Back With A Vengeance

I’m back ladies and leeches. Please forgive my complete silence over the past 10 days but I have been slaving to prepare for a very important trade show exhibition (not related to ‘trading’) and literally could not spare a minute. Anna and Berk did an excellent job here during my absence and I would like to thank them both for their tireless efforts in keeping the blog interesting and flowing along.

As I’m just getting back into the swing of things I’ll continue to tack on charts here throughout the day. Let’s start with the good ole S&P – as you can see we have been moving along just as proposed over ten days ago. However, we are now getting very close to my expected target zone and it’s time to start thinking puts again. Yes, we could easily bust a bit higher as a ‘blow off top’ would count just nicely at this point. But as bears we have two trading choices: Either we pick tops/bottoms based on our TA or we let the market prove a trend change to us based on important inflection points.

If you are the type of bear who prefers to ‘be late but right’ in determining a trend change then this is the chart you should be looking at. Forget about all the daily gyrations and look at two simple trend lines. The first one connects the Primary {1} March low with the July Intermediate (X) low and finally the October 2nd drop into B of (Y) – i.e. the long one 😉

The second connects the lows of this Intermediate with important touch points in August and September and finally also the B of (Y) low. So, what the ‘late bears’ will need to see here is a three punch combination. The ‘jab’ will be the drop through 1070 followed by hook through 1015 and then of course the knock of upper cut to take out 1000. Once that psychological line falls you will see late some profit taking, followed by some dip buying, which should be a great chance for bears selling the rip to add short positions.

Personally I’m prepared to keep playing the same game I played back in September – load up on puts at new market highs (not unlike this one) and let the tape prove to me that I’m right.

I checked my CBOE Put/Call Ratio chart last night and was very excited to see a dip down to the ‘danger zone’. This is code red for all bears and although we could see a drop below 0.5 here the risk is now on the upside. Maybe not for long but most definitely for the coming week or two.

Man, it’s good to be back – I couldn’t have picked a better time 🙂

12:08pm EDT: Insite alerts us to the new POMO schedule which was probably updated last Wednesday (but I didn’t look all week):

I’m always worried to hold positions ahead of these days but:

1. They are running out of funds – last time I checked there was about $5 Billion left.
2. We are still a few days out, so the schedule would permit a nice drop to the downside with plenty of opportunity to take profits and hedge ahead of those days.

12:20pm EDT: I had to catch up on sleep last night and thus missed out on a great opportunity to trade Anna’s AAPL call spread – I expect her to bank some nice coin on that one. I better get my butt back into NYSE hours – LOL 🙂

1:51pm EDT: Call me completely NUTS but I just backed up the truck here.

Yes, we probably push higher and yes I will have to endure more pain and insanity but options are cheap here, so whatever – what the heck do I know anyway but I’m insane, so don’t do what Mole does. It’s best to let the market prove to you that a trend change has occurred – the money I just threw in is money I expect to lose. And remember that Berk’s 13 indicators did not budge all last week, so be careful!

2:02pm EDT: Here’s a chart you should see before even thinking about buying any puts or getting into short positions here:

The Dollar seems destined to fall even further as every push higher gets instantly sold. Let’s however remember that I have a nice new gadget courtesy of 2sweeties over at retracementlevels.com:

So I see a lower probability that we turn around 75.15 but who are we kidding – 74.9 or perhaps even 74.45 is in the cards, which might get us to 1120 on the SPX. As you know I don’t trade correlations – but I do see the current correlation as an inverse ‘bias’ for equities. But since I don’t trade them I decided to load up on puts now – which again I don’t recommend any of you to attempt.