Fibonacci fun with SPX

It was a tough, rough week of trading for me.

I made a nice profit on ALXN by exiting cautiously under its short term high at 39.22
And timing was close to perfect since the whole health care sector crapped itself this week after Obama's socialistic health care reform BS legislation.

I've had many bullish trade set ups in the health care sector, and now, all are kaput.
Needless to say, I was pissed Thursday. Now I need one of my walls repaired since I punched a hole in it after realizing that my my filled entries in MDT and AMAG are losing trades ruined by political garbage.
So long health care sector. Nice knowing ya.

The only bulls left are in technology now. SMH and XLK to be exact. You can argue there are the education stocks, sure, but I don't think those trends will last very long.

Anyway, I got interested in 168, 268 and 423% Fibonacci retracement levels lately because they have been proven to be consistently hit in many of stocks on my watchlist lately.
The August trough of '07 to '07 peak has produced a 423.6% fib level at 703.35, just another 30 points from where we are now. Notice the 168 fib level is very very close to the trough of March '08. This could be a big support level for SPX.
As to exits of this long swing trade, I drew the fib levels from March '08 trough to June '08 peak, and the 423.6% fib level there is at 835.71.

So buy at 703, sell at 835 could be my next market timing strategy if I also see the following:
Some exhaustion levels in volume, extremely low bullish percentage levels, NYSE new lows screaming higher, and divergence in TICK average compared to prior short term low.
At least 3 of 4 must happen and one of them has to be exhaustive volume fo sho.

Taking another look at fib levels, I went all the way back to the 1987 crash and placed some fib levels there:
Of course I did not rely on Prophet's inaccurate historical data, I relied on StockCharts.com's instead when I placed those fibs. So the 423.6% fib level of the '87 crash is 731.70, just roughtly 3 bucks lower than current SPX price.
731 was also an important support level in 1997.

FXI - shorting China

I started scaling in to my short ideas now that we FINALLY had an up day. First set up is FXI, which is on the tip of a bearish rising wedge. A break of current consolidation then 23.30 level would confirm a new bearish intermediate-term trend.

The rally we had today had a relative average volume compared to median 20-day volume, according to Dr. Brett Steenbarger and compared to the shake out of the shorts on Feb. 13th volume is relatively thinner.

XLF, XHB and RKH lead the rally today which just means that its nothing more than a retracemet to slow down the intermediate term downtrend, since these also lead on down days.

I'm out of GLW since it refused to get back over its supporting trend line today.

Now GLW is probably a great short set up, but I'll pass since there are better set ups out there.

I reduced risk on ALXN since it finally had an up day and outperformed the market. the trend continues. I will now continue to add on weakness if ALXN stays over its supporting trend line.

I added a long bonds position in TLT:
I waited for a return to the trend line before entering. TLT is a pretty expensive stock though, so I'll be careful about scaling in because 300 shares is a full position for my budget. Now all I'm exposed to is 100. I don't like volatile triple digit stocks because there's less chances to scale in a tight budget like 300 shares.

A broken TED spread trend is my other rationale for this trade.

MRVL is my shining star today. Up 13%.
TDG is still stuck between supporting and resistance trend lines. This week will make or break it.
AVB rallied sharply today and is now looking like a good short opportunity again tomorrow.
Still waiting for TTC to touch 24 for me to short it.
DBA is holding pretty well and consolidating. I reduced exposure to 100 shares because I expect it to go back to the low 23's.

TTC - short idea

Keeping TTC on the watchlist for short ideas since it closed under the 61.8 fib level on heavy volume. With enough selling pressure after this bounce in the indexes, TTC could be sliced in half because of very weak support area between 24 and 11. Weak but not an island reversal gap, so it would be better to scale in after break down of key support levels under 24 than go "all in" right away. It could take a few months or even over a year till TTC reaches 11.

PCLN - waiting for the dip after the break out

Long term, PCLN is a winner. Plenty of overhead resistance, but PCLN outperforms SPY most of the time. It typically forms a long term double bottom, then a cup and handle break out.
The long term supporting trend line was broken already last year and I expect it to break it again to form another double bottom like in 2003, then another cup and handle, then the supporting trend line will be a resistance trend line.
Short term, I'd wait for a retracement under 76 then buy the dip and sell at intermediate term resistance at 92.

Weekly Indicator review 2-16-09 --- 2-21-09

SPX bullish percentage divided by VIX ratio breaking its support line that started since the October's first trough,
Put/Call ratio divided by VIX is still trending down despite the lil bump this week.
SPX spread divided by TED spread has broke its supporting trend line since October as well. TED ratio (3 month treasuries divided by 3 month Libor instead of subtracted) is still trending well.
Financial sector bullish percentage is getting close to 5%, a bullish level in the last few months.
A confirming indicator, Euro/USD divided by SPX, has signaled a confirming sell signal on the SPX. So did McClellan divided by VIX.
New lows (green) are rising, but not at exhaustion levels of an intermediate bearish trend yet.

All signal that we are in the middle of a bearish intermediate term trend but we may retrace back above 800 in the SPX then its time to load up on the shorts.

Waiting for a retracement to short into

I've been waiting patiently for shorting opportunities.
I missed my chance in ADSK,
since it broke the supporting trend line, retraced, touched it underneath, then closed down on the day.

Now I'm looking to short EPD:








And my favorite sector for going long in the past few months is now a great shorting opportunity:

As to my bad ideas this week:
SPILIt is not outperforming SPY, which is a requirement for all my long positions that are not small caps that don't correlate with the market.

TMXand the good ideas: (so far, so good... so what!)

ALXN
It touched the supporting trend line and bounced back, perfect. My biggest position because the trend is strong and the chart is beautiful.

MRVL Closed up on the day and touched the trend line. I initially got excited when it broke out but I knew patience pays, and SPY ready to tank at the time, so I kept it on my watch list and waited.
I will add to this winner on a break of resistance at 7.60

TDG
It closed right at the crossroads of supporting and resistance trend lines but still above horizontal support at 35 on very high relative volume.
I initially bought 200 shares, but soon realized I was overexposed for a first entry on a trend that hasn't proven itself sustainable yet, so I cut off 100 shares slightly above my entry. Its a volatile double-digit small cap and as such, tight risk management is absolutely necessary.

I'm also looking at AVAV, a recommendation I read at Centrifugal Deforest's recent blog.
Another pretty chart:

Developing a Niche

Alright, today was a pretty a bearish day, still dragging to lower lows on the SPY.
Cumulative 1 minute tick is dropping like a rock, like in November, scary sh1t.
but NYSE new lows ($NYLOW) are not converging with VIX. Only during convergence the trend is strong. Now we have a good chance of some kind of retracement.

I'm starting to develop my own niche lately. I started sticking with rules I've developed towards strengthening my edge:

1. Only swing trades,
2. only scaling in a 1/4-1/3 of a full position on the first entry, then add up to 1/2 a position on 2nd entry and 3/4ths on 3rd entry and a full position on 4th entry on strength,
3. Only position my portfolio in many small positions (profit target=1% portfolio gain) with good set ups. No net short or net long with exposure over 20% of my capital for either long or short side,
4. 75% of position have to be highly correlated to their sectors, 25% not correlated

I'm giving DBA another try














TMX closed above 14.94,
which is great news for my triple bottom set up, and relative volume has picked up this last few days














SWY, a TERRIBLE place to work for, is setting up a great short set up:

Out of PEG, into TMX and SPIL

We finally broke the 800's range in the SPX! halleluja, too bad I was long since Friday.
bad sector, good sector, doesn't matter, its every sector crashing once again. Mid-Febuary looking like mid-October now.

But its not October-November and there are still great bullish trends out there in Healthcare (medical devices especially), technology and other select stocks.

Few of these have great set ups as well:

MTX is outperforming S&P consistently and is setting up either a break down or my favorite set up: intermediate double bottom.

To start a new bullish trend, it has to break the cyan bearish trend line and stay above the 17 level, since it has the most volume by price in the last few months. Its make or break time for TMX.



SPIL has some room before it reaches its long term peak-to-peak trend line and breaks 4.90. Sell target is the January '08 bottom at 5.40.












I'll use these set ups as hedges once I scale into short positions... yeah that squeeze on Thursday was JUST A SHAKE OUT and its too bad I covered my RTH and PFF shorts since they tanked so nicely today.

I'm also looking to get in IHI, XBI and SMH and select stocks in these sectors as well.
As to shorts, I'm hesitant about geting into TBT since it broke a supporting rising trend line:
Maybe it'll be better to wait for a break of the other (cyan) trendline.

Is it time to short energy?

Energy, specifically oil & natural gas, has been a leading sector lately, despite Oil's crash and burn. It would be so counter-intuitive to start shorting energy stocks now since every lil rally in the SPY gets XLE outrunning most other sectors.

The last time bullish percentage signaled a fake out, there had to be a significant bullish trend to get back above the rising trend line and this was a great buy signal as well.
* I just noticed that most downtrends started at approximately 70-90% range, not 50's, so it could be a nice buy signal if and once the BP goes back above the trend line*

Question is, does the BP indicator get back above the trend line or just keeps falling?
Only next week or 2 it would be known known for sure.

SQUEEEEEZE! 2-12-09

WOW! what a squeeze! just unbelievable strength in every sector.
Its good that I realized its never good to go 100% short or 100% long at any time.
I went long my favorite bullish utilities play, PEG, which was showing weakness today until the squeeze and was touching the support trend line since October:

It was not only a long play but also a hedges for my RTH and PFF short plays which got smashed in this rally, but thankfully I reacted somewhat quick enough to save myself and got out without a scratch.
Now its time to add on strength to my long plays PEG and PEP.
I wanted to add to PEP at 50, but got no fill, it didn't reach that low...
now if only I was in KO like I mentioned yesterday, I'd be already green this year. KO probably kept PEP so bullish throughout the very bearish action today (till the squeeze of course):


My pick for another long hedge, HRS, turned out to be a crappy one:

It broke its intermediate term support trend line, rallied, then U-turned back down to where it came from forming an intraday double bottom, but it was severely underperforming SPY.
My entry level was thankfully lower, so I got out unscratched, but now I need another hedge for the next few short trades and I was thinking about getting in XBI instead of this poop shoot.

It sucks to be a bear in a bear market that is starting to look like just a chopfest market instead.
*crossing my fingers for a decent bearish trend in the indexes*

Rep. Ackerman on Madoff Fraud - finally some straightforward approach with the SEC

ABOLISH THE SEC!

Identifying short-term institutional participation with A/D volume and issues' volatility indicators

I have been paying attention lately to AD issues and AD volume's volatility studies as forward indicators of short term sentiment.

Heightened volatility in the advancing - declining issues' volume has my particular interest because I use it to verify if short term moves are just market maker chop or have real institutional interest.

Of course, its all under Dr. Brett's more valuable relative median 30 minute volume on E-mini S&P sentiment, which really tells if institutions are behind the moves or not at the time.
I use in TOS Historical volatility and ATR on 3 minute heikin Ashi charts.
For Historical Volatility inputs, I use long length:10 and short length 3
For ATR, I use 10.

TDG - huge break out from bearish trend

TDG broke out from a bearish trend since late 2007 and is now heading towards resistance at 42.

I'll wait for the indexes' selling pressure to push TDG back down to red trend line and then scale in.

A break below the trend would be my stop.