Archive for September, 2008

SPY Rising Wedge

Tuesday, September 30th, 2008

Here is a chart of the bearish rising-wedge pattern on the SPY intra-day chart that I mentioned earlier (click to enlarge):

The wedge is bounded by the purple lines, and began to form Monday afternoon around 3pm. Notice that volume picked up dramatically before the close Tuesday. That is a potentially bullish development since it might indicate that the upper boundary of the wedge will be pushed upward.

However, notice that that surge in volume was absorbed in the resistance area bounded by the blue lines on the chart. Quite a lot of buying was absorbed, so there were quite a lot of sellers. That area marks the cliff that the market fell off of when the House shot down the TARP. So, the traders that were betting on the TARP passing, and were instead treated to an historic plunge, were selling furiously into Tuesday’s rally, no doubt with great relief to get out even.

The surge in buying at the end of the day was triggered by news reports that the FASB mark-to-market accounting rules were in play. Some Republicans have said that if such changes had been part of the TARP, it would have passed the House. Mark everything up and save the taxpayers some money, right?

I think that the buying on Tuesday afternoon reflected way too much hope, just like on Friday afternoon. This FASB discussion says to me that the TARP is still DOA and our leaders are instead cooking up new crazy schemes. I see disarray.

So, the market is full of hope, has rallied on no real good news, has hit a resistance area, is overbought (short-term), will no longer benefit from quarter-end mark-up, will probably get hit by a wave of hedge-fund redemption selling, and Congress seems intent on doing nothing at all.

The only thing that the market has going for it was the momentum at the end of the day. However, the futures immediately sold off on heavy volume after the bell, so that momentum is likely gone too.

One more thing to consider: even though a lot of systems have messed up data and you might not be able to see it on your chart, the two-day candlestick pattern for SPY is a bullish Harami. I think there is a good chance that this bullish pattern will be broken since it is coming on the first day of the month when the big funds are likely to pull their bids.

Gun-to-head, I would be short.

Tuesday’s Trading

Monday, September 29th, 2008

The Panic is Over!
That’s the good news. Now the bad news: the Depression has begun. The explosion on Capital Hill today was the political version of Dick Fuld’s suicide bombing of Wall Street a couple weeks ago. Confidence in both our financial system and political system has been lost. And in case you are wondering, none of this is “healthy” – this is a total disaster. Some traders are looking for a giant rally after today’s panic selling. Not me. I’m sticking a fork in America.

McCain Knows He’s Toast
John McCain spoke briefly after the market closed. He sounded like he was delivering a eulogy at a funeral – and he was – his own. I wonder how many decades the Republican Party, a.k.a. The Depression Party, will be consigned to opposition status in Washington?

It’s Time for Congress to Abdicate
It’s pretty obvious that the USA’s experiment with democracy has been a failure. As Congress’s last act before abdicating, they should hire a management team from Singapore to take over. It is no longer acceptable for the world’s largest economy to be managed by rubes.

America is Stupid
Stop and think about what just happened. Ben Bernanke is an acclaimed scholar who has distinguished himself by doing groundbreaking work on the causes of the Great Depression. And here in this new Depression, the American people have told him to pound sand!

Hank Paulson is no scholar, but he is a top practitioner, and is the perfect compliment for the egghead scholar. Even if you don’t like Ben and Hank, you have to admit that you couldn’t find a team with better resumes for this job. But now they are pounding sand. Well, I’m sure that the masses will come up with a better solution…

Stomach Turning
Watching my country commit suicide has interfered with my concentration. But now that I am cheering the rubes onto their new Depression, I am back to enjoying life and should be posting more comments.


Watch the comments for updates throughout the day.


The New-Month Massacre

Monday, September 29th, 2008

On the SPX chart below, the purple arrows point to the first trading day of each of the last four months (click to enlarge):

All of them began badly. The first trading day of July finished up, but it opened on a large gap down and then rolled over the next day. This happens for a good reason: month-end mark-up. The big funds do their best to levitate the market at the end of the month to pump up their numbers. Then on the first day of the new month, they pull their bids, since we are in a bear market after all. Also, hedge funds do the bulk of their selling to meet redemptions during the first few days of the month.

Of course, on a day like today, not even the big funds can keep the market up. But the futures are up as I write this at 11:30pm, so perhaps the big funds are doing some buying to get some phony enthusiasim going for a bogus mark-up rally on Tuesday.

In any case, regardless of what happens on Tuesday, holding long positions over Tuesday night is probably not a good idea.

I made a couple of hundred dollars with a quick scalp from the long-side in the futures earlier. And now, just when I look up from writing this, I see that I missed another strong move up where I could have made a few hundred more dollars. Do you see the sacrifices that I make for this blog?

Fortress America Fires the First Cannon

Monday, September 29th, 2008

Now that the “voters” have defeated the evil bankers of Wall Street, might they now get more aggressive? What might be next?

Perhaps jobs that have been exported to India and China will be brought back to the USA.

Perhaps trade agreements like NAFTA will be canceled.

Perhaps the Japanese and Euros will be told to pay for their own military defense.

Perhaps the empire will be rolled back and Iraqis and Afghanis will be on their own.

Perhaps support for Israel will be discarded. After all, there may have been a tinge of anti-semitism in this war on bankers, right?

What else is in the Rush Limbaugh/Pat Buchanan playbook?

Free at Last!

Monday, September 29th, 2008

I used to feel sorry for “voters” who lost their jobs, had their retirement portfolios melt away, lost their houses due to foreclosure, etc. It was quite a burden.

But now that “voters” have instructed the fat cats in Washington to make things even worse, I no longer feel sorry for them. My burden of empathy has now been lifted.

Each time I see an economic report showing millions of “voters” out of work, or kicked to the curb in foreclosures, I will drink a toast.

I have made quite a lot of money this year. I like to imagine that it has been directly transferred out of some fool “voter’s” retirement account and into my account. That makes me feel warm and fuzzy.

When I descend from my paid-for luxury condo with a spectacular view of Miami Beach and stroll along the streets soon to be populated with even more homeless “voters”, I will be whistling a happy tune as I go by. When they reach up to me from the gutter, and ask “buddy, can you spare a dime?” for another bottle of cheap wine, I will spit in their hands.

Yes, there will be a Depression, but not for me of course. I will be happy and cheerful all the way through.

Note: I hope that you were paying attention over the weekend when I was skeptical of media reports that the deal was done. That was a classic, premeditated, and coordinated propaganda blitz. On Friday, the market, like Warren Buffet, was confident that Congress would do something intelligent. I was in cash. After the bill went down today, I went short in the futures, set a stop and let it ride. Hopefully, I bankrupted yet another “voter.”