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chessNwine

Full-time stock trader. Follow me here and on 12631

Pardon Me, Would You Please Pass the VXX Jelly?

Tue Mar 8, 2011 2:41pm EST 13

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[youtube:http://www.youtube.com/watch?v=G_pGT8Q_tjk&feature=related 550 412]

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[youtube:http://www.youtube.com/watch?v=3xBydH93eDY&feature=related 550 412]

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So sorry for being “that guy” who performs technical analysis on charts of cockeyed concocted financial instruments (the horror, OMG!). Looking at a daily chart of VXX, however, compels me to at least discuss the idea that this is one of the more bullish charts that I see at the moment. Note the steep downtrend, followed by a notable increase in buy volume to support the recent spike up. Since the move higher, we now have a small series of higher lows, settling into tight symmetrical triangle. Also note this is the first time since last September that the VXX has spent any reasonable amount of time above the 20 day moving average (now flattening and turning up, for good measure).

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What about the actual VIX, you say? Same deal. Residing above the 20 and 50 day moving averages more comfortably than at any point since the rally in equities began last September. If the bulls are going to see the November scenario I discussed in my previous post, I believe a spike in volatility would likely throw a wet blanket on that idea.

Watch the VIX.

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The “November Scenario” Cometh?

Tue Mar 8, 2011 12:03pm EST Comments Off on The “November Scenario” Cometh?

In my strategy video for 12631 subscribers inside The PPT last evening, I discussed a bullish possibility for the markets playing out, called “The November Scenario,” referring to last November’s breakout from a descending triangle. Thus far today, we have a bounce going that is starting to gain momentum. Putting the rally into perspective on a daily timeframe, we can see that the bulls are still incredibly resilient in holding a series of higher lows by a thread. Indeed, the 1300 level is proving to be the true test of mettle.

While I may put on some trades as the day progresses, in order for me to get really aggressive again on the long side I am looking for this symmetrical triangle to firm up and resolve to the upside. Ideally, you’d like to see the action calm down a bit and these violent price swings abate. This should happen as price reaches the apex of the symmetrical triangle shown below, on a daily chart of the S&P 500. If we see a few “doji” days of more quiet, than violent, indecision, I am confident we will see an abundance of charts set back up underneath the surface.

However, we do not have the luxury of trading the market that we want. Instead, just like everything else in life, the main thing is trying to correctly play the cards that you are actually dealt. Accordingly, given the recent propensity of the market to punish momentum BOTH longs and shorts (instead rewarding extraordinarily nimble traders who buy the dip and sell the rip), I will let the bulls prove themselves first by following up on today’s move to the upside before signally the “All Clear” sign.

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Video Market Recap 03/07/11

Mon Mar 7, 2011 4:36pm EST 2

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No Respect I Tell Ya

Mon Mar 7, 2011 3:01pm EST 4

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“In high school, when I played football I got no respect. I shared a locker with a mop.” -Rodney Dangerfield

Downtown Josh Brown is out with a great piece today, affectionately titled:

TIME’s Embarrassingly Useless “Top 25 Financial Blogs” List”

Here is the list he is referring to:

Complete with a shoutout to iBankCoin, Josh notes the glaring omissions from the list, namely active traders who blog, as well as writers who focus on technical analysis.

My take: Too many economics professors on the list. Way too much macro; Not enough micro. The TIME list illuminates a basic lack of desire to seek out independent blogs that are actually well-read and respected within the realm of traders and investors who take a proactive role in managing their finances. As cool and intellectually stimulating as a blog post may be about why, for example, people in Spain eat less tapas when the economy is under pressure, I believe just as many–if not more–readers are looking for actionable stock ideas and timely broad market commentary.

(Click here for original TIME list)

(Click here for Josh Brown’s piece)

SEE ALSO: Click here for Abnormal Returns’ take on this issue.

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To Drive a Point Home…

Mon Mar 7, 2011 1:48pm EST 2

The chart of JDSU is the perfect microcosm for this market. It had already seen a spectacular run since last fall, yet headed into the past two sessions still looking perfectly set up for higher prices. On Friday, we saw the big breakout. However, not only did we see a lack of follow-through today, but all of the gains–and more–have already been given back.

So, is JDSU a high probability long swing trade now? No. Even if it continues higher, the giveback today negates a disciplined swing trader from entering.

Is JDSU a high probability short setup now? Not necessarily. Although the breakout failed, we’d need to see at least some follow-through to the downside.

The same can be said for the market at-large.

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Cash Was, Is, and Always Will be a Viable Position

Mon Mar 7, 2011 12:32pm EST 4

Midday Update 03/07/11

In my weekly prep video series for 12631 subscribers last evening, I discussed the concept of having a clear game plan and being prepared. Despite all of the enticing long setups, I noted that it was crucial to not jump the shark and suffer a vicious bite wound. Instead, we wanted to first see the bulls show that they would, once again, emerge from a short-term pullback victorious. If we saw that, then we were prepared to strike, and we knew which sectors and stocks to quickly attack.

However, after popping up to 1327 this morning, the bulls failed yet again to take out the 1330-1332 area on the S&P 500, which is where I wanted you base your market posture off of. Instead of blasting through this recent volatile range to new highs, the market sharply reversed, and now we find ourselves below last Thursday and Friday’s lows. To make matters more troublesome, the small caps and Nasdaq Composite Index are leading us lower, which usually indicates a pretty clear case of risk aversion.

Many of those setups we had are eyes on are not broken by any stretch, but they’re obviously not working anywhere close to the point where it is worth risking precious capital. Going forward, I am eyeing the 1312 level on the S&P. At the time of this writing, we are just below it at 1311. If the bulls can recapture it, then there is a decent chance for a more spirited bounce this afternoon. That 1312 level represents the lows from last Thursday and Friday. We also need to closely watch the 2730-2740 area on the Nasdaq Composite Index (currently at 2740). A breach of that area, and I expect sellers to swiftly take us lower to at least 2700.

If you insist on actively trading, please respect your stop losses and do not get rattled by the increased volatility. Speaking of which, given how choppy and unpredictable the market has been of late, I want to reiterate that cash was, is, and always will be a viable position for individual traders to have when the market is violently indecisive. Seeing as 12631 subscribers are paying for our service, I take their portfolio account balances very seriously, despite not managing their money. Playing great defense is more important than trying to hit home runs every single day the market is open, particularly when we are faced with a market like this.

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