What a day! Was expecting the DOW to be red today. However, it just kept going. No bailout news or other news would slow it down. This doesn’t mean that it will continue going up. It might have a little correction. It pierced thru the 8845 level mentioned in the yesterday post. It also opened above the previous close and stay above the 8580 mark. It opened and closed above the trendline. The gap open is normally filled and that might not be a good thing here. But red or green, to a trader only movement matters. The direction doesn’t. Especially, options traders do not care so much about the direction but more about the movement/volatility.
Volume is interesting to note. Volume is slightly higher and holding ground since the last 700 pt drop.
Tomorrow might be red to do a short term correction – just a little. Or it might continue on with the green candle.
So looking at DOW, what does one see? It’s up, it’s down, it’s up, it’s down…. what is it really saying?
The DOW in the very short has been bullish. In the very very short term. In the long term it has been bearish. It’s at crossroads of sorts. From this point there’s not a lot of downside left. Wait, that comment requires a clarification – there’s not a lot of downside left unless we’re in for a full blown recession. And with experienced and heavy weight investors calling a bottom already and with people’s inclination to run for the quick fix, it is unlikely that much more severe downside will continue. It might put a few more lows, lower than the 7550 or higher. But it should slowly rise from here. It may have bear rallies and then fall again slowly and continue on the sideways move for a while in the long term.
What does this mean to a trader in the short term for day trading? Well, that depends on how the Monday session goes. A break and close above the blue trendline will be a short term bull sign. The next resistance will be 8845. A break and close above that might clear the path till 9260. It’s highly speculative but this might even turn out into a reverse head and shoulder pattern. But let’s not speculate for the moment. Besides that’s on the weekly timeframe.
How were these support and resistance lines drawn? Simple support and resistance. No Fibos, no pivots, or other retracements. Those are nice too. I just would like to keep things simple.
Positive divergences forming on RSI and MACD. RSI is also getting ready to cross 50. Almost at 50. These signs indicate bullish tendencies.
In addition, there’s has been much talk of the auto bailout being approved. It would appear that many politicians think it to be a somewhat catastrophic thing for an automaker to fail. So there would seem to be more in favor of the bailout getting approved.
This week, Legg Mason’s Bill Miller, a celebrated value investor but whose stock picking is far off the mark this year, said the “bottom has been made” in U.S. equities, and forecast opportunities for strong gains once markets rally.
Miller said that all long-term investors believe that stocks today are cheap, but credit markets must regain health before equity markets can rally. It “looks as if the bottom has been made” in U.S. stocks, said Miller, who runs Legg Mason’s $7.6 billion Value Trust fund.
At the Reuters Investment Outlook Summit this week, 15 prominent portfolio managers including legendary hedge fund investor and philanthropist Michael Steinhardt will discuss if U.S. stocks have indeed hit bottom.
So it would seem that many large investors are starting to think this is either the bottom or bottom is in sight soon. I have also been thinking, based on the divergences, for a while now that the DOW has been signalling buy. However, to make money from that, one would have to buy and hold. Investing is the right thing for this time of markets. Daytrading requires a different strategy. One must find daily movements and make use of those.
The past month of real trading has been an eye opener for me. I have really realized that daytrading stocks and options are really different. The stocks can be held for profit if the trade goes against you a little. The options simply keep losing money. So with each passing day, the underlying security must make a more drastic move than the day before for the options to show profit.
533K jobs lost in Nov. That’s a lot of jobs. The market rallies anyway. Either this means Monday will be red as in blood red, or that the traders/investors are tired of hearing negative news and just want to buy a little at this point.
Market Recap - Dec. 5th.
Very aggressive!
Holding spider Puts for Dec. in practice account. On the 4th it went down. There was the symmetical triangle and then then the descending triangle. Sounded like it would break below the support line. But it would appear that the bottom is forming. It might still fall a bit for a few days but it would seem that it is reversing trend here. Of crouse, the reversal is not shown in this chart, this is from the 4th. The char on the 5th shows a good green candle.
So the short trade didn’t pan out well. This market is starting to put in some rallies. Is the down pressure done? Or just letting up a little for a while. Looking at the chart, it seems it might go up a little before trend line, and Fibonacci resistance.
Market Analysis - Dec. 2nd.
If DOW breaks above the trend line and Fibonacci level .5 and closes, it might be a reversal here. DOW will have alread put in a higher low. Last higher low (if it can be called low) was around Nov. 9th and was immediately broken. CMF shows some buying pressure building. Although, with 700pt move, the CMF swing wild.
This couldn’t happen at a more inoppurtune time for my Puts. Oh well.
Market Recap - Dec. 2nd.
Another almost 200 points! So yesterday’s 300 points and then today! That’s almost 500 points after a 700 point down. Only 200 points left to break even.
Will there be a minor pull to the downside? It’s very possible. I will look to exit my positions on the Puts.
Well, looking at the yesterday’s red candle and today’s little rally, it was sounding as if my guess from yesterday was somewhat true. I guessed that market would go up in the morning then go lower later on. Once the market was at 200 points, it slowed. So I entered two trades to the short side. Bought one AAPL put and 2 BAC Puts. Was slightly up during the late afternoon but towards the end of the day, due to the rally, I’m down a little.
1 AAPL Dec. 79 PUT at .97.
2 BAC Dec. 7.50 PUTs at .19.
Let’s see how this works. Forgetting the DOW divergence that i’ve been seeing for days, this is the current market trend. Up down up down. Once way too much then corrects. But it hasn’t really ever moved down one and then corrected itself the next day. It has recently gone down 3-4 or even 5-6 days before correcting back for 2-3 days. So after a 700 pt drop, it would seem ok for it to go up 200 points and then resume temporary downward move.
In the long run investors could already buy good companies at these prices and forget about them for a while. But what is a good company? Comapnies that used to be good aren’t really great now. They’re all showing crashes and crisis.
Well, the market is still down. The indices are painting red with no worry. What can ths mean to us daytraders? In the past, my posts have been focused on going long and on indices showing long term buying signals. In these posts, what’s not reflected is that despite the long term indicator signals the potential to daytrade is still present.
So today was a 600 pointer red day! Well after a number of green days, this is a first red day. Probably the market will pull up in the morning. At this point it would be good to enter some short term short trades. Buy puts, short shares, buy reverse ETFs, etc. Having said all of that, let’s see what the DOW charts show.
Market Recap - Dec. 1st.
The Fibonacci retracement shows that the DOW retraced to .618 level, then just powered thru all resistance to the down direction. It will probably go up to .382 or .50 level then go down. Seems the 0.00 level might be easy. It’s a previous known low in recent days. There’s a little resistance at today’s close.
Almost 349.xx points! The whole week was pretty much green. So what will the next week bring? It would sound as if the market has finally changed direction. However, the market sentiment might still be leaning to be bearish. Many technicals on the DOW are diverging to show trend reversal. But this trend reversal is going to be swing or slightly longer term reversal. That would mean, Monday could still be red. The market might go down from here little more then rebound. Or it might simply rebound. We don’t know. The first few hours on Monday should be good indicators.
DOW - Nov. 39th.
MACD, CMF, RSI are showing positive divergence. CMF shows buying pressure. Monday is looking at trendline, normal, and Fib resistance. If it breaks, above, it should continue on to 9000 mark. Then eventually to 9500 mark.
SPY performed well today along with the market. SPY is the S&P500 ETF that you can trade and trade options on. I wasn’t sure yesterday which way the market will go. Will it, after having gone up on Friday, go down today? Or will it open green. So far the sentiment is bullish. Bouncing off of long time lows. S1 was the support point on the way down. On the way up, it would be resistane. it was breached and the candle held. So this should be a support point now. Next resistance using S&R lines would be R1. However, the trendline in blue on the top would be the next resistance probably.
RSI is positive, MACD is turning up and about to cross the trigger line. Is this is a buy signal? Well, I don’t know. But during the day this morning, the market had good signals.
Volume was very low earlier on the DOW, and by close it was high. On SPY the volume was average to high. This should mean good thing for tomorrow. Dec 87 calls that I’m holding in my practice account are only down $400 or so now.
The Fib retracement levels should also be a good point to use for trading.
Market Recap - Nov. 24th.
This is the market recap for the day. Almost 400 points. That’s good. Now, if the 9K is reached, it might be good news soon.
So looking at the current situation of the market, it might not be such a bad idea to be long. The market is near its long time low.
SPY Analysis - Nov. 23rd.
RSI is making lows at the same level. MACD is making higher lows. CMF making higher lows. If we have a close above 80, it would nice. But a close over 86 would be higher than the previous two candles. It would be a very bullish signal. Might be more likely to see it closing above 80. I’d be thinking of possibly getting some calls. Dec 85 SPY calls would be decent. But also expensive. Can only afford Dec 90. Those are too far out of the money. SPY could certainly see 90 before the end of Dec. but it’s a long way to go and time decay would also start factoring in.
