target of
1140 SPX. I have marked in a rising support trendline on the chart, and a
very tentative rising channel line above as a possible immediate target
area. That only has one touch so far though, and until we see the next
short term reversal it is only an educated guess:
I've marked in possible fib retracement targets on the SPX 60min chart.
The main ones are the 50% retracement at 1130.29, which seems low for
me, and my preferred target of 1151.41 at the 61.8% fib. That would be a
typical wave 2 retracement, and I have two important trendlines that
will be near that level within two weeks. I have also marked in a
declining channel trendline from the top in early May that looks
compelling, and that I am seeing as the first serious resistance in the
1120 – 1125 area:
On the SPX daily chart I am seeing two key broken trendlines that look
interesting as potential resistance and they are the broken lower
trendline of the main SPX rising wedge, which will be in the 1150 area
within two weeks, and the broken lower trendline of the main SPX rising
channel from the March 2009 low, which will be in the 1170 area within
two weeks.
The main declining trendline from the SPX high will intersect the broken
rising wedge trendline in the 1150 area in two weeks as well, and that
too is likely to prove significant resistance and is another reason why I
like 1150 as the retracement target from the low this week:
In terms of timeframe no doubt you'll have noticed that I'm using a
working timeframe of two more weeks for this retracement, specifically
with a speculative working target of Friday 11th June. That is a
workable contender for a turn date, and I don't think that the USD
currency pairs leave room for a much longer retracement period unless
they break up from their declining wedges. In practical terms I am
assuming that we have at least another week of retracement and perhaps
as many as three.
Ikaga osugoshi desu ka, Slopers?
Japan is wonderful, and I'm having a great time! I wish I would have packed more "western" style clothes though. The Colonel told me that Japanese men only wear traditional kimonos, so that is all I brought. I sort of feel like a jackass walking around the streets with everyone staring at me. Not sure if it's my pasty white skin or the flowered kimono I'm sporting; maybe a little of both.
Tuesday we visited the zoo and I learned that pandas, which I used to think were as cute and enjoyable as lolcats, are actually demon bears from hell with terrifying fangs. I got too close to the panda cage and it tore one of my kimonos to shreds leaving me battered, bruised and naked as the day I was born. The whole experience made me nervous hanging around bears in the near future. The Colonel got a real kick out of it, making several wang jokes at my expense.
Here is an updated point and figure chart with me in my kimono (pre-panda attack). I exited all of my shorts last Friday and added a bit of longs, Tuesday I added more longs.
I don't trade as fast as people here. My plan is to stay long, wait to see if we get to around 1120-1125, then 1140-1160 before I start shorting again. When and if we get there, I'll wait to see what the market internals and sentiment are like before doing anything. If we breach those down sloping lines on the point and figure chart (top one around 1170-1180) I will close my shorts.
One thing that has really been bothering me is that stupid flash crash. An enormous amount of wealth was transferred that day, but I don't think many bears (myself at least) got much out of it at all. I have a really troubling thought in the back of my brain telling me that distribution was completed very quickly, and market makers have been accumulating over the past two weeks. If so, we could possibly go way back up. Maybe even breaking the highs?
