Equity Markets: Technical Update (11-28-08)

Looks like we’re in a bear flag or a rising wedge (close-up view). This pattern usually spikes higher and moves laterally toward the top of the flag/wedge and then falls off a cliff quickly. The volume should also be decreasing each day (regardless of whether it’s a holiday week or not). It’s important to short as quickly as possible because the breakdown almost always falls much faster than the time it took for the pattern to materialize. The top of this pattern must be paid attention to as it could be a false pattern. This is most easily determined by Fib retracement levels. I did lose a few % today covering some test shorts, but it’s all part of the game. Knowing when to let go of a position avoids ruin. Monday should give some additional guidance to short provided that the pattern doesn’t fail and monstrously breakout to the upside which I highly doubt will occur.

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www.weeklyta.blogspot.com

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I can’t write much cause it’s time to travel, but Happy Thanksgiving to everyone. My friend T.G. posted a Thanksgiving video that’s very nice to watch. For those that suffered significant losses since Oct 2007, it must hurt tremendously, but put things in perspective by watching this video. Also remember that Jesse Livermore went bankrupt and lost his fortune multiple-times throughout his career, but he still banked coin. If you’re reading this blog, chances are that you have all the basic necessities, plus an education and “stuff” that’s not really necessary. You are still better off than most people in the world, but you probably don’t want to hear that. You want to make more and more money. Forget about all of that and go spend some time with your family today. Cheers!

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Doji day! Yes it was. Nothing really happened and the day was plastered with indecisiveness. If you tried to get in-and-out throughout the day, chances are that you didn’t end up green. Typically, I would enter short positions at the end of the day, but today proved, once again, that the market likes to show its altered personality in the last half hour of trading. Thus, I remained in cash once again. Days like yesterday mark a 50/50 chance for a sharp movement in either direction, and it’s usually a reversal. Many sectors look like they will reverse imminently, so be warned (Example: Solars).

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I came back from a nice dinner, a very important annual meeting of my own, and a very controlled, early night of hedonistic pleasure. I run several businesses, so unfortunately, I cannot participate in late-night debauchery sessions. My first and foremost allegiance is to everyone else, and not myself. I realized that when a friend asked me why I never planned a personal party. Answer: I’m just not the outgoing, personal planning type. I keep to myself most of the time. I prefer small groups of friends and associates and familiar places vs. large groups and high-end venues. However, I will be going out every, single day this week because it was my tradition to do so since I turned 21. Therefore, posts may be delayed during this most important week as I make this painful and sudden transition from 23 to 24.

Okay, anyway. We had the Citigroup rally, but we always rally on a bailout, so what’s new, right? I say that if we have a down -350 to -400 point day, this rally is entirely over and the leg down continues via bearish engulfing or dark cloud cover. If we drop less, then we are most likely ok and we will become range bound. The only thing I don’t want to see are continued spikes with more and more narrow days as they tend to exhibit strong reversals at the end. We have hit a key resistance area which can be seen in the multi-month chart below. What was support has now become resistance. It all depends on the size and shape of any morning gap within the first 30 minutes. As for today’s orders, the program has been changed to promote short positional trading and no orders were issued today.

All I can say is that we won’t be continuing up in a straight line fashion. We can either reverse here or at the 20-day MA. It is possible to thrust back up to our consolidation zone. This week will determine if we continue in the fourth leg or if we just hang out in an excruciatingly painful neutral range designed to slowly wipe out people’s accounts. I will remind you that a strong bull rally requires buying conviction. There is still so much fear money on the sidelines. I made it back to +68% for the month and feverishly wait to break +70% in time for Thanksgiving.

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Yes, that’s right! I turn 24 today. I’m getting old (90% of the people reading are saying, “WTF?”). Ha, no I’m not getting old, I still have have a lot to learn. Usually, my birthday is either on Thanksgiving or before or after that day. My birthday will always be remembered as Citigroup’s bailout day. Wonderful…

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I’m mad. Or, I was mad today. There is such an utter delay with this post because something that shouldn’t have happened…actually happened. At around 3:20PM, my exceptionally high-speed ISP cut off. Now remember, this is the last half hour of the trading day (and usually the most critical). You would understand why I yelled at them. I was so pissed off and explained to them (with enough force) why it was so important for me to have internet from 3:20-4PM. They gave me 6 months of service free as a result. The most important thing? It’s my fault. It’s my fault for not being prepared for it. I didn’t panic because I was in 90% cash, but I’m sure I would have reacted differently, let’s say, if I was 100% short. Ouch.

The most interesting and disturbing part? I issued my last order to cover short positions at 3:07PM (I, myself, covered 90% of my shorts and kept 10% as a spec play). Keep in mind that these are original positions from yesterday afternoon. This means that if I delayed covering my shorts, I would have been screwed. 13 minutes could have changed everything and there wouldn’t have been anything I could do about it. Therefore tomorrow, I will get a backup ISP, most likely Comcast cable, along with a Verizon BroadbandAccess card for my laptop so I can access the internet from everywhere. I don’t care how much it’ll cost me because I am not going to take any more chances. Learn from this experience, and realize how close I flirted with a serious loss. This is part of risk management and it didn’t even cross my mind, until now. The market gods must have anointed me at the close.

I missed most of the Tim Geithner rally as a result, but I’m more happy that I covered my shorts 13 minutes before I got cut off from cyberspace. One must ask themselves if this rally truly has substance, or if it is another news item rally. The short-term significance of today is the fact that the candle neutralized yesterday’s loss. However, there is still a lot of ground for the bulls to recapture. This requires sustained positive catalysts and I don’t see too many of them. What do we look out for over the weekend? See if the autos are still functioning, Citigroup is still alive, and if any surprise government regulations or gov’t-assisted deals pop up. This weekend just feels like something is going to happen. Either way, the government will be busy this weekend, and I am in 90% cash and 10% short (because I can afford to). I did lose 2% today but still sit at +65.6% for November’s gains. Can’t win everyday, but better than getting your sack nearly chopped off by your internet service provider.

And by the way, the service became operational around 9:30PM, 6 freakin’ hours later. Thanks a lot.

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