Sunday, August 23, 2015

What happens next - Part 2

Current market rating here

I am posting 3 scenarios on what to do if you are short, long, neutral right now.

We took 50% off the ST and IT positions on 08/21 at market close, explanation below. I will let the other 50% of the positions stop themselves, higher or lower, when the turn signal is initiated. LT positions will be stopped on a close of > /ES 2035.

Anyway, where does the market go from here. As I posted in my previous post, I have no clue. Up? Down? Sideways for several days? No idea. Everyone out there is throwing darts at the market, one of the darts will hit the bulls eye. My experience tells me that instead of guesstimating what the market does next, it is best to have plans on how to manage the positions. 

  • Have a plan to do if XYZ happens
  • It doesn't matter if that doesn't happen, you still have a plan B if PQR happens
In other words, be flexible in this market. If you are chopped by market whipsaws, that is still ok. Take a walk and come back to trade another time. I do have suggestions on what to do if you are:

  • Short right now: If you are short from ~ 100 SPX points above like us, take some off the table. That way, your profits will be ensured. Because what if the markets rally straight up from here? You have profits, so take some off the positions. Then, there are 2 scenarios. Market goes up or down. If market goes down, wait for the turn. Close the positions when the market turns. If the market goes up from here, have a stop at about SPX 2065. You still end up profitable being in short positions on this "mini crash" because you scaled out already.
  • Long right now: Depends on what level you were long from. We sure hope that you didn't enter long positions at SPX 2100. If you did, you should have been stopped out before 6% down. If you entered long somewhere around, 2025 - 2050, you still should have been stopped by now. If you didn't close the longs on friday at market close and are expecting a rally next, we cannot help. Because there is no guarantee rally is going to come next. May be it will rally. May be it will not. We don't see the rally yet. Without any buying in the market in the last 3 days, how can you expect the market to rally? There are no indications right now that market will rally. That may change come Monday, but we have to see the evidence. 
  • No positions right now: This is the best place to be in. :) Cash is King!!! Traders who are in cash are at a huge advantage. Traders who are short right now, have to close their short positions and then take longs - in other words, they have to be ultraflexible about 2 moves; There is a high chance that this group may miss the next up move. If you are in cash now, you are obviusly relaxed and will see the next turn better without getting whipsawed.

Do not try to trade counter trend moves, you will lose the opportunity. We were short on ST, IT, LT positions prior to market open on 08/21. But, we were "expecting" VST counter trend move upwards. We knew for sure that the market did not bottom, hence clearly mentioned this was a VST move. But, the VST move did not materialize and we got stopped at /ES 2005. As a result, we were down 0.6% on the VST move AND we lost the opportunity to profit on the VST short positions from /ES 2021 to 1970. May be VST, but still 50 points is a big move. 

Hence, do not try to trade counter trend moves.
Do not guess the up moves. 
Be nimble

Saturday, August 22, 2015

What happens next - part 1

Yesterday we tried something foolish  , more on that foolishness in the next blog post. But, let's try to understand where we stand in this market "crash" and what is next. 

Ivanoff suggests this is a market bottom like Oct. 2014. Technical trader says puts haven't been this high since March 2007, hence this is THE BOTTOM. Is it? May be both are right. What if they aren't right? Are we trying to playing a guessing game on who is right or wrong? Are we gambling with our money on guessing?

I am going to post tomorrow what our game plan is. Hence, watch out!

1st let's look the current situation from my perspective. Last market update was this. Our market guage suggested a decline. We got a 3% decline. So, what is the next scenario? Chart below.

1) Market bottom like Ivanoff suggests and bear crushing rally!
2) What if market declines further for 1-2 days and then rally for few days and further decline?
3) Who knows what happens? And why exactly are we trying to guess!

This post is about perspective, so let's just do that. Chart below. 

More puts have been bought in several instances before. And does more puts bought = harder the market crash? I don't think there is a linear relationship between extent of market decline vs puts. It is not wise to guess based on "VIX hasn't risen more ever" or "puts are high" this time. 

So, what do we do? That is for tomorrow. Thanks...........

Friday, August 21, 2015

VST market update

E-mini set up a positive divergence on the hourly. Go long with a stop at 2005 /ES. Only VST.

Market update

Previous update here

We had to post the previous update to guide ST longs on when to close the position and what levels are important. The /ES futures market was down 15 handles, hence defining levels was important. As posted yesterday, market closed below /ES 2060 and /ES 2035 as well. 

ST - changed from buy to sell
IT - had been a sell signal since July 26
LT - changed to sell from buy

Our options machine is in the "sell" zone, so exercise caution. Chart below. Could this sell move be a headfake? Well, may be, but let the market tell us that point. We are confident to read the charts when that happens.

I am a contrarian but I do follow the charts to identify the trend. I do not play counter trend moves though. Being a contrarian and a counter trend trader are quite different. 

We will post an update when the ST trend changes.


Thursday, August 20, 2015

Market update

Previous market update here 

Was that update like 3 hours back? :) That is how much this market allowed me to sleep. :( Sometimes (FOMC/ OPEX), the market doesn't allow us to sleep. We are being used to working hard. We will catch up during the weekend, not to worry. Since I am sleepless anyway, I will present few interesting charts below.

Based on the market close, we will post updates.

Chart below: Since the cash markets are closed till 930 am EST, we will talk using the futures charts. A close of /ES (daily chart) below 2060 triggers the ST sell signal. A close above /ES 2060 is hold. A close above /ES 2072 reiterates a buy. 

Next lower level to watch for /ES is 2035. A close below that will trigger a LT sell. Clear? Any questions please raise your hand. 

Next up is FB - chart below. Yesterday's wild swings in the market did not influence this ticker a bit. FB held its nerve and closed +ve. Buy with a stop below the orange rectangle. A close below that rectangle will trigger a short position.

Next is Gold. My neighbor told me yesterday that Gold's bear market ended and it will never go below $1000. Well, there are no fixed claims in stock markets. We are very flexible to buy or sell. No fixed opinions here. 

Chart below: Gold is up against some strong IT resistance. We reckon Gold is a sell here. The recent uptrend should end here. A close above that line is a IT buy with a stop 1% below that line. In simple terms, a daily close above ~ 1142 is a IT buy with a stop at ~ $1130. Got it?

We have seen some positives yesterday despite the sell off in the markets. LQD closed positive. Let us see how it will follow through. LQD has been a sell for more than 6 months but let us see if this ticker will turn a corner. No recommendation but thought this was interesting. Chart below.

We have a recommendation for you. This ticker is low volume, so you got to have a 10% stop. And please don't get heavy on this name as I said this is (relatively) new ticker to the market. Buy EROS with a stop @ ~ $35.


Wednesday, August 19, 2015

Market update

Previous market update here

Before the market update, based on the question from a reader, we have a post for crude oil. Chart below. 

If you already are short, right now it is hold. Close the short position on a close above /CL = $43.

If you have no position, then open a long position when the /CL bounces in the rectangle. 

What instrument do you use to trade crude oil? ETFs are the way to go. Unfortunately, there is no "best" ETF as a direct play to crude oil. See chart below, while crude oil is down 54% YoY, other ETFs are down much more. USO is an ETF, OIL is an ETN; UCO and UWTI are leveraged plays for /CL. The best of the worst is USO though. 

Now, let us discuss the market update. We flipped the sell to a buy on ST and the market went down 0.8% on the reading. Yesterday was a FOMC day. Nothing significant comes out of FOMC on most days, except once in a while. Yet the market swings a lot. That is never our problem, anyways. We have our own instruments, our own indicators to tackle all that noise. 

No change in market update, we have a 2% stop on the ST.


Tuesday, August 18, 2015

Market update

Previous market update here

ST changed from sell to buy
IT - sell
LT - Buy


Monday, August 17, 2015

Market update

Previous market update here

First up, we have a buy recommendation for you. Buy Dominion resources with a 5% stop, chart below

Market update

Previous market update here

No change in the market update as of now. We had a ST sell from 26th July @ SPX 2079.xx

I will post a change in signal as soon as we see it. But, let me post a warning to the bears. This is good for the shorts to close the position. 

The circled turn marks the bottom of the market whereas the arrow confirms the turn. This indicator serves as a warning prior to the turn. But, the signal change is not there yet! 


Friday, August 7, 2015

Market update

Previous market update here

We do not have a change in the market update as of now

VST/ ST - Sell
IT - Sell
LT - Buy

We mentioned that we will take a short position should the market close below SPX 2095. The index did close below 2095 on 08/04 and we did open a short position. However, we closed the position the next day as the market closed above it. 

In short, we do not hold a ST position now. The above update holds good until the next signal comes in. But, we did enter the warning (for the bears) territory already (see chart below). The confirmation would be a turn below the blue line that the turn (to buy) is in place. As long as the indicator is above the blue line, then the bears don't need to worry. I don't rue a missed chance to be short now, sometimes it happens. This stance is for the ST position only. We do hold a IT short position though.

If I were holding short positions now, I would not close the position. Coz we only gained like ~ 1% + with this sell signal , but I would have stops above SPX 2105.

We will keep you posted, GLTA!

Thursday, August 6, 2015

Priceline Inc.

As simple as it gets, buy the breakout of weekly close above $1380 with a 5% stop. Sell short below $1250. Click on the chart...

Tuesday, August 4, 2015

Market update

Previous market update here

No change in the current market update from the previous one, but we do have a warning (chart below). To be honest, there are several warnings in all time frames, some of the warnings being extreme. But, this market wouldn't budge down. It continues to amaze us.

We don't hold any ST positions as the market did not close below SPX 2095. One of the good things for me personally was that I did not trade much from Dec. 2014 - June 2015 for ~ 6 months, luckily. The last 1 month has been super whipsawy, hence I can understand how it must have felt to have traded during that period. I did not trade, but our staff have traded and I easily understand them. 

Usually we do not do much political/ fundamental commentary 'coz: 

1) Trading is not about talking, it is an art in itself which is based 70% on a) putting the right risk size on the table and b) being flexible to close positions

2) If we start to talk, then we will have to dish out some criticism on someone out there - which is not our wont. 

Out there, I am reading reviews suggesting that the "fear seen among investors now is same as the fear at the 2009 market lows" Oh, really? 

How do you measure fear in the markets? Objectively or subjectively? 

If you poll 100 people on fear about markets, that is subjective. If you look at the data from the market exchanges and derive fear that is objective. 

If investors are fearful of the markets, they should either buy puts or get out of the market, right? We simply don't see any extreme levels of "fear" among investors. If you say there is extreme fear among market participants only 2% off the all time highs, you must be kidding!

Anyway, we do not subscribe to the notion that we are seeing extreme fear currently. Atleast, it is not simply seen in the data. In fact, it is opposite of what is being reported in the interweb.

Chart below

This is only a warning that top is probably in (or close) for this ST frame. This is not a signal, however. Especially in this market where every indicator and signal has been mercilessly trashed. 
It still pays to watch for the warnings, as it allows us to be prepared of the risk that is in the markets out there. Nothing more, nothing less.....


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