Day Trading – The Bullz And Bearz

10-Year Treasuries – Bad Investment

July 12th, 2010

That’s right I said it – short the 10-year treasury bonds. They have been on a huge upswing of late and there will come a time when interest rates HAVE to rise to counter balance the debt structure of the US. It’s not going to happen overnight, but after nearly every single recession bond prices eventually fall hard.

When this happens, bond prices will fall dramatically so as to entice people to come back and buy more bonds. Here’s where we are right now. Also notice the huge spread between the 50-day and 200-day moving average.

Traded Index Futures – Index Charting

July 1st, 2010

Looking at a chart of the major traded index futures from yesterday and you can clearly see we are heading lower this morning. It could just be the technical break of the 1,040 level on the SPX that is causing the commotion. Remember we warned about it’s consequences earlier this week?

Now are are flirting with a major support break and a possible “lower low” signaling the final trend higher has changed.

Why the 200 DMA Is So Important

June 28th, 2010

My main concern and thoughts this weekend surrounded the heavy selling we experienced last week away from the 200 day moving average. I said in previous posts that we needed to not only break that level but hold above it to really get the bulls going crazy – and that did not happen. From the chart you can see that we merely pop over the 200 DMA, hit the major fibonacci level and then sold off. I’ll be watching the latest lows this week for any signs of weakness.

House, Senate Pass Sweeping Financial Reform

June 25th, 2010

Another horrible example of BIG Government trying to step in everywhere they can. Mark my words – this reform bill WILL do more harm then HELP. With more regulation comes more costs which are going to be directly passed down to you all and myself.

Since when did we become a country were individuals don’t take responsibility for their own problems. Everything is somehow cause by some other factor other than our own decisions. Unbelievable…

If you think the banks on Wall Street are just going to eat these costs and NOT find a way to make money – you are so sadly wrong. Time once again to call your representatives. This financial disaster will get worse…

Under the agreement banks would only spin off their riskiest derivatives trades. Banks to keep some of their lucrative business based on trades in derivatives related to interest rates, foreign changes, gold and silver. They could even arrange credit default swaps, the notorious instruments blamed for the meltdown, as long as they were traded through clearing houses. Banks also would be allowed to trade in derivatives with their own money to hedge against market fluctuations.

The legislation next heads to the full Senate and House where it is expected to win final approval and President Barack Obama could sign it into law before July 4.

China Will End Peg Of Yuan To Dollar

June 21st, 2010

Mostly all of the hype this morning is a result of the announcement that China will end the peg of the yuan to the dollar which has boosted investors’ confidence in the global economy.

The original two-year currency peg was adopted during the global financial crisis to protect exporters from currency values. Now, the “un-peg” is really a good sign that policy makers expect the economy to strengthen. This is why we are seeing the markets rally so hard this morning.

Fibonacci Retracement Levels Resistance

June 17th, 2010

I said it yesterday and I’ll say it again – the long term Fibonacci retracement levels are very important for the SPX, DOW, NASDAQ, and RUT. Yesterday I mentioned that they were going to act as strong resistance until we see a slight pull back to gain some strength – and that they did. As soon as we get above this level things will be much stronger, but until then…it’s anyones market.

Moody’s Downgraded Greece To Junk

June 15th, 2010

Moody’s has once again downgraded Greece’s credit rating – this time to Junk status. This is a huge move and could really sway the markets over the next couple of weeks. I’m almost certain that more downgrades will be coming especially for Spain and Portugal.

Moody’s slashed Greece‘s rating by four notches (unheard of move) citing “macroeconomic and implementation risks” and really persistent doubts about Greece’s ability to repay its massive government debt.

I say again AMERICA, we must learn from this and make the hard changes now!

Dow Jones Fibonacci Levels

June 10th, 2010

The Dow Jones has had some really clear and easy to trade Fibonacci retracement levels. Notice that the flash crash hit one then we bounce again off the same level shortly before breaking it hard (a clear sign of strong support). And now we are hitting our heads on the same exact level as resistance. My guess is that we rally there first before continuing higher.

Don’t Trust Ben Bernanke’s Forecast!

June 8th, 2010

Two words: Lehman Brothers. Should we trust Ben Bernanke’s Forecast? Heck no! These guys are terrible at economic forecasting. Monday he said that he didn’t think that the U.S. economy would slip back in to recession. My guess is that’s exactly where we are headed. If you followed their predictions, you probably would have ended up bankrupt. Here’s what he said about the housing market back in May 2007:

All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.

Fibonacci Levels and Moving Averages

June 3rd, 2010

With yesterday’s early morning decline which was quickly erased, the S&P 500 went back to ‘extreme’ oversold levels, which we define as more than two standard deviations below the 50-day moving average. Using our chart, you can seen in red what we are talking about here.

A move higher is likely of course to continue today. However, a major fibonacci retracement level is near and should not be taken lightly.

S&P 500 Monthly Gains

June 1st, 2010

May is gone and June is finally here. May was horrible for the markets and one of the worst performing months in many years. As we get towards the summer months, many traders (including myself) will look towards an easing in market volatility, volume, and movement. The next three months historically have been very favorable for the bulls which is why I still believe we will end up higher.

However, this morning we are not kicking off June on a good note. Futures for the S&P 500 are down 1.7 percent, Dow Jones futures down 1.4 percent and Nasdaq 100 futures down 1.3 percent. The bulk of the news if coming from the European Central Bank which said euro zone banks face another 195 billion euros ($239 billion) in potential writedowns to the end of 2011 in a second round of losses from the financial crisis.

All in a day’s work I guess. More to come throughout the day.

Gap Fill In Crude Oil?

May 28th, 2010

We’ve had a wild ride in crude oil this month haven’t we traders. Earlier this month crude prices were as high as $87 a barrel then they took a nose dive after worries that Europe’s debt crisis could undermine the global economic recovery. It also didn’t help that the EURO was completely weak against the dollar. However, after the large gap lower earlier this month – and a sharp sell off – we have nearly retraced and filled the huge gap. This area will serve as strong resistance for the time being.

Hammer Candlestick Pattern – Reversal Or Not?

May 26th, 2010

Did the reversal yesterday signal a strong short term bottom? This hammer candlestick pattern sure looks good.

The S&P 500 closed up after being down by more than 2.5% shortly after trading opened. The bounce back was stoked by comments from Congressional leaders saying they would not push for banks to spin-off lucrative trading desks as part of financial regulation reform – finally some common sense from them, at least for now. Big swings in trading have again become the norm in recent weeks, similar to the volatility that helped define the market during the credit crisis and the early parts of the recovery last year. We should expect to see more as the months continue.

Huge Market Selling Off Underway

May 25th, 2010

Stocks are setting up for a horrible day. Futures are down big time across the board – already more than 3% on the /ES. We are setting up for a huge sell-off and gap lower at the open. We are already past the level I posted last night as major intra-day support. The /ES is already trading near 1,040 – and must hold that level today. A close below this and we could honestly see some major selling similar to the crash in 2008.

Profit From The VIX Spiking

May 21st, 2010

I would have thought that the passing of the banking regulation would have sent the markets higher today – maybe they will maybe they won’t – but its not looking good early on this morning. U.S. index futures are dropping again and oil retreated on concern the euro region’s debt crisis will slow the global economic expansion. The VIX is still at record highs and got there very quickly. Remember all the warnings about a low VIX? Here’s a couple posts to refresh your memory.

As Predicted – VIX Spikes 30%

VIX – The Falling Knife

What’s Behind The VIX’s Big Fall?

Is The VIX Setting Up To Spike?

And here we are now, with the VIX near 50. Short calls here are easy money if you get in – I’m just saying! It wouldn’t take long for the VIX to come back down near the 30 mark if we start to see the markets rally anytime soon. That could be very easy and fast money for traders.

Hard Selling Is Coming Today

May 20th, 2010

The harsh reality is finally here; the S&P 500 is on the verge of breaking the important 1,000 level here very soon. Futures are down over 1.5% already this morning and falling. From jobs, home foreclosure data, the EURO, Oil, and new banking regulation – traders are running for safety where ever they might find it. Remember that this could turn very ugly very fast, so please make sure you buy put protection if you need it. Good luck out there today!

Crude Oil Futures Chart Analysis

May 19th, 2010

The last two days the crude oil futures chart shows a major break in a trendline that has lasted for about a year now. Although we all know that lines are just that – lines – and that support and resistance is much more of an “area” than a point on a chart, this break is still not a good sign. If this holds true then oil could be headed lower for the rest of the week before making a final retracement higher to re-test the resistance level. A major role is this is also the dollar’s move over the next week.

Why We Won’t Go Long Here

May 18th, 2010

If I may, I have some general thoughts I’ll like to share with everyone. Rarely do we dive deep down into the global economic picture around here since we try to focus on solid technical analysis happening right now. But last night I had a couple coaching sessions and the question always comes up: “Kirk, is it a good time to go long?”

Here are my top 3 reasons why I am hesitant to say yes:

1. The debt crisis in Europe is going to spread here to the US – period, end of story. Like it or now I feel like the Greece situation is similar to the sub-prime event here at home. Remember when we all used to say “yeah sub-prime is a problem, but it’s only a small piece of the market.” Well enter Greece center stage. And it’s not like our government is spending less and cutting taxes – they are spending at historic and record levels. The crisis over there will get worse and it will effect us all in the next couple years.
2. The markets are forming a major long term top. Just look at the S&P 500 and tell me that this doesn’t look like a classic topping pattern. Honestly I could see the markets move down BELOW the bottom in March in the next two years.
3. Finally, the dollar is unbelievably weak. Yes it’s been strong recently but only because we are “preceived” to be a safer investment than Greece and Europe right now. Remember that our dollar is fiat money – meaning that nothing backs its worth but our history of paying and good credit (for now). That’s why we are seeing gold breakout into high levels consistently. Gold is about the only thing I would go long right now.

I know this doesn’t paint the best picture – but it’s the truth. We were big players during the 2007-08 fall which we were late to the game but profited wildly on once we got in. I vowed then that I would not miss another opportunity to short the market into oblivion. If the S&P breaks this level below over the next year – I will get heavily short and stay that way for 2-3 years.

/ES Mini Futures Trading In Tight Range

May 17th, 2010

Futures and the /ES mini contracts are trading slowly this morning. Most of the focus is on the “new sub-prime” i.e. the Euro which fell to a four-year low. Clearly investors are grappling with whether budget cuts in countries like Greece, Spain and Portugal will drag Europe into a recession or not? Unless they do something drastic now which will also hurt the economy, a long and deep depression might be in store.

Anyhow, it’s expiration week! So we all know it could get a little crazy as we near Friday. Here are my thoughts for the week…

Late Day Sell Off Sentiment Continues

May 14th, 2010

Sorry we were MIA yesterday. We had a couple meetings with some people regarding the new website that is being developed. It’s going to have many more features, extras, and do-dads that you all will truly enjoy. More on this later on.

Yesterday was a quiet day – to start at least. And then near the end of the day the markets really took a 1% nose dive into the close. Seems that sentiment will continue today per the early morning futures. Resource-related stocks will be in focus as U.S. crude oil tumbled to a three-month low below $74 a barrel and all the traders are left wondering how deep spending cuts will be to get the deficits in Spain, Portugal and Greece — as well as big economies like the U.K. — back on track financially. Anyhow, here is your chart today…