If your a bear holding front month options (like me), you’re probably ready to throw Elliot Wave Analysis out the window. You might have even covered your positions in frustration. In times like these, I try to hold to my convictions, provided they are backed up by rigorous rational thought. Wave Minuette (ii) of Minute [iii] is taking its sweet old time, subdividing into complex patterns of lower degree. Remember, corrective waves are much more difficult to count than impulsive waves, and Minuette (ii) is no exception. This count is borrowed from Kenny over at Kenny’s Technical Analysis Blog. It shows Minuette (ii) tracing a double zigzag, which consists of a 5-3-5 zigzag for W, a 3-3-3-3-3 triangle for X, and a 5-3-5 zigzag for Y, with the last 5 in the form of an ending diagonal. The final 5th wave of the ending diagonal could complete Tuesday or perhaps ends truncated, allowing for a gap down Tuesday morning when the markets reopen. If you’re new to counting waves, don’t get thrown off by the WXY notation. Just think of them as an ABC. When counting zigzags, we use WXY for double zigzags and WXYXZ for triple zigzags. Could Minuette (ii) trace a triple zigzag? It’s possible, but I think unlikely given how long Minuette (ii) has already lasted (nearly twice as long as wave 1).
Holding front month options into expiration poses a great deal of risk. Historically, expiration does not end well for option buyers because stocks are manipulated by larger institutional players (ie. banks, hedge funds, prop trading desks, etc) so that stock prices close where option buyers make the least amount of money. There is a great site, optionpain.com, that calculates the “max pain” price for any stock ticker. When I type in SPY, it shows me that option sellers would pay out the least amount of money if the SPY closes at $110 on Friday. That is $2 higher from where it is now. Try it for yourself and you will see that option sellers prefer higher prices for most stocks and ETFs by Friday. If the wave count above is correct, I don’t see this expiration working out for these larger players. And when they become aware of it, you will see some real dumping as they try to hedge or reverse their positions. I guess this all makes sense if we are on the cusp of wave (iii) of [iii].
POP to 1083-85 area. overthrow. but im not so sure we crash and burn. i have sell orders on alot of PUTS hoping for a quick move lower following that pop but i then think this market will be SAVED once again. we may just trickle higher from any low that day. next trading day may be a chance to get out of puts as we consolidate or move higher through the week. this is a tough game. the weekend is nice to gather thoughts and look at charts. im favouring a move lower from the FRI close but …………. if we hold 1060 – 65 then im favouring higher or sideways action over the next 10 days or so. decide then how i feel. FEB 24 CRRRACK? or will it be a POP to 1104 ? only our best guesses can direct us and hope we “BET” right.
IMPORTANT THING TO NOTE ON THE WEEKLY CHART:
the FULL STOCHASTIC does not show oversold reading like it did back in AUG 2008. back then it did not show any signs of curling up. for this reason im seeing this look more like the move from OCT 2008 so far. next week will tell us I HOPE. when permabears like me are already fearing a bounce the likelihood of more decline must be considered. as the day goes on here im finding myself on the fence just like the market. if we begin a bounce im watching the weekly chart FULL STOCHASTIC to back test the mid point 50 like it did in DEC 08.
is it JULY 2008 ……………….. down in a straight line to oversold weekly
is it OCT 2008 …………………. down and bounce and down we go to oversold
right now im leaning to say the action is more like OCT decline.
the dates i mention 2008 …. should read 2007
also , im bidding CALLS …………. on BZH … i think they are doomed. the chart says the price goes higher. im biased to the charts.
my plays are based on individual stocks. the move the index has made looks more like OCT 2007 and the retrace to 1004 SPX seems highly probable based on the weekly chart and the FULL STOCHASTIC appearing it will curl up this week. watch for this as that indicate the move is more mirrored to OCT 2007 move . the JULY 2007 move the FULL STO just pointed straight down without a pause and then whip sawed us back to a double top.
Fazzers on YHOO MB wanted wanted to know what would happen if the $RIFIN declined 25% a day for 30 days..
Day RIFIN FAZ FAS
1 . 740.0 = $20.55 = $65.44
2 . 555.0 = $35.96 = $16.36
3 . 416.3 = $62.93 = $4.09
4 . 312.2 = $110.14 = $1.023
…
29 . 0.2 = $131,182,888.52 = $0.0000000000000009
Zee – can you share your thoughts on what you are expecting … I know you were bullish till middle of Feb ….
Im bearish ST.
Short at 1080.
Stops at 1090.
The reason I said that early feb was bullish was because, the past 7 times the $CPCE has put in a number >0.70 and sold off 5%, the market put in new highs shortly after. Of course this time is different, so I’m not using my cycle indicator. The indicator will prove to be very useful when march comes along, so until then, trading this market is like gambling. I’m switching to $natgas. Seems that buying at $5.30 and shorting at $5.85 is one of the easiest plays to do.
What am I expecting?
A bunch of rallies and sell-offs that takes us to 1040-1100 by april. The market is about to get VERY VERY BORING. All SPY 102, 103, 111, 112 puts/calls will be 0 by mid march.
To newcomers onto ST. This is a bear- biased site. Do not take this bias as gospel. I watched more than a few naive ST-ers lose their shirt believing the bear talk that permeated this site during the entire most recent bull rally. Kenny is as bearish as you’ll find. This IS a great blog site but be sure you take the EW analysis with a skeptic’s view. And balance ST with other less bearish bogs for a more balanced perspective.
And all EW talk aside- here is why I would not be surprised to see our market conitinue a slide into next week.
Cheers.
http://www.zerohedge.com/article/euro-event-bullish-usts-short-term
im short term bullish (2 weeks) and have a bearish portfolio. im going to place a few bullish bets based on charts to better balance. i may be longer term bullshitish should this turnaround prove itself at the lower channel trend line at 1104. if we trade below 1104 through to MARCH 4th ill go BOMBA short.
IM READY TO ADMIT. i made a boat load of cash in the crash but i never touched FAZ and im glad i only made one failed trade in FAZ on the way up and simply bailed a few days later.
MY WORST HABIT IS OVERTRADING during consolidation periods when the market shows no direction. at least im taking smaller positions
. MY BEST HABIT is getting out when i know im wrong.
im thinking most traders who truly understand what is going on in the world have a bearish bias. but it cant prevent us from gaining $$ in the runs up.
pray for a pull back to 1069 on MONDAY to get long and have a chance to bail on PUTS. of course if we head to 1020 im ok too since im positioned for that.
GOOD LUCK TRADING!
Ahhhhhhhhh c’mon Rich, you KNOW you WAAANNNNNNT it:
http://stockcharts.com/h-sc/ui?s=FAZ&p=D&yr=0&mn=6&dy=15&id=p46777170994&a=191434204&listNum=1
http://www.freestockcharts.com/?emailChartID=d4f9d9bd-418e-4d97-b593-8fdd55a0cf62
UNER………….. i found my victim. im buying PUTS on BLK
if it bounces at all . FAZ has treated so many so wrong. it
looks bullish. poised to fly. but it seems consolidation
kills the action in FAZ and so ill take BLK PUTS instead.
hopefully BLK can hold up this week and give me a nice entry.
id rather a set up that shows a potential ABC corrective on the
weekly time frame. nice and clean. XLY staying below $29.60
will set it up for a nice ABC pattern also. it has a very clean
daily chart.
as much as i dont like shorting financials. im thinking these
overpriced beasts like MTD and BLK with flat 80 WEEK SMAS
will magnetize to that average in the coming weeks.
BLK definitely looks grim:
http://stockcharts.com/h-sc/ui?s=BLK&p=W&yr=1&mn=7&dy=0&id=p76223836083&a=191444857&listNum=1#
I am stuck with bear ETFs when bearish, though, because I can’t do shorts or options or margin. I must also wait three days for a sale to settle before I can sell what I bought with the proceeds. But then a gain is also not a taxable event . . .
IF ,,, BLK and pull off a miracle and do more than just consolidate we are in bear dream land. it fell 30 and maybe it can gain back 10 during the next 7 trading days. that would be a good entry 219
By losing my shirt, I actually learned a ton.
I agree with you there!!!! I have to fall hard to knock sense into this thick stubborn skull of mine. But you hate to see the wide-eyed rooks jump in over their heads with a 3X short when their new-found mentors talk gloom n’ doom.
So many EW technicians focus on this being Minuette (ii) of Minute iii… As soon as we didn’t crash and burn on Feb 9, I knew it was taking a different form, but I let my bias take over.
McClellan oscillator went positive on Friday, one of the characteristics of WAVE 2 up. A quick visit to 1085 (DJIA 10176) would fit well on Tuesday and then a crash and burn. The Fibs line up much better in this case.
everyone is watching that 1085 . man alive. this is going to one wacky two weeks imo. alot of stocks are heading back toward 50 FIB on the daily or weekly time frame and its going to be do or die there.
if that XLY closes below $29.60 this coming week. ugliness. so many good earnings coming out of stocks like PNRA ,,, CMG ,,, but, from talking to unemployed friends i see what is going on more clearly. people out of work with savings are spending thier savings out of boredom not realising that this is not a run of the mill recession. if the market looks ahead and sees that the unemployment numbers improving are only because people are leaving the work force and that people are going on vacations using savings to escape reality then we are looking at more than a correction here.
the market must hit above 1104 in the next 3 weeks or rut roh!
1085 is also a key level for thinkorswim’s Chief Technical Strategist, Peter Reznicek:
http://www.shadowtrader.net/videos/sunday100214st.html
He says also that 1085 was reached after hours, continuing the unusul late run-up, which he believes was caused by buying of BRK.B after it became an S&P stock.
Yeah i saw that. all that hype about BRK . the futures hit cash equivalent of 1083 i believe. will they try to gap above it on Tuesday? guess we find out then. im going to add short if we do that. but if we close above it the following day im going to probably go more cash and wait and watch.
ALL IVE BEEN POSTING THIS WEEKEND is be careful. the market may be capable of running a slow grind higher to put doubt in the bears and hope in the bulls. see alot of people posting charts this weekend rating all sorts of expensive stocks as a buy because they are sitting on trendlines. but many of them have shaken off oversold conditions and you can see many of them were oversold at the last touch of the trendline. HMD.TO tracks miners to the downside. man does that chart look bullish.
i bought SRS calls at the close FRIDAY. and some news came out after hours on the increased rate of default in CRE loans. IBOC has plenty of CRE exposure and so does CMA. if you look at the chart of CMA daily it has the 50 FIB of last move lower at $34.75. watch for a close below that on TUESDAY as the likelihood of this one moving much lower.
IBOC has frustrated me for so long as they don’t post much information to the general public. you have to make the extra effort. this gives me more reason to believe something is deeply wrong. since when does a company not post financials to the mainstream investor websites.
GO TO CNBC.COM …. get quote for IBOC. click on FINANCIALS. no data available. do this for any other bank and try every other company you know. CMA had a very interesting move on FRIDAY to even $35.00 close. yet in CMA thier is little evidence to the public that this action is option driven. i see little open interest. Private off floor deals in options?
THERE IS SO MUCH ” FISH SMELL ” with bank stocks i need a new air freshner. who is buying them up? who is buying up the Treasury Auctions? sure would like to see the faces who supports these stock prices in the middle of the most scary times the market has ever faced since the GD.
Fritz – so what are you seeing now in terms of timeframes ?
Still looking for a crash now into a Mar 5 low or you think that cycle has been delayed ?
Anjali,
i know you are asking Fritz. but ive been involved in this market for a long time. it appears incapable of crashing. continuation of down-trend may be more appropriate. until those in charge lose control that is. the tape was modified late FRIDAY if you did not notice. a few large BANKS were big buyers?
either the downtrend is complete or we get a nice whipsaw to 1025-1035 area. be nimble be quick and if you have some stocks you think should be $1 and are currently $5 get long if we start going strong. BZH is my pick
if we stay below 1095 in the next 7 trading days id say we head lower before we head higher. March 5th would be an appropriate date to take profits as it is 10 more days to OPEX expiry from there.
IMPORTANT TO NOTE. the USD$ is overbought on the WEEKLY time frame so a few weeks of sideways or downward movement would alleviate this overbought condition and open it up for higher prices … correct? falling dollar leads to higher prices in most commodity stocks. this 2 week grind is probably best played with stocks that benefit from a weaker dollar.
the dollar does not have to fall to relieve the overbought condition. it can trade sideways. this would result in what i was calling for through OPEX and part of the following week. 1060 to 1080 trading range with fake out breakouts to either side. im looking for the end of the 24th as possible target date to get MUNDO SHORT. if this does not go like i ithink my action will be lower participation.
some here think that the market will tank during OPEX WEEK and im not favouring that idea but am positioned to profit if we do.
does this make sense to you about the USD$ ?? i use UUP to track.
———- CRAIG ——— im up late looking at charts and playing some poker. futures point to a possible 1089 open. can you make your chart taller? if we gap to 1089 at the open it wont fit on your chart
i dont know what PEE we are in but isnt P3 suppose to put the fear in everyone. over the weekend im looking at lots of people posting charts of what they just bought and why they bought the “DIP”. the “DIP” buyers are programmed bots and they get backing from a nice reversal candle at 1050. is CITI right about a double top. wow.
this is simply a traded market to screw all the little guys who cant take a hint. i made a nice profit from the top to 1060 where i covered most. then im going to get whacked on the rest?
Is anyone holding BIDU puts through the weekend? I got some March 440 puts, but with the tech stocks looking like they are gonna open higher and google staying in china news has done nothing to slow down BIdu, it looks like i’m gonna get stopped out today. Fritz, weren’t you holding BIDU march 440 puts at around $10? are you looking to bail? or maybe add long calls like you mentioned Friday if BIDU closed above $482 for a run up to $500.