Note to self… Divergence day #1

Low volume day today.  Classic fade.  Market starts up firing, but where’s the volume?  Market moves to equilibrium.

Notes…

• FAZ vs Market had improper pricing.  FAZ did, however, mover properly intraday.
• Smooth correlation with VIX~SPX
• Got faked out on FAS long earlier in morning.  Error was buying while VIX was in a uptrend.
• Long FAZ after VIX double bottomed later in day.  Market sold off about -80 points.  FAZ rallied all the way to the green after being down -9% from rally point.

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After flagging from low to low, the market has done something a little different.  In the past two days we had a bit of consolidating (market catching breathe), with higher lows.

One thing about Wednesday’s tape was that close.  It went from a manageable bear tail, to all out dump.  Hmmm, not what the bulls want to see.   However, we still above this mini-trend up from the lows.  I expect a little more chop in that yellow circle before seeing the market go up further.

For now, I am using whatever reversal at the resistance points in the VIX to get long the hesitating market.  There’s a lot of them, so that may stall the bears a bit.

So, looking for market to get below 7234.14 before searching for a VIX reversal.  If I get it, then I will get long FAS for a trade.  Other then that, I’m using all those blue lines intraday for day trading FAS and FAZ.

K-den brah.

-gio-

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Here’s the +10% trade I annotated today on StockTwits in real time.  Click to enlarge.  It might be too big, so I don’t know, do what you gotta do.

… We had about 20% to play with there on that VIX reversal down.  I hope you at least caught some of it.  I capped out at around +4%.  I think volatility will decrease soon.  But if you’ve traded FAS or FAZ intraday, then you know what I mean when I say you got to be quick with your trades, and be very picky with your entry points.

Laters!

-gio-

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Forgive me FAZ….

… I almost got the StockTwits award for that call.  It’s all g.  Off to the intraday charts:

Well, I got my VIX < 51 rally spot, and I went long FAS for a daytrade.  We still have one more hour to go on the tape.  I expect the bulls to hold this one, so hopefully we don’t get a reverse-WTF pattern into the close, or more appropriately a ɟʇʍ-pattern.  For now, FAZ is getting nuked, and deservedly so.  Down about -27%.

Once again, when there is fear or panic in the market, I would switch to using the VIX over technicals.  The hard part about technicals is that when you have a free-falling stock/market, its tough to call a bottom.  However, when it comes to fear, people generally get tired of it, and panic is an ephemeral emotion.  So, instead of trying to spot a possible rally by guessing the bottom in an index, I used a reversal in fear.  VIX under 51 is the spot! 

Brian from AlphaTrends gave me a shout out today on Twitter.   Right back at yah!  For technical analysis from a proven vet, check him out http://www.alphatrends.blogspot.com/

Enjoy the rally.

-gio-

… if you think this video is nice, imagine watching 4 beautiful girls dancing hula to this.

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Market crashing?  Relax to some Hawaiian Tunes

These markets that open already gapped up are useless.  Bulls are so Paul-Pierce-like, they get scared and sell all their longs into every morning gap.  If you take a look at the Dow, it has been doing horribly in 09.  Just ask Danny, or read his newsletter.  The Dow has closed in the RED about 21 times in the past 32 sessions, which is still a tad better than the Golden State Warriors record.  NDX has done worse this week… down almost double digits.

Nevertheless, Monday’s selloff felt very “soft.”  The bad news for bears was, despite a -3% uppercut, volume was light.  The very bad news for BULLS is, is that I’ve explained before, you never want to get long (jumping the tape) on a bear-flagging tape (whether swing or day trading; ie, see my chart from yesterday’s post)… those bear flag NEAR the lows almost always lead to another flag lower, and you can discount volume at that.

… so for now, the correct side of the tape is to be bearish.  To short on every rally and stuff like that.  Do NOT enter new shorts here.  There has been way too many distribution days this month, which is usually a sign that profit taking for bears is near.

That doesn’t mean we can’t be a Matrix-Bull.  I feel we are in for a tradeable bounce very soon.  However, what I would like to see is the market to start gapped DOWN, then buy into a rally attempt up.  It will come.  Just keep an eye out, keep yourself sharp, and be prepared to stick a dagger into an unsuspecting bear.  Then when it’s all done, join their side. 

I guess I’m still searching for a trade-able bounce in the same place:  VIX < 51, and perhaps even more conservative, VIX in the high 40s.  What I would like to see though is for the VIX to move higher then reverse  simultaneously with a market that starts gapped lower then reverses up.  That would be a proper correlation.  When that happens, FAZ will be horse nuked.

I’m extrapolating the data from Monday’s intraday tape to use for swing trading.  Don’t ask how.

 

-gio-

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Today, we were supposed to be up 200, not down 200.  At least that’s where I honestly felt we would be heading.  I will probably be buying this dip near the close.  This sell-off just felt a little soft.

Okay, off to the intraday charts… (click to enlarge)

• Today was tricky.  Market just melted down all day at a rate of like 5 points every 10 minutes.  So, we had a pretty steep slope.  Maybe everyone was thinking we would rally?
• First 3 hours of trading we “flagged lower” and lower.  One thing you should always be aware of, whether you are swing trading or day trading, is that a bearish flag near the lows almost always leads to a new low.
• The attempted rally after lunch (12:53) looked really good.  I saw FAS rally from -6% to +2%.  But then out of no where, the rally got shut down, and quickly sent market to new lows.  This was really unexpected for me!  Volume is low, hence VIX is skewed (very flat), and usually when the VIX is sleeping I lose my edge.  If you noticed on the VIX, it had a nice and steady straight line up.  How am I supposed to find a reversal point if we get a straight line up!  The VIX measures volatility, hence, it needs to be volatile itself.
• I made two ugly calls on the tape with FAZ.  When FAZ was red, I thought the trend had reversed and thought it was going to go even deeper in the red (approx -5%).  However, both times I thought that would happen, both times FAZ rallied back +5% in a matter of minutes!  Goes to show, its tough to bet against an obvious trend that we had in the morning hours.

I guess the mistake I made today was expecting too much that the market was going to rally after seeing what happened on Friday.  Turned out, that brief squeeze on Friday was a shake-out of the weak bears.  Nevertheless, we are coasting in oversold territory (I hate that word, “oversold”) and so will advice to NOT enter new shorts here.   For now, I’m waiting for the VIX to see if it wants to get below 51-50 before trying to catch a relief rally.  If the VIX gets back to the 40s, the bears will panic.

So far, its great to see all the new members on The PPT.  Just get used to the system and take advantage of the community there.  It’s a very valuable resource.  If you ever have any questions about it, let me know.

laterz traderz,

-gio-

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