Friday, October 28, 2011

The Other Side

I have published several posts of late, some of bearish nature,some of bullish nature. Admittedly, I have been leaning towards the bearish side slightly, and as much as I have always tried to be completely neutral, and "neither bullish nor bearish" I find being neutral nearly impossible. Most people who say that they are completely neutral are full of it, and there are very few people on the stream ( but there are a few) I know of who can honestly claim their complete neutrality.I realize that achieving this state of total neutrality is an absolute prerequisite to being a successful trader, and I am trying harder and harder each day to truly believe and embrace the fact the market never produces good or bad information,it just produces information. Here are two charts, a weekly and a monthly, that have the possibility of producing very bullish results in the near future:

A bearish rising wedge from July 2010 that might have failed could bring a fast move up to top of wedge, which would result in a move to above 1400, breaking the neckline of this inverse head and shoulders:

A break of the neckline of 1400 on the weekly( a possible effect of the failed bearish rising wedge breakdown on the weekly which I pointed out) would mean a break of this monthly descending trendline (which is not coincidentally also at 1400), and a test of this monthly neckline of this monthly huge inverse head and shoulders possibly at 1550 with the additive of a bullish higher right shoulder:

Tuesday, October 25, 2011

I Can't Think of A Clever Name Tonight

Below are two charts requiring an open mind ( As does everything in trading).The first chart posted below is a chart of the every so significant Shanghai Composite Index. Notice the bullish RSI and MACD divergences occurring hereand the breakout today from a massive falling wedge taking out the 9SMA:

This next chart requires a bit longer of a glance. It compares the SP-500 price history (top)to the price history of the Shanghai Composite Index (bottom). When we have a sustainable and prolonged move higher, The shanghai trends higher nicely (the orange uptrend line), but when the SP-500 moves up while the shanghai moves down, the move is not sustainable and the shanghai negatively diverges from the SP-500 and trends down (blue trend). The last rally in the SP-500 is accompanied by a break upwards out of the falling wedge ( which shouldnt be a "falling" wedge if the SP-500 is moving UP!) and that is the final rally attempt before a large additional long leg lower in the general market. The orange trendlines in the SPX and the Shanghai represent positively correlated moves while the blue trendlines on both as well represent negative bearish correclations. The falling wedges in the Shanghai are also in blue as I believe they are very short lived and bearish.Look what the SP-500 does everytime we get a falling wedge breakout in the Shanghai. Can you say last gap? I dont know, just a thought. See you guys!

Curious, Very Curious Indeed

Below is what I believe a VERY telling and somewhat ominous chart. Please study it carefully!

Monday, October 24, 2011

A Harmonic Point of Return?

I annotated a daily chart of the SP-500 below in detail. I understand and vehemently contend that K.I.S.S is honestly the philosophy of importance in this business,yet for this broader perspective,the beauty and symmetry of this action should be noted. The chart looks confusing, which is why I made each marking a certain color. The red trendlines run parallel to each other, and the red circles reveal the significance of the red trendlines. The blue trendlines run parallel as well, and the blue circles and rectangles reveal the significance of the blue trendline. The fat purple horizontal line is the neckline of the massive head and shoulders top, which we broke in August, and are now looking to retest it. The main point I want to bring to you is the 1265-1275 area. The more points of reference that cluster together in the same spot, the more significant it is. And seeing as we are looking to test the; 200SMA, neckline from h and s top, HUGELY SIGNIFICANT uptrend line from July 2010, and downtrend line from the right shoulder, all in the SAME EXACT AREA of 1265-1275, is massively significant. MASSIVELY. After you review this chart, look at where that area shows up on the weekly, which brings me to post a weekly chart with annotations as well.

Here is the weekly chart: See where that 50MA weekly is? 1267!!! same EXACT level, giving it so much more importance by the fact that it is Huge on weekly and daily timeframes! and that huge 1265-1275 level on the daily is the same exact spot where on the weekly all of the following levels appear on this timeframe in one and same exact spot. 50SMA, neckline of a longer term more significant head and shoulders ( i point it out on this chart) hugely significant uptrend line from 2009 (the green one). here it is

Sunday, October 23, 2011

The Resilience of Hedge Funds

The following is a clip from featuring super hedge fund manager joel Greenblatt speaking to the WSJ on the resilience of hedge funds .

Courtesy of

Saturday, October 22, 2011

Don't Trust Me Yet

Posted below are two charts. Both charts of the SP-500, yet on different time frames, and their respective moving averages reflecting each chart's respective time frames. The first chart displays the daily SP-500. I will dissect that first. We have been performing very nicely, but I believe that the biggest test is yet to come at the 1260 level. It is a HUUUGGGGEEE battle zone with a confluence of some unbelievably important points of resistance: 200 day SMA, historical head and shoulders reversal neckline, former massive support and resistance, down trendline from the highs of the year, and broken uptrend from the 2010 lows. This is at the 1260 level.

Now check this out. This level corresponds to the 13 period SMA on the monthly, coming in at about 1265. The points that are circled on the monthly charts with the 13SMA (second chart) shows what happened each time we broke below the 13SMA for the month ever since we broke out from accumulation in 1994 on the SP-500. Allow me to point this out:When we broke below the 13SMA on the monthly, the only times we fought off a massive decline is if we managed to close back above the 13SMA within three months. If we did not close back above the13SMA monthly within three months after we broke below it, we declined at least 350-500 more SP-500 points.And if we managed to continue a massive bull run and recapture the13SMA, we got back above the 13SMA within three months. We are in October, we broke below the 13SMA in August.If you arent counting,yes, this is the third month that we are below the 13SMA. And it comes in at those same massive reference points which I highlighted in the first paragraph and on the daily charts. And, odds are, these final few trading days in October are make or break it time.Here are the charts

Wednesday, October 19, 2011

Against All Odds

Since 1995, the $SPY has closed below the 20SMA for the month only TWICE. Yes, you heard me correctly, twice. Both times it did, we got a small retest of the 20SMA monthly, but never closed the month above it, and declined over %50 percent both times. Again, after closing below the monthly 20SMA, we havent closed above it again before declining at least 50 percent before we recovered. This past September, we closed the month below the monthy SMA20 for the third time since 1994. Now, odds would say that we will not close above that 20SMA before we take a 50 percent haircut at least. But if we hold out gains through the rest of October, we are for the very first time in almost 15 years, closing above the 20SMA on the monthly even after closing below the monthy 20SMA the month before. Needless to say, the fact that the market is trying to recapture that monthly 20SMA before a decline of any significance ( let alone 50 percent) shows some unusual strength

Against All Odds