Bottom watching

Trapped bulls hope that the bottom is in while the side-lined bulls and bears are hoping for a capitulation. I have already seen a few articles today talking about bottom-fishing here, however, I won't do any SW from the long side until we see the June employment report, which potentially could be a capitulation trigger.

Trading update:

1. BIDU calls: exited in the early moments when it spiked towards 320, only a small loss.

2. CTRP: exited when it broke 46 again, and lost around 15% instead of last Friday's 20% gain. Originally I planned to exit if it breaks 45, but the accelerating time decay somehow soured the whole thing.

3. PCX: Bought July150 Puts when it was around 154, but oddly enough, by the time it closed just above 153, the price actually drop a bit. A risky trade here, we'll see how this turns out.

Market will attempt another rebound tomorrow, which might gain some tractions if oil/energy sectors pullback somewhat here. Went through my list, and did not see any compelling long setups, and a few half-assed short setups. I think the most sensible thing to do right now is bottom watching.

The arrival of the Bear Kingdom?

The breaking-out oil, rising inflation, the bambling from the toothless Fed, and the disappointing ER from several key tech leaders delivered a devastating blow to the bulls as the market suffered huge losses last week. By the end of last Friday, DOW became the first major indices to smash through the Fed-engineered double bottom of Jan/Mar’08 with SP500 only a spiting distance away its bottom. By doing so, DOW is now about 20% off of its last year’s high, thus formally kicked the door to the Bear Kingdom wide open.

On Weekly Charts:
DOW continued to lead the market to the downside as it closed below MA200 along with SP500 for the first time in over 6 years. For both DOW/SP500, the momentum has now firmly flipped to the negative side, while declining for the 5th straight week for NASDAQ/Russell2000; MACD in solid down trend formation for both DOW/SP500; volumes rose for all major indices as the losing streak now at four straight weeks; overall candle formation became increasingly bearish; DOW is entering oversold territory, for other major indices, only RSI2 is now in oversold territory while stochastic still has distance to go.

On Daily Charts:
The negative momentum kept rising for all major indices as they accelerated to the downside; DOW is now 300 points south of its Jan’08 intra-day low, while SP500 only 22 points north of its Mar’08 intra-day low, but NASDAQ still about 160 points above its Mar’08 low; all major indices have been lingering in deeply oversold territory with several failed attempts of technical rebounds.

On 60 min Charts:
Just want to point out that there are signs of a nascent oversold rebound for all major indices.

Thoughts and observations about the current market conditions and near-term outlook:

1. Technically speaking, if the market was at a crossroad last week, it is now taking the path to the bear country. The weekly charts suggest that it is likely to take another 2-3 week decline before all major indices would reach the oversold levels that were associated with the previous bottoms in Aug’07, Jan’08, and March’08. Given that, other major indices are now very likely to follow DOW’s footsteps and break their previous lows in next 2-3 weeks.

2. Even though VIX is up for the week and now on the verge of resuming its uptrend on the weekly chart, it continues to diverge from the market movement and currently at a level that is around 1/3 lower than those associated with the previous bottoms. While arguments that the muted VIX is largely due to the lack of any significant single-event have some merits, it is rather obvious that relatively speaking, there are still too much complacement in the market. Once again, you won’t see a real bottom or at least a tradable bottom until the fear turns into panic and the Wall Street is soaked in blood.

3. It is worth to point out that all major indices and many key sector indices have now completed the 1-2-3 trend reversal, and their primary down trend, which started last November, has now resumed following the 3 month low-volume counter-trend rally. I would also like to point out that if the previous decline was largely due to the self-doubting and discouraging bulls, bears really took their glove off this week as the Lowrys selling pressure reached multi-year high last week.

4. Here is another alarming bearish signal: according to the latest COT report, the commercials have dramatically reduced their long positions this week. In the past, such re-positioning by the big boys were often followed by a 2-3 weeks of major market decline.

5. Perhaps the most important and fundamental changes in recent days are the raging inflation AROUND THE WORLD with many central banks have embarked a rate-hike campaign (with ECB likely to join the list next Thursday) hoping to reign in the inflation before it is out of control. I would like to point out two things: first, this rate-hike campaign has just started with a LONG WAY TO GO; second, the rate-hike will significantly dampen the economic growth around the world if not triggering an outright global recession. On this regard, the US is far behind, and we may pay a much bigger price down the road.

6. Contrary to my expectation, oil broke out a 3-week trading range to the upside this week despite of some bearish divergences on its daily chart. Other commodity sectors, especially energy related ones such as coals, are poised to resume their parabolic ascending. Even though the US dollar may weaken further and thus drive oil/commodities higher in near-term, the increasing possibility of a global recession could ultimately pull the carpet underneath them. When that occurs, we would likely see an equally parabolic descending, if not more dramatic.

7. The market is on a 4-week losing streak, but since Sept./2002, no losing streak has been longer than 4 weeks. That, along with other factors, might favor yet another technical rebound attempt next week. However, I doubt the size and sustainability of any rally under the current market conditions. Right now, I am leaning to an overall “sell all rally” strategy until the major indices reach a tradable bottom, my guess is: DOW 10750-11000, SP500 1170-1220, NASDAQ 2150-2200.

I welcome any comments!

Drowning in the oil tsunami?

Considering the fact that oil broke yet another record and that the rising negative momentum and fear, bulls should be content that SP500's previous bottoms are intact by the end of today's close and that there were many many doji/hammer candles ending this free-fall week.

Trading update:

1. Bought puts on PCX when it spiked towards 153 and showed signs of intra-day topping, closed near the close when it spliced through 50, felt good about the plan/execution/profit.

2. CTRP July45 calls: about 20% profit and still holding, its action in the last several days have been quite bullish, or more properly, suggesting a tradable bottom to say the least. We will see if my sitting tight is going to be rewarded.

3. BIDU July330 calls: under water and still holding, feel that it will have a good jump if the market rallies on Monday. So far the paper loss bit a chuck off my profit for the week. I totally screwed up this trade:
** Got in unplanned AND when it was far from oversold on 60 min chart (that point would be today when it was around 306-308).
** Failed to re-adjust the bullish expectation especially in yesterday's near-crashing market, had 3 chances to book as much as $1000+ profits, did not do so, and turned it into a losing position and distraction.
The lesson here? when you bottom fish, especially in the current down-turn, make sure that the stocks are oversold both on daily AND 60 min charts, given that other conditions also met.

Will I learn my lessons? Well, I will see about that after a few rounds of beer/Junmai sake in a few hours...

I hope you all survived the week without much hurt!

Window dress this!

I am gonna be brief here.

We certainly saw the blood on the Street today, the problem is that with DOW now solidly broke all the previous lows and SP500 poised to do the same, and still relatively low VIX, the blood shedding may be yet to run its course. There is no doubt that market is oversold on almost every time frame, however, without any conceivable catalyst and the out of ammunition Fed, the oversold condition alone won't produce any sizable or sustainable rebound. With that said, the market often does not accommodate the majority views, so what the market will do tomorrow is everyone's guess. Who knew, maybe big boys will do some serious window-dressing tomorrow/Monday as the month/quarter ends.

Since both long and short could be very dangerous undertaking at this stage, unless you are as sharp as Razor, or as experienced and ballsy as PCAGUY, or as fast as the wabbit, you might just hold your cash tight and enjoy the battle between bulls and bears.

Position update:
I currently have some BIDU calls (entered when it was just above 117) and some CTRP calls (entered when it was around 45.8), I might lighten both positions if market gaps and rally in the early going tomorrow.

One more thing: it is just unbelievable that the Fed engineered a double bottom with its massive rate cut and liquid injection, only to see not only the imminent demolish of the bottom, but the raging inflation that would cast a very long long shadow on the market for months to come. If I was big Ben, I will cry my eyes out tonight, seriously.

Short-the-rebound candidates: ASK, CF, GOOG, PCX, RIMM, AAPL.
Bottom fishing candidates: CLR, CRM, FSLR, MON, POT, SOHU, X.

Good luck all!

Fed up?

Is it just me or if Fed is getting better and better at using seemingly plain language to confuse the heck out of everyone? Apparently even the big boys could not figure out what exactly Fed was thinking (just look at the intra-day charts of SPY/QQQQ).

Bulls obviously felt a letdown into the close, and the AH RIMM/ORCL ER have all the looks of a gap down coming tomorrow morning. Speaking of tomorrow, it will be a crucial day for bulls because if they could survive the opening down and closes the day in black, their chance of having a 2-3 day rebound will be greatly increased.

At this stage, even though I have a bearish bias towards the whole market, I am reluctant to be aggressive from the short side mostly because of the deeply oversold conditions on the daily charts, as matter of fact, I might catch a few falling knives tomorrow morning if the market gaps down big, and even better, QQQQ/SPY reach oversold on 30 min charts (at least for RSI2). Of course, pre-determined stops will be in place for all long positions and I will nimble when it comes to take profits.

Bottom line: bears are not yet done, but bulls are not yet over.

On today's trading:

1. Closed OIH put when it sliced through 215, too bad it is a small position.

2. Somehow decided to put BIDU around 327, did not promptly book the profits, ended up with a hole in my pocket.

3. Luckily I put MEE when it rebounded towards 91, and exited when it fell down to 88.5, that got me into the black today, woohoo!

Waiting for Godot, Act #N

Well, it is time again to start the count down for the tomorrow's FOMC decision, or the lack of. Things are definitely getting dicer by the day on the Wall Street, as yet another attempt of technical rebound fizzled today. Today's decline might have more to do with the deflating bulls than the edgy bears who might be having flash backs on the beatings they took after previous Fed rate cuts.

As of the close today, several more key indices completed the 1-2-3 reversal, including: Russell2000, SP-Mid-Cap, and Dow-Transport. With DOW/SP500 only a stone-throw away from their Jan/Mar lows AND financials as a whole are at new low, it must be disheartening and discouraging for Big Ben and Co. right now. After all, the massive rate cut campaign, which was meant to save the financials, has not only failed miserably, but further fueled inflation flame along with the excessively injected liquidity. But perhaps the most tragic part of this odyssey is that unlike other central banks, no matter how much the Fed wants to, it just cannot raise the rate right now. Talking about quenching the thirst with poisonous liquor!

I gather many folks are ready to buy into this post-FOMC rally, especially the market is deeply oversold. But be very careful, especially if the Fed jacks up the hawkish tone, there are reasons while the technical rebound attempts have failed 2 days in a row.

Today's massive price raise from the DOW Chemical and India rate hike news are pushing me towards the "every rally must be sold down" mode. I probably won't be aggressively bottom fishing, unless I see a sizable drop (2-3% on major indices), and I probably will actively look for short setups if there is a 2-3% immediate jump of the major indices.

And oh, don't forget tomorrow's RIMM's ER in AH, it could be a kicker or spoiler for either bulls or bears party. Speaking of RIMM's ER, my plan right now is to use any post-ER jump as an opportunity to initiate short positions, why? just look at its weekly chart (hint, volume and other indicator bearish divergence).

Good luck to all for tomorrow, and trust me, you will need it (unless you sit out).

Boiling point!

Today was a really boring day, well, maybe except the short few minutes in the opening when bulls' technical rebound attempt turned out to be nothing more than a premature ejaculation (sorry for not finding a better term). However, several noteworthy events did happen by the closing bell:

1. Following SP500/DOW, NASDAQ and QQQQ finally completed the 1-2-3 reversal on closing basis.

2. Both semi and retailer sectors broke and closed below their recent lows.

And of course, the financials continue rolling over.

Oil and related energy sectors (including coals), however, were stronger than I had expected. I sure hope that is not because too many players like me who are convinced of an imminent pullback here. But in any case, I still feel that those parabolic movements are about to end.

Trading Update:

1. SOHU: bought 1/2 position of July 75 puts when it was just below 76, may add another half between 78-80, with intra-day stop just above 81, closing stop above 80. Initial target=72.

2. OIH: bought a speculative July220 put position when it was around 222, might not be a good move here as it broke out into the close, but hey, it is a speculative position.

3. DVN: bought a 1/5 position of July120 put when it was around 122, stop just above recent high, initial target=118.

4. RIG: bought 1/5 position of July150 put when it was around 154, just like OIH, might be a bit early here. May add more in the range of 158-162. Intra-day stop just above 162, closing stop just above 160, initial target 150/152.

5. USO: I look to initiate a small July110 put position tomorrow, especially if it gaps up at the open.

6. Coals: I plan to initiate some speculative put positions this week in the following names: ANR, JRCC, PCX and WLT.

Things will get very tricky tomorrow: with market in oversold and FOMC decision/key ER from RIMM/MON ahead, bears probably are not eager to corner the wounded bulls here. On the other hand, while certainly not on their last breath, bulls simply don't have much left to mount a meaningful counter attack, all they can do right now is just hanging tough and hope to get a shot in the arm in next day or two, and they might just get it.

Tomorrow might be another boring day, but the energy will be building up and the boiling point will be near, hopefully, it won't be the wabbit who gets cooked and passed along as snacks to those crazed bulls and bears.

What is behind us, the worst OR the best?

The talking heads on the Wall Street have been asserting us for months that “The worst is behind us”, they also told us many times that banks/brokers had finally done the write-offs. Considering how reality has been blowing away all the smoking mirrors on the Wall Street, we might just have to consider the possibility that the opposite answer might be closer to the truth.

Bulls, especially the tech bulls, tried very hard last week to stop the recent slide, but last Friday’s precipitous sell-off on heavy volume has not only squashed bulls’ hope but also drove bulls to the edge of a cliff.

On Weekly Charts: DOW led the major indices towards the bearish territory. Positive momentum flipped to the negative side for the first time in 11 weeks for the DOW while declining for the 4th straight week for other indices; MACD crossed and turning downwards for the DOW with other indices following the same path; overall candle and volume patterns remain bearish since May; stochastic and RSI(2) favor more near term downside;

On Daily Charts: the bearish short-term MA bow-tie formation now in full swing for all major indices; negative momentum started to rise again; both DOW/SP500 breached last week’s lows and key support levels with DOW now only about 100 points north of the March low; MACD in solid down trend formation; candle patterns remain firmly bearish; stochastic/RSI2 in oversold for DOW/SP500; NASDAQ/Russell2000 managed to close above last week’s lows after the failed attempt to reclaim their MA50.

Thoughts and observations about the current market conditions and near-term outlook:

1. Technically speaking, the market is at a crossroad right now: if the market goes down next week with NASDAQ/Russell2000 following DOW/SP500 footsteps, the MACD and momentum would flip to the bearish side for all major indices. That could mark the beginning of a lengthy decline as the weekly charts suggest that the market will need a minimum of 2-4 weeks before reaching the oversold levels that were associated with the previous bottoms in Aug’07, Jan’08, and March’08, which means that re-testing of the Jan/March lows will be inevitable.

2. VIX has been overall indifferent to the recent market decline: even as both DOW/SP500 solidly broke their last week’s lows, VIX remains well below its last week’s high. The muted reaction in VIX simply indicates that there is simply not much a fear in the market right now. The VIX behavior collaborates well with other facts, such as the increasing of the long positions by the big boys (as seen in the latest COT data).

3. There is a consensus that market has seen its true bottom, solidly manifested by the double bottom formation (Jan and Mar’08 lows). Consequently, many seem to position themselves for an all-out bottom fishing should the re-testing of the bottom arrives in the coming days. That kind of the mentality might well explain the muted VIX movement in recent days. However, if you study VIX chart, you will find that VIX spikes to very high levels with any meaningful bottoms, such as the Aug’07, Jan’08, and Mar’08. The relatively low level and lethargic movement of VIX right now is UNLIKELY indicative of a bottom of any significance. In other words, you won’t see a real bottom until the fear turns into panic as the Street is soaked in blood.

4. Since I am on the bottom testing topic, I want to point out that while the double bottoms formation is common and often reliable, the triple bottom formation is rather rare. In other words, if the market breaks the current double bottom formation, the consequence of the nasty surprise may be dire, especially for those who are convinced that the bottom is in.

5. I expect the tech sector to hold up a bit better than the rest of the market before the RIMM ER. Speaking of RIMM ER, it comes at an extremely crucial time. Right now the market has a high hope for RIMM ER and its recent price movement has reflected this. A better than expected RIMM ER may just give tech bulls enough jolt to regroup and save the market, but a weaker than expected RIMM ER will destroy the safe heaven for the tech bulls and send NASDAQ down to its March low in a hurry.

6. Take a look at GE’s chart if you want to know the outlook of both US and global economies.

7. Watch GOOG, BIDU and AAPL for what’s coming in tech sector, if these big name tech stocks break their recent lows, it is a kiss and good-bye time for the tech bulls.

8. Next week’s FOMC meeting is probably going to be the most irrelevant one in recent months because the Fed is now really between a rock (troubling financials and economy) and a hard place (raging inflation), and all it can do is just lip service.

9. There are now concrete signs that the raging inflation may finally choke down the miraculous economic growth in key emerging economy such as China and India. If that trend gains more traction in the coming months, it would not only dashes the hope of a quick turn around for US economy, but also deliver a lethal blow to the parabolic moving commodity and energy sectors.

I would like to ask those who consider my weekend market analysis like this one valuable to spread the words about this blog. This might be the last time that I would really spend time to go through many charts and readings to write up an in-depth weekend market commentary if I don’t see a meaningful increase in the readership in the coming days: I have been really pushing myself, but the efforts may not be worthwhile.

Bears rule!

Well, folks, there is no other way to put it when the market sold off on high volumes (especially NASDAQ) and the major indices closed below key levels (DOW under 12000, SP500 under 1320). What surprised me is that there was virtually no rebound going into the close, and the big name tech leaders were under persistent selling pressure all day long (just look at AAPL and BIDU). Even though the market is approaching oversold region again, the testing of the March bottoms is fully on now.

I got stopped out for my RIG put position, which sucked because it fell right back. Also did a couple of AAPL DT calls, and got out with small losses. Fortunately, I bought MOS July155 calls when it was retesting 150, and the quick profit on the bounce pretty much evened out those loss. Also got lucky to sell my ANR puts at 8.9 (the high of the day) when it spiked down in the early going. Despite of the decent profit for the week, the fact that I suck (just look at my FCX trade and where it closed today) has left me with a bad taste in the mouth, which can only be washed away by some yummy beers.

All in cash now, will get ready if there is a big panic sell-off next Monday.

Enjoy your weekend!

Looking for a compass?

The market is becoming more treacherous very day with bulls and bears all looking for the direction. My short-term bias is neutral as I expect the major indices bounce around between the recent lows and the May lows, my intermediate term bias is bearish as I think that a test of the March lows is a real possibility. Both bulls and bears got hurt in recent sessions so maybe it pays to be a fast-running wabbit like me :)

On recent trades:

Weds June 18

** DT GS (puts) and AAPL (calls) for modest gains.
** RIG: Swing, bought half position (5) July150 puts when it was around 149.5.

Thurs June 19

** MOS: planned SW-puts, but chickened out in the opening moments and then later when it rebound towards 157 :(
** OIH and USO: planned to short near the tops, but GoldmanSucks' upgrade ruined my "conviction".
** ANR: planned to initiate a speculative put position in anticipating a blow-off top with ez=105-110; failed to step up in the opening moments, but later bought 5 July95 put when it rebounded and stalled just below 97. My IT right now is MA10/92, but today's candle/volume combined with the extreme overbought conditions may suggest that a short-term trading top at least with downside to 85-88. Should I once again be quick on taking profits? Any thoughts on ANR welcome.
** RIG: this morning's Goldmensucks' upgrade ruined my "resolution" to add another 5 contract around 152, but still holding the original position, IT=145/147. But it might be pinned to 150 tomorrow.

Thoughts on the energy and related sectors

Look at USO chart, I feel increasingly strong that oil is on the verge of big pullback in next few days, and when that happens, the related sectors will do the same (look at OIH chart).

The coal sector(especially ANR, MEE, JRCC), and to the less extent the solar sector may take a sizable hit should the oil breaks down. While I am on the commodities, I also expect sizable pullbacks in fertilizers, especially CF and MOS.

A note to PCAGUY

Man, you got steel balls for sure! I myself try hard not to average down (UNLESS it is well planned scaled-entry) because whenever I do it, I got half-cooked. Deep pockets sure help a lot, but I am still unsure your way in recent drys play is fundamentally sound :) but congrat on good wins!!!

Do you really like FIDO's Active Trader Pro? Any major pitfalls?

One big concern I have is if FIDO has "Gainskeeper" (Ameritrade has) that would automatically generate forms for annual income tax return?

I am watching GS too, but since it closed above 186, I will be waiting at 190/195.

Later, all!

Born to be a day trader or just an idiot who never learns and will bite the dust soon?

So I said that I was going to quit DT last Friday.

Day 1 (Monday)
** no SW setups, no biggie.
** I even let a perfect DT setup in GS go (canceled the order right before it was about to hit because I remembered what I said on the Friday, it would've been a 1-2 grand winner).

Day 2 (Tuesday)
** The night before: planned swing short setups for MA around 300, and FCX around 125.
** Opening moments: MA gapped up, and acted exactly what I had expected and wanted to see, but the July300 puts had a spread of 50-70 cents, the cheaper version of wabbit took over, no entry.
** 10:05 am (EST): FCX setup materialized, bought 10 July125 puts when it recovered from the opening drop and stalled around 124.5. Planned to exit 8 contracts around 120/121, and leave the 2 run.
** 1:15 pm: Another perfect DT short pattern in GS as it rebounded toward 184, but no, I am no day trader! So proud of myself, you go, wabbit!
** 2:55 pm: FCX finally cracked, when it hesitated a bit around 122.7, I hit the sell button as if I had waited too long and I was desperate for some dough. I closed all with nearly $650 profit, woohoooo! But wait, what the (*&#$ was I doing? Did I just DT again? Holy $&#*(! it dropped more, oh my god, I could've doubled the profits, maybe more tomorrow. What was I thinking?!
** 3:30 pm: Heard my girl laughing, saying that there was not even a 5 min bullish engulfing candle and I was like a drunkard who could not even hold a $20 bill steady, wait, make that a $1 bill. Damn it!
** 5:30 pm: look at Razor, he just made another 13 points on DRYS, 13 freaking points! I wonder how many trash cans he had to destroy before he became what he is today!

A Question for Razor and PCAGUY:
which online brokerage you are using? Do they have a good option trading platform?

A Question for PCAGUY:
When there is a sizable spread in an option you want to get in, what do you normally do? Place an order around the mid point of the spread range, or just bite the bullet and hit the ask?

A Note to myself
Start looking for good online deals on trash cans you cheap idiot, you may need a lot of them. If they work out for Razor, they might do the same for you....

Best online option trading firm?

Would anyone recommend a good online brokerage firm for option trading? I have been primarily using TD Ameritrade all these years, and when it comes to option trading, it is really rudimentary to say the least. I have just looked at OptionHouse and Fidelity (OptionTrader Pro), while both seem much more sophisticated than TD Ameritrade, I am not sure which one is better. My main criteria are:

1. Speedy execution with easy navigation within the system.
2. Pre-set order entry forms for all major option strategies.
3. Essential option analysis tools, especially for P/L analysis.
4. Automated generation of year-end tax form to be filed with income tax.
5. Low commissions and rates are plus.

Thanks in advance!

Have not got chance to review the charts yet, but if there is a gap up tomorrow morning I will actively look for short setups.

Weekend notes on the market and weekly calls

TA on Major indicies

On Weekly Charts: positive momentum declining for the 3rd straight week; stochastic show developing pullback of over-bought condition; volumes came in high for the second week in a roll; MA10 turning down for all major indices for the first time since the Mid-March bottom; candle formations mostly indecisive for the week.

On Daily Charts: bearish short-term MA bow-tie formation in nascent form for NASDAQ/Russell2000 and fully developed for DOW/SP500; negative momentum stalled for the last 3 sessions as the market rebounded; all show signs of over-sold rebound; MACD in solid down trend formation; volume/candle patterns remain bearish bias; NASDAQ/Russell2000 following the footsteps of DOW/SP500 as they decisively broke their May lows and MA50, but reclaimed those key levels by last Friday.

Thoughts and observations about the current market conditions and near-term outlook:

1. Technically speaking, all major indices have broken their uptrend that started Mid-March, and now in the process of resuming the primary down trend that started last November.

2. The market is oversold, and more rebound is possible for next week.

3. Something with deep and fundamental long-term impact on the market occurred this past week: Big Ben and Fed sounded alarm of raging inflation, with a never-before-heard hawkish tone. The inflation picture is becoming gloomy as major Asian economy (China and India) started raising rates this week amid the signs of run-away inflation. Some of those inflation will be exported to US, and with out-of-control energy and commodity prices domestically, Fed may be forced to raise the rate much sooner than they would like to. This is the key reason for my overall bearish view of the US stock market throughout this year, if not longer.


Overall Trading Strategy for Next Week

Once again, while some technical rebounding will occur next week, the market/economic conditions are increasingly unfavorable to SW longs. I will use short-the-rebound approach during this oversold rebound, in addition to seeking initial SW short positions in energy and other commodity sectors. My expectation for the rebound: NASDAQ 2490-MA200; SP500 1375-MA50; DOW: 12500-12750. A close above the top of those resist zones will prompt me to reconsider my TA.

Weekly Swing Trading Calls (holding time 2-5 days for the most)

1. AAPL
SW-L2, ez=155-161 (MA200), IDS <150, CSSW-S3, if it spikes towards 180 in the early part of the week, IDS>MA10, CS>180, IT=170.

2. BIDU: CTT between 300 and 360 with a 1-2% stop, don’t trade the mid range.

3. CME: SW-S1, ez=439-459, IDS>462, CS>MA50, IT=400.

4. DRYS: CTT between 65/68 and 84/88 with a tight stop just across the boundaries, don’t trade the mid range.

5. EWZ: SW-L2, ez=85-88, IT=MA50.

6. GS: CTT between 185/195 and 160/163, don’t trade the mid range.

7. MA: CTT between MA50/270 and 300/310, don’t trade the mid range.

8. PCLN: CTT between 120 and 132 with tight stops.

9. FCX: speculative S3, ez=125-127, IDS >130, CS>128, IT=MA50.

10. Steel sectors:
AKS: speculative S3 around 72, IDS/CS>73, IT=66.
X: speculative S3, ez=180-185, IDS/CS>186, IT=MA50.

11. Energy sectors:
APA: SW-S2, ez=142-150, IDS/CS>150, IT=132
CLR: speculative S3, ez=72-76, IDS/CS>77, IT=65
OIH: SW-S1, ez=215-220, IDS/CS>221, IT=MA50.
RIG: SW-S1, ez=149-152, stop just above 152, IT=140

12. Fertilizer/agriculture sectors:
CF: speculative S3 just under 160, CS>160, It=MA50
MON: speculative S3 around 140, CS>141, IT=132
With the lead of AGU, these names may well break to new highs next week, be patient and any setups must be initiated at least in overbought (daily/60 min) with stalled momentum/topping candle formations.

Notes on last weekend's blog survey

1. Thanks to those (45 of them) who took the survey even though I was a bit disappointed that the response rate is less than 25% of the readership.

2. I am encouraged that over 95% of the participants have a very favorable view of this blog, and I am especially pleased that over 25% of the participants have financially benefited from this blog. Several folks left very kind and generous words, for which I am grateful.

3. Just over 50% of participants like the idea of turning this blog from a "monologue" to a forum where folks like Razor and PCAGUY can regularly post their comments/trading calls, vs. about 13% opposing and 35% unsure.

4. Nearly 80% of the participants expressed their willingness to do their part to increase the readership of this blog. While I very much appreciate that, I am unsure about the outcome from such intention.

In addition, both Razor and PCAGUY favor the idea of a forum where a small group of traders exchange their market insights and trading ideas aimed at improving each others trading, and I am all for it. On that regard, I would like to ask anyone who is interested in that to shoot me an email at flyingwabbit@yahoo.com, and I will figure out the best way to do that while still keep this blog as a valuable resource to the rest.

For reasons I stated last weekend, while I will try to do my best, I might have to cut back the posting a little bit, especially for next couple of months.

I will post a brief version of weekend note/trading calls later today.

TGIF!

Not sure about you, but I am glad the week is over and I came through alright and closed week all in cash. The roller-coast week ended with a draw between the bulls and bears, which means that the battle will intensify next week.

For the day, I bought puts in both POT and AAPL, exited with a tiny profit, just enough for a fancy dinner tonight with my girl, maybe at some Japanese restaurant, and do some sake-boarding.

Learned lots of old lessons this week, well, sort of, just like every other week, but will likely forget most of them and make the same old same mistakes all over again soon. However, I have made one decision: starting next week, I will no longer day-trading. I will start with small position sizes and learn how to sit tight, especially when things are moving in my direction. In other words, I must become cool and sharp, just as Razor. Being ballsy like PCAGUY but without his experiences and deep pockets, the FlyingWabbit will end up as a rabbit stew served at some raucous parties of the bulls or bears, sooner or later.

What's your lesson for this week?

Feeling GASy laterly? No worry, inflation will be as tame as it has been!

Bulls jumped higher on beer and oil in the early going today, only to gap and almost crap as they found that the mixture was not exactly a shot in the arm. Tomorrow's CPI probably will bring a lot of volatility and bulls better hope that the bad news has been priced in the precipitous drop in the past few days.
While I will still seek bottom-fishing setups, I am turning more cautious after reviewing all the charts tonight (especially GE): I will further lower the ez for my stalking list (AMZN, BIDU,DYRS, EXM, CRM, CSIQ, EWZ, LUK, MA, PCLN, GS). On the other hand, if the market gaps up in light of CPI, I may consider shorting AAPL, APA, GS, CF, MON, POT, FSLR, AKS.

The bottom line: with relatively low VIX reading (meaning not enough fear), the expected technical rebound may not worth the risk of further downside, especially given next weeks ER from troubled financial sector plays such as LEH, GS, etc. This might be especially true for those who plan to hold the bottom-fished position for more than 2-3 days.

Kung Fu Bears!

Bulls, especially the tech bulls, gave bears plenty of black eyes since Mid-March, and along way, they started to mistaken the black-eyed bears as the fun-loving, bamboo-eating, trash-talking comic relief pandas, and they paid dearly for that mistake in the last four sessions. With today's drop, NASDAQ (and QQQQ) and Russell2000 finally joined DOW and SP500, breaking both MA50 and May lows. All major indices are oversold on the 60 min charts, but are still 1-2 day away from oversold on the daily charts.

It is quite obvious that at this stage, the easy/fast money from the short side has been largely made for most short-time-frame (3-5 days) swing plays, and like many of you, I would actively bottom fish. However, keep the following in mind when conducting such risky fishing business:

1. The overall market has now resumed its primary down trend that started Oct'07. Be very careful whenever trading against the primary trend, especially when it is going the same direction in every time frame.

2. Bottom fishing here is only for the technical rebound, so try to initiate as close to the possible bottoms as possible (deep oversold+key support), honor your stops, and don't be greedy when taking profits.

3. Watch the momentum and candle formation, especially on the daily chart. Currently, these two indicators strong favor more downside in the near-term.

4. Keep eyes on Leh and WM, if they keep dropping like a rock, the market won't go higher in a hurry as the fear of something terrible persists.

5. Speaking of fear, even the major indices went down a notch today, VIX did break
the earlier high. As I said before, no fear, no bottom.

Position update

I exited my AAPL July 185 calls early this morning when it broke the opening low around 183.5. I need to be a bit more patient with AAPL under the current market conditions. As a restless wabbit, I exhibited extraordinary patience today by sitting tight on cash, resisting urges to go long on stocks such as AAPL, MA, PCLN, DRYS, and GS. I feel that I might get better entry prices in next 1-2 sessions.

As for tomorrow, I might start some fishing if the market gaps down at the open, I will refrain from chasing the long side if it gaps up at the early going.

A special note:

When answering question #4 in my survey: "If a significantly increased readership will drive me to maintain the current pace at the blog, are you willing to help out on this by means such as recommending it to your friends or/and post your recommendation on other venues such as Yahoo stock discussion boards?", about 80% of the participants said yes, and I do appreciate that. May I ask those folks to follow through their words in next couple of weeks whenever you think a post is worth recommending. I will see if there is any noticeable increase in the readership.

Thanks in advance.

Big Ben turns hawkish?!

When Big Ben turns hawkish, the real inflation picture is likely to be worse than most would imagine, and that casts a long shadow for the market in the months to come. In the meantime, bulls tried very hard to hang in there, and they might get some bounce tomorrow. I hope many energy/commodity names will move up in next few days so I can find better entry points, possibly use backspread puts as initial top catching strategy.

I bought AAPL July 185 calls this morning when it broke 183.5, and exited half near 186, while holding the rest for tomorrow. I did not keep all for tomorrow mostly because I am getting concerned that something bad might occur (just look at the charts of LEH and WM) that will drag the market down. I keep half of the position because even though it failed to close above MA10, it formed a nice bullish engulfing candle today. With any help from the overall market, I expect AAPL to test the 188-192 zone in the next day or two, at which time I might exit half of the remaining position, while leave the rest for a possible run to 200.

Also bought GS July 170 put around 169, but closed out for a small gain. This market is becoming very difficult for me to have any convictions.

Another day, another old lesson, duh!

First, thanks to all who took the survey, I will talk about the survey results and my thoughts next weekend.

Position update:

I took a good slap on the face today for my last Friday's AAPL July 185 call position. I managed to cut the loss around 183.5 before Jobs gave the presentation, and later, scrambled a DT put trade when it snapped back near 184 and exited just above 179, and luckily even out the earlier loss and then some. However, last Friday's call entry was a terrible decision as it was NOT based on any technical analysis, but on some kind of "great idea" that supposedly reflecting my incredible insights and convictions. Folks, this is yet another my same old same mistake that almost always cost me dearly. Though I had not committed it for quite sometime, I am extremely disappointed and amazed how sometimes I could so effortlessly leave all my painful lessons behind in the heat of the actions. Disgusting stuff like this makes me wonder if I should just give the whole trading thing up for good.

Let me say something about AAPL while we are at it:

AAPL is at a very tricky point, another bearish candle and close below 180, a test of MA50 would be a given, and a test of MA200 or even the gap near 156 is not out of the question. On the other hand, if it manages to close the gap near 185.5 and closes above MA10 with a bullish candle, it may test 192 or even 200 before July 11. I will keep an eye on how it opens and behaves if it approaches 185/186 before deciding which way to go. Along with the new iPhone, there were also some business model changed announced today, and I wouldn't be surprised that big boys are figuring out the math today before move in/out tomorrow, we shall see. I wonder if you all feel bullish/bearish about AAPL right now.

Today, I was itching at pulling triggers on shorting ACI, MON, MOS, JCG, CF, and long BIDU, GS and MA. But I lost focus while choking on the sour apples. I will go through them again tomorrow.

As for the overall market, let me just say this: if I shorted before last Friday's plunge, I will not exit just yet, and since I did not, I will actively look for the short-the-rebound setup.

The worst is behind us, right? right?!

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I appreciate those who have voiced their views via the survey, for those who have not done so but care about the future of this blog, please take a minute to complete this very short survey.
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The market rallied off the March’08 bottom for nearly 10 weeks on the notion that the worst was behind us. The rally stalled for 2 weeks before showing signs of reversal in the last week or two. Both DOW and SP500 completed the 1-2-3 reversal last week, while NASDAQ and Russell2000’s break-out on last Thursday have all the looks of a head-fake following the huge sell-off on Friday.

On Weekly Charts: positive momentum all declining; both stochastic and RSI show initial signs of over-bought pullback; volume patterns bearish for the past several weeks with last week’s drop came in on the highest volume since the mid-March bottom; extremely bearish candle formation for both DOW and SP500; MA10 turning flat for both DOW and SP500 while still upwards for NASDAQ and Russell2000.

On Daily Charts: MACD crossed down and pointed down with negative momentum on the rise; DOW/SP500 in oversold; volume/candle patterns clearly bearish; NASDAQ/Russell2000 following the footsteps of DOW/SP500 with their latest failure of reclaiming MA200; DOW/SP500 solidly broke through MA50 while NASDAQ/Russell2000 still have some decent room; all major indices are now at major support levels.

Thoughts and observations about the current market conditions and near-term outlook:

1. Technically speaking, the market is at a precarious point: a further break-down of the market leaders NASDAQ/Russell2000 would confirm the trend reversal of DOW/SP500, and puts the testing of March bottom in play. The tenacious tech bulls are increasingly beleaguered, and their chance of lifting the rest of market is slipping.

2. Last Friday’s job report highlighted a new ominous trend: after weeks of overall benign/neutral headlines, the macro-economical conditions are going down a notch, which can be seen clearly in the banking/brokerage sector (breaking down to new lows) and housing sector (approaching previous bottom).

3. Oil price, shot up with the help of short-squeeze in the past two days, has the momentum to go higher in the near term. However, it is getting closer to the end of its parabolic movement. On this notion, I will start to actively seeking SW short setups in oil and all related sub-sectors.

4. The market reaction to AAPL’s new product release on Monday now becomes extremely important: a big sell-off could drive the tech bulls into the woods and a big run-up may re-ignite the tech bulls and save the market, well, for at least another day or two.

Overall Trading Strategy for Next Week

While some technical rebounding will occur next week, the market/economic conditions are increasingly unfavorable to SW longs. Personally, I am leaning to short-the-rebound approach, in addition to seeking initial SW short positions in oil and other commodity sectors. The key is that making sure you only long extremely oversold conditions (both daily and 60 min charts) and short the extremely overbought conditions, and ideally you have solid S/R in the vicinity as the stop references. As the battles between the bulls and bears in white-hot, be agile in locking-in profits.

Weekly Trading Calls

1. AAPL (for Monday):
SW-S1, IF it closes below 179/180 with a bearish candle/good volume, IDS around 182.5, IT=MA50;
DT-L1, if it spikes towards 170 following Job’s presentation, IDS just below 169, IT=175/176
SW-L1, IF it closes above 192 on a bullish candle and good vol, IDS just below 189.5, IT=200.

2. DRYS: DT-L1 if it spikes towards MA50/MA200, IDS just below 80, IT=88.

3. FSLR: CTT between 220/230 and 275/MA50. no mid-range trading.

4. GS: L3, ez=160-166, IDS just below 160, DT-IT around 170, SW-IT around 180.

5. SOHU: SW-S2, ez=88-90, IDS just above 92, CS just above 91 on bullish candle, IT=75/MA50.

Initial short setups in oil and related sectors:

CLR: extremely overbought on weekly/daily; huge run-up in recent weeks; speculative-S1 around 80, with a stop at 5% price move; IT=MA10

RIG: SW-S1 if it spikes towards 150/152, IDS just above 153, IT=MA200

APA: SW-S2, ez=139-145, IDS just above 150, CS above 142 on bullish candle, IT=120.

ENER: speculative S3 around 70, stop just above 75, IT=MA10.

Initial short setups in coal sector:

ACI: speculative S3, ez=80-85, stop just above 85, IT=65

JRCC: speculative S1, ez=42-50, stop just above 52, IT around 35

WLT: speculative S2, around 100, stop with a CS above 100 on bullish candle, IT=85/90.

I will also keep eyes on agriculture/fertilizers (AGU, CF, MOS, POT, MON) for possible initial short setups, but I will be more patient on this group.

Thoughts on the direction of this blog

While I enjoy writing this blog, I feel increasingly difficult to allocate the time and efforts needed to maintain the current pace. This is mostly due to my work demand, which will put a lot pressure on me throughout this year.

I have thought about lighten up the blog a little bit for weeks now, but have not done so because I feel there are many folks reading this. However, now I think more about this, I really don't know if/how much my blog benefit the readers. After all, I have only had less of 10 folks in last several months who have posted comments here, which represents not even 5% of the regular readership. In other words, I am really not sure if it is worth the efforts and time to keep it up if the regular readership is less than 500/day, and discussion participants are less than 5% of the readership.

I feel lucky to get to know folks like Razor and PCAGUY in the blog, whose regular comments/discussions benefit me a lot in both thinking and trading. They are really what I have got out of my efforts so far. One thing I am considering about for the future direction is maybe transforming this blog into some kind of forum where folks like them can post their comments and trades in real time. I myself feel that such format will help me a great deal, however, I am not sure if majority of the current readers will feel the same.

Before I make any decision on this subject, I would like to first hear your views. If you value and care about this blog, please take a minute to complete this very short survey. Obviously, a low response rate on the survey indicates most of the readers don't care much about this blog or whatever I want to do with it.

Thanks a lot!

Click Here to take survey

What a week!

Hog wild, no? Just 24 hrs ago, tech bulls were triumphant but by the end of the week, it is the bears who are on the top of the world! There is little doubt that both bears and bulls got hurt badly this week, I feel lucky as it turns out to be one of the best trading week I have ever had. Unfortunately, the week is littered with the same old mistakes: fear when I should be hopeful! I exited early in both FSLR and SOHU, capturing less than 50% of the entire move. Something has to be done to snap me out of this misery groundhog day!!!

Position update:

** SOHU: exited before I left for work when it was near 86 for a 0.9 point gain in puts, had I hold it, I would've been gained 2.2 points by close!!!

** AAPL: bought July 185 calls around 12.55 when it hit 186 in the closing minutes. I figure it will at least run up a bit on next Monday before Steve Job's presentation, who knows, AAPL might hit 200, but rest assured, I will once again have an early exit.

Got cures?

Tech bulls rule! More to come?

Well, tech bulls answered my last night's question, at least for today as it powered the entire market up. Looks like everyone is betting on a good job report tomorrow, I hope it will be, and if that triggers a big gap up, I might consider fade the gap on some stocks (AKS, CF, FSLR, GS, MOS) for quick DT using recent highs as stop. If the break-out remains intact into the close, the better SW short setups will come next Tues/Weds. Will also keep an eye on AAPL, and may go long if tomorrow's job report comes in worse than expected and it gaps down in the open.

Today was a very weird day in which both oil and market went up big, and both gold and dollar went down. Tomorrow could be even more hogwild, I think some bears and bulls are losing their mind in the heat of the battle.

Stay cool!

Tech bulls keeps running, but for how much longer?

You got to be impressed by the tech bulls' tenacity as of late, without which the market would have rolled over by now. With financial sector breaking down, recent leaders from the energy and solar reversing, and both DOW and SP500 are completing the 1-2-3 reversal, I wonder how much longer the tech bulls can march on alone.

Stalking list:

Below are the names I am monitoring for next two days, especially after the Friday's May employment report. Most long side plays are for technical rebound, which means you should not be greedy when it comes to taking profits.

1. CME: getting oversold on all time frames, L2, EZ=340-361, IDS just below 340, CS just below 350 on bearish candle, IT=395.

2. DRYS: L1 if it spikes towards 80/82, IDS just below 80, CS just below the MA50/MA200 area on bearish candle.

3. EWZ: L2, ez=86-90.3, IDS just below 86, CS below MA50 on bearish candle, IT=95

4. FCX: L2, ez=100-106, IDS <100, CS < MA200, IT=115

5. FSLR: L2, ez=220-231, IDS <220, CS <225, IT=248.

6. GS: S2 if it spikes towards 180, IDS >182, CS > 180, IT=172.

7. RIG: L2, ez=130-138, IDS <130, CS
8. WLT: L2, ez=80-85.2, IDS <80, IT=92

9. X: S1, ez=176-180, IDS >180, IT=170/166.

10. MON: unlike PCAGUY's decisive action, I pondered over 1 freaking hour yesterday when it was around 136, and chicken out in the end. I am now looking for re-entry.

Open Position

I took an initial put position in SOHU today when it was near 91, the decision was based on bearish momentum divergence, overbought condition, and recent parabolic bull run, I will add to the position if it gaps/spikes up, with stops just above 100. IT around MA10.

Who are scared? Who will blink first?

Well, the answer to the first question is that both bulls and bears are scared as seen in the last two hours of trading today when panic selling followed by panic buying. The answer to the second question is yet to come.

On trading

Was too busy to write something during the day, but I bought some AAPL calls in the last hour of yesterday, and exited in the early going today for a small gain. Then I bought some put just before the big drop, but exited a bit too early for yet another small gain.

Random thoughts

1. Following DOW's step, SP500 became the second major indice to break its May low and closed below MA50. Bulls better hope that NASDAQ won't follow the suite or things could get very dice in a dime for bulls. On the other hand, if oil pulls back to 100/110, bulls might get some temporary relief, however, a much steeper drop of oil or the failure of another major bank could place bears in the driving seat. The battle for the supremacy is white-hot!

2. The Lehman mess reminds me a widely circulated report SP just weeks ago saying that because of the aggressive write-offs by all the banks/brokerage, not only the worst is over, but there might be some upside in the coming months. Sometimes you have wonder if those well-informed analysts are not as sharp as we thought, or they were just playing games on retailer stock speculators.

3. Speaking of Lehman, though it might not follow BSC's path, the chart just looking gravely hopeless, I start to think maybe I should buy a small puts just in case....

4. AAPL has been weaker than I expected so far as if it has already priced in the new iPhone release. I still might consider buying calls as close to 180 as possible with a stop just below, but will reduce the size.

Almost back now...

On the trip
Had a very nice trip and really enjoyed the California coast line from SF to Santa Barbara, lots of incredible scenic views. Too bad that I did not have much time, otherwise would definitely do some hiking as there are many great trails, especially in/around the Big Sur.

On trading
Did not get chance to trade much, except got lucky last Friday when my FSLR JUNE 260 put order ($8.1) got hit when it spiked towards 275, and even luckies when it gapped down this morning. Again, I got out too early (at $14.4), but it was a nice gain, which finally pushed my option trading account over the doubling mark, six weeks after I started playing options on a regular basis.

On the market
Looks like the battle is really heating up between the bulls and bears. So far the market is in a well-define trading range, but the momentum is clearly shifting to the bearish side.

Stalking list
AAPL: L2, ez=180-185, stop just below 180, IT=190. I have been very patient so far today.
FLSR: speculative L3, ez=220-242, stop just below 220, IT=260.
CME: L3, ez=380-401, stop just below 380, IT=440.
BIDU: L3 if it spikes towards 320, stop just below 310, IT=350.

Patience is needed for any long side entry.

I am going to be pretty busy with my work for the rest of the week, will try my best to write something here.