Saturday, July 4, 2009

Please Also See Updated Long Term Stock Market Outlook to the Right

Head Shoulders Suggests Lower Levels; July 4, 2009

Happy 4th of July all! I'm gonna celebrate America's birthday with a movie and some tri-tip grillin. I hope everyone has a nice enjoyable holiday.

As for the markets, they have not been clear lately but a massive head-n-shoulders pattern has formed on the above 8hr S&P futures chart above. A break of the 885 necklilne will open up the the market to a fall to the 845 level which is a prior congestion area. I added a little to my existing covered call S&P (SDS) strategy on Wednesday, once I saw the market topping in the afternoon. I am about half short of the full position I'd like to be and might add short on any large rallies toward the right shoulder area at 928.

For the head-n-shoulders pattern to hold, the market must stay below 958, but a strong break of 930 on big volume and expanding NYSE breadth would probably signal that 958 will be broken in the near future.

I have half of a full position short the S&P.

Tuesday, June 30, 2009

Stopped Out Most of Short Positions, Waiting....; June 19,2009

The market rallied completely unexpectedly as I surely thought it would fall today after Friday's action. July 4th shortened weeks tend to be bullish but I don't usually pay much attention to that type of stuff. The market internals were not impressive at all today but the Dow did confirm the rise from Friday in the S&P and Nasdaq which removed the bearish non-confirmation I discussed the other day. Plus, with the rally today, most of the major indices made new highs to where it creates a clear 3 wave decline from the highs a couple weeks ago. This means it's quite possible the short term correction is over. The market structure in the short term is now unclear, so I stopped out about 60% of my short positions at the highs today (unfortunately). I will wait for clarity on the short term structure before I get aggressively short again. The key element to all this analysis is that the long term picture points strongly toward much lower levels in the stock market.........specifically this means an S&P crash to the 400s with a year or so. So I do not want to lose focus on the bigger picture. So I will continue to look for shorting opportunities only.

I am currently short the S&P with a covered call strategy on the SDS.

Monday, June 29, 2009

Market Should Fall Monday; June 28, 2009

The market was fairly flat, but fractured on Friday and an divergence occured between the Dow and the S&P with teh S&P making a new daily high while the Dow did not. After this occured, the market sold off sharply into the close Friday. As long as this divergence holds, the markets should be on a downward trend.

Expect the market to fall Monday, especially at the open at the least.