Thursday, December 11, 2008

The Quick and the Dead; Dec. 11, 2008

The market's technicals continue to show weakness on this rally as shown from the last chart posted below. However the internals of the market are still strong and signal further rallying. NYSE breadth is positive today, however it keeps getting weaker and weaker every day as seen at the bottom indicator in the chart above. All this tells us the trend is weakening and will end with a sharp selloff. With the weakness building but internals still showing strenght, I expect a pop rally into the 950 area of the S&P before a top forms. Any strength above 900 is a good shorting opportunity and I will be taking advantage of that. I bought back more call option protection yesterday and today at a lower price in preparation for this rally to 950. As seen in the above chart, I project a rally to 950 and then a sell off to 800, a period of consolidation will then occur. This will be a great shorting opportunity because our risk will be well defined and the profits will be quick and big.

With all that said, we are in a large 4th wave which means it's going to be very ugly and difficult to predict what's going to happen. So my strategy is to align myself on both sides of the market for now and take profits quick as they come to me. As the title says, in this 4th wave there are two types of traders, the quick and dead. I'd like to be quick. I'll be taking profits on positions when they move into the green.


Anonymous said...

I was the dead, I had a short going and the market open low on 12/12 and I didn't want to cover it because that mean I would have to wait 3 days for it to settle.

Hey Todd, I don't have Scottrade elite because I only have $2.8k. Is there any other way I can get a live chart of the breadth, or should I just follow your advice along the way and hopefully turn my $2.8k to $25k. :). I am now using your blog as my guide line. Please keep up the good work Todd. You are the man, I love how on 12/11, you had 3 blog. Hope you have time to do that everyday.

Todd S said...

If you have more than $2500 I believe you can have a margin account. If you have a margin account you should be able to close trades and immediately reopen another one before it settles. Try applying for a margin account. As far as breadth goes, go to Scottrade's web based platform for your account. Click on the "Quotes and Research" tab at the top, then on the left side click on "Market Statistics". You'll see in the upper middle of the page the NYSE up/down volume and advance/decliners. You just need to divide the volume (up or down) by the total volume and you'll get your number. You can also look at a chart and under "Lower Indicators", then "Breadth" it has NYSE indicators for up/down volume, advancer/decliner, etc. Just click on the index you're watching it will will refresh the data.

Good Luck!

Anonymous said...

My mom won't let me open a margin. But thanks for the info, very helpful, you have a good strategy.