A RECAP OF THE WEEK

I will start with a link to last weeks recap. Not to “tout calls” (extra fuck you) per se, but rather to show where balls were placed at turning points where few had answers or insight.

Last week I had talked about two traps that needed to be set. Last week we had the bull trap set and played to perfection, and also in that post I said that I hoped we would start off with weakness at the start of the week to engage bears at the lows. Monday and Tuesday proved to be the lows for the week, and all option activity and market action showed bears fully engaged at the worst levels possible.

Here’s a snippet from the Monday morning post…

As mentioned last week, your resolve will be tested here over these next few days. In terms of signals on the week, I want to focus on divergences. Any divergences this week should communicate to me that I am in the right place and the right time in terms of taking risk here, in the thick of this ugly price action.

Towards the end of the day, I started buying ($LABU, $NFLX, $YOKU, $CYBR) that day stating that…

This action on my behalf doesn’t indicate that I think the market has bottomed today, FYI. Our theme this week is divergences and I will hop on to explain this concept in better detail later tonight.

Also, a post about the divergent Yen, and how it pertains to higher stock prices.

Here was a detailed post about which divergences we’d want to see this week and why they would matter…(great read) all of which worked this week.

This was all out Monday, making sure everyone was prepped for the week ahead.

I closed out my $BIS position Tuesday not long after it bottomed and said Tuesday morning that…

I don’t think this was the bottom, but that we will see one more move this week that will seal the deal. The yen says this isn’t it, and breadth isn’t what it will be when we actually bottom. One more move this week and we’re done.

Mind you, that was after a pretty bad-ass reversal. In the afternoon…

As mentioned in my last post, this isn’t the bottom yet. It is for a few select stocks, groups, and other instruments, but the bottom isn’t here yet for the market. Most importantly, the Put/Call ratio at 158%!

They’re buying puts into this rally. This is the final trap that needs to be set, and that is to engage all bears at the bottom of this range.

In other words, participants were calling “BS” on that reversal and we’re engaging on the short side at the lows. Trap set.

We added another indicator to the bag, which was Goldman…assuming it would act as a market proxy this week.

The best call out of the entire week, was Tuesday into the close. The $SPX went to its low on the week and NOTHING ELSE FOLLOWED IT DOWN. This was the divergent action I warned of the week prior to provide comfort in the risk taking process.

Wednesday we opened up, and I said at the open…

The bulls need to nod here, and let this one go. I knew with an hour to go prior to the close and the twitter heckling at the lows, that the pain trade would be up today. This isn’t it yet, but shit, I would be nervous being short down here.

On the day, RUT non confirmation, Yen non-confirmation, breadth non-confirmation. I’d like to see a repeat of yesterday to be honest and this shit is a wrap tomorrow.

In short, hoping this is the start of the last “uh-oh” move.

Stocks rolled over, and bottomed about noon. At that point I had taken notice that all week, everyone was talking about stocks in relation to their August lows. Most analogues followed called for a breach, and I was leaning back and forth on that one detail.

Thursday we opened up and sold off again, and into that weakness, again, everything came up divergent.

By noon Thursday I went through my second round of buying at lunch time…$SOHU, $GS, $LULU, $FEYE, $FB, $LNKD and $NFLX. Very well timed too.

By Thursday’s close I was convinced…

The more I think about this whole thing, the more I’m convinced that the only thing both sides of the trade are watching for here is the lows. All analogues call for a break of the lows, right? Except for the 2015 analogue?

The ultimate pain trade here is that while everyone watches the lows with bated breath, the market has already bottomed.

NFP hit this morning, and all analysis had met the ultimate test. My last two remaining confirmation signals had yet to hit, and here we were, selling off pre-market. Blog title “The Knights Have Been Summoned.”

Everything came up divergent again immediately off the open. About 20 minutes in, I started the next round of buys in $TSLA, $PYPL, $AAPL, $WING. The USD/JPY screamed back up into its range, and the market found its initiative buyer. The last two qualifications that needed to be met for the week.

I am doing these weekly recaps to help answer the questions I get in the chat, and to illustrate the process. You learn more about markets by watching these things unfold, than you do at any other point in time.

In the next ten years, all the old books from the 80’s relating to techincal analysis will be burned. All books pertaining to market analysis will emphasize the mental aspect, how to understand pain, how to forward think how the market will fuck you, and how to avoid those moments.

Have a good weekend.

OA

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