Today we looked at the SPY, Dow, XLF, GS, VIX, GLD and FAZ. We discuss our afterhours short trade on thursday as the SPY finally hit our resistance of the longer term descending channel. This is the first time we hit this resistance in 3 months, and the bears are all on the sidelines still since they were squeezed on monday by Geithner’s 1 tillion dollar plan. With that in mind, the bears should come back very to sell the market down to fibonacci retracements of the latest move higher. The market today saved itself from breaking the support of the short term ascending channel, hitting it 5 times intraday. We believe that a possible move higher on monday could be what is needed to get the few bulls left trapped in, and then the sell off can occur. A potential fakeout above the resistance line is possible, in fact that 61.8% retracement of the last high is sitting at around 83.80$. We confirm our view by looking at the XLF which started breaking it’s ascending channel support today on a 60 minute chart. We recommend buying both FAZ and SDS on this potential move lower in the market as you may catch a double or even a triple (in case of FAZ). Are we going to new lows? We don’t think so, but it’s possible. In order to confirm a bull market though, the market has to break through the longterm channel resistance on strong volume. The GS chart looks like it topped out as it hit the resistance of its ascending channel and will probably want to go down and test the support which is about 15-25% lower. GLD, the gold ETF is trading right at it’s ascending channel support, we placed a long trade on the ETF with a stop just below $90.40, we believe it can get a nice push higher which may coincide with the VIX going up and the Market going down. Finally we discuss that the Dow is showing weakness, however, many times in this move higher, the DOW dictated technicals better, and so we might get a fake out in the SPY until the DOW reaches it’s resistance of the channel. Have a great weekend!
Bummer for me, I am swinging the total opposite. Fingers crossed.
3min… comon… you know the routine…
the consolidation phase routine… end of a bull or bear run
bullish feeling close = bearish outcome
bearish feeling close = bullish outcome
i went short Thursdays close and covered in first hour today
i went long today’s close and will hold for more than the first hour of Monday
is this a guarantee? no… but… you have seen my posts.. how often am i wrong?
dont sweat it.. will see soon!
now watch… i’ll be wrong on Monday
That was my thought, exactly. I plan to be totally short very soon, but until I see the end on EOQ crap. I did play a scalp with FAZ last week, but was only a gamble.
Careful though… . this rally may extend past EOQ … CNBC is saying the rally ends at end of quarter … that is like an open invitation to short and lose your cash. they also promoted FAZ and SRS before they collapsed. im going to probably wait until Thursday to go full on my FAZ calls. im going to take a bit if we rally Monday… and im going to wait and see after eom to add more.
MAYBE VIX CALLS ARE THE BEST BET! IF WE MOVE UP OR DOWN IT WILL PROBABLY BE NASTY AND THAT SENDS THE VIX UP. probably should have got some during that lull on Friday.
every weekend i listen to this market theory commentary. something strange is going on in our bear market. im not in the P2 camp but i may just be after OPEX April if we push past 940…. i may just buy more MAY index calls during APRIL OPEX expiry week… as i believe things will get very bearish again there and we rip higher… roll with the punches.
HERE IS A LINK TO THE COMMENTARY: http://www.cyclesman.info/Articles.htm
im a “permabear” but im not a “permamoneyloser” and im very bearish on the future but im always going to try and trade the right direction.
good luck trading.
Thanks! In the little time since I first came across this site, I have really learned a lot from you and your commentary. Should you ever need a letter of recommendation, please just let me know. I’d be pleased to help.
Haha that might come in handy.. what do you do for a living?
That’s what my wife asks me.
ouch.. haha… glad i don’t have one of those.. yet…
Not yet?
This may not be the appropriate forum but these are my words of advice to a handsome young man:
Variety Is The Spice of Life
There is an infinite number of wonderful women so go chase skirts. Don’t get married until you’ve traveled to Paris, Rio, Shanghai or Tokyo.
Timing Is Everything
You may fall in love but if you’re preoccupied with graduate school or really busy with work (or if she is), don’t jump into marriage. The timing has to feel right for the both of you.
Know Her Folks
Whether its nature or nurture, this woman will be more like her parents than you will ever imagine. Make sure you really get to know them well.
Chase Her Skirt
Treat your wife as if you’re still chasing her, particularly on Valentine’s Day.
Good luck, Idan. There’s really nothing better than having a great wife, as I’m sure you’ll see.
Here’s a very famous letter of advice from an acknowledged expert:
http://teachingamericanhistory.org/library/index.asp?document=468
Idan,
you should try charting a WEEKLY SPX … take a look at these weekly charts FL KBH TOL
see what is happening… many stocks are topping out this move at the 40 week moving avg.
THANKS A MILLION FOR DOING THE VIDEOS!
—————– 836.16 —————
this is my magic number
——- for everyone sweating out the FAZ trade ——-
http://social.stocktock.com/photo/faz-tastic?context=latest
so you think 35$ may limit upside? idan is talking about 40 as well as possible 55
short term resistance at $35 … on my buy in ill take half off there in case this up trend continues 3 weeks. it’s possible we get a pull back only and head higher. these times are as uncertain for me as many traders.
that’s exactly what I was going to say, I will be taking some off as we hit retracements on the XLF. But even a $35 target is basically a double. So what the heck huh?
XLF retracements sit at: 38.2% = 8.25, 50% = 7.80, 61.8% = 7.35
These should coincide with the resistances we will see in FAZ, i’ll have a video about that once we start moving higher on FAZ.
P.S. Nimrod are you israeli?
shouldn’t we see more calls on fas then faz, (as a contrarion) if FAZ is really going up, which IS not happening on the options ..
but then again, maybe the bears aren’t piled in, and are waiting for a gap up on monday..
I have sold both april Fas calls and puts, up about 12% combined. If it gaps up I will buy back my puts and sell more fas calls.
Idan,
Your video shows potential retracements of FAZ to possibly $55 as the first target. You also mention that FAZ may top out around $40.
You are obviously very knowledgable about trading FAZ but my question is why do you belive that charting a 3X etf can produce valid estimates for prices ?
As you stated, the price movement of FAZ is influenced by VIX as well as the underlying financial index. So it simply doesn’t seem plausible to me that FAZ would possibly double or triple from the current price of $20. That would require an extremely strong downward move of the financial index to new lows.
When it comes to predicting the prices of leveraged ETF’s I try to construct the required movement of the components of that ETF. In doing so, I see no higher than a $30 price for FAZ.
http://social.stocktock.com/photo/will-financials-stay-flat
That chart is rather messy, but it shows the distinct possibility that the coming rise in FAZ will be greater than most dare to say, especially if we wait out the squiggles. Also, comment no. 11 to the item linked below presents considerable technical evidence that R(pb), Idan, and at least one other genius are correct in contending that the current bearish flag in conventional stocks is NOT PRIMARY WAVE [2], but merely 4 of (5) of PW [1]
http://stocktock.ning.com/profiles/blogs/sitting-tight
Contains three charts showing evidence that the coming drop in conventional stocks and the corresponding rise in FAZ and its ilk may be greater in duration and magnitude than widely supposed.
Torches and Pitchforks Update
London Protest March Likely to Attract 40,000 Ahead of G-20
By Thomas Penny
March 28 (Bloomberg) — More than 40,000 people are likely to march through central London today to protest the handling of the world economy as the leaders of the Group of 20 nations prepare to meet in the U.K. capital next week.
London’s financial district is preparing for demonstrations centered on the Bank of England and the European Climate Exchange on April 1, which police have warned may turn violent. There are also likely to be demonstrations outside the Excel conference center, in east London, as G-20 leaders meet April 2.
http://www.bloomberg.com/apps/news?pid=20601087&sid=arhB8tIhmR8Y&refer=home
G20 Update
A world currency moves nearer after Tim Geithner’s slip
US Treasury Secretary Tim Geithner confessed on Wednesday that he had not read the plans by China’s central bank governor for a “super-sovereign reserve currency” run by the International Monetary Fund, but nevertheless let slip that Washington was “open” to the idea. Whoops.
By Ambrose Evans-Pritchard
Last Updated: 8:58AM GMT 27 Mar 2009
http://www.telegraph.co.uk/finance/economics/5051075/A-world-currency-moves-nearer-after-Tim-Geithners-slip.html
FAZ Update
Saturday, March 28, 2009
OCC Issues Update On Bank Trading And Derivatives Activities
Posted by Tyler Durden at 10:11 AM
The Office of the Comptroller of the currency is out with their much anticipated quarterly report summarizing all the recent trends and losses (would say profits but not much here lately) in derivative trading at commercial banks.
Here is the report’s summary.
* The notional value of derivatives held by U.S. commercial banks increased $24.5 trillion in the fourth quarter, or 14%, to $200.4 trillion, due to the migration of investment bank derivatives business into the commercial banking system.
* U.S. commercial banks lost $9.2 billion trading in cash and derivative instruments in the fourth quarter of 2008 and for the year they reported trading losses of $836 million. The poor results in 2008 reflect continued turmoil in financial markets, particularly for credit instruments.
* Net current credit exposure increased 84% from the third quarter to a record $800 billion, and much of this is attributable to the sharp decline in interest rates in the fourth quarter.
* Derivative contracts remain concentrated in interest rate products, which comprise 82% of total derivative notional values. The notional value of credit derivative contracts decreased by 2% during the quarter to $15.9 trillion. Credit default swaps are 98% of total credit derivatives.
http://zerohedge.blogspot.com/
To play FAZ, you need to watch RIFIN (which FAZ tracks in an inverse 3x way).
Many got burned (me included) entering FAZ when RIFN was at 420 and then burned again when RIFIN was at 460. Ouch. Still, bailing out was in the cards once resistance was broken and confirmed. Now, look at this an make your own entry point decision.
http://social.stocktock.com/photo/rifin-faz-is-inverse-3x?context=user
Thanks. I’m really new to TA but based on Idan’s earlier video, there appears to be a wedge in the RIFIN chart similar to SPY’s which, to my understanding, foretells a significant decline and thus upside potential for FAZ. It’s quite depressing, actually, to bet on this because of what it implies about the possible future. Thanks, again.
Yes, I should have drawn that. Here is a revision. I also moved the blue lines to be more accurate. Idan is probably right that Monday will open will a drop in the financials……I just think RIFIN needs to touch 535 once more.
Now here is the really important part. RIFIN spent almost a month in the horizontal channel between Jan 20 and Feb 18. During this time, FAZ fluxed between 70 and 40. Because of the deterioration factor of 3x ETFs, this change now represents a FAZ movement between 30 and 15. So, since the downside risk right now of playing FAZ is low while RIFIN is in the upper part of the hoizontal channel. Maybe I am being greedy, but I am going to wait for one more push up in RIFIN or pile in when I see the horizontal support broken (which should be around 30).
NOTE: If RIFIN breaks the Horizontal Resistance, then a whole new FAZ range should be established once we get back in the channel (probably FAZ 10-20).
http://social.stocktock.com/photo/rifin-wedge-faz-is-inverse-3x?context=user
SORRY – SHOULD HAVE PROOFED WHAT I WROTE – cleaned it up here.
Yes, I should have drawn that wedge line. Here is a revision. I also moved the blue lines to be more accurate. Idan is probably right that Monday will open with a drop in the financials……I just think RIFIN needs to touch 535 once more (about a 5% rise in financials).
Now here is the really important part. RIFIN spent almost a month in the horizontal channel between Jan 20 and Feb 18. During this time, FAZ fluxed between 70 and 40. Because of the deterioration factor of 3x ETFs, the RIFIN horizontal channel now represents a FAZ movement between 30 and 15. The downside risk right now of playing FAZ is actually low while RIFIN is in the upper part of the hoizontal channel, so maybe I am being greedy waiting for one more push up in RIFIN (5%). I do see a pile in when horizontal support broken (which should be around FAZ 30).
NOTE: If RIFIN does break the Horizontal Resistance, then a whole new FAZ range could be established once we get back in the channel again (that range will probably FAZ 20 to 10).
http://social.stocktock.com/photo/rifin-wedge-faz-is-inverse-3x?context=user
G20 Update
March 28, 2009
George Soros: Britain may have to seek IMF rescue
George Soros said there was a possibility that Gordon Brown would have to beg for billions of pounds in international aid
Alice Thomson, Rachel Sylvester and Philip Webster
Britain may have to go to the IMF for a huge financial bailout, the influential investor George Soros warns today.
The man who made $1 billion on Black Wednesday in 1992 told The Times that Britain was particularly vulnerable to the economic crisis.
Mr Soros – speaking days after an auction of government bonds failed for the first time in 14 years, ringing alarm bells about Britain’s ability to fund its growing debts – said that Gordon Brown might have to go begging for billions of pounds in international aid. He also warned that next week’s G20 summit in London was the last chance to avert a full-scale depression that could prove worse than that in the 1930s.
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5989746.ece
Found the following on StockCharts: Thoughts?
http://stockcharts.com/def/servlet/Favor...
Above link doesn’t work. Please use the following:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3271030
This makes more sense than the P2 balony. If this week ended 4 of 5 of P1, then 5 of 5, timed with crappy 1Q earnings and guidance, should dump prices hard. See my video below.
Since most are expecting a 50% fib retrace of this last leg before another leg up, then this likely will NOT happen since it is too damn obvious.
B E W A R E
So you don’t believe it ends at the 50% retracement level?
Not if it’s a 5 of 5 which looks more plausible to me.
No one can honestly look at that drop from Feb 9 and see a 3, 4, and 5 of 5, all wrapped up in one leg. Sorry – it was all part of 3 of 5. We just finished 4 of 5 and now are starting 5 of 5 to new lows.
Revenue, margins and earnings are all declining, and prices will reflect that.
Far from a bottom:
http://www.youtube.com/watch?v=2CPk-DLNnQk
1Q disaster might stunt this recent run permanently.
Interesting website for those who haven’t seen it before:
http://pragcap.com/
Thanks for sharing the above charts and the various market commentary these past few days. Given the weight of the arguments provided in your material, I am a bit surprised that you would consider dumping your FAZ. What I am reading on this site gives me confidence that the best strategy would be to hold for at least another week. Hopefully we will have found that wave number five.
G20 Update
Expansion of membership announced by the Basel Committee
13 March 2009
At its 10-11 March meeting, the Basel Committee on Banking Supervision decided to expand its membership and invite representatives from the following countries to join the Committee: Australia, Brazil, China, India, Korea, Mexico and Russia.
http://www.bis.org/press/p090313.htm
Note the BRIC counties; all have publicly called for the replacement of the USD as the world’s reserve currency in the past week. Bretton Woods II may well be in jeopardy after all so we may want to keep our eyes on the dollar.
Torches and Pitchforks Update
Cuomo Subpoenas AIG Swap Data in Taxpayer Fund Probe (Update5)
By Karen Freifeld
March 26 (Bloomberg) — New York Attorney General Andrew Cuomo subpoened American International Group Inc.’s credit- default swap data to see whether its customers including Goldman Sachs Group Inc., Societe Generale SA and Deutsche Bank AG were improperly compensated with taxpayer dollars.
Lawmakers led by Elijah Cummings, a Democrat from Maryland, in a letter dated yesterday called for a federal probe into whether banks including Goldman Sachs received more funds than necessary from the AIG bailout. The banks got about $50 billion in payments tied to swaps. Nobel Prize-winning economist Joseph Stiglitz also has said AIG’s settlement of credit-default swaps following its bailout by the U.S. government looks like “grand larceny.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=alET1YYjVjTM&refer=home
Idan
Thanks for the video, I do have a question, I was wondering if you will be holding any Faz that you buy, or will you be unloading the same day.
Also thought Faz should have moved more than 1.30 on Friday with GS & WFC and all other financials down.
Fredd
Hey, Well the way I trade, is I bought lets say 2000 shares of FAZ, I unloaded some as we hit the ascending support of the channel. It bounced, and so I bought back some more. If we hit the descending resistance of the long term channel, I will buy even more. I will unload some again as we hit the support of the ascending channel. The only time I will realllly pile in, is when that support breaks. And then i’ll hold my FAZ until a 38.2% retracement of the move higher that we had in the last 3 weeks. I will unload about 60% of my position there, another 20 around the 50% retracement and another 10 at the 61.8% retracement, and then use the rest to day trade.
Obviously if the bulls seem to be back early i’ll change how much I unload and where.
FAZ is so leveraged up that it also acts on volatility. Friday financials were down 2.5% so you would have expected a 7.5% rise in FAZ, you only got a 6.5% because volatility was so low. On days where the VIX really climbs up, you’ll see FAZ go up more than 3X the decline of financials, as people position themselves for a continuation upward on FAZ.
We may see a downward market this week. Check out the weekly forecast from the astrological perspective:
http://www.wallstreetweather.net/
Interesting. The moon and stars may have affected Morgan Stanley:
Morgan Stanley Says Sell Following Best S&P 500 Rally Since ‘38
By Nick Baker
March 30 (Bloomberg) — Investors should sell U.S. stocks following the steepest rally since the 1930s because earnings are likely to keep weakening, according to Morgan Stanley.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aCEfLp6MMols&refer=home#
Lots of different views and charts re PW[1] vs PW[2] in
http://social.stocktock.com/profiles/blogs/wave-4-redux
. . . especially the brilliant comments . . .