Don't Fight the Tape

Well, my short position that I posted about was taken out when the resistance did not hold..this market is on a roll.  6 straight days of higher highs and higher lows.  Lots of traders got excited about the "Death Cross" and as it turns out, that was the point right after the short term lows that we have yet to see again.  What's the point?  The point is that if CNBC is talking about a major technical point, like the Death Cross, use caution. 

 Now I was short like lots of others, but not because of the Death Cross..I was short because my system was calling for shorting the market.  Now I'm out because the market is on a bull run and staying short through this action is merely fighting the tape..good luck with that.  What will be interesting is to see if we're still in a range bound market (likely) or if prices will continue to climb the wall of worry (2009 style).

I'll be traveling for the rest of the week and will return home next Monday.  Posting will resume then. 

Have a great week.


TLT

Wisdom Quote

"Little else is required to carry a state to the highest degree of opulence from the lowest degree of barbarism, but peace, low taxes, and tolerable administration of justice; all the rest being brought about by the natural course of things.  All governments which thwart this natural course, which force things into another channel, or which endeavor to arrest the progress of society at a particular point, are unnatural, and to support themselves are obliged to be oppressive and tyrannical."

--Adam Smith

Bears Beware?

We saw a wicked rally yesterday and a substantial gap up this morning but, unfortunately for the bulls, prices plunged this afternoon.  That little rally was enough to inflict some pain on the shorts, me included, as I got to watch prices gap right through some of my stops and take me out of some positions that ultimately would have been great to have at the end of the day...kind of an insult to injury but that's part of the game.  

SPY Daily

 Technically, stocks still registered a higher high and a higher low, so there's still some hope for the bulls, but I think we're heading lower.  My indicators are calling for lower lows and fortunately, I've still got some shorts on the table...I got knocked out of my TZA (3X small cap bear) position but I'm still in the slightly tamer SDS (Ultra Short S&P). 

So should the Bears Beware?  Obviously, I don't think so and I've got my money where my mouth is.  That being said, there's always the chance of being wrong which is why using stops (even when you get whip sawed) and proper position sizing is so important.  The best trades tend to be at inflection points, where the market looks like it will go either way, because those are the spots that offer the best risk to reward.  The key is to have a reason (indicator, system, guru to follow, etc) that helps you determine which side to be on and  is right often enough to make money.  So my system is pointing down..we'll see how it plays out.

Hope everyone's having a great week so far.

TLT

Wisdom Quote

"If you want to change your experience of the markets from fearful to confident, if you want to change your results from an erratic equity curve to a steadily rising one, the first step is to embrace the responsitiblity and stop expecting the market to give you anything or do anything for you. ... Taking responsibility is the cornerstone of a winning attitude."

--Mark Douglas

Trading In The Zone

What a Day, Glad I was Short

What, did he just say he was short?  Didn't the Lawyer Trader just post something about the intermediate trend being up and that the path of least resistance would continue to be up...?  Although I did say that, I also said that this was subject to change and change it did.  I've been short for 2 days and I piled into TZA (Triple Short Small Cap) this morning at the open...an etf that gained 10% today!

So what happen to change my mind and give me the conviction to pile on the shorts this morning?  Well something occurred over the past couple of days, especially yesterday, that over rode any bullish bias.  That something was in bonds, and bond spreads to be exact.  I've posted about my Treasury Spread Indicator before and it gave a glaring sell divergence yesterday.  Here's the chart: 

So what's the significance of this divergence portrayed on the chart?  Well it basically boils down to the stock market and the bond market disagreeing on the state of the economy and the state of the stock market.  Stocks were flat and bonds indicated that stocks should be sold off.  When that happens, it pays to bet with bonds. 

Have a great weekend.

TLT

Eur/Usd Update

The Euro has continued to rally..the only question now is how long will it last? I don't know and will look to price action to get me out of my current long position. Here's the current daily chart:

One thing that I find interesting about the Euro right now is that the correlation between the Dollar rising when the stock market declines seems to have been decoupled.  For example, this morning when stocks slid more than 1%, the Euro rallied.  What does this mean?  It could mean that the currency market has merely changed it's relationship with stocks.  It could also mean that the currency market is not worried about Europe anymore..the worry is with the US.  Not a far fetched theory.

It's too early to tell, but it will be interesting to see how this plays out.  The only thing that I can say is that according to my system, the right trade is to continue to hold the long Euro position. 

TLT

And The Beat Goes On...

Markets had a good day today, as they continue their recent winning streak.  AA and CSX gave the markets something to rally over and it appears that INTC is contributing fuel for tomorrow since it's up 7% in after hours trading today.

Here's a quick look at some of my indicators that I update and maintain myself.  First up, the TLT Oscillator:

As you can see, the Oscillator score is positive (bullish) and the moving average just crossed into positive territory today (very bullish).  This indicator tells me that the intermediate trend is up for now..time to look for longs if you're not long already.  Of course this is subject to change as a couple of good down days could provide a negative score and drag the moving average back down to negative territory.  So I'm not saying that we should all pile on the longs and hold them right now, I'm just saying that this indicator (one that has been pretty reliable but subject to it's own set of limitations) says that the path of least resistance right now is up.

Another indicator to check on that I've posted about before is the Overbought/Oversold Indicator:

The Overbought/Oversold Indicator just crossed over the 4 mark into overbought today.  This means that I'll will be waiting for the market to back out of the overbought territory before entering any longs (assuming the trend is still bullish when we pull back).  I guess it's just a wait and see type of thing now.

TLT

New Zealand Dollar Benefits From What?!: File this one under whoops

That is just plain funny!  Good job Yahoo and Daily FX.  Also, good job to Mish for posting this..gotta give credit where credit is do.

TLT

Wisdom Quote

 "Economic history is a never-ending series of episodes based on falsehoods and lies, not truths.  It represents the path of big money.  The object is to recognize the trend whose premise is false, ride that trend, and step off before it is discredited."

--George Soros

Interesting Action in Monsanto

Just look at chart of Monsanto's price action for the past 6 months or so and you can see that it's been relentlessly sold..fortunately, I had a little bit of that action.  Taken to the woodshed would be a good way to describe the beating that MON took.  Well this week, it put in a potential reversal.  Monsanto was up over 7% alone today and it registered a Bullish U-Turn on the weekly chart:

It will be interesting to see how this one plays out as this stock could rally a bit simply because of how far it has dropped recently.  Short covering is undoubtedly gonna be fuel for the fire..gotta love a good old fashioned short squeeze.

As for the market in general, I'm seeing short term bullishness.  Nothing worth getting too excited for yet, but there is potential.  Here's a chart of the TLT Oscillator with the SPY plotted over it:

As you can see from the chart, there have been 2 successive positive readings, which is a bullish sign but not bullish enough to go fully long.  The 5 day moving average is still negative which tells me that any buy signals right now have a high chance of being a whip saw because we are still in a downtrend.  However, all bull moves have to start somewhere and this one could be a bigger bull move..we have to be open to possibilities, especially if they don't seem likely to happen.  So for now, there's a slight bullish bias for the next week or so but I'll be keeping my eyes out for short signals as down is still the path of least resistance.

Hope everyone had a great week.

TLT

Overbought/Oversold Indicator Update: Back Into Neutral

Here's an update to my Overbought/Oversold indicator. This indicator is constructed by taking readings from 30 different stocks in 10 sectors and averaging their current readings over a couple of different time frames. As you can see, we just went from oversold to neutral.At this point, I am patiently waiting for it to reach the "Buying Pressure" levels and then I will look for short signals to initiate new short positions. The short positions will be premised on the market still being in a downtrend overall, which it is right now.

TLT

Andy Kessler Interview

If you have 30 minutes to spare, this interview video is well worth your time. In it, Andy Kessler (author of Wall Street Meat, Running Money, The End of Medicine) is interviewed by Howard Lindzon..check it out.

TLT

Buy Signal On the Euro/Usd

I don't really like it, but I'm in it. The Euro rally that occurred last week on July 1st triggered a buy signal in the Euro/Usd. Personally, whipsaw comes to mind when I look at the chart but, only time will tell...you never know which signal is going to be the beginning of a huge move. Here's the daily chart:As for the stock market, I'm in cash right now and waiting for a fresh short signal or a buy signal. I can tell you that the path of least resistance is still down, so a new short signal will most likely be next..but you have to stay open to different scenarios playing out.

Hope everyone's having a great week so far.

TLT