Once again, the beauty of blogging about the markets or taking private notes on the markets is that when you have a setup that develops, you know what to do and how to trade it.  I outlined it here: http://ibankcoin.com/gioblog/?p=2357

I outlined two days ago on a few blog posts that I would like to see the Vix give me a “double spike” to the mid 80s.  Well, I sort of got that… we had Vix at the 80s and SKF trading ridiculously over $200 points (almost hit $300 today).  Clearly there was too much fear, and a squeeze was imminent.  ”Who wants to stay short  the weekend”, is what you should have asked yourself.  Also in my notes I pointed out that the double inverse ETFs are trading at a high premium, for example EEV is trading at a Dow 7,500.  I even noted that a Dow +0 day would send EEV down hard.  Look at them now (EEV: 97.50 -22.66%) , (FXP: 64.50 -30.65%) , (SKF: 244.12 -6.98%) .  

Anyway, I waited all day for volume to pick up, and we finally got it… right on the breakout from the inverse HS triangle (thanks Woodshedder), but in reality I was using trader instincts that we would rally into the close.

Anyway, I made a clean trade in shorting (FXP: 64.50 -30.65%) since yesterday (added to current position today.  But covered all at the close) and shorting (EEV: 97.50 -22.66%) .  It is useless to post a day-trade chart in them.  There are no technicals to discuss in them.  It was simply a matter of using “fear” and the Vix as our only indicator to find an optimal entry point, and therefore you could have got long any stock or shorted any inverse ETF stocks and came out a winner.  Shorting the inverse ETFs was the big winner.

Remember, today’s insane 500 point rally on the Dow was simply the undoing of yesterday’s -500 point (yeah, I’m rounding) insanity.  Also note, both huge swings occurred because of two news events.  One was of Paulson speaking of how bad our economy is, and then there’s today’s news event on an announcement of a new Treasury guy.  These are not fundamental changes in our economy, but only news items.  Therefore, I still will notch today’s rally as a Sisyphus Rally.   If you are going to pick a side, pick the winning side!  Lol.

An aloha and a high five to my new twitterfunknastilicous followers! Oh hey there , Andy Swan!  Follow that guy if you’re a bull, and if you want to laugh.

	tradejunkie
	IRON100 / David Buffalo
	StreetRaiders
	ukefuture
	bertram25
	AndySwan / Andy Swan
	dariuswei
	cruxmonger

Right now its 5 am in Hawaii, got like 4 hours of sleep, so naturally I’m cranky and pissed at everyone.  I don’t even know why I’m making this stupid post, but why not? I’m up already, might as well post something even if its crap.  Crap.

Hmmm. I changed my mind, I ain’t making this post.  Just read the title and figure it out yourself.   Fine, I’ll tell you… low volume rallies will be kicked back down all day.  There, you happy?

(I’m waiting for all the important intraday points… lunch, 1 hour before close, 30 minutes before the close… and why not, 5 minutes before the close.)

One more tip…

If you’re in the water and you see a shark, how fast do you have to swim to the shore?

Answer:  faster than the guy next to you.  

Back to sleep.

Right now, you really have to approach this market like a military General.  It’s a battle out there, and you have to pick and choose which battles you want to fight.  I know a lot of you out there are feeling like me… afraid to click the button.  But looking back at yesterday’s meltdown, it happened “on the news.”  What a lame way to selloff.  We should get back most if not all of those points.  Or not.  Again, pick your battles!

I outlined yesterday a scenario that I would like to get, and I’m getting closer and closer to taking a shot at the bears.  So far, we have scenario 1 playing out (this is why you blog, or take notes, so you can go back to them and see how to attack back):

Right now the Vix is following the red line, and this is my strategy there:  

(1) Vix spikes showing more bull panic:  We already had one “vix spike” that occurred on 11/05 - 11/06 which was a jump from 47.11 to 64.78 (a 37% spike).  Tomorrow, I am hoping we gap down a little so that we can get that second “spike” to the mid 80s.  That would mean +20% move in the Vix in 2 days.  That would be a great spot to get long or hedge your shorts, aka “buy the panic.” [http://ibankcoin.com/gioblog/?p=2346]

… amazing.  That is exactly what happened yesterday, but unfortunately the Sisyphean Bulls decided to roll the boulder up +140 points and mess with my scenario a little.  And as we all know, Paulson came, opened his mouth, and kicked the boulder right back down.   But at least we have Vix @ 80.  This is VERY VERY fearful guys.  Its almost as if 95% of the community is betting on a complete collapse of the American economic system.  I would like to think it is a little stronger than we give it credit for.

There’s two problem with the Vix though.  First, intraday, we got our 80, but we got it twice.  Once on the morning gap down, and then later in the day.  That tells me the Vix still can go a little higher from here, maybe 85 or (and I sincerely hope it doesn’t) to the 100s.  I do not know what problems a Vix100 could bring to the entire investor community.  Second, if we add yesterday’s move up + today’s move up on the Vix, then we have a “spike”, however it was a weak spike.  I would have liked the Vix to just get it over with and hit the high 80s.  Again, what a Vix “double spike” means, is that the investor community has acquiesced that the market is going lower, and that fear is more thorough (an “confirmed fear” in my eyes).  Therefore, what we can draw from this is that it is NOT a good time to enter new shorts here, and that profits in shorts must be taken (at least 1/2), or at the very least hedged (I mentioned buying SKF puts in December).

So, with that said, I haven’t entered any longs yet.  None!  Not even in yesterday’s meltdown, mainly because I turned the computer off and went out to enjoy the day with 2 hours left of trading.  I am still waiting for mid-December, where I suspect heavy trading will take place in anticipation of quadruple-witching day.  And so, I will only nibble on longs whenever I see a good entry.  Right now, its clearly the winning trade to be short, but with the Vix between 80-85, is not a good time to short.  I said that already.

I wish I stayed to trade the close, but maybe leaving that day might turn out to be a blessing in disguise.  The only thing I did enter was starting a shorting position in some inverse ETFs.  I tell you, they really hurt me.  I went from +5% to -15% in a matter of minutes!  Wow!  … but I take this as a good thing though.  It’s good to be in the middle of the battlegrounds, to get cut up a little, because now my senses are up, and I’m working hard to find a good setup, like a sniper in the trench.  It kind of forces me to be alert, and search for good setups, the ones that you will kick yourself if you missed them.

See you on the battlegrounds!

———-

Aloha to my new twitteraddicts!…

	Skyb0x
	PiterSwenson

First, here’s my commentary for Wednesday’s trading, Hawaii Trader style! (That’s me at 1:10 taking out a bull)…

 

Tomorrow (Thursday) should be real interesting.  Whatever happens I will be waiting for another “miracle rally” to setup.  That means we either start off down and break the gap up to day highs, or we just get higher.  Or, I do nothing… and wait for it  to come to me.  For now, I’m leaning to the belief that Sisyphus’ boulder has rolled to the bottom on the short term.

I realize that almost every index  and indicator is against me tomorrow…  futures are down over 100 points, Nikkei down almost -7%, Hang Seng down -4% … but that’s not going to stop me from at least looking now.  A really good place to look, and I’ve pointed this out before, is around early to mid December, before quadruple-witching day.  During this period, volume starts to really pick up.

As for all the technical traders, throw away your charts.  They have not been working.  If they have, then you would have been short this market with me at least since last Thursday.  I’m really getting tired of all the bottom calling, the resistance points, the breakout points blah blah blah.  Those are only important to me on an intraday chart where all the trading action takes place.  There will be a time when we need them, but it’s not now.  

What we need now is to observe one indicator, and that is “fear.”

When the market gets this bloody, money can be made on the street.  I am detecting all kinds of fear… in the blogosphere, in the media, even in my local community… I can’t even get a good workout at the gym without some old farts debating about stock prices.  

Where we stand right now, from a week-to-week perspective, is that what happened in last Thursday’s Miracle Rally (Dow -300 to Dow +500) happened again yesterday except inversely (Dow +100 to Dow -400).  So what do we have?  A washout of the Sisyphean Bulls.

But anyway, here’s my argument for why its tough to short here.  Basically, we have in store for us the great possibility of the next Sisyphus Rally, which I imagine can be a few thousand points in the Dow.  No one believes it, no one sees it, and therefore it’s coming (the heart of a true contrarian).

Now earlier I said, the only indicator important to us right now is fear, so for starters, I give you the $Vix and the “double inverse ETFs”.  No one else has even mentioned it yet, but I’ve been noticing that using the 2x-inverse ETFs (that have significant volume), can be used as a contrarian indicator (3x inverse ETFs are nonsense).  So, although the Vix has been acting “strange-bound” up until the past two days, we at least have the action in the inverse-ETFs to verify fear/panic conditions.  Remember, this does not always result to immediate reversals in trends, but it does serve a high probability that it’s a good idea to cover your shorts or hedge your shorts now.  Here’s my notes…

… There are two scenarios for the Vix that can potentially hurt the bears.  

(1) Vix spikes showing more bull panic:  We already had one “vix spike” that occurred on 11/05 - 11/06 which was a jump from 47.11 to 64.78 (a 37% spike).  Tomorrow, I am hoping we gap down a little so that we can get that second “spike” to the mid 80s.  That would mean +20% move in the Vix in 2 days.  That would be a great spot to get long or hedge your shorts, aka “buy the panic.”

(2) Vix immediately reverses, causing panic buying.

… I’ve been starting to use the inverse ETFs as a contrarian indicator.  Its currently just a study, and I have to add more data points to this experiment, but so far, I would not like to open new shorts based on my findings so far.

Aloha to the new twittericious fellahs.  Make sure you follow my friend zStock for a good chart…

	julek / j targowski
	zstock
	j0sh1ngU

It’s a swan dive.

Which post do you want me to bring you back to?

….Last Thursday’s miracle rally was a short term bull trap, and I’m disappointed that many people failed to realize that.  It’s difficult to determine how much lower the market will go, but being under 8,000 is not fun.  I myself don’t like it.

If you want an illustration for what our market is like, then read up on my post about “Sisyphus Rallies.” How many times have the bulls rolled the boulder up, only to get smashed by it when their energy runs out? Case in point… today.

Last night, I was discussing with Mac @ chartswingtrader.com that even IBD refused to notch yesterday’s rally as a follow-through day. Thank goodness. Then Danny’s LoBV charts as of yesterday’s close clearly showed that it still wasn’t ready to go long. Bottom line, bulls are Sisyphean, and the slope is slippery. I will wait for a better entry point around Vix 80 to get long, but more importantly I will wait for quadruple-witching day near mid-December (that’s where volume should pick up). I suspect volume will slow down as we head into next week.

Anyway, for those of you who followed me on Twitter, I made this day trade while posting the “300″ video over and over once the Dow hit -300. Long EEV @ 106 and 103 near the close…

And Aloha to my new Twitterificaliciously new pals…

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	jewdpac

They got dissed at the end of the meeting. Basically, the chairman said… what will the public think if I hand you out that kind of money, when you greedy CEOs earn millions in compensation. Quit crying.

The public says let ‘em fall. Let Sisyphus’ boulder crush them all.

But really, it was interesting to see three CEOs who compete and cut each other up in the industry, band together with their cups filled with pennies, begging for help.

… wow, our economy is falling apart. “Lowest since World War 2″…

As I mentioned before, the market right now is trading like a boulder being rolled up a steep hill. Without volume, or without participation in pushing this “boulder”, we will continue to roll back down over and over. If you are bullish, then you understand how frustrating this action has been.

We are only a few points away from notching last Thursday’s “Miracle Rally” from turning into a proper Sisyphus Rally… remember the components for this long term pattern:

1) severe bear market decline leads to…

2) extremely oversold conditions, leads to…

3) market “rolls” up very sharply, but on news, hope, and NOT fundamental real positive changes

The current “rally” could indeed develop into Sisyphus Rally because the market could move up here on the famous seasonal “Turkey Effect”… again, this is fueled by the “hope factor” which does not bring about real fundamental changes, ie, we still will have staggering declines in consumer numbers and extremely ominous guidances. The boulder will come rolling back down. Here’s a chart of what could play out to be what I would call a proper Sisyphean Rally.  Really, the downside looks pretty much done on this chart, but then again, how many times have we said that this year?:

As for tomorrow’s tape, here is a snapshot of the volume going on in the Dow Again, the price side of the rallies look good, but the volume just isn’t strong enough… even 11/13 big volume up day pales in comparison to 10/10 sell-off. And the two rallies we had on “big volume” in the past month has not been followed by another up day with volume… NONE!! Even IBD refused to notch yesterday’s final hour breakout as a FTD, which is good because then I would have to cancel my subscription to them.

… we got that one last floor at 8,140 holding us here.  We need another big +5% move with volume before we get under that.  Bulls, do your thing, or else!

… as for me, instead of waiting for the bulls to commit financial fratricide, I will wait two scenarios:  1) for the higher probability of the market breaking that 8,140 on the Dow to get below 8,000, which would send the Vix back up to the 80s.  Then I will get long for my Sisyphean Rally before getting short before the boulder rolls yet again.  OR 2)  wait for the follow through day and get long intraday.  Who knows, that may come this week.

Stop making predictions based on the color of your screen, ok?  Pay attention to volume!

Aloha from Gio, to my new Twitter stockers (get it, “stalker” haha.  nevermind.)

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	internetplays
	torontotrader

Today was a good day for day traders… not really.  Unless you traded the final 30 minutes. It took a lot of strength to sit through the entire day’s low volume action.  But I waited for the close to make a move.  Twitter was down all day so I caught up with some friends over at WallStreak.  I’m trying to get Stewie to get a twitter so some of you day traders can learn something from him.  Anyway I put in this trade at the end of the day:

Another messy 3 point gain here, but it took a lot of balls to play since there were many attempts to get FXP back above 78.   Basically I knew that today’s market would have a very volatile close, but the probability for a short squeeze would be very high.  So, even though the market swung hard in 80 point channels, I sat through it and covered near the close (holding the rest as an ONH).  I guess yesterday’s market should have already given you an idea of what to expect today’s market volatility would be like.  Anyway, know the game, and play by the rules.  The game always changes.  Dynamic traders rule this tape.  If you haven’t already done so, please read my previous post on Sisyphus Rallies.  It will give you a good idea on how to trade this market from an important perspective.

Aloha to the my latest twitter collaborates!…

TodaysTrading

	hjl / Ho John Lee
	matchpointtrade
	prefad
	mankle6053
	coffeygrinds / Andrew Coffey

Yesterday I made a post talking about how dangerous these past couple of rallies have been.  I decided to do a little more analysis of all the major rallies that occurred in 2008 so far.  Anyway, many of these rallies have been “Sisyphus rallies”  (hat tip to one of my readers that pointed this out).  If you don’t know who Sisyphus is, then read about this mythology character here at Wikipedia (you must read about him before you understand this post). All you need to know about this mortal character is that Sisyphus overstepped his bounds by considering himself a peer of the gods who could rightfully report their indiscretions (sounds a lot like our modern fund managers).  He seduced his niece, took his brother’s throne and betrayed Zeus’s secrets. That pissed Zeus of course.  As a punishment from the gods for his trickery, Sisyphus was compelled to roll a huge rock up a steep hill, but before he could reach the top of the hill, the rock would always roll back down again, forcing him to begin again.  This is much like our stock market today  (There is only one rally that does not fit the Sisyphus Rally component, and that happened from March to May… let’s call that the Queer Rally) .  So with that in mind, you should understand what a Sisyphus Rally is…

 Basically these fallacious rallies have these components:

1)  ”market going to hell”… in other words, first the overall market is in a severe bear market.

2)  The rally comes very sudden and sharp, stabbing as many unexpecting bears in the back.  As a result, we have “panic-buying” which we all know as a short-squeeze.  Therefore, it’s only natural that we would be in an extreme oversold situation when the rally ignites.

3)  Enter the Sisyphus Bulls (you don’t want to be one of them).  Basically, these are the ones that jump in on the bear market rally, convincing themselves that the trend has turned, basing their opinions on news events, promises, and hope, when really there has been nothing fundamentally changed for the long term good.

4)  These Sisyphus rallies have a very high volume day, and like Sisyphus, they push the “boulder”/”stock prices” higher and higher.  But understand, that one day with high volume action does not signal a major reversal.  There must be follow-through days (FTDs… see IBD), which means higher volume, which means more than the hopeful traders are participating in the rally.  However, in a Sisyphus rally, the main players in the stock market remain on the side, adding no strength to the rally, and henceforth, by the next key resistance level or news item, the boulder comes rolling back down.  

As you can see, the analogy is quite fitting for the sins we’ve committed… greed, deceit, presumptuousness…

The higher the Sisyphus rally pushes the “boulder”, the stronger the velocity the boulder/market comes crashing down.  Just as in the myth of Sisyphus goes as his punishment from the gods for his trickery, Sisyphus was compelled to roll a huge rock up a steep hill, but before he could reach the top of the hill, the rock would always roll back down again, forcing him to begin again; such a story is quite fitting for the many players in the stock market with their incessant trickery- banks with their toxic assets, over supply in homes, credit manipulation, commodity manipulation, Government intervention… whatever trickery that has been done to prop our market up, has been revealed, and the market has punished us all for participating in this chicanery.

The trend is down until proven otherwise, and we will continue to get these Sisyphus Rallies.  The question is, are you behind the boulder?

Here are this year’s Sisyphus Rallies.  Study them real good, and make sure you don’t get smashed by these false rallies.  Can you see why and how the bulls got tricked?  Can you see the “boulder” moving from rally to rally?…

Sisyphus Rally #1:   The Fly declares 2008 dead (January 2008)

  The market starts the year off with heavy selling after reaching a top in November of 2007.  The end of the month the bears start covering though, as bulls refuse to believe the great market rally from 2003 is not yet over.  15,000 here we come!  Push… push… push!!!

Sisyphus Rally #2:  The Pre Summer Meltdown

From March through July, Bear Stearns collapse begins to be felt throughout the market sending the Dow below 12k psychological level, but right when summer comes, commodities are lit on fire.  This is largely in part to the Beijing Olympics hype, that maybe China’s productivity is good for the world.  But is higher oil good for the market or bad for the market?  We can’t figure it out, so the Sisyphus rally ends into a tug-of-war of volatility throughout August.  Then in September, the commodity markets pop, completely collapse, sending the boulder right back down…

Sisyphus Rally #3:  The “Epic Bounce” (after October’s historic meltdown from the bailout bill)

  The major sell off in gold, oil, agriculture and other commodities was only part of the problem.  The market selloff accelerated as the credit crisis starts flexing its muscles (even though we ignored the signs from Bear Stearns) as large companies like AIG, JP Morgan, and other keystone American companies fall apart.  Then the rest of the world gets a rude awakening as the U.S. Government proposes a “bailout package”, that only verifies that the problem is bigger than we can handle.  The market sells off hard as we get under 10,000 on the Dow, and until the Vix more then doubles.  Soon enough, the Sisyphus Bulls enter and ignites the “epic rally,” sending the Dow up over 10% in one day as bears run for cover!  Push that boulder! Push push push!!

Sisyphus Rally #4:  The Vix @ 80 Rally

… but no, we are still going down.  The boulder gets too heavy and hedge funds take advantage of the squeeze to unload.  Trillions of dollars are lost.  And global markets start rolling over too.  But then in late October the Vix gets very high, in the 80s!  With the feeling of “change” coming with the elections coming up in a few weeks, another massive 1,500+ Sisyphus rally rolls forth in a few days…

Sisyphus Rally #5??:  The “One Day Miracle Rally”

… but here comes November.  The elections are over, and talks are just talks.  The boulder rolls over all the hopeful Sisyphus bulls until we get under 8,000 for the first time in a looooong time.  Then volume gets very light in the past two weeks, leading to all kinds of mysterious actions on the tape.  One being a “miracle” rally that sent the Dow from -300 to +500 in a few hours on impressive volume, perhaps on seasonality hopes.  But in the past two days, that +500 has turned into -500 and the news headlines are searching for ways to explain it….

… right now we are in the middle of what could be a Sisyphus Rally.  I would call it a Sisyphus Rally if we get back under 8,000 which would send the boulder right back down over the bulls that bought up Miracle Thursday.  I personally would NOT want to see another Sisyphus Rally that leads to the boulder rolling right back down again.  So at least I can say that we are at a very critical point, perhaps one of the most important points all year for the bulls to do something.  Its tough though, because once again, nothing has changed for the good fundamentally.  Even if we rally here for a few days, if we don’t get follow throughs on follow throughs, then Sisyphus will grow weak, and the boulder will come back down.

Aloha to my awesome and new twitter buddies! …

	JimPunkrockford / David Ashburn
	Danny_iBC / Danny iBC
	jmilez / jamez
	young_jeezy
	HanMoai / Extrememly Shorter
	elditto