|
23
Oct
|
|
I haven’t had a chance to sit down and update in a while, but I have been trying to be more active in the intraday postings. I’m thinking of starting my own blog soon to post more regularly, but I’ll still be posting here and in the intraday as well. One thing I don’t want to do is write too much on the intraday and take away from the other good input in there.
So the last time I posted, which was a few weeks ago, I had a 1090 fib projection. If you’ve been following me on the intraday, I clarified that fibs can lead up to a certain point, but just because they do, doesn’t mean that it is the TOP. What it does tell is, is that it is at least a short term top, and a minimum area that will be reached. Anybody who followed my previous charts to 1090 area should have made a good amount of money with their bull bias up to that point. After it was reached, I noticed there was far too much top movement for it to be the top, and have posted multiple charts prior to the 1090 top suggesting that we head higher than that point. Since then I have drafted a possible 1124 scenario, which I’ve had for some time, but didn’t fill in because I was waiting for the minimum of my former chart to fill in. this 1124 60 minute 6 month chart gives a fairly good explanation of the current market movement. Apologies to anybody who had any heavy short positions at 1090-1092. I made sure to clarify that it wasn’t a top, so I hope that not too many people had losing positions there, and had tight stops, which I always recommend.
Let’s start with a monthly chart on the SPX.
I drafted this brand spanking new today. It is a 1 month, 5 minute chart. So give or take about 1 point from each of these areas. It has a potential top of 1119.87, which is right near that 50% retrace from 1500s to 666.
With this chart I went a step further and went through possible outcomes of a fall. What’s interesting is that the 61% retrace of the complete rise in this picture goes down to 1051. and if you draw fibs down to that area, you get some pretty looking line ups. Also, if you get minor drops within the drop south you get good looking temporary stop point of 1070. You see one of the pink fib lines that I drew? Well I expect that to hit tomorrow, and possible create a bounce to one of the trend lines above. Then I expect a move down to the 1051 area. So even though I think we’re headed higher, short term, I’ll be buying short/puts on this temporary bear bias towards 1051. If the market just rises tomorrow, then this scenario would be completely thrown off, and I’m fine with that too, but if these fibs play, I’ll wait till 1051 before buying calls.
Here’s a 6 month chart that is very tentative:
now the fibs line up around 1118 on the 6 month chart, which is fine relative to the 5 minute 1 month chart because it allows for more room up and down since the average is over 60 minutes. Numbers line up nicely. There have been a number of instances in the past where we fell south of a long term trend line (like the dark blue line above), and then went back up later to meet where major trend lines crossed. In this instance it may happen again.
Here is a 2 year chart I redraft about 2-3 days ago.
I think this explains the movement that happened in July 2009. Also explains why the movement down from the 800+ area to 666 was a CLEAR 3 wave prior to this 5 wave up, instead of what people thought would be an additional 5 wave. So basically we had an “expanded flat correction” happen. I sat down for a few hours trying different possibilities, and this is the best I could come up with, which makes everything fall into place. Actually, the A portion of that ABC, I break down into an ABC flat expansion (not an expanded flat) within the ABC, but that’s within a more complicated chart, which I decided not to include here. This expanded flat correction gives the general idea, and I’ve included a link which explains it above for those who are curious, and too lazy to google haha.
What does this mean? It means that we are INDEED in a 5 wave movement up from 666 contrary to those who may believe it could be a 3 wave movement. The 954-956 top I calculated earlier, was based on a wave 1, that helped get that number. So 954-956 was indeed the top of wave 3, and the current area is the top of wave 5, which is near the 1.6x extension of wave 1. This means we can’t go that much further than the 1120s area anyway be pure definition of a 5 wave. So when the 1120s area hits, I’ll be naked shorting with a large position, and I’ll place some loose stops somewhere around there just in case.
so now you know the future of the stock market and can get ridiculously rich, and then donate to me, and give me a 10% tithe. No? I can’t believe I do all this work for free *sigh*
moving on…
Here is an amazon long term chart.
I created this chart BEFORE the take off into new highs in the 120 area. Yesterday night, Idan was asking if I saw a possible fib in the 107s area, and so I created this fib projection, which got me the 120 potential top and the 120 top that he listed in the intraday yesterday night and today in the morning on the blog. I didn’t think I would be so right *pat on the back*. I really should’ve posted it earlier so that other people could have benefited, but Idan put out some good suggestions on the intraday. This was definitely a GREAT long position yesterday before closing, it was almost a guaranteed move towards $99 and testing the top, and if it would break out (which it did) then more added benefit. I never would have expected $120 area to hit so quickly, but the chart pretty much explains what happened. strong long term trend lines were crossing and were broken to the north, from there it went straight to the fib projection. crazy. I mostly stick to SPX/SPY and so don’t get chances to post these charts much. I’ll try and post more requests and individual stocks, but it takes a lot of time…
GOOG
The beloved google:
Lots of eyes on google. I think Idan made a great suggestion on shorting/putting GOOG. Not only is it overbought, but it hit the 61% retrace of its long term movement. On top of that there is a strong trend line that it just hit its head against. I would place stops at that trend line, and look for a drop down to the 525 levels minimum for a trend line hit there. Long term I think it’s headed higher though. I didn’t add the chart here, but I made some fib projections, and this definitely looks like it could head higher than current highs.
are you sick of this long blog post yet?
WFC
The green trend line and fib is holding at the moment. I don’t want to see a break below 28.93, the bottom of the channel at 27 should hold. If it drops to 27, I will definitely be trying a strong call position there. Currently have a position and am fine with a rise now, or a rise later. I’m willing to hold this 2 weeks if needed and strong support lines don’t break.
XLF
A break south of the $15 mark would mean a break down of the fib there as well as the long term trend line. that would be a definite put position.
I have a few other charts, but I think I’ve loaded enough into one post. Let me know what you think. As always take everything with a grain of salt, and don’t just take my word for it. Like we always say here on stocktock “we don’t trust opinions, we trust the charts”. good luck, may the charts be with you.
Hey woo, thanks for the update.
I like the 1051 target, it alligns with my 6% sell-off I’m looking for by nov . 3
IMO 1120 before November 3rd is a great short.. after November 3rd, I wouldn’t be caught dead shorting. One has to take into account that the market is most bullish after the bearish months, not the opposite way around.
October 24th, 2009 at 1:37 am
zee, would it be a great time to short in January or Feb. not in november or december.
October 24th, 2009 at 11:15 am
Woo, great idea for starting your own blog. Of course you don’t want to detract
from the resident ‘genius’ idan encouraging shorts on overbought and overvalued
AMZN a few days before it rockets up 76%.
FWIW i see you have been as right as idan has been wrong. Now, how do i get
invested in the idan hedge fund? Are they still taking investments or wire the money
straight to israel ? we all run hot and cold in t/a and other areas of life.
October 24th, 2009 at 12:12 pm
Paul:
If by January we are closer to 1200 you bet your ass you should be buying MASSIVE puts.
If by Janaury we are close to 1050 I suggest you be long..
That’s oversimplying everything.
October 25th, 2009 at 8:42 pm
Hey Zee – can you pls post an updated chart along with possible timeframes to go long … I know one would be Nov 2nd / 3rd – is that right …
Also, the other question is does the low have to happen on Nov 3 … in that case if we reach 1050-1070 early, then does that mean upside start os we make a slightly lower low ?
October 25th, 2009 at 11:39 pm
Hey, I`ll try to get some charts in by next week.
To answer the question whether nov 3rd will be the bottom.. well.
85% of the time , nov 3rd (+/- 2 days) will be the bottom. This is a good probability, hence why I play it.
Friday Oct 30, Monday November 2nd, Tuesday November 3rd or Wednesday November 4th are the main dates to be looking out for.
On 1 of these days we will have some sort of very strong push lower (we are looking for a ferocious, chaotic push lower.. that will be the opportunity to go long, ONLY if we are above 1018 (previous cycle low). On this day, you`ll read blogs saying “P3 HAS STARTED“, “FAZ to $25!!“ “SELL STOCK“, CNBC announcing “CORRECTION OF 10% COMING“
The dates are set in stone. If we reach 1050 by Tomorrow, you cannot go long.. the dates are set in stone. It would actually be very bearish if we reach the targets very early.. If your a bull, you really don`t want to see 1030-1040 until the last trading days of October.
This is one of the bigger cycle lows, so the selloff could easily exceed 6%.. take caution in going long.. As tempting as it is, I don`t want to interfere with a larger order cycle makings it`s bottom. We get this kind of cycle only 8.67x a year. I believe we could even go as low as 1020-1040 by nov 3rd. and going long at those levels would be a gift !!
–IF 1018 breaks, the BULL is gone and P3 has likely started–
Your EW count is wrong. your wave 4 enters the price territoryof wave 1. This is not allowed and is a basic rule.
October 23rd, 2009 at 8:58 pm
the wave 1 of P1 actually does the EXACT same thing as what is happening right now at the end of P1.
look at wave 1 of P1 in comparison with P1, P2 does the same thing that wave 2 of P1 does. Basically you have another expanded flat correction of wave 1 of P1. the actual wave 1 of P1 ends higher than the wave 4 of P1, but the abc expanded flat correction has a B that goes down lower. I generalized the chart and just called the that area of wave 1 of P1 the bottom, when in fact the wave 1 is the prior dip, and the dip shown is part of wave 2 b of P2.
Hope that makes sense!
October 23rd, 2009 at 9:05 pm
2 more erros with that count:
1. Wave 3 of P1 is the shortest wave. This is another basic rule.
2. Exapnded flats are 3-3-5. which means wave C should be a 5 wave up. But wave C of P2 is a clear ZigZag A-B-C
October 23rd, 2009 at 9:13 pm
thanks for the comments chevron! if you have these concerns others might as well. so it’s good to clear these up.
i made the mistake of generalizing in this chart without explaining, like i said, i have another chart that is much more thorough and complicating (like explaining the 1 of P1 expanded flat correction), but chose not to post it and simplify.
1) Since the wave 1 of P1 has a 2 wave that is an expanded flat, you have wave 1 actually going down above the 1260 that i wrote on there. so wave 1 is actually smaller than 312. it’s the b of wave 2 of P1’s abc correction that goes to 1260. so wave 1 is the shortest, wave 3 is slightly longer.
2) Expanded flats are indeed 3-3-5, and as i explained the current movement is a 5 wave movement. I don’t see it being a 3 wave zig zag, and the C would have to extend a good amount further in a 5-3-5 movement for that definition to be complete. It’s actually easier to see the 5 wave movement on the SPY as opposed to the SPX which has a cleaner 2 wave retrace of exactly 38%. I have a number of older posts which predicted the 954-956 levels based on a 1 wave minimum movement, placing a 3 wave at the 954-956 level. the current peaks i am projecting are also all based on that same 1 wave. just do a search for my older blog posts for further explanation.
Thank chevron!
Therefore, I do not believe that my EW count is wrong.
October 23rd, 2009 at 9:24 pm
Thanks for the response. But I just can’t see wave C of P2 being anything but a A-B-C. Can you please post your other chart?
October 24th, 2009 at 12:36 am
Here’s a post from almost 3 months ago that explains it a bit:
http://www.stocktock.com/2009/08/05/1080s/
Hi Woo,
Thanks for your nice work…
Only my 02 cents….
It is waste of time and money ..at least for now..to short Amazon (like Apple for example, it is not ready yet)….Microsoft is the best choice (only dropped today after the huge gap)….Google as well
I am using the same strategy like before…maximum SMA(100/20) divergence
October 23rd, 2009 at 9:06 pm
i agree. i am not going to short amzn. like i’ve posted in the past, when i have an overall bull bias, i don’t like to short the market unless i see a 2 or 4 wave of that 5 wave trend. i current see us possibly in one of those scenarios and am willing to short the SPY, but amzn is very bullish, and i would not short/put amzn. amzn was a chart i drew up 2 days ago, and never looked at that chart in detail prior to that time, so i don’t know enough about the stock to trade it beyond the fib projection of 120 that i had. with all that has already happened with the stock, i probably also won’t be drawing longer term assessments on that chart (so probably a one time thing). with my 120 number hitting, i’m pretty much out of any amzn entries haha.
goog is the only one that i actually recommend considering a short/put position temporarily in this one particular instance.
thanks!
October 24th, 2009 at 10:15 am
watch bidu
Would you mind going over how you come up with your projections. Are you using the retracements because stockcharts lacks extensions? To me it looks like your are picking a random level and drawing a retracement,perhaps seeing if the retracement levels hit important support, whats the method behind your madness?
October 23rd, 2009 at 9:22 pm
actually a lot of different things go into it. get any previous market movement (a completed 3 or 5 wave long term pattern), and then draw a fib sequence for it. you’ll notice that the fib retraces actually play a significant roll in the movement of that stock to the end point. so if you had known those significant points, prior to the whole wave completing, you could have had a better idea of market direction. based on EW and this knowledge that waves will play on fibs of a future end point, you can use it as a powerful tool. EW will give you basic definitions of the wave, and minimum and maximum points mathematically for particular waves. when you have one potential end point, that end point should work cohesively with a number of different fibs from various bottoms and areas of significance. all support/resistance points can be defined by: trend lines, fib retraces, and fib projections. most people don’t know the fib projection numbers, which is a good thing to add to your arsenal but a tough thing to get good at. even for me it takes quite a bit of time to find the point that is just right.
hope that makes sense.
October 23rd, 2009 at 11:37 pm
Makes sense. Where did you learn your EW knowledge? EWP?
October 24th, 2009 at 12:37 am
some books, and also online, in the end i mostly use the basics, i rarely have to use a word like expanded flat correction, but in this case it was necessary to make sense of the market movement.
Woo. Days when you and Idan are buzzing with posts are days when I stick all day with ST and don;t wander over to blue chip. Why start your own blog? Just fill this board with your posts. If you start you own blog we’ll lose you from ST much as we lost Shank. My two cents worth but you and Idan compiment each other verry mucho well.
October 23rd, 2009 at 9:12 pm
sorry- no spell check w/ that message but you get the jist.
October 23rd, 2009 at 9:17 pm
lol. thanks val. i’ll still be posting regularly. i love the stocktock family and will be sticking around as long as possible. i think we’ve got a great atmosphere and awesome analysis. we’ve also managed to keep out most of the trolls (with some work). the separate blog will probably be more for my own personal documentation and personalization, but won’t be active for a while.
Woo – amazing work … as usual your stuff blows my mind … I am about 8 months into learning TA and trading the mkt and there is just so much to learn !!!
I agree about staying on one blog … it makes life much simpler and is the reason why ST is my primary blog during the day (when I peek in from work ;P ….
Idan – one suggestion for you is that I know that you post a lot on expensive stocks like GOOG, BIDU … do you also have stocks in the 20-100 range … where options are not that expensive .. at least some of us have tiny trading accounts and these would really help ….
Idan / Woo – again want to say thank you for the great work you do ….
… keeping the trolls out is great.
October 24th, 2009 at 12:39 am
i’ve seen you make some great trades and suggestions. it’s more of a day by day process i think. i trade completely differently from how i traded 1 year ago. but i would never have expected to learn as much as i have in the course of all my trading. if i read what i wrote 5 years ago, i would not have any idea what i am talking about haha. it takes lots of money and practice (and being wrong in the process). thanks for all the encouragement!
October 24th, 2009 at 11:04 pm
Thanks Woo – am learning … with my account, I limit myself to max 400 per trade … to ensure that I dont bet the farm on one trade …. however my limitation on not being able to day trade means, that the volatility has been killing my trades …
Thanks for the encouragement
– l have great company on this blog !!
Contrary to what people are saying (don’t hate me) but I think a separate blog would be best. To be honest stocktock isn’t what it used to be although Idan does a great job. When craig and dan were running the show this used to be my favorite place. Ever since then I find myself going to other individual blogs, and sometimes it makes it easier for both the user and the blogger. Again thats just my opinion.
October 24th, 2009 at 12:02 am
You’re OK Mike. I see your side of it. My (selfish) concern is that we’d lose one of our primary ST voices if Woo started his own blog. And as much as I liked the ‘Craig days’ ST has become more bear/bull balanced with our current trader mix.
October 24th, 2009 at 12:48 am
mtkmike proves a good point, i think there was a golden year portion of stocktock where there was a lot of learning and growth, a lot of people were very excited about coming upon this site, and we had a ton of contributions and a lot of interest for people wanting to join the team. i think now we’re more in the maturation stage of stocktock (2nd generation if you will). we’ve got the steady followers, and some new people every now and then, but the regular posters are like the family, and we’re used to the way we post, the way we joke, what role we play, etc. i think valerie is right where we do have a more well balanced view now than we did before, and we definitely have a lot more people who have stepped up to the plate. what is different now than from before was that we used to have 1-2 people who pretty much lead the way, now i think that we’ve got about 10+ people who regularly post very solid things in their own areas of expertise. less blind following going on.
i still think that this is one of the better free sites out there, and me and idan are doing what we can daily to keep up the quality and friendly banter. real thanks goes out to all the regulars who have made this site their second home. no man is an island, and i know i wouldn’t be as effective a trader if it weren’t for the comments/suggestions/disagreements from others. keep up the good work everyone.
October 24th, 2009 at 1:30 am
woo would you recommend if you are a bear, waiting till December and taking a june put position. in the spy
October 24th, 2009 at 1:30 am
woo would you recommend if you are a bear, waiting till December and taking a june put position in the spy
October 24th, 2009 at 6:06 am
it’s a little harder to call the timelines, but i would say, that when you start seeing 1120s you can take an spy june put position, and look to make a ton of money. if you see the market rising higher, i would avg and purchase more june put positions as it goes up, if you’re leaning that far long term, then you have very little to worry about.
as for me, i try harder to maximize profits short term, so i would be buying any rise and selling drops, but long term put positions, will be solid investments.
October 24th, 2009 at 12:46 pm
woo, you are truly a master, thank you, my emotions have me a little concerned about the ppt and the banks manipulating the markets.
October 24th, 2009 at 4:54 pm
yeah, totally know what you mean. last thing you want to do is make decisions on emotion. that’s why i would say to set specific stops. i think i can get exact numbers for when the 5 wave can’t extend any further, and you can pretty much set stops above that point, and not worry. if it breaks there, you sell out, take a small loss, and look for the next good position to get in, if you don’t plan in advance, you’ll end up selling something at a bad price, then look at your chart later, and realize you got out at a bad point (has happened to me many times, after missing a significant trend line or fib because of not being prepared). remember that stock is just all numbers, and although there is a gut portion that helps with leaning towards good decisions, you want to focus on the math.
October 24th, 2009 at 11:08 pm
Woo – that is great advice … could you also share how you look at your process ….
You explained how you look at multiple /fibs from various swing highs / lows like on the WFC chart …. however, how do you decide when it will bounce and when it will break from there ? What do you look for ?
——————- EXCELLENT ——————-
Master Woo: two quick questions: Do you think that the current pull-back will continue to the 1050’s?
Second: Does it appear based on the chart above that the next big P3 drop will start before or after Dec. OpEx?
Gut-wise I have been leaning toward the drop starting in Jan because I believe that Big Money will keep pumping up the balloon to sucker in every last retail investor and max-out year-end, but I’d really appreciate TA input.
My contribution here: I’m looking to play VIX calls in a big (for me) way: this way I can front-run a major spike in the VIX without having to pick a starting point like with SPY puts: Whether the drop starts at 1120 or 1250 doesn’t matter, but picking the right month does!
Many thanks in advance.
October 24th, 2009 at 6:11 am
i do think that 1050s is very real possibility.
i haven’t calculated timelines yet, but you can often use rough fib definitions for timelines. i generally avoid that because the timeline can vary so much. i lean more towards minimizing risk, and if you’re worried about december not being the end point, i would grab january puts around 1120s, and you’ll still earn a solid amount long term.
personally once the 1120s hit, i’m hoping the market will reveal more of an exact top (either confirming the tops i have here, or pointing towards a higher move), and i’ll be grabbing current month or next month put options, with fairly close stops above specific trend lines. i would lean more towards worrying less about timeline and focusing more on minimizing risk. if 1120s doesn’t seem like the top after a good amount of more market movement, i’ll let you know what i think, at the moment, 1250 is impossible. 1140s is impossible too i think. i did the calculation for 1.6x wave 1 a little while ago, but don’t have the number off hand, but if i see a 1140s+ i will be very very very surprised.
In addition to EW analysis and fibs, I watch 3 things
1. Reaction of the market to news. The lat 2 weeks, the news has been good. However, the market has come down a bit. This suggests that there is further downside. I agree that around 1050 would be a good buying opportunity
2. What happens in Washington. The U.S. economy is artificially supported with massive deficits and quantitative easing (printing of money). The best analogy I use is that of an airplane. As long as it has the fuel, it can remain high. Once the fuel gets low, it has to come down. So far, I am not seeing any signs of fiscal or monetary restraint. This tells me that the market is going higher after the correction is over
October 24th, 2009 at 12:19 pm
you said, in addition you watch 3 things. Is the third a secret?
October 24th, 2009 at 5:00 pm
actually i’m curious too now haha, good catch gunsgutgold haha. we are in suspense.
for me, news is more entertainment. i think market psychology is an important thing to understand, so i do read the news everyday and throughout the day on the computer and on my phone, but i rarely take it into consideration when trading my stocks. i’ve seen too many times when good news has been skewed badly to account for market movement, and bad news has been skewed good. or relatively useless news is given as the reason for large market movement, instead of much larger news, which they downplay just to try and make sense of the market.
in the end analysts and journalists mostly don’t know what the heck they are doing (not saying i do), but i’ve heard from many friends and investors that know some large traders, and they mostly go with their gut and with trends. they use the same analysis as most traders here, but have a good knack for decision making and minimizing risk. i always make sure to draft my own charts before taking in the suggestions of others, so i know what i believe first, from there if i see really good points (i try and remain objective lol), i redraft accordingly.
October 24th, 2009 at 7:02 pm
Sorry, I forgot to add the 3rd think I have been watching carefully the last few weeks. It is treasury bond rates. I use Bloomberg’s website at http://www.bloomberg.com/markets/rates/index.html. I also watch many technical indicators carefully like “% of stock above 50 days moving average”, etc. I watch bond rates because there is a major risk in the market if long term interest rates spike. If that happens, I want to get out of stocks.
Usually, when bond interest rates start going down, it tells me market may correct. It means that money is moving to bonds from stocks. Investors are afraid of a market correction and are parking their money in bonds. This Friday’s selloff, it was different. The bond interest rates went up !! Reason: It does not make sense for central banks to buy U.S. dollars when the dollar is falling. They will be needing higher interest rates given the risk associated with the falling U.S dollar and inflation risks down the road.
This is not good news for the market. The fed has nearly finished buying its quota of $300 billion of treasury notes. The federal government is flooding the market with new treasury notes (to pay for the massive deficits). About 40% to 50% of these notes is bought by foreigners. It does not make sense to keep buying a these low rates (manipulated by the fed). Fairly soon in my opinion, we will see these interest rates spike – especially long term rates. That would be time to short the market
October 24th, 2009 at 7:45 pm
thanks rocky! you make a good point, and i know a couple others who pay close attention to bond rates, can be a very useful tool. appreciate the explanation and link!
Excellent stuff you guys, I am a new investor and do not post much but try to listen and learn.
Woo your assesment on S&P 1120 is very intriguing.Let me see if I understand you correctly.
You think the S&P can currently retrace to around 1050 then bounce to a top of 1120?
How would you position yourself in the current retrace stay short or look for a bounce then drop..Thanks again for all you do I find it all fasinating.
Will the market be dictated by the dollar or does it begin to decouple from it?
October 24th, 2009 at 12:17 pm
That’s exactly it.
I too see 1050-1070 area playing nice support until Nov 3rd.
Gl.
October 24th, 2009 at 5:02 pm
thanks zee. yup that is correct. i don’t have a specific date like zee does, but i have a very small put position going into monday on SPY, and will consider leaning put until the 1070s, i’m not sure how big the rise will be at the 1070 hit, but will watch for more market confirmation if that actually does occur. as with all things, i could be completely wrong, and we may not even see 1050-1070, but for now i am leaning in that direction. remember to always place stops to minimize risk. i’ll try and give key points for stops whenever possible.
October 24th, 2009 at 6:31 pm
in terms of positioning, i’m leaning towards this drop being a 3 wave, so that 1070 is one area to watch and the drop to 1050 the next, so the bias for the next few days is to the downside. but with how the market has been, it could easily just gap up. this is a dangerous area of the market to play, so i would not put any large amounts of money into any position currently. if you do want to grab a position keep it small.
if it drops to 1050, i will consider a slightly larger position, playing the drop to 1050 has a bit more risk, than playing the rise from 1050.
in terms of the dollar. i treat it like other portions of the market, it is all one big cohesive unit. just like any powerful stock, bonds, etc. there will be times when the dollar outperforms or underperforms the market. i would take the movement of the dollar as one particular tool for overall market movement, but not THE tool. relying too heavily on one thing to determine overall market movement can be dangerous.
i’m not a dollar expert, but i actually think there’s been a good amount of anticipation over the dollar. i’ve seen far too many articles forecasting hyperinflation to kick in by 2010. not sure if that will result in the dollar being a precursor of the fall, or a follower. since i haven’t really charted or followed the dollar much, i can’t give much input on the dollar vs. market in particular.
Another possibility to keep in mind is that we may have a H & S pattern forming with the neckline around 1020. The left shoulder and head have already formed and we may drop and then bounce back to form the right shoulder.
I like the idea of buying at 1050. If the market continues droping, I see strong support at 1020 and we will get a bounce to form the right shoulder. Hence, risks are fairly low.
October 24th, 2009 at 6:44 pm
i think if we see a break down of the light blue trend line that i drew, then we might see a good amount of falling like you said. i’m hoping it doesn’t do that though, because that could mean the beginning of P3 is more likely, or that it’s going to take a LOT more time than i would like to see 1120s.
I am amazed at how everyone is afraid to short AMZN now. Look at the past spikes…they all fall back substantially within days. I believe the vacuum from 101 to 110 has to be filled. It may go up more monday but then it will trade down. IMHO. I’m not chartist, just seems like with the volume spike and price action, it’s gonna come down and fast. All short squeezes do…Someone tell me why I’m wrong…
October 24th, 2009 at 11:24 am
And this spike from friday to 119.65 comes when it is at an all-time high….Look what happened 2 years ago in OCT. when it spiked up…could we see the same pattern and see this stock trade down in the next 5 days. I’m betting it will with a sizeable PUT position in NOV PUTS.
October 24th, 2009 at 1:25 pm
yeah, at some point it will get filled………….but there is over 20 million shares that were short on this, thats why it was very stupid to try and catch this now. do not mess with it now…..you will get burned……………there is no way they will ripi it down with all that short activity. good luck
i have opened some new positions on TZA………..what do you guys think. the russell looks to be the first index to be cracking…………..with the transports. they always lead a market downturn
October 24th, 2009 at 6:49 pm
it’s always a little rough when stocks break out into new highs, hard to get a good grasp on it. i know some companies that only purchase stocks on cup and handle breaks.
Hey leutdan
Where do you see, russel is the first to crack down. No indication on that, as I see.
I can see a lot of stocks overbought,… and like you, I would say direction must be the
way down,…but I am still not shure,…to many buyers. I agree with woo!!…1120 and
then down. But who (woo) knows.
Stock Rose
October 24th, 2009 at 11:53 pm
yeah, i can’t agree that the RUT or the transports ALWAYS lead the market down.
Usually transports lead the market both up and down, but in this very unusual rally, they didn’t lead it up, they have only tagged along with it, and have actually even lagged it.
According to DOW theory, the transports and industrials have to confirm one another. In Dow’s time, the railways were essentially THE transports, and the U.S. was a growing industrial power. How things have changed.
Transports are struggling, and are a very big concern, no doubt about it. BNI, US second largest railway, reported Thursday night and although they easily beat EPS estimates on strong pricing, freight volumes fell by 27%, and the stock fell 6.5% on very heavy volume.
BDI (raw material) ocean shipping prices have been on a strong rebound again since late Sept, pretty much as expected. But HARPEX (container shipping-finished goods) pricing is still floundering very near all time lows.
Off topic, but interestingly, DOW theory also says there are 3 phases to a market trend.
1) accumulation phase
2)public participation phase
3) distibution phase
Are we still at 2, 2.5, or 3 is the question??
October 25th, 2009 at 8:18 am
i am trying to keep things simple here………………..transports have already broken the 50 dma on heavy volume the past few days. you can spin it all you want , but that is the first signal. russell 2000 never made a new high when the dow and s&p did…………..signal number two.. transport chart is starting to look ugly. russell has broken below the 20 dma……………and below 50 on the rsi. these 2 indexes are giving us the very early signs.
October 25th, 2009 at 10:27 am
Leut, I’m not trying to spin anything, just saying…
October 25th, 2009 at 2:30 pm
yeah, i understand. here is what i see. russell has already backtested the trendline, and failed. she has now drifted below the 20dma………which is major. transports have clearly broken out of the chanel, and broken the 50 dma on heavy volume…………which is major major. transports lost more than 3% friday, compared to just a little over 1% on the other 2 indexes. distribution has already begun……………we may get a light volume up day tomorrow……………….to stay cosistent with all other previous mondays…………but new lows will be here very soon, then we see if the whiz kids formula on 1120 ish works……………from what i see i think they are correct so far. i think all of those in tza this week, will do well. master level of 109.68-110.34 has been touched so many times that i think its time for a pullback, to re-load and pump again to 1120 ish.
October 25th, 2009 at 2:55 pm
Thanks for the input. You might be interested in this Leut;
http://seekingalpha.com/article/168684-watching-the-transports-index-closely
October 25th, 2009 at 6:07 pm
thanks ggg…………nice link. did you read the comment about the railways on the bottom of the article………….i think the party is coming to a end real soon………………….fed is printing 30 billion a day………..how much longer can this go on ? when we start to crack, ypu want to be in some kind of 3x bear etf. GO TZA
i think we are set up this week for a major short squeeze on the dollar……………dollar will rally this week. too much negative media on the greenback
Great post Woo! I know everyone on the blogospheres is waiting to short the SPX near 1120s. This was the same sentiment back in July when everyone went short with the Head and Shoulders pattern. If the White House announces Stimulus 2.0 after everyone has gone short, then we could see a major short squeeze. Just providing my 2 cents.
October 24th, 2009 at 6:50 pm
haha, wouldn’t that be something special? that’s what stops are for. always have to be careful. i am no prophet, so i post what is possible in the charts, but it’s by no means the definition of what must happen. =P
October 25th, 2009 at 12:32 am
I don’t think they can or will announce any kind of additional major stimulus, or more QE, except in a panic situation, which may be soon coming. But then thats why I have gold.
Woo,
How low do you expect S&P will go in P3?
Mandy
October 24th, 2009 at 6:49 pm
if it’s anything like 1929 (i should’ve reposted the chart), then a LONG time….way longer than P1 took.
Woo, amazing content and charts. And I also look forward to some training material from your blog.
Just wondering, why insist on a scalp trade for 1124 when we have already reached 1100. Considering that it is only 20 more points is it not wise to start adding to the shorts for the next big wave down? Also, how close we reached to 1124 is it possible that P3 is already started?
October 24th, 2009 at 7:43 pm
ahh…very good observation shiva. your question actually revolves around trading strategy. if you are trading stocks, then it’s not a bad idea to start trickling into short positions because you’re looking at like you said, 20 more points north (well a little more now), but if you are trading options…20 points is a LOT of money. 1% on the spy can be a huge amount of money when it comes to november call/put options. so for those who are daytrading, or holding less than 2-3 days, with options you’re looking at 10-50% change in the price of your position. also if you are grabbing november options and for some reason you have a november put position starting now, and the market heads higher to 1120 and then dips south, but takes its sweet time, then your options could expire near worthless.
so this scalp is huge for anybody doing options (also bears more risk than thinking long term). but for those who are holding positions 1 year or 6 months, or even 3 months, they may want to start grabbing positions now. idan thinks more long term, a few others as well. generally people have a super long term position, a mid term position, and a short term position, and also diversification within that. my suggestions are based on those who are looking for scalps on the short term.
if P3 has already started, then i will get in later after a bit more confirmation of P3 because if this is really the P3 we’ve been waiting for, even if i miss 100 points of the fall, there’s still a LOT more fall to come, and with options, a ton of money to be made. so i currently play the day to day, and when my 1120 comes, i’ll start considering long term as well as short term with fairly big positions.
October 25th, 2009 at 8:24 am
IMO, we have 2 cycle lows that have never been broken.
They are 985 (6-month cycle low)
and 1018 (41-day trading cycle low)
Until these cycles are broken, I am not going to touch OTM puts or go short on margin.
Don’t fight the tape. Trade what you see.. Do you see P3? Well I don’t, because the cycle lows are still holding.
Don’t be fooled by this P3 crap.. Daneric/Kenny have been calling for it ever since August. As long as you keep on hearing P3, we’re going higher.
I trade what I see, and what I see, is that if you plot a sine function over time from March, the peaks of the sine function are progresively higher every month. This my friend, is a BULL CYCLE.
Do not go short on OTM puts / margined shorts..
Theroretically, we are bottoming by Nov.3rd.
If this is truly P3, woo, we need to break 1018 by NOV3RD or the bear case is dead until JAN 2010.
October 25th, 2009 at 8:44 am
nice work zee…………..i copletely agree on this. i have it around 1019 ish………close enough. christmas rally still looks like a winner……..unless something crazy happens. ( h1 n1 etc.)
October 25th, 2009 at 12:24 pm
ok woo we look for 1070, bounce 1079 than a move to test 1050 before we try to take out 1120.?
October 26th, 2009 at 12:32 am
that sounds about right, not sure if 1079, but i expect somewhat of a bounce at 1070, but it isn’t necessary. these are more minor waves, so they won’t always be clean 3 to 5 wave movements.
Woo – one more thing … can you take a look at BIDU – it has earnings on Tuesday evening … if you could share some projections, then we can maybe take a tiny position on Monday / Tuesday before earnings ….
Even a further OTM put like JON did on the AMZN 110 was very profitable … I believe he bought it for 0.90 and sold it the next day for 8.90 … and at EOD it was at 14.90
Thanks …
October 26th, 2009 at 12:33 am
i just got home a little while ago from having errands and appointments all day. i’ll have to take a look at BIDU and other stocks tomorrow or coming week. sorry!
master woo, i want to trade with you. never done options but see you are extremely successful at it.
Do you normally tell in advance what you will buy/sell or post it after you have done it? Are you positions relatively large, I want to start small.
I assume you are filthy rich and I want to be your student.
October 26th, 2009 at 12:36 am
errr…i am still learning myself. even if you are good at charting, or can guess long term market movement, making money off of it is a completely different story. make sure to keep asking questions because there are tons of useful people on this forum that are willing to help and give their input. different people have different favorites and specialties. i’m more of an SPY/SPX guy, but that may not be what’s right for you. feel free to ask questions along the way. i’ll try and post my buy and sell positions along the way. sometimes i’ll post possible positions that are great for daytrades, but not feel i want to take the risk myself. thanks bbb!
woo, I am short AMZN in your options where do you see it going…
October 26th, 2009 at 12:39 am
hard to say exactly since it just hit my fib projection. could drop down to 112 short term. but it’s up in a different channel now, so you would need to see a drop below 112 to start seeing some more downside. below that is 108 with a fib and trend line. then another fib and trend line at 104. always have tight stops on this stock. it’s in new highs, and above a LOT of support areas.
The favourable trading play, until Nov.3rd, is to short any fast rips higher in the 1095-1115 level and cover it 3-5% below.. why? because we should theoretically be in the 1050-1070 range on Nov 3rd.
I’m likely just going to have a bunch of limit orders on Inverse 1x ETF’S that are 2.5-5% Out of the money, and hope they get filled next week.
GL
Great post Woo! You are a tremendous asset to this site.
October 26th, 2009 at 12:39 am
thanks morris, wouldn’t be the same without you around either. should be an interesting week to say the least.
Friday earnings update;
Earnings reports were for the most part pretty good. Some are even surprising on top line growth, and many new 52’s.
Some notables;
RNOW EPAY RCKY NFLX BUCY NEU LPS HWAY ACO WHR JBSS LEG ALGN PWER MTX CMCO GDI AMZN COF MSFT DLA GIFI ACPW CPWR SCSS CACH HITT POWI
There were also some uglies;
IBKR CYBS BRCM SPWRA WOOF SNV STSA BNI RVBD CA AVID WDC WFR PMCS MVIS COLM CMG SCSC CLS CB NTCT
pick your longs and shorts well, there’s money to be made on both sides.
And with a market neutral tactic, I can’t see getting hurt., IMO.
BTW, Woo, thanks for your contributions, most generous of you. Now don’t leave, you hear, you’ve spoiled us.
predictions are all good…but it’s still just predictions. just remember one thing, mkt always surprises the smartest guy in the room. i’m not suggesting that we see any particular number…but just stay cautious and be open to all realm of possibilities, including 1250. i’m long into monday…
October 26th, 2009 at 12:41 am
agree that the market is hard to read. and yes, these are totally predictions as i always try to clarify, and can be WRONG. it’s currently very hard for me to see 1250 at the moment, i would need to see a huge retrace before that possibility comes to life. we’ll tackle that monster if it comes our way. =P
Excellent work as usual Woo! (Where are my Q’s LOL) I find most of your targets lining up very much with what I have. I think (without looking) initial upside is around 1117-1118 SPX. Purely based as of now on the last set of fibs I have drawn from the Septemeber 23rd high to the October 2nd low. I have to admit AMZN caught me completely off guard, I didn’t see that higher than 116 and change when I put my short on it. I only bought 10 due to the fact it just wouldn’t rest, and unbelievably they aren’t all that red (100 strike).
A shout out to Anjali too about some cheaper plays since it sounds like you prefer options. I haven’t been trading much longer than you have, and started out with the Q’s. Components of some of the DOW stocks are very manageable as well. The DOW stocks I like: AA T BA JNJ CAT MRK KFT PFE VZ DIS HD to name a few. I found it easier to start with stocks around $30.00-$50.00 to start with. I just stay away from those that are in consolidation whenever possible.
The market is reminding me about the topping process that took place back in May, and the bottoming process that started in February when things were tougher to comprehend. It would be nice to see a new high and new low sometime soon to help us all gauge new targets. Of course the market makers know of the latter, so I am not looking for this to happen any time soon.
One more question for you Woo. In the grand scheme of things, have you considered this to be A of an A B C of a much longer correction of the entire market instead of the possibility of P2 drawing to an end and P3 around the corner?
I want to add that I am not sure why everybody thinks Idan is always wrong. I monitor this site and have always noticed that he is more likely to give both sides of the trade, even if he does have more of a bearish bias. He is great at pointing out stocks that are reaching short term tops. Personally, I think resistance is harder to crack than support, so find these sets ups easier to target and pursue. It seems to me whether you are a bull or a bear, we are all waiting for the next shoe to drop to protect our investments. In the end, that is the only bias any of us need.
Happy Trading,
Ox
October 25th, 2009 at 8:50 pm
Ox – thanks for the suggestions … will take a look …. with working fulltime and 2 small kids, things get really crazy – but love ST and the community we have here …
I also love the fact, that we seem to be getting more neutral vs the bearish bias that prevented a lot of us from making money for most of the way up … that is a big change here at ST !!
October 26th, 2009 at 1:06 am
good advice.
in terms of your question i actually HAVE considered this move up to be the A of an ABC, with A being 5 waves, and a B coming up. prior to the ABC expanded flat correction theory, i was basing charts off of a P1 666 bottom, with this current 5 wave up being the A of ABC like you mentioned. however, when the 1080s area passed, this started posing problems for the overall larger ABC scenario. then for C to stay within the 61% retrace of the complete drop from 1500s to 666, you would need B to drop below the 61% retrace of A. then you get a really overextended B, or you get a C that is retracing far too deeply into P1. the expanded flat correction theory seems to be the best explanation at the moment, and i am no longer leaning towards a larger ABC happening. 1118-1120 area is my current top of P2. good question ox!
also i agree with you that i don’t think idan should be seen as wrong or getting a bad rap. you have to take everything into context. idan is not trading large positions in stock right now, and on top of that he is only trading positions on heavily overbought stocks. he is staying away from SPY positions because he knows there is a possibility of a rise to come. you can be wrong in a 1% position of your portfolio, and lose 1% on a stop out of that 1% position and it can literally be nothing in the grand scheme of your portfolio. he is leaning short because he is dealing with overbought stocks, and for overbought stocks, there is nothing wrong with leaning towards a short position, especially when those overbought positions have the chance of falling prior to the major indexes. i personally think that idan has been doing a great job on getting in good positions, and stopping out for very small losses, or for good sized profits. if you lose money based on another person’s suggestions and analysis, you can only blame yourself, and remember that idan does all this analysis for free and is here to help people.
one thing i want to clarify and keep trying to stress on the site is that it’s a family, team, charity (maybe not? haha). we’re not here to argue with each other, or to be more right than somebody else. if there are disagreements it doesn’t mean that one person is calling you stupid or trying to disrespect you or your opinion. if someone questions your judgment, then back it up with more TA. if you disagree with somebody, back it up with TA. it’s fine to joke around, and it’s fine to gloat when you’re right because we really are happy for you when you make a profit (even football players do a dance in the endzone), but don’t do it at the expense of someone else (calling people out, etc.). the reason we’ve kept quality people here giving free advice and helping out everyday is because of the quality of not only the TA, but of the atmosphere also (at least that’s what i think). if you’re paying for a site, and someone is managing your money, and they lose it, then sue or cause a ruckus. at stocktock, let’s just enjoy the day and try and help each other all make some money.
glad that we’re getting all this feedback, comments and interest! there’s TONS of quality in these comments.
Well many people have been talking about the market going south now since March and the trend just keeps going up regardless of the news good and or bad. I just wonder who is buying all this manipulation? The way I view it is as long as the dollar keeps going down this market will continue to rise even further. The questions I have for you Woo is why on earth are they letting the dollar drop and letting the oil go up? If oil heads back in that 100-140 range again they might as well kiss this recovery off till 2011-2012. Also do you see any chance of FAZ ever back in the $50.00 range? Thank you
October 26th, 2009 at 1:15 am
everybody is buying this manipulation. even though we’ve got people here on this site who regularly short the market, you have to remember that a huge number of the american population, from 401k’s to other retirement stock accounts only hold long. and a lot of people (me included) don’t care how the market is brought up, we just buy and sell accordingly.
with american debt so high and all that stimulus plan money, i’m surprised the dollar didn’t devalue sooner. oil is heavily manipulated from OPEC to random news on the market. i think there’s a huge amount of oil being found lately, but they’re keeping that news on the down low. even when oils hit all time highs, many analysts were saying that it wasn’t driven up by supply and demand at all. i wouldn’t base too much of what will happen to oil on the news. i would watch the charts very closely for that one. some of the guys/gals have been posting regularly on oil and have been making a killllllllllling. kudos to them!
faz i haven’t charted yet, but i have charted fas really quickly. FAS is currently in a rising channel, and has some additional trend line support right now. if the $80 area breaks soon on the FAS, you could see a drop to the $60 range, not sure what that equates to on FAZ.
And now a public service announcement. Go and sign this petition to stop the proposed Trader Tax!
http://www.rallycongress.com/no2tradertax/1536/tell-congres-to-block-trader-tax/
This was def. one of ST’s best weekend posts in a long time
October 25th, 2009 at 8:30 pm
Yep, I think this place is getting better and better!
October 25th, 2009 at 8:48 pm
Absolutely !!!
Three cheers for Woo and Idan … I love Idan’s plays … and how he is so giid at hedging … even though he has been bearish, he has placed stops right and got inon oversold stocks to move in the right direction, even when the mkt moved against his thoughts – that is the biggest lesson for me !!
October 26th, 2009 at 1:16 am
totally agree. trading strategy is the MOST important aspect of making money on the stock market. good charts only gets you part way there. locking in steady profits is the hard part.
October 25th, 2009 at 10:39 pm
Zee I see the low coming Nov 9th,which is a turndate,then up to around 1200 in December for the final top.
October 25th, 2009 at 11:21 pm
Cool, glad to know I have some sort of confirmation.
I’ll keep the date in mind!
Woo – I hope you will be able to look at BIDU .. #18
October 26th, 2009 at 1:17 am
i will try to chart BIDU and QQQQ before the day begins, but i can’t guarantee it at the moment. sorry! had a really busy weekend.
October 26th, 2009 at 6:41 am
SOHU beat this morning and could help BIDU. I can see where 451 is possible, but purely on an earnings gamble. It could trade very much like AMZN did. I personally wouldn’t gamble on the earnings play after hours, but would give it every opportunity on Tuesday if it were to follow the AMZN pattern. After hours trading could easily run it up to 451 only to see if fall before pre-market on Tuesday, so be careful. It is hard to trade stocks at all time highs.
i think 1075 holds and we go up to 1090.
October 25th, 2009 at 11:22 pm
A third chance to reload shorts! (will likely be the last too)
I’m 100% short going into Monday and feel very confident. TZA is a good bet, I agree, and also FAZ and SRS. Got a feeling the week will end down more than 5%.