First the scare, then the tear. Last Thursday’s price action was essentially mimicked today only with less violence. Below is an excel spreadsheet I use to record the market internals. The important columns to note are the Trin and the NYSE % change. The light orange dot represents a bearish Trin close on the day, the following day we had a bullish Trin close, but a bearish market. This is an extreme warning signal. When we see Trin readings above…
A choppy day today, but again nice size intraday swings on the /ES. The 6E was a nightmare to trade and we will be treadding lightly for the remainder of the week. We have three scenarios for tomorrow. 1. If we move up to $1123 and and sell off, we will have a downside target of $1088. 2. If we move up to $1123 and continue up through $1129 will have a bullish target of $1203. 3. If we open and do NOT trade up…
Right from the open signs pointed to a gap fill, let me explain. Local pit traders (those trading their own capital) vs. brokers (those trading client capital) tend to fade the opening gap on the open of each morning. This means if we gap up, they are looking to sell, and if we gap down they are looking to buy. Knowing we never want to fight the gap fill (going long on a gap up, or short on a gap…
Gold stocks failed to break the highs of Friday, as the market sold off and then rallied into the close. What does this mean? We’re more bullish on stocks, and should see a decline in the VIX. When everyone expects the markets to go down, they go up.
The Dow Jones and the S&P 500 started off the week with impressive gains, making up for just about the whole slide from the previous week. The Dow finished the week up 2.3%, although, it spent Thursday and Friday selling off. We are looking at the 10,400 level in the Dow and the 1120 level in the S&P which are their 50% retracements for bulls. As a case for the bears, the Euro currency has hit an 18 month low…
News announcements for the week ahead can be found here. These are the stocks we are watching for next week 5/16/2010… Longs: ABX, AUY, CELG, EMC, GG, NEM, SLV, SLW, UNH Shorts: FXE, GS, LVS, WLP Given that next week is Options Expiry we will be looking to buy June Calls/Puts on these names. We would like to balance the delta on the portfolio and we are looking at ITM options with approx 70% intrinsic value. Here is a demo…
A very choppy day that provided many intraday setups. To continue our discussion on positioning and trade entry, I would like to stress the importance of NOT chasing moves. We do this by identifying our entry, stop, and profit target before the trade is even placed. One of the hardest things for a trader to do, which may surprise you, is let his profits run. A trader is quick to let a stop get hit, but often when a small…
Positioning yourself a move is obviously the first step to a profitable trade. When analyzing the market with whatever method you prefer, keep in mind that the market will move with the least number of participants as possible. Understanding crowd behavior is in general more important than understanding complex economic theories.