Wednesday, July 13, 2011

The Effectiveness of Short Selling Bans (sarcasm)

With Italy now requiring disclosure of short positions and debating an actual short selling ban I thought the following news headlines and accompanying charts would be reassuring to observe.

SEC bans short-selling
Agency puts temporary halt to trading practice that 'threatens investors and capital markets' for 799 financial companies.
By David Goldman, staff writer
Last Updated: September 19, 2008: 7:41 AM EDT

"This will absolutely make a difference," said Peter Cardillo, chief market economists at Avalon Partners. "Short sellers are going to have to cover their positions very heavily."

Schaueble plans to ban short-selling –sources
BERLIN | Tue May 18, 2010 12:16pm EDT
BERLIN May 18 (Reuters) - German Finance Minister Wolfgang Schaeuble plans to ban short-selling from midnight, coalition sources told Reuters on Tuesday.

Tuesday, July 12, 2011

2007 Top and Current Price Action

The following charts represent a study I have been analyzing the last few days which concerns the topping pattern seen in mid-2007 before the financial crisis, and the chart pattern that has been observed in the last few months in the S&P 500. Granted the charts do not line up perfectly, it is obvious that the chart of the last few months is happening at a faster, more compressed rate than that of the price action in 2007. Nonetheless similarities are abound even MACD, stochastic, and rsi indicators are all lining up with eerie resonance. In addition to the technical side of the pattern, I think too we can examine what’s going on globally and concur that the problems facing the European Union right now are similar in potential systemic affect as those that caused the financial crisis. Quite simply when Lehman collapsed it created a domino effect in the credit and derivative markets. With an Italian default in question a similar domino effect could be observed, not to mention that many more of the European Union members are in poor position to even service the debt they have now, much less be able to deal with an imploding credit market. Many individuals are speculating that a default by one of these nations would be more systemic and more destructive then the financial crisis of 2008. I’m not too sure to what degree I agree with that statement however, a situation as illustrated would create significant downside in the markets.

Wednesday, June 22, 2011

Reviewing Yesterday and Todays Strategy

We had a nice rally in the market yesterday; we broke the prior day’s highs and ran strongly through several minor resistance levels as well as a major s/r around the 1295 handle. I took profits on the SPY calls and VXX puts, I felt the risk reward into the Greece vote of confidence was too far weighted to the risk side. It became evident after the vote that the event had been priced in and we had a shallow sell the news pull back in equities and the euro. Overall today though we are pushing higher, we have some more serious resistance at the 1300 handle which I feel is a psychological pivot point in the market. From here it really depends on how the market digests the Fed statement at 1230 there seems to be a slight expectation of some more easing, maybe in some different form, but definitely a continuation of SOME accommodation. I stress that because an all-out QE3 would be a surprise to this market and we would see a pretty aggressive rally. Obviously any hint of tightening will lead to a steep sell off. So what’s the strategy into the meeting?
Strategy 1
·         Fed does QE3/Keeps Interest Rates Low
·         Unlikely/Market Surprise
·         Strong Rally
·         Buy 4 GLD July 150 Calls
Strategy 2
·         Fed Keeps Interest Rates Low/Provides Additional Alternative Accommodation
·         Market Should Have This Priced In
·         Sideways/MixedàEuro/Greece Headline News Focus
·         Hold current GLD position and see mkt reaction
Strategy 3
·         Fed Tightens
·         Surprise
·         BIG sell off
·         Sell Current GLD position/Buy 4 SPY August 129 Puts

Tuesday, June 21, 2011

Technical Take

The S&P currently looks ready to go on the daily if we get a break of Friday and today’s highs. We’ve bounced nicely off the 200sma and closed above the 200 ema since testing these levels last Thursday. On the daily chart a run to the top of the megaphone pattern looks likely to occur but will likely take some positive news flow to get the market motivated. From a contrarian perspective there are plenty of reasons to be bullish but we must remain conscious to the reality of the systemic properties of Greece and if the issues are not resolved serious impact to liquidity in the credit markets will be observed and will quickly spill over into all other risk classes. Now, do I honestly believe Greece will default? There is a possibility but I think there is too much “big money” at stake for the leaders of the ECB and Eurozone nations to allow such a reality to develop. In essence what I am saying is just as in the US, large players have large leverage on government decisions and it tends to fall in their favor. So i am still bullish on the S&P, now regarding my Friday post on my “risk/reward” trade my mental stop was the lower trend line of the channel. When Moody’s came out with their potential downgrade of Italian debt the market rolled over hard and broke that trend line. Honestly the news in my opinion should have already been priced in and Moody’s credibility is nonexistent in my mind as well so I waited for a retracement and took one contract off at a small profit. Anyway we will see what tomorrow brings looking for more upside but this market can roll very quickly, the 200 SMA remains critical support we break there 1250 will come into view quickly.

Monday, June 20, 2011

Where do we go from here?

There are some interesting developments that will be playing out in the market this week. While there is a multitude of economic data coming out only two things are in main focus for this week. Numero uno is the Greek vote of confidence scheduled on Tuesday at 5:00pm est. A vote of confidence will support the euro and equities as this should lead to the necessary austerity cuts demanded for a bailout of Greece. Thus a failure on the vote of confidence will likely have the euro falling and equities breaking major support. Numero dos  is the FOMC meeting on Wednesday at 2:30 pm est all eyes will be on Bernanke on whether there will be a QE3 and/or extended low interest rate language in the statement. In my common sense based approach I like to assemble various scenarios regarding possible outcomes.
Scenario 1
·         Greek Vote of Confidence Passes/ QE3 Launches
·         Probability is low
·         Extremely Bullish market reaction
·         Long risk
Scenario 2
·         Greek Vote of Confidence Passes/Fed keeps interest rates low and Balance Sheet stable
·         Probability High
·         Believe market has priced in this possibility, market reaction would be sideways to upward depending on headline news out of Europe and economic data
Scenario 3
·         No Vote of Confidence/ Fed keep’s interest rates low and Balance Sheet stable
·         Moderate Likelihood
·         Market will bleed lower with respect to headline news from the Eurozone.
·         Close long, risk based position. Take short term downside bets and prepare for reversal when/if Eurozone crisis is resolved.
Scenario 4
·         No vote of confidence/Fed “tightens”
·         Low Probability
·         Market takes a big dump
·         Close risk based trades buy LOTS of puts.
Overall my pick is scenario 2 of course I would love Scenario 1 to occur because it presents the most brainlessly simple trade just go long any risk based asset and you will make money, do it with leverage and you can turn that lots of money reference into fortunes. However I would be surprised if the fed flat out surprises and does a QE3, it’s not Bernanke’s style and it’s more likely to be put in place towards the summers end in the august meeting.

Friday, June 17, 2011


Added yet another SPY contract here off the lower trend line (1). Pretty good risk reward here bought just a few ticks above the trend line-which is rising –plan to exit on a break to the downside of this trend line if that occurs. In terms of upside I really do not want to hold this much risk over the weekend so plan to exit between the midline of the channel (2) and upper channel trend line (3).

Current Dollar Projection

Looking at two different scenarios with the US Dollar right now we failed at the upper trend line (1) and pulled back to the 20ema (2). Could go either way currently we will have major events out of Greece on Sunday which should pick direction in the euro and thus the dollar as well. My first instinct is that we will break current support (3) and fall to support at 74.20 (4).Really would be surprised if they just allowed Greece to default this all will likely pass as it did last summer as the can gets kicked further down the road.

Decent Bounce

So far were up around 10pts on the S&P which isnt bad considering relatively poor economic data that came out today im currently expecting more from this move. I added another contract today-long 2 SPY 127 JUL calls, 2 VXX 24 JUL puts, 3 GLD 150 JUL calls. Attached is also a link to one of my all time favorite trading documentaries. Its on Paul Tudor Jones, its pretty hard to locate since Paul had it removed from publication/showing since he believed it revealed too many of his secrets. Nonetheless great watching him predict the 87 crash, unbelievable really.

Thursday, June 16, 2011

Big Bounce or False Reversal
Today the S&P had a strong bounce off of the 200 sma as well as closing above the 200 ema. The Markets have been oversold for quite sometime so is a bounce in play for tomorrow or Mondays session? Time will tell my bet is that with a break above today’s high we will see a decent sized rally. As always I could be terribly wrong but believe with the overly bearish sentiment ( ) and an interesting analog to the S&P in august provided by Erik Swartz that a bounce is due. (

Sunday, April 3, 2011

As I currently write this silver has opened and move higher past 38 an ounce. Currently we are trading at 38.10 and in light of silvers price action on Thursday and Friday I believe its consolidation above 36 an ounce is very bullish and a run to 40 an ounce is highly probable.  Keep in mind with 40 being a nice clean number I wouldn’t doubt serious profit taking and resistance at 40. Not to say that 40 is unbreakable but on the first test I would be surprised to see it tick past that. Honestly a move to 40 will likely get me out of my May call on the SLV on a hint of a pull back/failure of that level. I will look to reenter into July at the money calls for a swing to 50(damn wouldn’t that be swell) on a pull back. The only thing that we need to watch for now is a break of 38.18 as long as we break that level a leg higher should end up on the chart.

I haven’t talked about crude yet on here so here we go. Last week we broke out of a wedge and the chart looks pretty damn explosive. Scary really seeing unleaded at 3.79 a gallon today. So I believe higher for crude as well unless the middle east starts holding hands (which is not going to happen) and the Bernank turns off the printing press which will likely not happen, the fed has financed 84.3% of debt since QE2 started-compliments of zero hedge(, if the Bernank does stop printing the hand holding everything up is gonna come crashing down on everything from equities, to commodities and PMs.

Now on Friday I closed out of a bunch of positions. First I had my timing off on MHP and NRG since I got in a day late due to settlement (that’s what happens when you don’t focus on having cash as a position), WFMI was showing me a good return and with the S&P making a head and shoulders on the 5 min I exited my WFMI, NRG, MHP and SPY calls to lock in some profits and build some cash for tomorrow. So for tomorrow if we get a pull back in the S&P I’ll be looking at SPY calls for a ride to 1340. May add to silver if we break 38.18 and looking at an entry in crude as long as we show some strength.

Wednesday, March 30, 2011


Press on

Another impressive day for equities, the S&P continues to charge upward and we will likely revisit recent highs soon. The next two days should be interesting, we have some important figures out tomorrow (Jobless Claims, Chicago PMI and Factory Orders) and on Friday (Non Farm Payrolls, Unemployment, ISM and Construction Spending) so we’ll see how the market reacts to their prints. I would like to add though that in order for Bernanke to press on with another QE he really needs the public and congress to see poor economic figures and “low inflation” ehem core cpi is bs to confirm that they need to continue QE to affirm their mandate. So a lot of times even numbers that miss consensus and look terrible actually have a bullish affect pushing market participants to further drive equities higher in the expectation of continued excess liquidity from the fed.

Anyway WFMI had an outstanding day today closing near its highs again as it did yesterday. The only question is how much further? Tomorrow we’ll see if we can’t push further up, I have a belief that the market likes to push prices to “even” or “pretty” price levels. So if a stock goes to 47 it will likely travel 3 dollars more to 50 or 97 to 100 etc.  etc. Obviously this isn’t something we should count on but I firmly believe that WFMI would look damn good at 70.

NRG made a decent move today confirming a breakout, MHP on the other hand painted somewhat of a bearish doji. Right now looking ike more upside in NRG but with MHP the possibility of a pullback is increasing its important to observe though that the doji has a relatively small body and pretty big tails. Obviously today there was indecision between buyers and sellers and no side (from a daily basis) really had control. Therefore this bar could be just a trading range bar. Upside break of today’s high will confirm, a downside break will confirm bearish doji.

Finally silver was phenomenal today and every time this crap happens when they (BLYTHE) try to run the stops and dump a bunch of paper on the market it only makes me more bullish when it completely reversed off that horrendous selling that we saw this morning. All this means to me are that the weak hands again have been shaken out and another leg higher will probably be made as the weak hands buy back in and throw prices past the recent highs.

Tuesday, March 29, 2011

No stopping yet

The s&p confirmed a continued upward move today, early we sold off on some poor economic figures and dove for the 20 ema, but the market it held that level and quickly reversed up and retested the lower trendline, consolidated under and exploded through that resistance. So we now have a nice reversal bar in a bullish trend from the lows put in place on 3/16. Fortunately on seeing that bounce off the 20 ema I unloaded my SPY put and am looking to add SPY calls on a break of today’s high tomorrow.

Of course a rising tide normally brings up all ships NRG and MHP both broke upside resistance. MHP had a very powerful move and I would expect to see strength tomorrow as well. Would like to buy calls in May on both; however I only have so much capital to risk and probably will only choose one. Leaning more towards

One stock I have a call position on, WFMI, I’m looking for more upside on, we broke out of a possible double top on 3/21 and have made highs of 64.33 yesterday and made a two cent higher high today,  we nearly broke this level in today’s trading session  multiple times, tomorrow we could have a decent breakout of this level and a new high, if we fail and break below today’s low I think the 20 ema will be where we fall and a confirmation of a 2 bar double top.

Monday, March 28, 2011



So in looking for my text books this evening  I stumbled across MHP-(McGraw-Hill), interesting ascending triangle-ish(TL 1, TL 3)/ horizontal channel (TL 2, TL 3 [TL=Trendline]), multiple entries on the chart and possibilities, any reversal bar off the 20 ema TL 1 or TL 2, or a break of TL 3 would have me buying calls. On the other side bearish reversal off TL 3 would start to make me feel like a triple top was in and I would begin accumulating puts with breaks of the 20 ema, TL 1, and TL 2 causing me to add to position.



An obvious inverted head and shoulders is seen below on NRG, we tested the neckline on Friday and traded inside that range forming an inside bear bar. A break below the bar should give us a test of the 20 ema and a possible entry if that level holds. A break above tomorrow will likely result in a retest of the neckline. Measured move is approximately $3, looking for a quick swing from the 20 to above the neckline.
Trend line Break on S&P
Reversal Bar Entry off 20ema OR break of Neckline
NRG MAY 11 $21/$22 CALLS

Turning Point?

It couldn’t have happened much better today the market ran up early and retested a major downward trend line. A nice reversal bar was painted off this area of resistance on the daily chart. Currently it is my projection that a break to the upside of this line will bring us back to recent highs. However failure as we saw today suggest possibly more downside. Just a couple points below we will smack into the 20 ema and price action around this level will be critical towards how todays reversal bar leads us. A break of the downward trend line will likely have the s&p retesting recent highs. However a break of the 20ema and close below that moving average should pull us back down a bit. Nevertheless we have to see tomorrow’s price action to decide on direction.