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?
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.
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.”
… 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…
….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…
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″…
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