Financial history doesn't repeat itself, but it often rhymes. You can't be stupid enough to trade off anything I say.... I'm lucky they let me out of the straight-jacket long enough to trade.

J. P. Morgan

"Sell down to your sleeping point"

Wednesday, April 29, 2009

just a chart...

we still have the possibility of the "Trade of last Resort" to the upside here, which is a breakout of the upper resistance.. I umnn... Watch the trend-lines... BUT.. I want to point out that like with geometry, valid trends are ones that have numerous valid points, not just 2...

and the resistance most tested is the one most likely to break...

pennants are normally 4 swing patterns.

10 comments:

Tony said...

Good lesson. The pink pennant lines have both been tested three times, to the upside and the downside.

But the orange trend has already been violated to the downside as the market has chopped sideways.

The green resistance trend failed.

Overall this looks like we are rolling over, but I won't predict, just observe.

QQQQ's don't look as bad, imo, but still breaking trends to the downside.

The question I have is, IF-- big IF-- this breaks down, which sectors will fall the fastest?

a) Weak sectors that have lagged and are not overbought, or

b) strong momo sectors that are overbought, or

c) sectors according to the John Murphy rotation model?

Eric said...

I was thinking about asking T-lo, to make sure she covers some rotation in the podcast.. but you could do it.

fed days are crazy...

there is still that chance of an upside break out.. we have weak dollar today, which stocks respond to.

and who knows what teh fed will do.

so.... what is the fatality rate of the regular flu vs this swine flu, so far?

Eric said...

the other thing... the other horror show is the potential bear trap below the pink line.

Tony said...

Head fakes. Not sure if that's good or bad, but the plan is a mix of shorts and longs with stops set.

So far, so good. Two steps forward and one step back.

Eric said...

seems like we are going to get that nice false breakout to the upside..

what we will look for is some form of head and shoulders.

it could take the next 2 days for it to develop.

we want to see the bears totally give up and for mackie and his friends to jump in for "The next Leg up"

and T-lo... tipping us off would help too.

Tony said...

Do you mean "inverse" h/s?

I would agree. There should be a podcast due soon. I'm not as diabolical as I need to be and I'm dodging some bullets here by sticking with discipline: longs in materials, semis and software, and selected shorts with stops.

I don't have a third derivative ideation about it, but it seems to be working.

I guess the diabolical thought would be that the shorts will puke this thing up soon and then we breakout. The QQQQ looks more likely to have this happen since it is now above levels not seen since October. (I know you hate those horizontal resistance lines, sorry.)

Look at IBM as a bellwhether, the chart looks great. Fastmoney talks about AAPL all the time, but AAPL is just a consumer toy company for adults ... IBM and software (BMC or PSJ) are more indicative of what business is doing and where the economy is going.

Or, this is yet another head fake and we crash on Friday. Ha! I told you I'm no good at diabolical thinking.... I may go do nine holes the temp is 56 and sunny.

Eric said...

56 is probably good for you...

we had 85 last week... that was when I strained a muscle running, wich after yesterdays run is bothering me a little...

I mean BULL TRAP ABOVE THE BREAKOUT!!! Which will look like a head and shoulders...

Tony said...

I could imagine a bull trap, but I don't see a h/s pattern.

Correct me if I have derivatives off:

1st derivative: this is a bear market rally and will fail as it fails to break through resistance.

2nd derivative: this is a new bull market and the shorts will get crushed above 87.50 leading to even more covering.

3rd derivative: the market has recovered some, but without new positive economic data the indices will drop as earnings disappoint... ie, this is your bull trap above 87.50.

4th derivative: A plethora of tangibly good news coupled with a positive catalyst (Osama bin laden is caught!) drives the market higher.

5th derivative: Good economic data and positive earnings restore confidence and the market climbs to 91 or even 100. But then a huge event like BAC and Citi refuse to play and file Chapter 11 which forces myriad other businesses into bankruptcies and the FDIC states they are broke and cannot guarantee all the deposits and there is a massive run on all banks.

Eric said...

that is because the H&S... Will develop... Or not... but we are about to start the left shoulder.

that is why you don't see it... because it's about to form.

this was the Classic Sentiment cycle... we had buy the dip.. now we get some nice euphoria...

and all the shorts cover all the remaining bull money comes in... and we have a top...

Eric said...

I'm not sure how to comment on your derivatives....

this is standard stuff... standard sentiment cycle... etc...

Like I said days ago... it was foolish to think anything would be different...

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