Sunday, May 31, 2009

S&P500 Weekly Commentary June Quarter 3 begins

Quick notes (3 finals down 1 to go):

Interesting stuff with GM, I wonder how much this is all priced in the equity markets. I haven't followed any news or blogs for so long now. My play last week turned out quite well early on and I hit my profit target, if such an option existed that I mentioned I would have made good on those proceeds as well. Mid week the early highs of 910+ were killed, but friday turned out with a kick in the butt surprise ending on 919! I don't even know where this move came from, but we definitely are seeing interesting pattern formations!

The past month one can argue has been trading sideways, its looks as if the markets are preparing to decide where to take the S&P500 for the rest of the year. These bullish short term moves are not to convincing with a lack of volume conviction, while in the past month the big down days such as may 20 and may 7th have quite a bit of volume to their moves. Im sure if I had time to check bollinger bands, the standard deviations are coming to a squeeze.

Im noticing an interesting trend in SMA, last week I think I mentioned at 30 and 165 SMA crossover for short term support. Currently the 165 increased to 175 to being as close as possible to get a cross under at 30 SMA support. With this increased trend maybe in the next two weeks we will see a price cross over the 200 SMA, which would be more reason to be bullish longer term.

The RSI on the Daily charts are staying above the 50 Mark after bouncing off it a few times during the week. This is indication for further bullish movement.

The MACD, though it maybe a bit early to say, is certainly possibilty indicatining bullish convergence in their longer and hsort term averages.

Quite possibily we are seeing percieved support at 880 or real support at 877 (my orginal support). This level has held quite nicely over the past few weeks and is part of the reason I maintained bullish stances short term.

However, because of this this will be making risk/reward ratios bigger, espically with short term resistence. However, my ideas of 910 resistence were totally blown outta the water on late day trading friday (too bad i dont' have time to look further into this).

If support at 877 maintains, I forecast that this week will test resistence at 930's, however I do expect a 1-2% drop mid week (if support holds) Something simiarly seen on may 27, 2009.

Hopefully all this craptacular news is priced in the markets, even still its possible the bulls with defend their beloved support...


This week I will give no strategy plays, after my finals I will continue with them though!

Sunday, May 24, 2009

S&P500 Market Commetary - May 24, 2009

Quick thoughts amongst the heat of intense finals...


Looking at the month of may alone, chart can be interpreted bullish short term by trend/pattern short term (short term, into the first month of the 3rd quarter). As before I stated last week I will remain short term bull as long as support at 870-877 holds.

I was playing around with SMA, I found something very interesting, there is short term price support from a cross over of a longer term average under a short term average. The shortest SMA I could get remaining under prices was 30, and the longest SMA I could get with a cross under the 30 SMA was 165; thats quite a range of support. considering the 200 SMA which is quite bearish. This leads me to conclude strong evidence for another move upwards if indeed we have changed trends from bull to bearish.

this possibly may indicate the S&P500 may need another higher low before going down. IF support were not to hold.

Bearish View

Considering volume trends though, and considering a longer time frame for the from about june 2008 ytd, can show a rather bearish interpretation. Depending on your read, one can say the past two weeks are a failure to break resistance at 934-943. Bearish trend in place as confirmed by strong volume seen on may 20th.

Within this time frame on the (on a daily chart) RSI indicating a reversion back to center line, making it harder to use as an indicator. However, from late march onward this is the first time from 1 year ago ytd that the RSI has stayed above 50 and reached near oversold levels at 70.

the MACD is also showing a more bearish indication as the longer term average clearly crossed over the shorter term average and is opening with the past two weeks ending on lower lows.

How would I play out next week if I were trading the S&P500:

Say I am short term bull:

Id probably have a tight stop on 875 (I would be stopped out if prices move about 1.3% downwards). I would probably expect prices to hit 904 which is where I would take profits if this hits before the week is over.

I would be wary to raise my price target higher because bearish volume indications, and short term resistance possibly forming at 910.

If one wanted to hedge this, one probably could buy puts if they had the money, or write puts matching to the stop loss. ( does this even make sense? man i need to review options strategies...)

interestingly enough this purely a technical play, im not considering sentiment, not reading the vix, candlesticks or news, and Im not considering any fundamental changes.


On a side note: after exams I will evaluate my performance for quarter 2 on currencies! Exciting stuff! Unfortunately this will be well into the first month of the 3rd quarter...

until then...

Sunday, May 17, 2009

S&P500 Market Commetary - May 17, 2009

Quick thoughts:

Last week horrible time to go bullish. With this 5% drop, as I stated before, this market would need a correction before seeing a possible break in 934 resistance (if even possible at all at this point). Read my last week's post.

I will remain bullish (as in buy on this dip), since resistance is still holding at 870-877. To be honest I'm not looking at the feasibility of resistance holding this week. Sorry, no time...

However, considering my brief analysis, I would assume its a bad idea to be bullish this week.


Thus, I must stick to the discipline and I will cut my losses short and consider going bearish if this week ends below 877 (870? I wonder which support is more significant or more realistic, for a bull, probably real support lies at 870 with retest bouncing off 877 or higher).

As I was saying before all these bearish indications form would seem to be bad but, Ill stick it out and be short term bullish. Until support is broken or If I happen to get a chance to look at some charts that would change my mind...

Until then...

Sunday, May 10, 2009

S&P500 Weekly Commentary May 10, 2009

Unfortunately I cannot give a fully analysis this Sunday, as I am too pressed for time. Just some notes:

Unfortunately last week I was wrong about being an drop in the early week, however my bullish call for the week was certainly correct. Either way being positioned bullish last week was the right move.

We are getting some indecisiveness at the close of the previous week. The stress test proved to be no big surprise on Thursday. Much of the news was priced in as seen by the huge jump on Wednesday. Which would have been the proper interpretation counter to other ideas that I blogged about on Wednesday.

This week is a big week as my new call on 934 resistance from last week will be tested this week.

Despite the bullish upper shadow on the drop on thursday, there was a significant volume spike, considering this perhaps this maybe evidence that resistance at 934 will hold this week.

Furthermore, more evidence for the bearish pictures is developing, the 200 SMA is appearing on the daily chart vs two weeks ago only the 150 SMA was in the daily chart. The RSI is being sustained at near overbought levels, while the MACD is a bit unclear.


Ill say the big things to watch this week is 934 resistance level, and to see if the 200 SMA will cross under prices (which would make me quite bullish for the S&P500 into the 3rd quarter if sustained for a few weeks below prices). It is more likely that we will see a holding of resistence coicide with at the 200 SMA moving out of the daily charts along with a fall in the RSI and a convergence of averages on the MACD.


My past discipline has told me to stick to the current trend until the trend has clearly broken. Despite this bearish picture developing I will maintain a bullish stance this week, which would most likely mean a break in resistance of 934. Further bullish confirmation will be seen of the 200 SMA moving and staying under prices for the next few weeks.

If we get a strong break and price closure above 934 my next price target will be 952. Considering the S&P500 is pushing into oversold conditions, there may need to be a correction before this level is seen (I was also clearly wrong in there needing to be a correction for 934 levels to be reached last week, as after 877 there was no correction). When may this 952 hit then if this rally continues? Considering this is only about a 2% move, if prices get a strong close above 934 this week, we may see 952 by the end of next week.

Keep those bullish pants on... don't think its the right weather for bear shorts just yet...

Wednesday, May 6, 2009

General Market Commentary: April 6, 2009

It seems that Monday was a big day for the S&P500:

Not only was my price target reached for the end of the week already (894), it was surpassed by about 1.2%. Prices yesterday subsided probably on covering gains, or perhaps this is alluding to something bigger?

Tomorrow is a very big day for the big banks with the stress test results being announced. Perhaps that yesterdays move was not only in part gains taking, but people heading to the short side due to uncertainty of the stress test results.

All in all it seems that the markets are poised to move higher. Despite a decline of bullishness from the 1st to the 4th of may seen on the cboe vix put/call(0.28 to 0.63, which maybe have been a good indicator of markets moving down on the 5th), markets have become extremely bullish as seem from the move from 0.63 to 0.1 (cboe vix put/call).

As follows, we are seeing Asian markets heading towards there close with strong gains, and with a strong start with the FTSE today.

Stress test results:

Scenario 1:

Considering, Bernake comments yesterday, I would assume the stress test results are quite positive, unless it was Bernakes devious desire to correct the markets in face of all the blatant discounting of poor economic news.

Considering the latter seems unlikely, it quite possible we will be seeing my call on 934 on the S&P500 within this second quarter, quite possibly by the end of this week or by the end of next week depending on tomorrows stress test results.

Scenario 2:

It is possible Bernake played up the recovery story in order to soften the blow of mild/to poor data from the stress tests. If this is the case markets may move more adversely to such results on the banks. I would be then looking to support at 870 and 877 my former Resistance levels (S&P500).

Summary/Thoughts on Economic Situation:

All things considered, I don't see how these stress tests can come in good, other than the fact that the government is backing all these banks hence the reason for good results. All this "capital" the banks can get is due to the governments ability to keep printing more money.

It really surprises me that one of the biggest drivers for a banks bottom line is not being emphasised. Lending I would argue is more important and whether lending improve depends on many other various factors.

Sure the liquidity is there, but what about all the uncertainty of bad debt banks or other financial institutions are still holding? Are these new monetary policies enough to clean up the mess. In other words considering interest rates nearly at 0%, are these programs monetarily and fiscally implemented such as provision of Liquidity Directly to Borrowers and Investor in Key Credit Markets, Purchase of Longer Duration Securities, Financial Stability Trust or "stress test", Public-Private Investment Program, Expansion of TALF, Transparency and Accountability, Homeowner Affordability and Stability Plan, and small Business and Community Lending Trust; are these enough to really fight off this recession, or are we just throwing money into the never ending big black hole?

How about the consumer? The reality we maybe seeing a divergence in market sentiment and what the consumer is actually feeling, considering job cuts, many people are cutting back and focusing on savings.

Deflation seems to be the talk of the day, what the heck will happen with inflation once it starts rearing its ugly head again? If economic conditions don't recover + inflation, economic conditions can head further south.

With the consumer not spending, banks are probably not feeling comfortable enough to lend. Many of the retail sales employees of banks now have becomed salary based employees alone with no bonuses(wheres the incentive to grow these banks? no point in working more hours when you are not getting paid for it)... no reason to borrow => no reason to lend + no reason to work. I know is an oversimplification, but imagine this magnified over many banks and jobs, I'm sure it has some effect, whether it be in terms of economic rational and behavior (changing spending habits, consumer sentiment, willingness to do work or do business etc...)

It looks as if banks will still have to rely on FX/market/transaction opportunites and fee based income growth vs. organic growth of lending to grow/maintain financial health in this current business environment.

Which leads me to my last idea. Perhaps Asia maybe in a better position to lead strong recovery in the banking/financial sector after all. Considering a totally different consumer, a relativitly underdeveloped banking/financial sector in many of the Asian regions. Maybe it would be better for banks to focus on development in such regions in order to restore financial health, instead of trying to fixing this boom/bust credit cylce system "old capitalism" has brought about...



Considering the very bullishness I'm seeing across the board I think it is possible we will see a higher high at the end of this week, I will definitely say that tommorows stress test will be an event driver. If bullishness remains the S&P500 will defintiely be testing resistence at 934. If not, the S&P500 will have to see support at 877 to 870 to see how "fo real" these bulls are.

All in all I'll maintain to the bullish side for the end of this week and will re-examine this weeks performance on Sunday as I do every week...

As much As I would love to delve into the political implications of the Obama adminstration, this linear regression isn't going to learn itself for finals...

Sunday, May 3, 2009

S&P 500 Market Commentary May 2, 2009

This will be brief considering my constrained schedule for May and first two weeks of June:

Talk about a bad bad week last week. Pretty much almost wrong on calls I made last week. Sentiment was very bullish last week, I should have noted the Vixx index remaining bullish at the start of the week. Despite a strong drop and lows in the 840's, Price levels never reached the 30's as I predicted, and the week closed at my second resistence level at 877. Resistence has held at 877 but the mid week saw price action well into the 880's (though there has not been a strong close above 877). Again with blantent ignoring of economic fundamentals this rally continues into week 9 of the bear market rally.

It would seem the masses are confident in the combined monetary and fiscal efforts, however I still am not convinced, but at this rate if price levels close strongly above 877 my next price target will be around 930 (reaching this level in the time frame during the third quarter).

What I did wrong last week:

1. I probably went with a poor gut feeling last week.
2. I let the longer term trends affect my call in the shorter term.
3. Possilby I didn't consider the slower movements in the equity markets as Im used to the speed of price movements in spot fx markets.
4. I didn't wait for very clear confirmation on the charts in order to take a full out bearish stance (this idea kinda coincides with number 3)

Next Week:


I will say the case for next week being bullish is not very convincing however. Considering the volume on April 30 vs. May 1st. Though one can see thursday was a day for the bearish with high volume, the long upper shadow indicated the strength of bears where not so strong which led to a higher high on May 1st. Though May first was a bullish day, there was nearly a difference of 1.5 million in volume compared to thursdays down day. In addition, examining May 1st's candle indicates bearish sentiment lingering with a long lower shadow.

Such a volume trend is not convincing for a bullish arguement.

The Vixx:

However, looking at the CBOE vixx index, it seems that investors are very bullish from thursday to friday from 1.08 (neutral/bullish) to 0.28 (bullish). (If I had time I would love to back test the vixx in comparison to the S&P500 to see how effective the vixx would be to use in forecasting the S&P500 in this current environment; will probably have to wait until summer begins).


Considering that Bernake will speak again twice this week, its more likely that this will be another bullish weak if the markets really believe bernake in the short term.


Considering we get a strong break in 877 I will say the end of the week will reach price target of 894 (890's).

(I reached this number by approximately averaging the past 8 weeks weekly increases of the bear market rally, however considering that I believe this rally is losing steam inconjunction with volume prices may only reach in the 880's, there will need to be a strong correction (to the downside) and strong support at 877 or 870 in order to reach my prior price target of 930's, which probably won't be seen this second quarter).

If this rally were to fail this week:

I would probably say this coming week would see a price target of 842. Considering the risk reward ratio, a 2% gain from the bullish side vs the 4% gain from a short on the bearish side, it would seem it would be better to be bearish. However, considering last weeks performance, and not full out clear signals on the charts, Id say this rally has some steam left in it.

Hopefully the markets are pricing any bad news the economic reports will have along with bearnakes speeches.


This week I will stick with the bullish arguement (though my longer term outlook is still bearish). In this case, I forecast prices to probably drop in early week due to bearish signals at the end of last week carrying over, and then prices to close above 877 strongly this week, and end on the high side of around 880 - 890.
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