Friday, October 30, 2009

Index Comparing: Watch the DOW (ndx/tran have passed the torch)

the direction short term is DOWN.
(edit: intermediate term)

I was not expecting a Friday to be like that. I had said I think the GDP will be a sell the news event weeks ago, and elaborated 2 posts ago, in that the euphoric climax celebration will in term cause a great tradable market top.

Of course GS uses its will to make the same trade occur just the way they want it, extracting even more juice...

If you look back since March, you can see for yourself that the few and far between larger down days we have had, they are never on a Friday. (well until now!). I have begin a strong feeling that this is intentional for the "feel-good weekend" comfort to suck more money in the market.

Again, this is my opinion. However, with the exception of today, look back and see what most Friday's looked like for the past 8 months.

Without going too deep, we sold off more "after the event" than we rallied "off the event".
That alone is a pretty strong sign of what the direction is. (and remember, the event was mostly a gs induced short squeeze itself!!)

But does one CHASE this short right here? I had fully expected the market to WANT to go down today, yet i "thought" the ppt would do all they can to keep the "GDP fever" fresh in the mom n pops all weekend long to sip on and celebrate, as their was quite distribution today.

Again, if gs had not set that estimated "fear" number of 2.7, then we probably would of ended the week on about the same level, but the route getting there (ie wed/thurs/friday) would not have appeared as dramatic.

Bottom line is that the "2nd half recovery" that everyone has been talking about for over a YEAR now has occurred, and is now past tense. Earnings are also now getting into 2nd tier stocks.

the dollar, and economic data should rule here. So next week will be very telling w/ FOMC and unemployment.

my hunch is that 9.9 would not cause a sell off
but the psychological 10.0 level would however

FOMC, no clue, but the first reaction (ie 5 min bar) immediate after is usually the direction for the rest of that entire day...almost like an earnings reaction w/o the anemic ah volume to sort through.

technically, we (short term) look like we are due a bounce.

Daneric's last short term chart very feasable to to me. (bouce to 1060ish area, then call the life alert)

I actually bought a few DIA 98 calls at the close, yep diamonds..... (only looking to hold the first few days of next week). And I might be trying to get too cute w/ that. It was only a few. IF we get a bounce early next week, I will then cash out of them and then trade heavily w/ spy puts. But i want to see a bounce first. Just cant chase it short after today.

I really wanted to buy some CLNE calls at the close, I just hate those nickle/dime spreads.
...why CLNE?? Nothing extremely specific about it, however they do not report till 9 Nov, and "MOST" stocks do not crack before earnings. Basically any stock that reports in the next 10 trading days or so. (ideally more like 5) would be a safer long for a short term trade into next week. That way if you do NOT have the market direction correct, you still have the pre-earnings sentiment protection which is rarely more bearish than the broad market itself.

In regards to T/A, I have 1 observation (see chart)
Since the March lows, the NDX, along w/ TRAN have been the strongest indexes.
I mention this several times, that the NDX was also the ONLY index that made a higher low in March 09 (as compared to Nov 08). It is the leader, period. And when the NDX decides to pass off the leader torch, then the rally is likely over.

Do you remember that "Head and Shoulders" a couple months ago, you know the one that people in the barber shop were even talking about. The same one the spy, and especially the weak INDU had signaled. Yet that turned out to be one of the best intermediate term BUY signals in a long long time. ? Just food for thought here, but you can see the NDX actually never signaled, it landed smack dab on support.

The point being, if you LOOK for bullish or bearish signals, you can not use the weakest index only to look for bear signals OR the strongest index only to look for bull signals.

The NDX has been the best performing index since March
The INDU has been the worst performing index since March
....yet just a few days ago, they painted the dow's close, remember?

the INDU lagged the entire move up. Once could of been long the QQQQ and short the DIA as a pair trade and been lovin it since march, with very very little risk.
Now looking back in backazmith, what index is the LEAST off its highs? - the INDU

at any rate, the line in the sand to me is the INDU trend line that it closed immediately above. This looks identical to the NDX scenario head and shoulders trap. (at that time the NDX was the leader). Now, the leader is the INDU!! (well not actually a leader, just the least weak, or most propped. Hey, "dow 10,000 is catchy", ya want the retail to have that vision out there to sucker em in)

Looking for an early week bounce (led by the dow to tease the 10,000 level again)
....then another entry to short the spy (from around 1060). Just how im playing it.
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