Watch the 20-day (840), Res @ 850, Final Sup (815 & 820), REITs, Large and Regional Banks

First, a poll.

What’s Geithner’s IQ?	Idiot (1-24) Imbecile (25-39) Moderate Mental Retardation (40-54) Moron (55-69) Borderline Mental Retardation (70-84) Average Guy (85-114) Bright (115-129) Moderately Gifted (130-144) Highly Gifted (145-159) Exceptionally & Profoundly Gifted (160+)
	Current Results

Oh man, we got some problems. I’m not kidding. If we break below 820, or 7 pts below our current level of 827, then that will break the only uptrend support level that the market has been relying on so heavily in the past few weeks. You don’t have to be smart to figure this out. I can guarantee that you’ll see some serious selling if (when) that happens.

If we do get a bounce, watch the 839 -840 level. This is the location of the 20-day MA. The SPX dropped 30 pts the last time the market failed the 20-day. In addition, 850 is key resistance  which also serves as a psychological reversal area where the SPX has failed many times..

This one is really tough for the bulls. In the intermediate-term, the action from mid-January till now looks like a bear continuation flag. It can also be an ascending triangle, but the market has to recover most of yesterday’s losses today to even have the slightest chance for an upside breakout. If we get some bs secondary reaction rally, it’ll be time to re-short. This environment also sets up for higher probability swing trades, most of which will be entered at the very end of the day.

Focus is on the REITs, large and regional banks. They will give you the biggest bang for your buck.

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I closed out all my existing positions yesterday morning and didn’t trade at all after that. The reason is because I know what the 50-day MA can do and how it can waste a trader’s time, energy, and in many cases, result in losses and potentially perpetuate a death spiral. We closed at 869.89, or .24 pts above the 50-day MA (869.65). This was highly expected.

You just don’t mess with the 50-day MA because it acts as a “magnet” on an intra-day level. If you noticed yesterday, the entire day zigzagged above and below the 50-day MA, eventually returning to the mean. This showed extreme struggle between the bulls and bears. This is usually because of a pending news item. The end result is that the day becomes a doji, or an indecision day. I even mentioned yesterday (mid-day) that the day was going to be a doji and that it wasn’t worth my time or energy to trade.

Not only that, the market is presently bound by the 30-day MA, located at 862.09. This is in addition to the 860-880 channel that I’ve mentioned many times already. Notice how we kept bouncing off of 860? There are too many support/resistance levels that are keeping this market in such a tight range. In fact, I picked a nice time to take a temporary break from trading to mentally refresh. As long as we’re in the 860-880 range, I will not be trading. As long as we’re lolligagging around the 30/50-day MA’s, I will not be trading.

I am very interested in seeing how the market will react in the morning. Currently in 100% cash and avoiding all the government fuckery.

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We hit 875 resistance on the SPX at 11AM. We are also at the 50-day MA, which is currently at 869.64.

If you also noticed, we are forming an intra-day symmetrical triangle. Until this consolidation is resolved towards a single direction, I will not be trading.

Below, you can see the market being led by the financials and oil with pockets of mixed strength and weakness all over the place contributing to fact that today is currently a doji day.

2:00PM Market Carpet:

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The most important technical area right now is the 50-day MA. This moving average has caused a lot of grief for bulls since 2007. We are still in a huge neutral range. I suspect that it will take the market a while to make up it’s mind, but when it does, jumping on the intermediate-term will be extremely profitable. Until then, stick with short-term swing trading and the more favored day trading strategies.

On the 40-day chart, you can see that I marked off 860-880. This is an area where the market either continued or reversed it’s direction. This area also marks the 50-day MA, which is currently at 867 on the SPX. We broke out of a short-term symmetrical triangle, but with all the crap going on, don’t be surprised if we get a -20/-30 pt pullback. There are too many news items that will be coming out that will precipitate an instant rally or sell-off. This could be another “buy the rumor, sell the news” type of thing. Don’t get too excited about anything.

I am currently reading “Trade with Passion and Purpose by Mark Whistler (Wiley, 2007)”. It’s a $49.95 book, but worth every penny. It deals with all aspects of the psychological/emotional element in trading, an area that is very much neglected. I always tell traders to be patient and stop being impulsive. Much of trading is about waiting – waiting for the set-up, waiting for the breakout, waiting for the pivot point, waiting and more waiting!

Be cool, hunny bunny.

[youtube:http://www.youtube.com/watch?v=fMRi-gFeK-M 450 300]

I did remarkably well so far in 2009, producing gains above +60% YTD. My intention is to now cut my position sizing by half and trade less frequently in order to make sure these gains (+ future gains) stay with me until the end of 2009 for my 4th annual triple-digit gain. In fact, I’m going to take a break for a week because I fucking deserve one. I would go on vacation, except I have to babysit some students. The majority of my gains come from my proprietary Spiker™ strategy and maybe, one day, I’ll write a book on it.

Currently in 90% cash and not giving a damn about what happens this week. Watch that 50-day MA.

Update: I forgot to mention that the Total Unemployment (U-6), unadjusted, is at 15.4%! The chart below is the only chart where I don’t expect a pullback any time soon – click to enlarge.

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[youtube:http://www.youtube.com/watch?v=yf2v0TR6QfM 450 300]

Have a great evening!

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9:20AM – Visualization of the employment situation:

8:37AM – Wow, those numbers really sucked (-598K/+7.6%). We lost a total of about 3.6 million jobs since the recession started in December 2007, FYI.

Here’s WSP to make you feel better:

[youtube:http://www.youtube.com/watch?v=hKg2doksrzk 450 300]

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We are at a critical juncture at the moment. The market was creating a flag all day yesterday right above the 20-day MA. It’s obvious that the Employment Situation and/or the Senate vote on the stimulus/bank plan will be the catalysts that will allow the market to exit from this month long symmetrical triangle.

At this point, it looks like it’ll be an upside breakout. Many financials are showing reversal signals, such as hammers/doji, and those signals are supported by massive volume, e.g. BAC. If the financials lead the market, then we definitely go higher. Keep in mind the following levels on the SPX:

Support: 820, 815, 805 = total breakdown.
Resistance: 850, 855, 860 (30-day MA), 867 (50-day MA), 875.

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