Saturday, September 28, 2013

Stock Bear Looms

On April 9,2010 I reprinted with permission essay by Adam Hamilton

SPX Levitation Act 2


At that time a lot of people were laughing at possibility of SPX going to 1500 in few years … who is laughing now




Without further due I present recent Adam’s essay (I am not affiliated, nor compensated – just like his LONG TERM views)


Stock Bear Looms
Adam Hamilton

     August 23, 2013     3001 Words


The US stock markets have enjoyed a dazzling year, levitating to a long series of new record highs.  But this relentless advance has stalled in August, with selling pressure mounting.  Even most of the bulls readily agree that a material selloff is overdue after such a mighty run.  But actually the odds are high this necessary retreat will extend well beyond normal pullbacks or even corrections into a new cyclical bear.

The mere idea of a looming stock bear is certainly heretical these days, but this is not surprising.  By early August, the flagship S&P 500 stock index (SPX) had powered an astounding 152.7% higher since March 2009!  Being so deep into such a spectacular cyclical bull has naturally left speculators and investors very complacent.  Most have forgotten that markets don’t move in one direction forever, they flow and ebb.

Still, late in mature cyclical bulls the ever-rising chances for the birth of a new cyclical bear are the last thing traders want to hear.  So let’s shelve that controversial thesis for now and start at common ground.  Nearly every smart bull either expects a material stock-market selloff or thinks one would be very healthy.  And technical and sentimental indicators are nearly unanimous in declaring the SPX very overbought.

Discussing all of these would require a sizable tome, but here’s an overview.  The SPX is stretched far above its trailing 200-day moving average.  Complacency isextremely high and fear non-existent as measured by key sentiment gauges.  2013’s SPX levitation has been on low and dwindling volume and narrowing market breadth, with fewer and fewer individual stocks maintaining the rally’s momentum.

Students of the markets can elaborate on these major topping indicators in depth, and expound on dozens more.  So the bears and smart bulls alike definitely agree that some kind of material selloff in the US stock markets is either already underway or imminent.  The only real questions are about its ultimate magnitude and duration.  The difference between a down day and a bear market is simply one of degree.

This is reflected in how material stock-market selloffs are categorized.  Anything under 4% is merely a series of down days without any formal name.  When selloffs extend from 4% to 10% off their preceding highs, they are called pullbacks.  Once they forge over 10%, they become known as corrections.  And if the selling continues long enough to push them over 20%, these selloffs become cyclical bear markets.

Pullbacks are fairly common in cyclical bull markets, usually on the order of 3 or 4 per year.  Corrections are considerably rarer, only happening about once a year on average.  Both types of selloffs are critical for keeping bull markets healthy.  They act to rebalance sentiment, bleeding off greed before it grows excessive enough to threaten the bull market’s very existence.  Selloffs are an essential safety valve.

One of the primary reasons a material selloff is so overdue today is the remarkable lack of them since mid-November 2012 when this year’s relentless levitation was born.  During the 9 months since, there has only been one pullback and zero corrections.  As this first chart shows, this is very anomalous.  The longer a bull market goes without a material selloff to rebalance sentiment, the more precarious it gets.

Even by the precedent of today’s cyclical bull, the recent lack of material selloffs is striking.  The SPX is rendered in blue below, with every pullback and correction of its entire bull run noted in yellow and red respectively.  Especially the past year or so is really conspicuous for the absence of these healthy and essential events.  The benchmark VIX fear gauge is also shown in red, warning of extreme complacency.

In the 8.5 months between mid-November 2012 and early August 2013 where the SPX soared 26.3% higher, there’s only been one material selloff.  And at 5.8%, it was merely a smallish pullback running between late May and late June.  There were minor series of down days amounting to 3.1% in late December, 2.8% in late February, and 3.2% in mid-April, but they didn’t even approach pullback magnitude.

As of the middle of this week, August’s nascent SPX selloff had grown to 3.9%.  But all these selling events were very minor.  The smaller the selloff, the less greed it bleeds off and thus the more sentiment remains out of balance.  Prior to 2013, the average pullback in the SPX’s entire mighty cyclical bull was over 7.0%.  So the lone 5.8% in the past 9 months’ incredible levitation is far from sufficient to rebalance.

And that explains the rampant euphoria plaguing the stock markets this year.  The financial media has been bursting at the seams with analysts and traders touting stocks as the only place to be.  Many have been arguing a correction-magnitude selloff is all but impossible!  Talk about hubris.  The longer any bull market goes without big-enough selloffs to deflate greed, the more this dangerous emotion flourishes.

Thus long stock-market levitations without material selloffs inevitably lead to full-blown corrections.  The last example occurred back in mid-2011, when the SPX corrected sharply.  Much like today, it had spent 9.9 months levitating with only two mild pullbacks.  So when the selling finally arrived, it was big.  So much complacency and greed had built up that it took a serious 19.4% selloff to fully eradicate that imbalance.

The parallels between that last SPX levitation and today’s are ominous.  Measured by that flagship index, the stock markets had climbed 33.3% in 9.9 months.  Today we are at 26.3% in 8.5 months.  The second pullback of that earlier levitation occurred late in it, and was relatively mild.  A slightly-higher secondary top was seen soon after as the perma-bulls foolishly refused to heed the dangers of overbought markets.

Sound familiar?  The technical pattern we’ve seen in recent months matches the early-2011 topping pattern remarkably well.  A long SPX levitation sans-pullbacks generated extraordinary complacency and greed, and the initial mild pullback was ignored by the bulls.  Their topping-indicators-be-damned buy-the-dips mentality was able to bully the SPX up to a secondary high on low volume, but it soon failed too.

And thus a correction arrived then and is certainly overdue now.  On average a correction-magnitude selloff happens about once a year in a healthy cyclical bull market.  As of early August’s recent high, the SPX had gone a breathtaking 22.0 months without a correction!  That just boggles the mind.  This bull’s previous spans between corrections were merely 13.5m and 9.9m.  Never has one been more overdue.

Corrections are easy to comprehend in the abstract, but are scary events to weather.  They force stock prices down so close to bear-market territory that most of the greedy traders who were hyper-bullish at the preceding top totally capitulate.  Back in both mid-2010 and late 2011 just after this cyclical bull’s previous corrections, I wrote hardcore contrarian essays that were very bullish when everyone else was terrified.

Corrections drag the great sentiment pendulum from extreme greed and complacency at the preceding top to extreme fear and despair at that selloff’s nadir.  A merely average correction is 15%.  Measured off the SPX’s latest early-August peak, that would hammer the SPX back down to 1453.  That’s not only 11.5% lower than this week’s levels, but would erase the SPX’s gains for this entire calendar year!

But it’s been so darned long since this cyclical bull has seen a necessary and healthy correction that I can’t imagine it will be small or average.  Complacency is always high at major toppings, as measured by the low VIX.  Since this implied-volatility index effectively measures prevailing fear, a low reading shows the absence of it which is complacency.  Recent months’ VIX lows have revealed extraordinary complacency.

So even if this cyclical bull is alive and well and has years left to run as Wall Street analysts have boldly asserted all year long, a big correction is overdue and inevitable.  The last correction was 19.4% in mid-2011, which is about as big as they can get.  A similar event today off the recent highs would crush the SPX down to 1378, another 16.1% below this week’s levels.  Just imagine the havoc that would wreak!

Round that big-correction target to 1375.  This mighty cyclical bull first challenged 1375 in April 2011, and first achieved it a year later in March 2012.  So at the nadir of the next correction, somewhere between 1.4 and 2.3 years of this entire 4.4-year-long cyclical bull’s gains will have vanished!  Both investors and speculators alike will have had their wills broken by that point, being extremely pessimistic and bearish.

Remember that the difference between a down day and a cyclical bear market is merely one of degree.  There is simply no arguing that the US stock markets are way overdue for a major correction.  And once that comes to pass, and the SPX is 17%, 18%, 19% off its recent peak, it won’t take much additional selling to push it over that 20% threshold.  One big down day would do it.  That would make a new bear.

Now calling for a new cyclical bear market in stocks is not something that can be done lightly.  Material selloffs that ultimately grow big enough to exceed 20% only happen in very specific conditions.  I didn’t even start thinking about one until a year ago.  Back in mid-2011 halfway through the last major correction, I evenactively argued against a new cyclical bear.  Cyclical bears are only born when cyclical bulls mature.

The really ominous thing today is our current cyclical bull is long past mature.  It has lasted much longer and risen much farther than average, which is the real reason a new stock bear looms.  While Wall Street and the vast majority of investors are loath to admit it, we remain mired deep within a secular bear.  These are simply very long consolidations, where the stock markets grind sideways for a whopping 17 years.

Stock markets move in great third-of-a-century cycles I call Long Valuation Waves.  The first half of each single wave is a secular stock bull, and the second half a secular stock bear.  The entire reason the bear half exists for those 17 long years is to allow stock-market valuations to mean revert from excessive highs at the ends of the preceding bull.  Like all major market reversions, they overshoot before the bear ends.

These secular bears force stock markets to grind sideways on balance, giving underlying corporate earnings time to catch up with high stock prices.  Mechanically this happens through a series of shorter cyclical bears and cyclical bulls within the secular-bear span.  It is nearly impossible to be a successful investor if you don’t understand these secular and cyclical cycles and their impact on stock prices.

This next chart shows our current SPX secular bear superimposed over the last one between 1966 and 1982.  This perspective is invaluable yet hard to find, the financial media almost never talks about it.  Wall Street perpetually tries to convince investors that anytime is a great time to buy stocks.  But the investors who foolishly buy general stocks high near the ends of mid-secular-bear cyclical bulls get slaughtered.

The past 13 years’ secular bear dominates the long-term SPX charts, it is undeniable.  Stocks have simply ground sideways at best since the last secular bull topped in March 2000.  While the financial media has been elatedly celebrating new record highs this year, at best the SPX was only up 11.9% over the 13.4 years between March 2000 and August 2013.  This compounds to about a 0.85% annual return.

Earning capital gains in the general stock markets of less than 1% per year at best for over 13 years is horrendously bad.  Factor in inflation, and there were actually big real losses.  Dividends helped offset some of these, but overall the long-term investors who stayed invested throughout this secular bear have still suffered substantial losses at best.  Secular bear markets are brutally unforgiving, eviscerating the naive.

Their sideways grinds are a series of cyclical bears and bulls.  The cyclical bears generally cut stock prices in half, and then the subsequent cyclical bulls generally double them again back up to their starting point.  So while secular bears slaughter buy-and-hold investors, they are very profitable to trade.  The key is buying stocks when they near secular support, then selling later when they hit secular resistance.

Secular support and secular resistance on the SPX are around 750 and 1500 respectively.  Support is hit after mid-secular-bear cyclical bears, and resistance is hit after mid-secular-bear cyclical bulls.  Like any technical lines, these are zones and not hard limits.  The SPX can overshoot in both directions, but not for long.  Soon the dominating secular trading range reasserts itself and sucks the SPX back into its maw.

In late January 2013, the SPX broke above this 1500 secular resistance.  In late March, it edged up to new all-time nominal highs (though it had and still remains far from real ones).  The last mighty cyclical bull topping in October 2007 overshot as well, but soon succumbed to the unyielding secular bear.  So not even 1700 on the SPX gets us out of the woods until the bear’s mission has been accomplished.

And that is to force the stock markets to trade sideways for long enough for valuations to plunge from extremely overvalued to extremely undervalued levels.  In P/E-ratio terms, secular bears are born at general-market valuations above 28x earnings (twice the 14x long-term fair value) and end around 7x earnings (half fair value).  Today’s secular bear won’t end until the SPX hits 7x earnings once again.

When it was born way back in early 2000, the SPX traded in a spectacular bubble at 43.8x.  7.6 years later in October 2007 when the last cyclical bull topped, its P/E ratio had fallen to 21.3x.  While the SPX was at the same levels, corporate earnings had grown enough to cut valuations in half.  But stocks were still very expensive.  Even during those epic stock-panic lows in early 2009, the SPX only fell to 11.6x at worst.

That was 9.0 years into this secular bear, and the best chance the stock markets had to hit those 7x secular-bear-ending levels.  They failed, virtually assuring this valuation-driven secular bear would continue for its entire 17-year normal duration.  Today 13.4 years into that span, the SPX is once again at the same high topping valuation of 21.2x seen in late 2007.  Its work far from done, this secular bear is far from over.

Greatly amplifying the danger today, the SPX is not only far above its secular-bear resistance of 1500 but the current cyclical bull has powered far too high for far too long.  It is up an astounding 152.7% over 4.4 years (or 53 months)!  Meanwhile the average size and duration of modern mid-secular-bear cyclical bulls is only a doubling over 35 months.  The more excessive the extreme, the bigger and faster the mean reversion.

The secular bear that has been plaguing the stock markets since early 2000 hasn’t even come close yet to accomplishing its mission.  Today’s stock-market valuations are three times higher than the 7x target, and even at their lowest point in early 2009 were still 2/3rds higher.  And this secular bear still remains several years away from hitting their tight average duration of 17 years.  It hasn’t had sufficient time to mature yet.

So as you can see, the US stock markets are in an extraordinarily dangerous place today.  They are very overdue for a selloff, and that almost certainly has to grow into a major correction to rebalance sentiment.  And one or two sizable down days late in a major correction when sentiment is dismal is all it takes to push the SPX over that 20% threshold into cyclical-bear territory.  These ultimately cut stock prices in half!

With today’s stock markets euphoric and overbought, with the recent years’ cyclical bull way too old and too high, investors and speculators alike have to be exceedingly careful in the months to come.  Wall Street will deny the coming selloff is meaningful every step of the way down, lulling traders into false security until it is way too late.  You need proven battle-hardened contrarians to help you navigate this transition.

That’s us at Zeal.  We’ve spent decades intensely studying and trading the markets.  We buy low when others are afraid and then later sell high when others are brave.  Fighting the crowd has proven wildly successful.  As of the end of June, we’ve recommended and realized 655 stock trades to our newsletter subscribers since 2001.  They averaged stellar annualized realized gains of +28.6% during a secular bear!

We publish acclaimed weekly and monthly newsletters for speculators and investors.  In them I draw on our decades of hard-won experience, knowledge, wisdom, and ongoing research to explain what is going on in the markets, why, and how to trade them with specific stocks as opportunities arise.  Alternative investments including gold thrive in cyclical bears.  So if you’ve not been paying attention to the markets, now is the time to get focused again.  Big changes are afoot.  Subscribe today!

The bottom line is the US stock markets are overdue for a material selloff after their massive levitation this year.  And this has to snowball into a full-blown correction since it has been so anomalously long since the last one.  Today’s euphoric sentiment will be so ravaged by the time that correction hits the high teens that it won’t be hard for it to edge over 20% into cyclical-bear territory.  That will push the selloff target to 50%ish!

A new stock bear looming is far from a radical idea, it is merely a high-probability mean reversion.  The ongoing secular bear remains too young to give up its ghost, and far from accomplishing it valuation mission.  Valuations remain very expensive, while the SPX’s cyclical bull is extremely overextended in both magnitude and duration terms.  In light of all this, it’s hard to imagine a new stock bear not being born.

Adam Hamilton, CPA August 23, 2013     Subscribe

Friday, September 27, 2013

How Many Should I buy? (by Osikani)

Following is an old post written by Osikani back in May 2010 when a lot of people did not want to accept that market has nothing to do with fundamentals and had really difficult time trading and Osikani was kind enough to share his enormous (no pun intended) experience on how to survive as independent trader.
Read up

Talking about position sizing.
Lately I have been feeling homicidal, as this market has kept faking me out. The only reason I am still solvent, after foolishly fighting the Fed for so long is my now ruthless and speedy exit from my numerous losing positions, and my staying in on the few days that give me traction. It takes a good whipping from Ms. Market to begin to appreciate how to stop being patient with losers, and being panicked into quick exits with small profits. Some pundits will tell you that in the market, there are fear and greed. Do not believe it; there is only one emotion in the market: FEAR. We exit too soon because we are afraid to give back our crumbs after we have been whipped so hard for so long because we were afraid to take our loss, just in case the hopium was real.
All of which leads to questions of risk. It may be paradoxical to some, but ALL positions in the market are function ONLY of risk. If we do not control our risk, we lose our shirts, and a few things besides. That is why I have taken a request out of the blog, asking about how to calculate position size, and will use it for a discussion that ranges a bit deeper than that.
We shall discuss:
  • How our risk determines our position size.
  • The likelihood of our being taken out by a stop loss.
  • A more efficient means of staying in our position without using a stop loss, allowing greater ability to hold the fort, so to speak.
  • A more efficient use of capital to handle the same risk.
To do this we shall start by building a position in the fictional XYZ Corporation. Once again, simply because it is generally easier to understand the concept of buying something, and then making money as it increases in value, or losing money as it drops in value, we shall look at a long position.
1. What are you willing to lose per share?
This is where most traders start. Whereas it is not the best place to start, it is still a valid one. So let us say that XYZ is currently at $50 (nice round numbers, to make thing easy), and you have determined using your latest technical analysis, or guru, that you will use a Stop Loss of $47.50 for whatever reason.
That implies that you are willing to lose &2.50 (Price - "Stop Loss") per share.
2. How much of your equity are you willing to lose if you get taken out immediately?
This is really the first question to ask. Let us assume that you have an account with $40,000 free equity (essentially the cash in the account).
The first thing is to decide what percentage you are willing to lose. I cannot think of any other method that makes sense, but I am sure there are some. A fixed amount is a bad idea because it means that if your account starts to lose, then you are risking more on each trade, and as your account increases, you are risking a whole lot less. While it makes sense to risk less on a larger account, that is probably only really true when we get to 7 figure accounts. Regardless, we shall risk 2% of our free equity.
If we allow only a 2% loss per position, then the maximum that we think we are willing to lose is 0.02 x $40k = $800. (2% = 2/100 = 0.02).
3. What then should be our position size?
This may hurt some feelings, but I have found that the American education system like to reduce mathematics to a long farrago of memorizing formulas for specific situations, instead of stressing that math is just a convenient way to use number to understand reality. As I insist that it is easier to remember if one understands, let us try to understand what we are doing here.
Essentially, what we are asking is this: If I am willing to lose $800 in total, while losing $2.50 per share, how many shares should I buy? In that case, it becomes obvious that you are looking for the number of shares, such that if you lost $2.50 on each, it will amount to $800. That translates to:
"Total Loss" = "Number of Shares" x "Loss per share"
800 = "Number of shares" x 2.50
Please try to understand what I have explained instead of memorizing that formula, but the choice is yours.
This is not a course in elementary math, and I do not want to be condescending, but let us see how we can solve the equation. We are trying to isolate the "Number of Shares" to one side of the equation. There are two ways to think of how to do it, one convenient, the other mathematically rigorous.
First the convenient, which is how my brother initially taught me when I was having great difficulty.
Look at each element in the equation, and if there is any operand ( +, -, x, / ) in front of it, assume that the operand belongs to the term. If there is nothing, then assume a "+", but ONLY if you are going to move that term across the equals sign. So the terms then are 800 = "Number of Shares" (x 2.50).
Move the terms that you need to move to isolate your quantity, across the equal sign to the other side. WHENEVER a term moves across the equal sign, it will change its operand to the opposite; so a multiplication becomes a division; an addition becomes a subtraction and vice versa.
We then get: 800 (/2.5) = "Number of Shares", moving (x2.5) across the equal sign to become (/2.5) and as the two sides are always equal, we can simply switch them and have: Number of Shares = 800/2.5 = 320
Now the rigorous method. We want to isolate "Number of Shares", and anything multiplied by 1 is axiomatically itself, so we are going to reduce 2.5 to 1. Therefore, we divide both sides by 2.5. (To maintain the equality, you must do to the other side whatever you do to one side). We are then left with:
800/2.5 = Number of Shares x (2.5/2.5) = Number of Shares x 1
Number of Shares= 320.
4. How many shares should we really buy?
300, a round lot, making our risk now 2.5 x 300 = $750. If you insist on a total risk of $800, then the question now becomes: how large should be my stop loss so that on 300 shares, I can lose a maximum of 800.
This translates to:
"Total Loss" = "Number of Shares" x "Stop Less"
800 = "Stop Loss" x 300
800/300 = "Stop Loss"
"Stop Loss" = $2.66
5. Why 300 instead of 320 shares?
To the market makers, odd lots are the mark of an amateur, ripe for the plucking. Markets are driven to clusters of odd lots, especially when there are no real institutional players putting large orders on the tape. It is a simple matter of the market makers taking advantage of fear. A large cluster of odd lots just means a lot of fearful folks who can easily be panicked out, and help to drive the market into a quick fade and pop. Basically, they place buy orders just under the cluster and then start selling. As the selling intensifies, the odd lots (stops) are triggered as a quick series of trades, pushing down even harder. The market looks like it is tanking, then hits the waiting buy orders, and pops right back up. That is what is called a stop sweep. Remember, the playing field is NOT level; your counter-party, the market maker's book shows where all the orders are sitting.
As we do not want this to be too long, or it might not bet read, this concludes our brief exploration of position sizing. Our next write-up will continue with the other issues.
Hold your horses, and do not become one of these.

Wednesday, September 25, 2013

NASDAQ is about to roll over?

With everyone talking about weakness in DOW and SPX and complaining about QQQs marching higher or not selling off - I think it is a good time to add QQQs puts  "Into the end of October to remember" short position.

See how well 2 weeks interval tracks DeMark signals and so it happened that Combo Sell is upon Qs now.



Oh, and while I am on it - NIKKEI is a disaster in the making



Saturday, September 21, 2013

For the new FED Chair(man)..meh…wowman

Elect me when you have no class

Rodney Dangerfield


Janet Yellen, December 11, 2007:

The possibilities of a credit crunch developing and of the economy slipping into a recession seem all too real .... I am particularly concerned that we may now be seeing the first signs of spillovers from the housing and financial sectors to the broader economy .... Although I don't foresee conditions in the banking sector getting as bleak as during the credit crunch of the early 1990s, the parallels to those events are striking. Back then, we saw a large number of bank failures in the contraction of the savings and loan sector. In the current situation, most banks are still in pretty good shape. Instead, it is the shadow banking sector-- that is, the set of markets in which a variety of securitized assets are financed by the issuance of commercial paper--that is where the failures have occurred. This sector is all but shut for new business. But bank capital is also an issue. Until the securitization of nonconforming mortgage lending reemerges, financing will depend on the willingness and ability of banks, thrifts, and the GSEs to step in to fill the breach.


Since he she is the last man person standing in a very short line of not totally retarded (that is not an equivalent of “NOT retarded” indeed) “This is the best AmeriKa can produce” eCONomists  - I’d like to help to John Q. Not So Bright Public to get use to him her.







Friday, September 20, 2013

Charts tell the truth-we just deny it

Since the beginning of August 2013


Monday, August 05, 2013

/ES update




this channel was on the chart, but I was to anxious to see head and shoulder similar to 2011, when the truth was staring in my eyes all along





I deserve to lose money for being so impatient and trading against myself – the worst opponent I ever had.

The only good news and excuse I can find for myself that I did as I said I would do and added short position yesterday on open and more today.

It is NOT about "revenge trade", but I think this blow off top is the best and last opportunity to go short LONG term into the end of 2014 (with crash like descent in October - I do not spit words like "crash" lightly - but what FED has accepted yesterday - that without their intervention America would stop... If not "existing", but "remaining afloat" - WILL sink into the heads of even most delusional momentum chasers out there and bears will walk the streets of Wall, like they have never had done so in Russia (another example of the dumbest view on the world outside of backyard by once superior power.
That being said - I will rebuild 100% net short position by the end of next week and I started doing so today on market open

VIX today



VIX few days ago

The answer I’d like to know



Tuesday, September 17, 2013

UnHolly Molly!!!

And I am shouting it from purely academic point of view after looking at 2 days charts of main ETFs.  Not that things like that matter anymore, but it is still amusing me from artistic angle. Don’t you agree these things in the market skies look like the purest electromagnetic Evil there is?


And, I have to say, I work too hard now and make too little money…. err or losing more than I am comfortable with. Therefore, even if tomorrow the gates of Hell are going to break loose (which I doubt being a paranoid nut that I am) I will take few weeks vacation the moment THIS DAMN TRADE is over.






And to my surprise this wave case is still in place though I suspect it will all be just distinct memories by market close tomorrow



The answer I’d like to know

Will today be remembered as The Day when BTFD and BTFATH became STFR?

(At least till the end of October for now?)




Monday, September 16, 2013

What is better than charts?

I wanted to post a lot of charts tonight illustrating what I think of as “reversing action”, but then decided not to. You all saw what happened today, after all that masterminded Sunday Summers announcement many of the indexes closed way below open and some, such as Nasdaq Comp – promptly went into the red down…

In DeMark-ians terms – many indexes/ETFs/futures even though they opened way above corresponding  TDRSs – they closed below risk levels. Some, such as DOW Industrial – reversed precisely at TDST.

SO, no matter what I will say  I will only reiterate my bearish stance, so I will remain quiet from now on … for tonight…

Sunday, September 15, 2013


Wall St cemeteries are full of people who were right at the wrong time


Hosed and tired of fighting, but that is what I am – I am fighting for and without reason.

I do not rant too often that the game is rigged – because it has always been rigged, nothing changed since prehistoric times.

But today I have to hand it to the FED – they are a very dangerous opponent, they know WHEN and HOW to strike.


That 20 points ramp up on carefully timed Summers news is a work of art.

I pressed my short position by going short /ESZ3 @1698 – my hard stop is on SPX new higher close.  Loss will be quite significant and shall that happen – I might take it easy for quite a while and resume “going with the flow” instead of standing in front of money printing bus.


The only good news if there is any – TDRL daily held up … for now on /ES … I am sure going to have quite a sleepless night.





Updated – multiple sell signals, resemblance with “pre June 18th” is quite strong






Am I trying to talk myself into holding losing position or is it really what it seems to be???

Saturday, September 14, 2013

Twerking with fire… or whatever that is…

Random thoughts….I do not remember any of the girls I knew when I was that age to be so dumb… oh well…




I hope those of you who observe had an easy fast and your names were scribed in the Book Of Life for the year Tishrei 5774

“For on this day He will forgive you, to purify you, that you be cleansed from all your sins before G-d.”

Leviticus 16:30



Back to business as usual…

On July 20th


I posted this chart




same chart today – I just love properly placed Andrews Pitchforks … which I just recently “cleaned” – I need to stop trying to tidy my charts – I need all that old stuff!!!



Work of beauty, of art I’d say … A La Kandinsky




Below are two charts – of 2011 and 2013 – similarities anyone?


( I know I presented my case before, but these charts use Fib Fans and Time Ratios – different toys)








As I said before – risk is limited (should I have not traded against myself ) and reward going into the end of October might be great.



I added a lot of November IWM and others puts today … Monday is going to be another day.

Glad I foreseeing upside day today – and that upside was within the limits I thought it would be.  But… walking on the thin ice here – a little more upside and my short position will be crashed … well – damage will be sizable indeed




Firstly – should I have stuck with my original “Top 9/10th Sep” based on 10th close SPX is only 3 points up.


BUT!!! The impatient parody on the trader I am I build most of short position on Sep 6 – morning of Sep 9th and it puts me in SPX terms around 1663 (wit latest addition of mount of IWM Nov puts at is around 1670 SPX cost, but – some call it sending good money after bad – we shall see quite soon) – good 25 points against the move…not the first time in my trading life though.. I am NOT trying to find the reasons to hold onto a bad trade, I still believe market topped August 2nd and I will let the market to prove that to be wrong – till then – I am short


Next ..when I say  “top or sell” that is not necessarily “short” – it might be pointing onto period of sideway consolidation – which we had last few days.

Now – with this “agreement between US/Russia” news we might see some more upside (but pay attention to this phrase “It was not immediately clear whether Syria had signed onto the agreement, which requires Damascus to submit a full inventory of its stocks within the next week”) – namely SPX might hit 1692-94 intraday, but realistically – that (“agreement”) is what market was pricing in since Obama backed off (Is not that is what most people who are in love with the sound of their voices do when meet strong logical opponent … can someone stand up and oppose ObamaScare???? Please??? ). With that possible UP open on Monday VIX will go down and reach my desired target at TDST.


My prognosis “bottom Sep18th, next shortable top – Sep 27th” became absolutely screwed by “War on, War off” rhetoric and I am holding big short position which I expected partially close by now should my prior scenario play out… but it did not. If there is going to be some downside on Monday/Tuesday – I will hedge that position a little more with either /ESz3 long on Sunday night or SPY calls Monday/Tuesday. (But I think it will be quite stale trading till Wednesday to bleed theta out.)


Because changed short term prognosis says now: “SHORT FED MEETING” – and I am REALLY surprised by that – upsides risks of FED ANNOUNCEMENT are far greater than downside. Imagine for a second they will say: “no taper” or “smaller than expected” – if Wall St pundits believe that “taper is priced in already” – can you imagine what kind of rally will ensue???


All overall – it is a very delicate point of time in the markets now, I personally, dislike that market makes higher lows, I thought it would match that of June 24th – but if my updated scenario will play out – that is what will happen next (hit June 24 low)

And, of course, shall SPX breach prior highs – I will swallow sizable loss and take some time off as I do if I screw up (in order to not to revenge trade – which, in spite of many years of trading I still DO)


BUT … my “mechanical” system says: ‘GO SHORT FED” and I am really confused and therefore I will try to preserve my capital (by hedging)

There are multiple TDSell Setup on different indexes on daily timeframes and plus to that – VIX is pointing on possible volatility increase on Tuesday/Wednesday going into triple witching Friday.





As well as that grey area being quite congested on both /es and SPX charts







Oh.. and – oil almost done with consolidating over that messy rectangle prior congestion and … are they pricing in $122 oil as well?????




And last, but not least – everyone’s favorite parody on index – NIKKEI – looks like one ugly short to me. That descending bullish wedge’s upside target was hit, so it might just fall off the face of the channel now.



Oh… one more thing – I am watching closely “real bottom” in Gold/Silver and miners, I am really anxious to go long term long silver via PAAS (company got some bad rap recently due to its hedging moves). I have standing buy order at 10.64 and 9.90



Don’t you hate to go though too many charts as oppose me just saying:





P.S. And for all of those who keep whining: “RUT is setting new highs day after day!!!”

Morons … yeah – you, morons – RUT has been setting new highs since 2011 ended and 860ish prior high was broken, AND it was making new highs every day back in 2007 … and back in 2000 – that is WHAT SMALL CAP STOCKS DO – THEY GROW – why all of a %^&*ing sudden are you making such a big fuzz out of it NOW???



Wednesday, September 11, 2013

One Chart



top part- NOW

bottom part - Jan to beginning of July 2011


My very big short position (Sep 6th/Sep 9th) is -8% in just few days due to being highly leveraged. I am willing to give up up to 15% on this trade - IF new high will not be established - it might yet turn out to be one of the most profitable short trades for the last 2 years.  Or ... most devastating - we all are responsible ourselves for all our gains and losses - other people just make it ... WORSE

As I mentioned before - Sep 6th was an impulsive mistake - wave B up did not print yet. Mon 9th ... not patient enough - opened second part while TDSetup Sell was only on bar 5

Being impatient is my biggest fault ... always... I need to learn that it is better to let the trade to run away from me than to chase the trade and fall into my own trap.


And now - today's trivia question:

Question: How do you know when blog owner is BSing?

Answer: When comment section is disabled.




For tomorrow, Sep 13th I would really love to see (SPY) to close above 169.50 to completed TDSequential daily Sell deferred since July 22nd.

But even if this will not happen - ongoing TDSetupSell bar 9 will be put in place tomorrow ... unless SPY plunges below 167.50sh area - .. which I would not mind as well. The only thing I will NOT like - if SPX will go up by more than few points ... will not like that at all.

Trade well

Monday, September 09, 2013

The old fart I am!!!

On Friday I changed my “prognosis” from “Top on SPX September 9th-10th” to “September 6th-9th” because some hidden switch in what I have left for the brains short circuited and I sincerely convinced myself that WAVE 5 prints when bar 21 is lower/higher than all of prior 21 bars.

Someone really needs to put me out of my misery and quickly approaching “golden years” (there is NOTHING “GOLDEN” about it) or just point me to this link

on my site which I created for people who just start with DeMark indicators, but looks like I, myself, can use a refresher from time to time.


It is 34 bars you idiot! Yes Dave – I am talking to YOU!!!

So SPX is indeed in DAILY WAVE B ( as I warned many times – famous for being difficult to trade on any side) AND it is STILL in vicious uptrending impulsive Dwave 5 on 30 minutes chart!!!! (which I use for shorter term targets)


Which, of course, was never suppose to be completed today, but… let me see …optimistically by the end of tomorrow, Tuesday September 10th somewhere around 1675-1677!




That is when daily wave C down will start with initial target around 1585, but I think it will extend into the end of October.

Other than that – my “down into Sep 18th, up into Sep 27th, down into the end of Oct” stays intact … for now… Do not know how far down SPX will go by Sep 18th, but by Sep 27 it might be almost on today’s levels ( most likely will retrace 62% of the drop to confuse everyone before any real pullback.

Sunday, September 08, 2013

Friday, September 06, 2013

Change you can believe in (SPX)


I would like to prognosticate a little, but before I do I need to say this:

Activities in Disqus section tell me that I am writing for myself and if so I can just take this site offline and be done with that. That another change you can believe in.


That being said:

Monday’s September 9th SPX close will be higher than today’s close, but high of the day will be lower than today’s.


Therefore perfect short trade’s entry was today right after 2PM EST, but positions can be added on Monday’s “higher close”.

If Monday’s close will NOT be higher – then Tuesday’s higher than today’s close.

We NEED higher close in order for wave B to print on daily SPX.


IF that is NOT going to happen – then it is even MORE BEARISH SCENARIO, because wave A will extend into lows on SEPTEMBER OPEX and then B will print at the end of September, may be as high as 1675 and vicious C down will rule entire October. (chart patterns lovers may calculate downside based on, in this case, materialized head and shoulders 5/22/2013-8/2/2013-9/27/2013


I went short after 2PM today with slightly more than  1/2 of intended position and will press on Monday if it plays out the way I see it.


Below is familiar (SPX) chart, I cleaned it up a little:

  1. Removed Fibonacci extensions that helped me to calculate Aug 2nd high as AB-CD 4/19-5/22-6/24.
  2. Removed Andrew’s Pitchfork
  3. Added “possible” trendline (yellow) which lines up nicely with today’s high and Monday’s possible closing price.


This entire counter trend move (and trend is DOWN from Aug 2nd) from 8/27 closing low was contained in 33% extension of the channel of DWave 5 from closing low on 11/15/2012 – the last attempt to stay with that wave and break of 33% line will be similar to June 18th “3 days bear market”.


Downside target by Sep OPEX is somewhere between 1595 and 1575, but as most of you know – price is secondary for me.










Chart added few hours later on Sep6th night to pinpoint dates and approximate levels of SPX until September end’s “all in short” time






So … this “war campaign” … how is it different from any other? Change….right…


Thursday, September 05, 2013

Updated SPX chart

with more precise dates and levels



and I will leave you with just that – chart speak better than my words

Sunday, September 01, 2013

Crazy Beautiful (SPX)


In my prior post I had few 30 and 60 minutes Dwave SPX charts that points to 1610 as a result of possible wave 5 target. But if trading was as simple as blindly following some magical technical indicators then everyone would be poor. WHAT???!!!

How is that IF everyone can be winning using technical analysis can be poor? well, money has to come from somewhere – and if everyone is winning – who is losing? Sounds like a 0 sum game and then everyone is losing because of costs of trading.

that being said – I am sticking with my September 7th-10th next sell point with Lows at he 3rd trimester of October.

Speaking of “sell point” on Sep 9th +/-“ – that might be 60 minutes wave 4 extending to another shoulder area and then going down as wave 5 to 1610 target area with intermediate “buy point” (short lived indeed) around Sep 20th. Just a speculation indeed as of now. But the point is –



and any new “tops” should be seeing as short entries






In addition – some quick observations as follows:


Gold and silver by September 9th will set new marginal highs just above recent highs to complete Dwave C



Oil will continue up



Natural gas might move up just a notch, but will go down to almost 8/9/13 lows


$DJU 2d ready for bounce


Dollar started leg up and from this point on “currency debasement game’ FED is playing is a lose-lose against other countries games played more successfully than that of ole’ no more good USsA