I’m not bothering to do any analysis today because who knows what kind of market we will have tomorrow. Will the inverse ETF’s even be trading? How will put options behave if market makers can’t hedge their risk by shorting? Etcetera.
I am happy to report that I was all-in and leveraged short before the Crash of ’08, and I got out at an ideal time: Tuesday morning’s gap down. I had excellent profits, and got out before they changed the rules. Now let’s see if my profits evaporate out of the computers of the financial system.
Nice going Washington! Nice going New York! You crashed the whole thing!
Well, it could be worse. You could wake up with 10 Russian warships on your doorstep just like the Israelis.
I have noticed a lot talking heads in the media, including President Bush and Steve Leisman, using the phrases “free world” and “free capitalist world” recently. Have the geniuses in Washington who just wrecked our economy begun a subliminal program to brainwash us for a coming war with Russia?
Starting wars is a traditional method for the USA to end economic recessions and depressions after all.
I must say that this enthusiasm to fight nuclear-armed countries like Pakistan and Russia is a bit alarming.
So, lets hope that our fearless leaders have sated their appetites for destruction by destroying the economy.
Do you think Dick Fuld is deriving sick pleasure from taking the whole system down with him? There were actually fools in Korea who wanted to buy his sinking ship!
BBT had a high of 45.31 up some $5 from yesterday. Now, it’s in the red almost a buck. Big move for that stock.
If this truly is a bear market, sellers will continue to sell and get out on these peaks? That’s really a question and not a comment. I was just wondering about the nature of a bear market.
Matt, I understand why brokers sites WOULD have problems, but it SHOULD not be happening. It is their business to make sure they can handle days like this. This has gone on for over a decade, and is totally unacceptable.
What will happen WHEN not IF the VIX hits 55?
I wonder how non-financial companies feel about all of these changes? They will also face higher taxes, and so far the financials haven’t shared the booty.
David,
For brokers, I think volume was only part of the problem. The other part is that bid-ask spreads were very wide, and prices were moving rapidly.
Stadiums can handle thousands of people leaving simultaneously at the end of events. However, if someone yelled “Fire!”, then that would be different.
Paul F;
That will make it on Letterman.
Treasuries trading at a whopping 0.7%, a big improvement but still low.
This is analogous to going from having your arm chopped off to only needing your hand chopped off.
phil,
You’re welcome. Nice trading!
Where have you been? Did you get your power knocked out?
Matt
K,
Look what Phil did. When he was long and felt like barfing, he doubled down and cleaned up. When you fell panic, that is almost always a screaming buy signal, and fading yourself is almost always the right move.
Make sure to print out a chart of Apple and mark your buy and sell points. Then get it framed and put up on your wall. That’s your diploma. Your education cost you $800, so you need to keep it in mind and make sure that the investment pays off for you in the future.
Matt
MATT…..i am in ct now on vacation …..just doing a couple of trades here and there…….38 degrees here last nite….YIKES….it is NOT florida weather..i had to wear LONG PANTS…….horrors………….hope hurricanes stay away for you and my CAT…SHE IS HOLDING THE FORT…while we are away….regards…….phil
Sorry, all! Support levels are “1212″ (not 1182 I typed twice above), 1197, and 1182.
1250-52 is very ST resistance, which, if held, projects to the 1212 level for a C or a minor 3 of a new leg down.
Again, 1239-42 is weekly-close resistance for the bear.
SPX 1179-86 is lower weekly support.
Good luck!
SKF has been added to the ban on shorts list, according to CNBC. I started filling out my application to the Communist Party while they gave the reasons, so can’t pass that on:)
George,
I see what you mean about SSO. Is that a signal that you have used in the past? I’m thinking that since MACD is based upon moving averages that a sudden reversal on a daily chart doesn’t allow enough time for the MACD to reflect the move. On the 60-minute chart, the MACD is positive.
Matt
The VIX is still moving up slightly.
eli, could you elaborate?
I honestly see that this is the government admitting that it has lost control of the situation. This attempted “fix” to a problem they allowed to be created could end up worse than the problem itself. This could get out of control very quickly.
Zen
This is what I have picked up.
CNBC reported that SKF uses swaps and conducts these transactions with counterparties. The cost of swaps has increased, thats part of the problem. The other problem may be the issuer of the swap probably needs to short the financials to hedge. Can’t do that now.
SRS is still buyable, as an ultra short for commercial real estate.
George – SSO is slow stochastic or the ETF ?
ProShares no longer accepting orders until further notice
Due to the emergency action announced by the Securities and Exchange Commission on September 18, 2008, temporarily prohibiting short sales of shares of certain financial companies, Short Financials ProShares (SEF) and UltraShort Financials ProShares (SKF) are not expected to accept orders from Authorized Participants to create shares until further notice. Unless notified otherwise, shares will be available for redemption by Authorized Participants as normal. The shares of these ProShares are expected to trade in the financial markets today, but may trade at prices that are not in line with their intraday indicative values. :theflyonthewall
Matt;
That’s correct. The MACD is always the “Boss” unless the stochastic within it is cycling up or down.
I noticed on the 1 minute SSO there was a good stochastic divergence I took advantage of.
Setting up a corrective 3 or C wave here: target 1211-17.
Watch 5m and 15m charts.
Next new Etrade baby commercial: “I can’t sell stocks. You just saw me not being able to sell stocks. If I can’t do it, neither can you.” Puke
the last two day’s accumulation on SPX is not bottoming quality. today is worse than yesterday
SKF seems to be trading again.
still no reversal confimation on new lows MACD. also no white candle on SPX weekly. every single bottom except Aug made a white candle. so unless we close over 1250.92 it won’t happen.
The MACD histogram is moved by the stochastic within the MACD trendlines. Until such time the MACD histogram changes direction via the stochastic, I follow the stochastic within it.
The trick is to drop down to the 5 minute and see where the MACD is at. I’m in the SDS 5 minute because the MACD trendlines are moving up and the histogram is positive. However, since the MACD trendlines are below the zero line, I know that time frame is trending down while the 1 minute is moving it up. So, along with my 5 minute core, I swing the one minute and see if it goes anywhere. If no trend develops, I’ve made 3 or 4 profitable trades while waiting.
On the flip side, I’m waiting to see if the 5 minute MACD on the SSO is going to turn back up since it is above its trendline which means it is trending up but moving down. There again, I will swing the 1 minute.
A trending (MACD trendlines above the zero and still “open”) MACD 15 minute has to be respected until the pincers close and it prints a negative histogram along with the stochastic in sync. So many times it looks like tankage and price takes off to the upside.
Right now, SSO definately has the advantage since all time frames are trending up.
Kinda convoluted, but it allows me to always be correct. If and when a big move comes, I’ll be there already.
Just a short squeeze. Now who is left to squeeze? Institutions did not back the rally yesterday.
http://www.stocktiming.com/Friday-DailyMarketUpdate.htm
and my chart shows accumulation even weaker today, so far.
the market retraced 80% of this correction based on interference on the free market not on fundamental outlook or earnings growth.
I used to trade only 1 time frame. That’s a great way to learn. Then I discovered the “waves within waves” among the time frames and started trading several of them.
Like SSO 5 minute MACD is going down while the 1 minute just made a good move from 57.40 to 58.40. During this time, the 5 minute stochastic is up at a double top, the MACD is starting or trying to go positive while in its uptrend.
I wait until the 1 minute stochastic crosses its 80, if it does, and get out. Flip to SDS and wait for another setup on it which should be soon because SSO just had its move.
Yep, I’m as busy as a long tailed cat in a room full of rocking chairs.
matt
no need to wast more money to print a diploma.
it is forever imprinted in my memory..
David,
Money appears to be flowing back into stocks from bonds. SHY, TLH, and TLT all seem to have made high-volume blow-off peaks yesterday. What do you think?
Matt
I know one thing… any kind thoughts I had about the current administration and congress (which were admittedly very few) are now completely gone.
My SDS 5 minute is still holding. I will wait until the MACD goes negative before getting out. Still with a profit because I got in early enough. The only thing that could spoil that is a spike down.
On days I am lazy, I just play the 1 and 5 minute and don’t go through all of this. Sometimes just the 1 minute. At first I thought the 1 minute would be too active and whipsaw me all over the place. Then I found a way to prevent that and really, the 1 minute timeframe is all that’s needed. I just use more because the profit potential is greater and I like the activity – so does my broker.
Rich your target may be forming. Is this intraday flag done? Hard to say with quad witching.
They should have just closed the market for a week. Everybody buying and selling today is speculating, because the fundamental are unknown until the new rules are known.
Paul F,
you think the rule change frenzy is going to change soon? That is a very effective way of redistributing wealth between in- and outsiders. under the guise of the public benefit.
George,
What do you do when prices just go straight up. For example, between 11:45 and 12:10 on the SSO chart, the stochastic was pinned in the stratosphere. Do you just have to wait until it dips like at 12:15?
Matt
Matt;
I’m in that now waiting for the stochastic to cross the 80 line WITH the MACD confirming by crossing or printing a MACD histogram below the zero line.
Is anyone tempted to initiate the short position right now ? The market has moved up more than 1000 points in a single day in a bear market. There is a very strong resistance around these levels.
Matt;
During this time, I’m looking at the 5 minute stochastic and MACD. If the MACD turns up (it’s already in a uptrend on that time frame), then I stay in. If it doesn’t, I’m out.
Meanwhile, my 5 minute SDS MACD is still okay on the 5 minute. Still in that one unless it prints below zero.
George,
OK, but if you just walked up to your computer and you saw SSO being so strong, would you jump in? I’m guessing that you would wait for it to come down and then re-evaluate things
Matt
Okay, I’m out of SSO 1 minute (I actually missed it a little cause I was typing). Then switch over to SDS 1 minute which is showing some luv on the 5 minute.
SDS has 1 minute has peaked to the 36 MA, will see what happens there. 5 minute stochastic turned up but not confirmed yet above 20 line or 9 MA.
Now, same thing with SDS 1 minute if it turns down on same conditions, I’m out.
If it keeps doing this cycling up on SDS, it will eventually begin turning the higher time frame stochastics up. That’s how to detect a bottom.
Doesn’t mean it’s this time. But that’s what happens. I just ditty bop through the time frames and see what’s going on. All the while, waiting for it to take me out. I only expect a scalp. A trend is icing.
Yerk,
You steal $100, you’re a thug. Steal a $1,000,000,000 – and then lose it – and the government bails you out.
Disclosure: Unlike a few smart but unlucky investors, I avoided the government screwing me this time: my bottom line has ticked up slightly since Wednesday morning. These changes will likely not harm me personally in the long run, just affect my strategies. So my I am not writing from a position of personal loss, but of social outrage. Despite my posts yesterday evening, I am an optimist. But everytime the little guy gets raped at the expense of the big guys who caused the problems, I get pissed and disappointed.
I’ll wait for the plan before fully judging it…
Even if SDS takes us out here, we’ve made some good change and wait on the next one.
Note:
This same procedure can be done with using higher time frame pairs like the 5/15, 15/60 – whatever, just that the wait time is longer and trading activity is farther between.
Oh, this is how I do BBT and other stocks also.
So the uptick rule was eliminated in order to allow the wall street white house cronies to score some bucks. Then when the movement went wild and the government had to start buying stocks and taking over companies, they changed the rules.
Why don’t they change the rules when stocks go up? Hell, at this point, half of all proceeds should go immediately to the poor and SPCA.
OK, Now, the 1 minute wants to cycle.
Decision time.
We either let the 1 minute take us out or look at the 5 minute to see if it looks good with stochastic and MACD moving up. If so, we may wait until the 5 minute takes us out. If not, exit and go to SSO.
The Call of the Day award for Thursday goes to Dressguard who was warning the shorts that the fix was in all day. Here is an example:
Dressguard Says:
September 18th, 2008 at 1:35 pm
This is a fight the bears can’t win. I am very bullish.
And funny how easy it was to sell XLF back down when it got out of control this morning. Gotta be sure those options expire worthless… max pain baby.
…or, stay in SDS and swing the 1 minute on SSO. I would do that because the 5 minute SDS MACD is still positive. I still have my original entry in SDS via the 5 minute MACD keeping me in.
BTW, these trades are bad examples due to the small and lazy moves.
WTG Dressguard!
I should have bought last night too.
The 1 minute stochastic on SDS turned over but did not make the MACD go negative while the 5 minute MACD is still moving up.
We could have either gotten out of the trade on the 1 minute but not likely because the 5 minute was confirming the move was okay at that time.
At any point we can get out and get back in, if needed.
It’s okay to take profits and repeat.
One last thing – SSO 5 minute MACD is still moving down while trending up. At the same time, the SDS 15 minute is about to go positive. A reversal of some type should be expected.
This is where trendlines are hit and counter moves are made. Just follow the exit rules and a profit will be made. Don’t let it shake us out of a trade if all looks good, but get out if we can’t tell.
We’ve gone up over a dollar on that last SDS move. That’s several dollars in the past hour between SSO and SDS.
Now just watch the SDS 15 minute and 5 minute.
Have fun!
Hi Everyone,
was out this morning and missed all the action!
So qq.. if our government suddenly turns into a communist party, does that make us communists too?
Matt,
thanks for the “Call of the Day Award”. Sold this morning. And although I made some profit I’m not happy because I don’t know how to position myself now. I am 100% in cash. Yesterday’s action was obvious. Today’s action is in my view actually pretty bearish. This is only option expiration action. I wished your job bombs would drop very soon so this massaging from the government and the FED would finally stop. How can I evaluate the market when my lovely SKFs are are put in a straight jacket?
My charts are not consistant between the pairs. They’ve been off all morning.
Matt-
I’m off to a reunion. My daughter rode
the big one all the way up. She’s a
great trader. LBR is her idol.
Take care.
MEB
SSO and SDS getting ready to hit the 36 MA for support / resistance respectively.
Expect a break out or break down.
Dressguard,
You’re welcome. Curiously, the short-selling ban is scheduled to end the night before the next jobs report is released on October 3rd.
Matt
If you’re in SDS, there was an additional swing on the 1 minute of almost a dollar. And a small one on the SSO 1 minute of about .50 cents.
Double-dipping is allowed and encouraged.
MEB,
Don’t be a stranger.
I’m still studying my LBR book. For those of you who don’t know, LBR is Linda Bradford Raschke, and the book is “Street Smarts”. You can get it from Amazon. That is where I learned about the TRIN indicator. I had to modify it to a 3-day average from the 5-day average used in the book because the market seems to have changed character since the book was published. But the book is filled with great things like that.
Matt
George,
The SSO/SDS breakdown/breakout occurred exactly when you said it would. Nice!
Matt
There comes a time when the 5 minute stochastic has to recycle as well as the 5 minute MACD. The same rules apply among the time frames. See what the 15 minute is doing or which ever next-higher time frame being worked.
I find it best that after I move up into time frames to get out of the latest good one when stochastic and MACD turn over. Or, and I keep forgetting, using MA crossovers, trendlines, whatever.
Agan, re-entry is easy.
You may want to do it differently.
When this settles out, and gold gets back to a 20MA, I will become a gold bug forever, as the financial system will take years to recover from this debacle.
Also, anyone notice the horrible performance of MSFT the last 2 days. It could form a very negative candlestick doji today. COuld set up as a great short (if it doesn’t make the list:)
Got out of my SPY puts from yesterday early this morning at a huge loss. As soon as I saw that they were considering banning short sales..but it could have been even worse…I was able to sell them for slightly less than the closing value from yesterday. 100% cash now, took a beating, but I’m still alive. Tough to play the game with the rules keep changing.
Why do this for only two weeks? I would like to know the thinking behind the time frame. Any ideas? Sadly, my gut tells me it was just so it could buy them two more weeks and not part of some master plan.
Matt;
They are fairly reliable although at times they will over- or under-shoot the MA. It may be due to traders using them as entry/exit.
So far so good with the 15 minute SDS MACD. If it clears, that will make a good move up, however, that MACD trendlines are still under the zero line so the probability is lessened somewhat. It will be sensitive to the 5 minute.
At this time, I exit with any 5 minute cross. At times, it will dip down then turn back up. Then get back in on the 1 minute if it reverses.
Wow, looks like the SDS 30 minute is trying to confirm.
The candles on my charts are really small. Anyone else have that problem? Stockcharts and Askresearch both doing that.
Okay so there is a report that this will add $1 trillion dollars to the U.S. debt.
If this is true, who is going to step up to the plate? Umm…
George,
See if there are any axis scaling options. Both of my trading programs are showing normal candles, but the big gap up in the morning might be stretching your axes.
Matt
Matt;
I hadn’t thought of that, thanks.
SPY is now overbought on the 60-minute chart. After the July low, SPY got overbought and worked off the condition by going sideways for three days.
I’m putting a stop on my trade at a profit because I have to step out for a while.
I read somwhere that the cumulation of these purchases by the gov’t is putting us over our debt limit, which is unconstitutional
The XLF is pinned at $22. That’s the strike price of that gigantic slug of options that we were talking about a couple of weeks ago when it seemed impossible that XLF could get to $22. Funny how that happens…
Matt,
Even funnier, the maximum pain for the QQQQ was $44. It hit $43.83 today at the high.
Volume has really dried up on the SPY, less than 20M share over the last 30 minutes. I guess everyone is on hold til next week.
Towelie
y 2 weeks , imho
powers that be r trying to maintain an orderly decline
believing the decline in assets will offset the inflation
created by world demand…i hope they keep control
Matt like I said earlier there was a decent trade of XLF $24 options the other day for Oct when the market was in the toilet.
Of course the government doesn’t care about that kind of manipulation. It’s only the EBILLL!!!!!1!1!! shorts
they went after the shorts during the
“The Crash of 1907″ , fwiw
Is anyone holding any positions going into the weekend?
And why/why not ? Or better yet if things keep rolling over a tad do we get a gap down on Mon ?
Why did everyone go quiet? Usually this board is bristling with activity at this time of the day.
My fault ? Witching hour ? Bar time ?
SEC to consider revising short sale ban in options market-Bloomberg
Who knows Dblwyo .. I guess I’m out of the market right now until I can get a feel for what happens next week. I want to have a good weekend and any position I take is going to make me go nuts and lose sleep.
eli,
If this week doesn’t prove that the big options-trading hedge funds are the most powerful force in the market, I don’t know what would.
Matt
Wow.. check out ABK stock. Who says stocks can’t tank without short selling.
Matt,
You better believe it.
So what’s the call around here then? Will this ignite a rally, or will the markets call the gov’t on the carpet on this one?
And that short selling exemption applies exactly to those people – the people who can manipulate the stock for the options expiration.
But of course that’s legal, right? Other manipulation, like short selling EBIL jerks, are evil.
Charlie – point and point. Nothing like a further downgrade along w/it’s brethern.
Matt – would you care to expand ?
SPY finished the week with a giant bull-pennant pattern on its 60-minute chart that began yesterday afternoon. Being overbought short-term, I wouldn’t expect this pattern to complete with another huge leg up. If the rally is to continue, SPY should consolidate its gains by going sideways for a couple of days before pushing higher. If the pennant falls apart on Monday, then things will get exciting again.
Dblwyo,
It’s a large topic, but options are very leveraged. Suppose that you had enough capital to launch a massive bear raid, drive the market down, and then at the bottom, you sold tons of puts. Then you turn around and start buying again to squeeze all the shorts that built up on the way down. All those puts that you sold at the bottom yesterday as people bought them in a panic go out worthless today and you make a stupendously huge profit.
Matt
Just bought some puts – too many stocks gone up too fast, too far.
The short squeeze in July was over in two days, this time everything moves faster. We are back at the July levels – economy still in the same shape?
Whoever sold XLF $22 calls and $22 puts (or at least who owns them) is really slugging it out in these final minutes.
Every big rally off extremely oversold conditions during this bear was quickly followed by a test or near test of the lows before a more sustainable advance got underway.
I doubt a retest of the lows this time. but about half the huge gains posted the last few days may be erased next week before the rally resumes.
I will watch next Monday and Tuesday very closely. If the market can keep it’s gains or at least most of it, I would see that as a bullish sign. If the market fizzles, it would be rather a very bearish sign and I will buy the next heart attack with a ticker symbol – FXP. Maybe the financials won’t do too bad after they are being bailed out by the American taxpayer. But the world economy is going down nevertheless and Asia will suffer a lot.
Sorry just forgot something. I expected the VIX to go much lower today. Normally when the VIX peaks, it drops like a stone. Not today. Still way above 30. My finger was actually pretty itchy at the end of the trading session to go into FXP/SKF but I kept my discipline.
Dguard – an interesting point indeed. And Rich called the 1260 resistance on the SPX dead on. Did you notice that the SPY close below the open and dropped right at the end of the day ? Doesn’t look like much conviction in this to me; a relief from catastrophe rally. AFter all yesterday until divine intervention time was shaping up as a bad (good) one as well.
Meanwhile in the real world 3Mo Treasures and 3Mo Corporates are still spread wide, credit is tighter than ever and none of the real problems have gone away. And now everybody knows it.
Whaddyayathink ?
If the RFC is the rescue, they should better set it up this time – oh, politics and bureaucrats involved again… Excerpt from Wikipedia:
“The RFC was bogged down in bureaucracy and failed to disburse much of its funds. It failed to reverse the growth of mass unemployment before 1933. Butkiewicz (1995) shows that the RFC initially succeeded in reducing bank failures, but the publication of the names of the recipients of loans beginning in August 1932 (at the demand of Congress) significantly reduced the effectiveness of its loans to banks because it appeared that political considerations had motivated certain loans. Partisan politics thwarted the RFC’s efforts, though in 1932 monetary conditions improved because the RFC slowed the decline in the money supply.”
Dressguard,
It will indeed be interesting to see how much of this gain will hold. I do expect to see a triple digit futures move for the 4th weekend in a row.
In regards to the VIX, it will remain high until the market know Paulson’s/Congress’s solution. Don’t forget that while people call it the “fear meter,” it is actually measuring implied volatility of options, which is one measure of option demand. With so many unknowns, it is natural that it remains high.
Yerk, I wouldn’t worry. I’m sure that political considerations will have nothing to do with decisions made 2 months before a Presidential election.