Butterflies taste with their feet.
Banging your head against the wall uses 150 calories an hour.
In the next seven days, 800 Americans will be injured by their jewelry.
Each of the above bits of information are "facts." The usefulness of the fact, however, isn't defined in any way by it "being."
I compare this information of "facts" to the unemployment reports our country puts out. We read about our unemployment, and the interpretation of "improving" or "worsening" based off faulty information as to the number of truly unemployed.
Use this kind of thinking as you analyze and watch the market each day. What is true, and more important, what is RELEVANT. And, what will "trigger" emotion in the eyes of other traders, which we want, making the market volatile. This is what an economic calendar or "event trade" is, when we hear the talking heads later say "the market moved down today because of 'unemployment, bank debt, etc"'.... it is NOT the event that caused the decline, which we know was already built into the market from our Dow projections, but the 'event' triggered or provided catalyst to the movement.
This is one of the most important lessons to learn in trading.
There are many chartists and traders that believe the bull rally will continue, perhaps thru June, and that we could rebuild highs we reached after the first panic. Institutional investors have had little downturn in which to buy up securities, and if it is true they are building up the market based on they "have no choice but to buy" to fill a portfolio, be prepared for the sad returns when their buying at highs surprises us all when lows do come again. I am a chartist, and cynic, that can't fathom why the market hasn't consolidated on various triggers, and thinks that the longer the consolidation is held off by "buying up" the greater fall we'll have.
Yet at the same time, core and top professional traders are right with me, shaking their heads in amazement. Here's Jeff Clark: "The market has sidestepped over multiple warnings signs, bearish technical indicators, and numerous negative divergences. My short-term momentum indicators have been extraordinarily bearish over the past few trading sessions, and we've seen the market dip lower and then snap right back.
We had the opposite situation in late February and early March, when all the signs were pointing toward a market rally, yet stocks continued to press lower. Eventually, though, the weight of the indicators forced a reversal and pushed the market up.
We are frighteningly close to the reverse of that point now."
___________________
Yesterday the market "tried" to consolidate. In early trading the market hit lows of 8593 on the theoretical Dow. Our June 430P hit highs of 7.50 in early trading.
Whipsaw shifts took place for higher risk call traders who day traded for great profits: -OXBFI OEX.X JUN 2009 445.0000 CALL Available as low as 2.80, sold to 4.10 6/8@!Nice profits. And later in the day...highs of 5.10, as call traders again rolled the dice that no downside would hold.
Traders interested in our new signal yesterday to the June 445P were able to buy only above prior day close, with lows at 15.80 in early afternoon trading, but by late afternoon were able to trade the put buy down in price on the swing. A constantly reversing market.
By 3.30 p.m. the market did a complete whipsaw, turned to in the black, and traders could see the bull/bear clash in reality.
The market went from s3 to r3 in a day, in a 200 point swing. Bull rally, or exhaustive gap? The dialogue never ends :)
Wednesday, June 10, 2009
Monday, June 8, 2009
Don't Let Personal Prejudice Enter Your Thinking
Art Cashin, director of floor operations at UBS, offered CNBC his insights.
Generally, "we're living in an environment where a lot of portfolio managers are underweighted," Cashin explained. The managers were "waiting for a pullback that never came" and now "they have nothing to show for."
Cashin said "one of the reasons for these late-day surges" is fund managers' desperation: "You've got to hold your nose and buy'em."
What does he expect going forward?
"I think — as I said when you had Byron Wein on — you might get as much as a 10 percent overtrade here. But if we went up another 1,000 points on the Dow, I would head directly to the bomb shelter."
The above from subscriber BD, trying to find "reason" for the euphoria. Sadly, the above answer may be a large part of the late day surges, as shorts also cover themselves, and we create a negative cycle of upturn.
Friday showed an opening swing and a progression of whipsaw throughout the day that shows the struggle in the market.
"U.S. stocks climbed on Friday after a report that showed a marked slowing in the pace of job losses.
Shortly after the opening bell, the Dow Jones Industrial Average was higher by about 76 points, driven by Alcoa, up 5%, Boeing, which rose 4%, and Bank of America, which rose 2.7%. The blue-chip benchmark turned positive for the year, up about 0.6% for 2009 in recent trading.
The S&P 500-stock index was up 1%, bolstered by gains in its financial and its industrial sectors. The Nasdaq Composite Index climbed 0.8%.
Nonfarm payrolls slid 345,000 in May, the Labor Department said, well below the 525,000 decline economists expected and the smallest fall since September 2008, when the recession intensified after the demise of Lehman Brothers. The unemployment rate jumped 0.5 percentage point to 9.4%, highest since August 1983. Economists had expected a 9.2% rate."
Allow Floyd to translate: Unemployment hit highs we've not reached since 1933. The pace of jobs statistically shows a "more positive decline," which to Floydian logic means the BEST jobs available for many right now are at $12.00 hour.
What this shows, the immediate 86 point run up in 20 minutes, at opening Friday showed the strength of the bull thinking, and allows many chartists to begin seeing new tops at 9150.
As you review this market it is important to not let personal prejudice enter the thinking ("the market should not do this", or "I'll double my positions I'm so sure of this") as any rally must be suspect after a certain number of days, as consolidation is healthy for a growing market.
And from a long term trader, a CPA, wrote to talk about Friday and what he learned:
I just wanted to thank you for your service. By giving me tools and knowledge of the market to use, this morning I was able to avoid panic selling my June OEX $435 put for a 40% loss. I purchased late yesterday using the support calculations. I did not want to hold over the weekend. I had hoped for a quick 10 to 25% profit in one day and I kept my investment low due to the risk. Needless to say I was surprised by the jobs report. With the big open, I recalculated the DOW and OEX pivot point around 9:50am. This turned out to be my savior as the Thursday night alert numbers were obsolete and did not reflect the true S2 as the market had reversed big time around 9:55 or so. I sold when it hit the S2 around 435 and made a profit of 9%. Not quite my target, but better than a 40% loss.
The market was perfectly trade game for us Friday, with the June 445 call easily bought and sold for $2.00 per contract profits :) Many day traders traded the range with the June 630P by doing exactly what our CPA, KH, wrote above.
These OEX trades bought on the new calculation, and sold on it, for a quick $1.50 on the June 630P. We hold a hedge put, and have two new trades for the day, and new Dow projections.
Will Rogers: " I am not nearly so concerned about the return on my capital and I am the return of my capital"
Generally, "we're living in an environment where a lot of portfolio managers are underweighted," Cashin explained. The managers were "waiting for a pullback that never came" and now "they have nothing to show for."
Cashin said "one of the reasons for these late-day surges" is fund managers' desperation: "You've got to hold your nose and buy'em."
What does he expect going forward?
"I think — as I said when you had Byron Wein on — you might get as much as a 10 percent overtrade here. But if we went up another 1,000 points on the Dow, I would head directly to the bomb shelter."
The above from subscriber BD, trying to find "reason" for the euphoria. Sadly, the above answer may be a large part of the late day surges, as shorts also cover themselves, and we create a negative cycle of upturn.
Friday showed an opening swing and a progression of whipsaw throughout the day that shows the struggle in the market.
"U.S. stocks climbed on Friday after a report that showed a marked slowing in the pace of job losses.
Shortly after the opening bell, the Dow Jones Industrial Average was higher by about 76 points, driven by Alcoa, up 5%, Boeing, which rose 4%, and Bank of America, which rose 2.7%. The blue-chip benchmark turned positive for the year, up about 0.6% for 2009 in recent trading.
The S&P 500-stock index was up 1%, bolstered by gains in its financial and its industrial sectors. The Nasdaq Composite Index climbed 0.8%.
Nonfarm payrolls slid 345,000 in May, the Labor Department said, well below the 525,000 decline economists expected and the smallest fall since September 2008, when the recession intensified after the demise of Lehman Brothers. The unemployment rate jumped 0.5 percentage point to 9.4%, highest since August 1983. Economists had expected a 9.2% rate."
Allow Floyd to translate: Unemployment hit highs we've not reached since 1933. The pace of jobs statistically shows a "more positive decline," which to Floydian logic means the BEST jobs available for many right now are at $12.00 hour.
What this shows, the immediate 86 point run up in 20 minutes, at opening Friday showed the strength of the bull thinking, and allows many chartists to begin seeing new tops at 9150.
As you review this market it is important to not let personal prejudice enter the thinking ("the market should not do this", or "I'll double my positions I'm so sure of this") as any rally must be suspect after a certain number of days, as consolidation is healthy for a growing market.
And from a long term trader, a CPA, wrote to talk about Friday and what he learned:
I just wanted to thank you for your service. By giving me tools and knowledge of the market to use, this morning I was able to avoid panic selling my June OEX $435 put for a 40% loss. I purchased late yesterday using the support calculations. I did not want to hold over the weekend. I had hoped for a quick 10 to 25% profit in one day and I kept my investment low due to the risk. Needless to say I was surprised by the jobs report. With the big open, I recalculated the DOW and OEX pivot point around 9:50am. This turned out to be my savior as the Thursday night alert numbers were obsolete and did not reflect the true S2 as the market had reversed big time around 9:55 or so. I sold when it hit the S2 around 435 and made a profit of 9%. Not quite my target, but better than a 40% loss.
The market was perfectly trade game for us Friday, with the June 445 call easily bought and sold for $2.00 per contract profits :) Many day traders traded the range with the June 630P by doing exactly what our CPA, KH, wrote above.
These OEX trades bought on the new calculation, and sold on it, for a quick $1.50 on the June 630P. We hold a hedge put, and have two new trades for the day, and new Dow projections.
Will Rogers: " I am not nearly so concerned about the return on my capital and I am the return of my capital"
Friday, June 5, 2009
1. Each of you will trade slightly differently than the other person. You are trying to learn both a system with logic, and the art of the emotion of the option trade.
2. All the information you need to trade is in the daily alert, and in fact, this can be used for your thinking about ETF's and the stock market in general. Our pivot point calculator works with all stocks and indices.
3. Study our videos online (full time subscribers, not trial) and learn the nuances of what Floyd does. We have many new videos online for your review.
4. To learn how to trade any option "for a living" takes practice. Take the time to study our work, ask questions, and truly learn a trade. A great % of our Level 3 and Advanced Mentoring students trade full time for a living.
_____________________________
Imagine former President Bush or "Shooter" Cheney making a speech to the Muslim world. I can envision a Saturday Night Live show alone on the arrogance, stupidity and "mightier than thou" approach.
President Obama is smartly trying to distance our history of "aggressor" to a 1/3 of the world, and working on a global "economy" approach. Personally, I believe the type of speech Obama gave in Cairo is unifying, and not "the axis of evil" babble that created so much world hate. Just gaining more of a world order that believes the U.S. is not a bunch of fat, arrogant Hummer drivers is a key focus to our re-development as a nation. I was impressed by our efforts to unify with the world, and recognize that not all are our enemies, and that we can easily create them, as we have been. This will in the end be good for our stock market, as we rebuild world confidence.
But my favorite....the Chinese are buying the Hummer, planning to sell it to the growing China middle class:) Ahh, the lessons we never learn.
With this said....
The government, we know, is borrowing more money than can be conceived. Treasuries are falling hard because of this, as they should. Worldwide we are seeing downgrading of government credit ratings, and it's likely our own debt could be downgraded. Geitner has been selling China, assuring our largest investor we are "safe" and will become the buyer of last resorts for bonds. What the government really said here: we will begin to monetize government debt.
This is happening because of some simple facts:
1. The spread between 2 and 10 year bond yields was a whopping 2.75%, which simply says investors are unwilling to buy long term debt.
2. The IMF estimates government debt to be be 97.5% of GDP in 2010.
3. The Chinese are buying less of our bonds
4. The Chinese are the largest foreign holder of American debt, which this year has shown the worst loss since 1977, down 5.1%.
Economists will argue that the rise in yields shows inflation is likely. Being a "Floydian Economist" I'd guess the world is just worried to hell about our debt, and their own. People are saving more, thusly holding us to recession.
If we have interest rate increases during what some now call deflation it could further depress economic activity.
This serious stuff is all fact. How we now interpret this fact is what is key, both as a nation, and as we view the stock market.
2. All the information you need to trade is in the daily alert, and in fact, this can be used for your thinking about ETF's and the stock market in general. Our pivot point calculator works with all stocks and indices.
3. Study our videos online (full time subscribers, not trial) and learn the nuances of what Floyd does. We have many new videos online for your review.
4. To learn how to trade any option "for a living" takes practice. Take the time to study our work, ask questions, and truly learn a trade. A great % of our Level 3 and Advanced Mentoring students trade full time for a living.
_____________________________
Imagine former President Bush or "Shooter" Cheney making a speech to the Muslim world. I can envision a Saturday Night Live show alone on the arrogance, stupidity and "mightier than thou" approach.
President Obama is smartly trying to distance our history of "aggressor" to a 1/3 of the world, and working on a global "economy" approach. Personally, I believe the type of speech Obama gave in Cairo is unifying, and not "the axis of evil" babble that created so much world hate. Just gaining more of a world order that believes the U.S. is not a bunch of fat, arrogant Hummer drivers is a key focus to our re-development as a nation. I was impressed by our efforts to unify with the world, and recognize that not all are our enemies, and that we can easily create them, as we have been. This will in the end be good for our stock market, as we rebuild world confidence.
But my favorite....the Chinese are buying the Hummer, planning to sell it to the growing China middle class:) Ahh, the lessons we never learn.
With this said....
The government, we know, is borrowing more money than can be conceived. Treasuries are falling hard because of this, as they should. Worldwide we are seeing downgrading of government credit ratings, and it's likely our own debt could be downgraded. Geitner has been selling China, assuring our largest investor we are "safe" and will become the buyer of last resorts for bonds. What the government really said here: we will begin to monetize government debt.
This is happening because of some simple facts:
1. The spread between 2 and 10 year bond yields was a whopping 2.75%, which simply says investors are unwilling to buy long term debt.
2. The IMF estimates government debt to be be 97.5% of GDP in 2010.
3. The Chinese are buying less of our bonds
4. The Chinese are the largest foreign holder of American debt, which this year has shown the worst loss since 1977, down 5.1%.
Economists will argue that the rise in yields shows inflation is likely. Being a "Floydian Economist" I'd guess the world is just worried to hell about our debt, and their own. People are saving more, thusly holding us to recession.
If we have interest rate increases during what some now call deflation it could further depress economic activity.
This serious stuff is all fact. How we now interpret this fact is what is key, both as a nation, and as we view the stock market.
Thursday, June 4, 2009
A Lost Decade of Investing
We have had a lost decade of investing. It is important to lead with this as we remember that as the Dow hit 7750 last fall we thought the world had ended, and as it hit 6400 months later that the great depression would never end. Now as the market moves back towards 9000, despite yesterday's setback, "all is better."
There is no doubt we've lost a decade in investing. Yesterday's consolidation was healthy, and well timed, as the market moves to actually be UP for the year are nonsensical. We remain concerned enough about the USD, our rising and printable debt, reassurances to other countries, and use of central banks. The following article might help us see how the shenanigans continue to "control wealth to the few," the opposite of what the "Obama anti socialists" are saying, as we do not shift the wealth of our nation to an equilibrium we allow only the few to prosper
http://mobile2.wsj.com/device/article.php?CALL_URL=http://online.wsj.com/article/SB124396078596677535.html?
Yesterday by 3 p.m. the Dow had hit a theoretical low of 8562. Note that 8550 was a former resistance line for us, and that yesterday we suggested former support lines would become resistance in any downturn, and vice versa as we are establishing new Dow channels.
I personally re-calculated the Dow (not the OEX) at 10.30 a.m. and 1.45 p.m. yesterday. I used the calculator on the website that asks for the Close (of the PRIOR day) and HIGH and LOW of the current day, to that minute.
To re-calculate simply find this information at your brokerage, enter it into the calculator, and use the new S/R and pivot to reflect the DAY itself, in CONJUNCTION with the Dow projections that you see each day.
As an example, I day traded the June420P and June430P both on watching the market move back to the pivot slightly and then move to s1, and s1 I recalculated again at 1.45 p.m to find that the downturn hadn't even hit s1 on the re-calculation.
What is important for traders to learn is this:
1. Watch futures to see the bias.
2. Study the S/R and pivot at open and, if necessary, recalculate to see the Dow or OEX for the day, in conjunction with our longer term projections. They help you now when to buy and sell.
3. Set rules for what price you will pay, whether you are day trading or longer term holding, and hold to them. Remember that option trading is the "sum of the parts", meaning the success comes from multiple trades, and not all the investments to a single single, using effective risk/reward for your investment.
There is no doubt we've lost a decade in investing. Yesterday's consolidation was healthy, and well timed, as the market moves to actually be UP for the year are nonsensical. We remain concerned enough about the USD, our rising and printable debt, reassurances to other countries, and use of central banks. The following article might help us see how the shenanigans continue to "control wealth to the few," the opposite of what the "Obama anti socialists" are saying, as we do not shift the wealth of our nation to an equilibrium we allow only the few to prosper
http://mobile2.wsj.com/device/article.php?CALL_URL=http://online.wsj.com/article/SB124396078596677535.html?
Yesterday by 3 p.m. the Dow had hit a theoretical low of 8562. Note that 8550 was a former resistance line for us, and that yesterday we suggested former support lines would become resistance in any downturn, and vice versa as we are establishing new Dow channels.
I personally re-calculated the Dow (not the OEX) at 10.30 a.m. and 1.45 p.m. yesterday. I used the calculator on the website that asks for the Close (of the PRIOR day) and HIGH and LOW of the current day, to that minute.
To re-calculate simply find this information at your brokerage, enter it into the calculator, and use the new S/R and pivot to reflect the DAY itself, in CONJUNCTION with the Dow projections that you see each day.
As an example, I day traded the June420P and June430P both on watching the market move back to the pivot slightly and then move to s1, and s1 I recalculated again at 1.45 p.m to find that the downturn hadn't even hit s1 on the re-calculation.
What is important for traders to learn is this:
1. Watch futures to see the bias.
2. Study the S/R and pivot at open and, if necessary, recalculate to see the Dow or OEX for the day, in conjunction with our longer term projections. They help you now when to buy and sell.
3. Set rules for what price you will pay, whether you are day trading or longer term holding, and hold to them. Remember that option trading is the "sum of the parts", meaning the success comes from multiple trades, and not all the investments to a single single, using effective risk/reward for your investment.
Wednesday, June 3, 2009
Ripe For a Fall
Stocks just rallied to three month highs and many believe “it’s a new bull market," with strong consideration given to the new “S&P 500 is trading above it’s 200 day moving average."
All good and true, and America is saving much more (which will prolong the recession)
I see the 200-Day Moving Average as nothing more than a support or resistance line being broken.
Many floor traders utilize a 20th month exponential moving average and chart it in to the S&P 500. These chartists believe that when the S&P 500 is trading BELOW the 20 month exponential moving average (EMA) it’s a bear market.
Studied this way, even with this nice little rally we’ve all become euphoric about, it’s still a bear market, and the end may not have been completed.
This is commentary to share that all is NOT as it appears, and we may be ripe for a fall. We think this "fall" may be two tier, with a slighter consolidation first, and even higher moves, before deeper downside, but in the meantime....
Floyd, nice trade on the June445C. Got in at 5.00 and sold to 6.30. Learning from you I also began to "watch" a put, and I day traded the June430P from 6.50 to 7.50 for a buck a contract twice yesterday while the market just flat lined along. Level 3 service has been extraordinary for me. I'm 9 months into it and day trading positions you don't even show in the alert, all on the Dow projections, and learning to "love an option" as you teach.
Thanks for your patience. MKL, Alberta, Canada
Floyd, interesting day yesterday. Made a buck on the call, and just took a second buy on the put. I'm 11 for 13 winners. I'm amazed the market is staying up, aren't you?
John in LA
Yesterday's flat lining for many hours, with repeated run ups to 8827 (8867 our "Greed top projection") showed what chartists see as a "waning bias" and a topping. Study our Dow projections today carefully, as we've added what could be a "two time" consolidation. Calls may have more run, and there may be more upside. Just take prudent risk.
All good and true, and America is saving much more (which will prolong the recession)
I see the 200-Day Moving Average as nothing more than a support or resistance line being broken.
Many floor traders utilize a 20th month exponential moving average and chart it in to the S&P 500. These chartists believe that when the S&P 500 is trading BELOW the 20 month exponential moving average (EMA) it’s a bear market.
Studied this way, even with this nice little rally we’ve all become euphoric about, it’s still a bear market, and the end may not have been completed.
This is commentary to share that all is NOT as it appears, and we may be ripe for a fall. We think this "fall" may be two tier, with a slighter consolidation first, and even higher moves, before deeper downside, but in the meantime....
Floyd, nice trade on the June445C. Got in at 5.00 and sold to 6.30. Learning from you I also began to "watch" a put, and I day traded the June430P from 6.50 to 7.50 for a buck a contract twice yesterday while the market just flat lined along. Level 3 service has been extraordinary for me. I'm 9 months into it and day trading positions you don't even show in the alert, all on the Dow projections, and learning to "love an option" as you teach.
Thanks for your patience. MKL, Alberta, Canada
Floyd, interesting day yesterday. Made a buck on the call, and just took a second buy on the put. I'm 11 for 13 winners. I'm amazed the market is staying up, aren't you?
John in LA
Yesterday's flat lining for many hours, with repeated run ups to 8827 (8867 our "Greed top projection") showed what chartists see as a "waning bias" and a topping. Study our Dow projections today carefully, as we've added what could be a "two time" consolidation. Calls may have more run, and there may be more upside. Just take prudent risk.
Tuesday, June 2, 2009
Help Me Out Here Floyd!
Trader BD said it best to me yesterday:
"I don't get it. Oil goes up and stocks follow? The cost of US debt is going up and stocks go up? The largest car manufacturer goes bankrupt and stocks go up?
WTF!!
Help me out here Floyd. Am I wrong in my thinking that when the cost of goods goes up, oil, that's a good thing for consumers that do not have the same access to credit that they did a year ago, if they even have a job.
This is Fu000 Up!!"
Trader BD said it well. As GM bankrupts and our debt soars the bulls run the market right to our Dow tops. Truly no chartist could begin to predict what in the human emotion has taken over to bring this much optimism to a market.
Fundamentals are out the window. The market goes up, and Gold hits all time highs. The market goes up and oil is soaring By 1.30 p.m. the S&P 500 had moved above its 200 day moving average.
So a lesson:
“If there is one lesson we have learned from the last four months of 2008 it is that the world financial markets are more highly correlated than anyone could have imagined.
The ability to hide behind any model that used a Gaussian copula function was deemed unwise as securities with previously slight or even negative correlations moved in tandem. Whether personal or financial, relationships tend to break down under duress.
Fall 2008 was the stress test for the global financial architecture, and that structure almost failed. Even though finance is based on mathematics it became very clear that human emotion had a vital part in deciding asset values”
~Andrew Busch
For the market to shift bias we need a 250 point or greater downturn in a day that holds; after this occurs the average downturn in the last 40 cycles has been 564 points from the highest high down. This would put the market back at the 8236 ground, and would be healthy in consolidation, and what many of us see as overdue. However, there is greater risk for even greater downturn as the market reaches an extreme count.
Bulls may have the strength and momentum to take the market to 8950, adjusting these ratios.
Call traders willing to buy above prior day close were the only signal traders out for yesterday, as we own a put, and have made second buys and are in the waiting game. This is where it's important to recognize that our alert shows SEVERAL different ways to enter a trade, and you should read the instructions carefully. OXBFI June 445 C, for example, was not available for those of us willing to only pay prior day close or below, but WAS available for many happy traders with OEX that paid 3.50 to 3.90 for opening entry, and sold to highs of over 6.00.
It's not often we're early on a signal. We saw calls as overbought and own a put losing value. Let's hold it as a hedge, and just watch this market. It's too erratic to be healthy and that is always to the advantage of the option trader.
..
Bloomberg has many articles on U.S. Debt, and a world currency, and the value of Treasuries. All is NOT as it appears, and our "watching" the market while we trade is key.
Many chartists, in addition to the Point and Figure supply and demand chartist Floyd, see a contracting triangle. Volume often begins to decrease, and "flat lining" occurring in the "trade range building" last week.
Usually in a contracting triangle when the pressure builds there is sudden movement, and it's equal to the largest up or down moves that occur.
Bottom Line: we could have a great deal of volatility this month, good for us, if we can read it right:)
"I don't get it. Oil goes up and stocks follow? The cost of US debt is going up and stocks go up? The largest car manufacturer goes bankrupt and stocks go up?
WTF!!
Help me out here Floyd. Am I wrong in my thinking that when the cost of goods goes up, oil, that's a good thing for consumers that do not have the same access to credit that they did a year ago, if they even have a job.
This is Fu000 Up!!"
Trader BD said it well. As GM bankrupts and our debt soars the bulls run the market right to our Dow tops. Truly no chartist could begin to predict what in the human emotion has taken over to bring this much optimism to a market.
Fundamentals are out the window. The market goes up, and Gold hits all time highs. The market goes up and oil is soaring By 1.30 p.m. the S&P 500 had moved above its 200 day moving average.
So a lesson:
“If there is one lesson we have learned from the last four months of 2008 it is that the world financial markets are more highly correlated than anyone could have imagined.
The ability to hide behind any model that used a Gaussian copula function was deemed unwise as securities with previously slight or even negative correlations moved in tandem. Whether personal or financial, relationships tend to break down under duress.
Fall 2008 was the stress test for the global financial architecture, and that structure almost failed. Even though finance is based on mathematics it became very clear that human emotion had a vital part in deciding asset values”
~Andrew Busch
For the market to shift bias we need a 250 point or greater downturn in a day that holds; after this occurs the average downturn in the last 40 cycles has been 564 points from the highest high down. This would put the market back at the 8236 ground, and would be healthy in consolidation, and what many of us see as overdue. However, there is greater risk for even greater downturn as the market reaches an extreme count.
Bulls may have the strength and momentum to take the market to 8950, adjusting these ratios.
Call traders willing to buy above prior day close were the only signal traders out for yesterday, as we own a put, and have made second buys and are in the waiting game. This is where it's important to recognize that our alert shows SEVERAL different ways to enter a trade, and you should read the instructions carefully. OXBFI June 445 C, for example, was not available for those of us willing to only pay prior day close or below, but WAS available for many happy traders with OEX that paid 3.50 to 3.90 for opening entry, and sold to highs of over 6.00.
It's not often we're early on a signal. We saw calls as overbought and own a put losing value. Let's hold it as a hedge, and just watch this market. It's too erratic to be healthy and that is always to the advantage of the option trader.
..
Bloomberg has many articles on U.S. Debt, and a world currency, and the value of Treasuries. All is NOT as it appears, and our "watching" the market while we trade is key.
Many chartists, in addition to the Point and Figure supply and demand chartist Floyd, see a contracting triangle. Volume often begins to decrease, and "flat lining" occurring in the "trade range building" last week.
Usually in a contracting triangle when the pressure builds there is sudden movement, and it's equal to the largest up or down moves that occur.
Bottom Line: we could have a great deal of volatility this month, good for us, if we can read it right:)
Monday, June 1, 2009
Day Traders Rewarded
The first trading day in June the market has been up 8 of the last 10 years. Judging from Friday's last 4 minute end of day 100 point run up, which may well have been shorts covering their positions, we remain with a count of 6 to the call. But, today GM declares bankruptcy. How will the market, and the American people, "take this?"
Do the American people understand this about unemployment? http://www.bloomberg.com/apps/news?pid=20601087&sid=aSc829RcWzSc&refer=home
Day traders were rewarded with our call recommendation Friday during the whipsaw market, and settled for 25% to 30% profits. First or second buys have been made on our June410Put, and we now have a stop loss of Friday of this week on this trade, with the second buy.
Our Dow projections are new for the week. My trading thoughts this week are influenced by what I see as a market ripe for more downturn, to perhaps 7950, or SPX at 800, but the bulls are fighting hard.
Our count projections were too "shifty" last week, as the market has created almost a new "trade range" from 8250 to 8550.
Thusly, we'll open trading this week with a signal to an OTM call, and hold our hedge put trade. The market is showing every sign of becoming overextended.
Do the American people understand this about unemployment? http://www.bloomberg.com/apps/news?pid=20601087&sid=aSc829RcWzSc&refer=home
Day traders were rewarded with our call recommendation Friday during the whipsaw market, and settled for 25% to 30% profits. First or second buys have been made on our June410Put, and we now have a stop loss of Friday of this week on this trade, with the second buy.
Our Dow projections are new for the week. My trading thoughts this week are influenced by what I see as a market ripe for more downturn, to perhaps 7950, or SPX at 800, but the bulls are fighting hard.
Our count projections were too "shifty" last week, as the market has created almost a new "trade range" from 8250 to 8550.
Thusly, we'll open trading this week with a signal to an OTM call, and hold our hedge put trade. The market is showing every sign of becoming overextended.
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