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Tuesday, January 24, 2012

SPX Update: Bears' Turn Now?

On Monday, the S&P 500 (SPX) made it into the 1320-1325 target zone I suggested on Friday and reversed; so hopefully the short term wave structures are finally starting to clear up again.  There's been no material change in the counts, however there's now enough structure to target some key price markers for the bulls and bears.

The preferred count believes the rally completed in the target zone yesterday, so the bears' line of defense is fairly obvious: the recent 1322 print high.  If the market moves above 1322.28, then 1330 becomes the next target; and if that falls, then 1345-1350 becomes the target.  The preferred and alternate counts are both reflected on the chart below.

The first alternate count would see yesterday as the completion of wave 3 of c, with 4 down and 5 up still to come -- to rule out that possibility, the bears need to take control of 1296.46.  If the downward movement (assuming we continue down after yesterday's reversal) looks tepid and overlaps the same price territory repeatedly, then I would suspect that this alternate count is in play.


A number of markets ran into resistance yesterday, including the NYSE Composite (NYA) and Dow Jones Industrials (INDU), so this seems like a natural area for bulls to take some profits, and for the remaining sixteen bears to make a stand.  Below is a daily chart of the INDU; the horizontal resistance faced by the INDU yesterday goes back to the 2007 top.


Yet another top indicator triggered on Monday, as the put/call ratio reversed its downtrend from near-historic lows.  This reversal is (yet another) bearish signal.  I'd like to quickly rehash the numerous other top indicators we've covered over the past couple weeks, counting backwards from the most recent:

1) VIX:TNX closed outside its lower Bollinger band, while COMPQ closed above its upper band.
2) Nasdaq volume as a ratio to NYSE volume reached unusual highs.
3) The NYA has formed (and continued) a negative price divergence with the SPX.
4) Daily RSI is in the upper "bear-market bounce, heavily over-bought" zone.
5) Daily MACD remains on the cusp of forming a bearish divergence.
6) My 12-year study on investor sentiment suggests that the current and severe lack of bearish investors is virtually always consistent with a top of some kind.
7) SPY has 4 unfilled gaps below the current market, all within the prior 100 trading days.  History suggests that these gaps will be filled 90% of the time.

These are some of the statistics and indicators which have kept me bearish recently while the bulls ran amok.  Granted, some of these indicators began triggering early, and have kept me from participating on the long side of the market since roughly the 1269 area.  Even if an indicator works 90% of the time, there will always be that 10% of the time when it fails.  I can live with that.  I don't need to trade every move, and when things start to look dicey, then it seems to me that being cautious and patient is not unreasonable.  I'll happily take the 90% odds all day long.

To reiterate another factor, I am virtually certain that QE3 will not be announced this time around.  Currently, my "no QE3 today" record is flawless, and I'd like to keep it that way if possible.  Given all the liquidity flowing into the U.S. from Europe, I would be absolutely shocked if the Fed decided to flood the system further.  In fact, indications suggest that the Fed has quietly been taking steps to contract liquidity.  So they'll probably give more jaw-boning to the numerous "tools" they have available to continue ruling the world, but I strongly doubt they'll take any significant action at this time. 

In conclusion, with several rare, once-a-year (and some even less frequent) top indictors triggering recently, I have to continue to stay with the odds here. I believe there's a very reasonable chance that the top is now in place.  Ultimately, however, top calling is the toughest racket in trading, and this one has been less-than-kind to me -- so until bears can break the rally channel and begin taking over some key price levels, conservative traders may want to give the uptrend the benefit of the doubt.  Trade safe.    

The original article, and many more, can be found at http://PretzelCharts.blogspot.com

330 comments:

  1. It's okay if you weren't being serious, but I did get a screenshot tonight in reponse to your post over the weekend (below). I can't actually screenshot the bluescreens, because, well... they're bluescreens and nothing works!

    But I'm willing to promise to never buy another HP. I think I've given them enough chances.

    :)

    *************************

    "I think we need to have a Pretzel Logic Blogathon to raise money for Blogmaster's suffering from Function Impaired Laptops (FIL). Just post a picture of your blue screen of death. I will match the first $100 ONLY if you promise to never buy an HP again, DELL only with the three year business supreme same hour service where they air drop both the new unit and former Swedish Bikini Team tech onto your mountaintop lair."

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  2. good morning........sunrise out here is always great.......not as good as your location tho

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  3. Sunrise is still about 3 hours or so away here.  :)

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  4. damn you are good. thorough. analysts put a supposition out there, stops take care of the rest. don't know what the 'big' issue is (altho i am aware that blogs eat their young during transition periods). thanks for all of your hard work PL

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  5. "...where they air drop both the new unit and former Swedish Bikini Team
    tech..."
    just found out i have a problem with my DELL, tech contact info plz

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  6. why dosnt this fed chmn beer-monkey have the brief-case indicator like greenspan did?

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  7. If you scroll down in the message text, do you see anything like a "Faulting Module" listed? If so, that's usually the most useful piece of information in those things.

    I'm not a huge fan of HP either.

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  8. I don't recall anything about a faulting module.  I reprinted the message on the weekend thread, and have since closed the most recent one, so I can't look at it again (until the next time it crashes today, lol).

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  9. Sun's up on the East Coast. You can use us as a leading indicator.

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  10. Yeah, you guys should just tell me what happens later, save me all this work.  :)

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  11. ES just doesn't want to give up 1303...i think the gap down fills early...I'd actually prefer this because I'd hate to start a decline with a pesky gap at the top always leaving doubt in my mind.

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  12. European exchanges are down today roughly 1%.  Safe to say we will not test 1322 today. 

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  13. Oh No...I do indeed put my money where my mouth is...I may be a BS'er, but not FOS. But Katzy and I get to assist the techs when they show up. The money is on it's way right after I drop off Darth's lunchbox that I forgot to bring with me this morning.

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  14. There's a South Philly saying that has been my guidestone..."Everybody get's paid"

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  15. Well, then, many thanks in advance!  To return a compliment you paid to me a while back, "You're a good egg."   :)

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  16. Oh OK. If you want to spoil all the fun of guessing, the sun is going to come up in HI too. We have a near 100% reliability record as a predictive indicator for sunrises in points west of here. You want to be a little careful when you get out into the Pacific though. For some reason, at some point between here and Asia heading west, we flip over to a trailing indicator.

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  17.  oil dropping, think ES will drop, GLD back to 159 to 60 before turning up.

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  18. That's an Event Viewer message in your screen shot. In Win 7, event viewer was folded into Reliability History. If you click the Windows Start menu and type "reliability" (without the quotes) in the Search box, you should see a link appear above to View Reliability History. That will take you to a timeline graph with little red x's and blue i's marked on it. The x's are bad things.

    Clicking on an x in the graph brings up a list of bad things that happened on that date in the list box below. Your crash(es) should be listed there somewhere. If you click on an event in that list (the event itself, not the check for solution link) it should take you to that same report you saw on reboot.

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  19. Morning, this is my first stop every morning, thanks for turning me on to EW. I'm a small fish in this ocean of traders, and mostly just play with my 401, GE,money market,Ge,money market. exc.exc...... Told my friends when GE hits $43 move to money market and sit on it, I was the laughing stock of the dept. These guys had worked there 30+ years and had amassed millions of dollars only one guy listened to me and got back in at $6 he has since retired.....and still thanks me every time I see him ;•) .....I've been sittin' on the sidelines since the last day of December, still getting poked and prodded ie "wanna buy some GE shares" ha ha.....but I'd rather lose a dollar to the up side than who knows what to the down.....long story short. When the big fish start movin', its time to get out of the way!....thanx for your time..

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  20. I agree. Maybe back test 1305 once more, then down toward 1294-1296. My only concern is how the cash markets will open and wreak havoc for a little while.

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  21. Katzo7 & PL,

    If I undestand correct,
    either we are in wave black 4 (PL alternative) or at the beginning of big red 3 numero uno, either way ST;
    gap down approx 1305 (wave (i) b), gap fill (i) c maybe to 1312,
    then wave (iii) of black 4 or bigredthree 1.

    the above is what 3 months of reading this site have hopefully learned me. Or not learned me, lets see. 
    Have sometime difficulties separate Katzo7s view (who often writes more micro-ST view?) from PLs (more "standard ST, IT, LT view).

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  22. jbg, you are as good as your word... and I don't think there's too much better one can say about a man.  Thanks.  :)

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  23. I think that I shall throw caution to the wind and not pull my stop on SPXU back to my max loss level in anticipation of a morning pot. Can't remember not doing that in a while.

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  24. i am a day trader in one acct. so micro, and position trader in IRA accts. here is LT view.

    http://www.screencast.com/users/katzo7/folders/Jing/media/1df4a8f4-8e84-4f97-9903-a523a1e74f91

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  25. This may be another drop and pop day.

    Euroland and profit taking will tank the sucker early on. After Europe closed, earnings and US fundamentals will assert themselves plus short covering ahead of AAPL may drive it back up into closing. No?

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  26. TY....I wasn't always, and I can tell ya first hand that Karma can be the bitchiest McBitch bitch of all when you're job was to be a ruiner. Life is good now, gotta share when I can, cuz we're all in this together.

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  27. You learned me something new today!  Here's the message I got after following your instructions:

    The computer has rebooted from a bugcheck. The bugcheck was: 0x0000009f (0x0000000000000004, 0x0000000000000258, 0xfffffa8006d3ab60, 0xfffff80000b9c510). A dump was saved in: C:\Windows\MEMORY.DMP. Report Id: 012312-22542-01.It's nice that Windows took a dump and saved it for me.  How sweet.  :/

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  28. I appreciate that...truly.

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  29. Now, if this is a 4th wave, approx. target is 1304 cash.

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  30. So I understood by yesterday, just took a little while when you used the term LT in a few posts in a way not may others used it a couple of weeks ago at this site. No criticism at all, just my language barrier and that I'm very new at this (Ew, trading and so on) and just do it trying to learn.
    Thanks for your long - long - LT view.

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  31.  20/50 MAs/120 about to cross, confirming down

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  32. I just noted the piss poor overnight volume on EURUSD...hmmmm

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  33. I suspect Karma only works on those who can actually benefit from it.  I've always been hit with instant-Karma very consistently throughout my life -- pretty much never got away with nothin' when I was young (not that I ever did anything horrible, but every little infraction always hit me back). 

    Conversely, I have known truly *evil* people who get away with terrible things, seemingly without consequence.  I don't think it comes back to them, because they're lost causes and, as such, actually serve some particular function in the grand scheme of things. 

    Just my theory.  Who knows. 

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  34. I think we’ll see some support (going back a while) at 1299.25. May even start a correction there. If so, target 1308-1311.

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  35. ST = a day or less, based on 3, 5 & 15 min. ES charts, for day trades
    IT = over a day to a week, swing trades, based on the 60 & 120 charts
    LT = longer view based on DAY & WEEK chart, for position traders

    always feel free to ask questions for any clarifications.

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  36. A lot of the indices have these little red number with minus signs next to them.  What does that mean exactly?  Does that mean they're still up for the day, but just not as much as usual? 

    :D

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  37. Covered most recent ES shorts at 1302.75 for a couple points.  Not seeing much momentum currently, and not interested in hanging on through a bounce.

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  38. Unfortunately that's probably a pretty apt characterization. I doubt that the DMP file would do us any good. I can't recall ever poking into one but I'd bet it's probably binary or hex.

    Oh well, it was worth a shot. If you can remember later though, when you're ready to call it a day, try putting it to sleep from the menu instead of closing the lid. That could yet tell us something useful.

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  39.  You're too polite PL... Let me translate for those who might not understand...

    Socket, BritcheZ.

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  40. I'm not a wave counter, yet. :)

    But from New Zealand, to Australia, to China, to India, ... , everyone and their brothers in law are lowering interest rates. That is a lot of liquidity sloshing around. The market can stay irrational for a while. :)

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  41. Alright, short again at 1304, tight stops.  ES did a lot of work just overhead last night, I want to see if they can break through it.

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  42. Seems like I spend half my life troubleshooting other people's sound card and video drivers. In this room I'm the rank newb though. I sit at your feet and learn... and ask a lot of annoying questions.

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  43. Alright, see if this info helps in any way.  I updated the video card driver, and the computer crashed when I did so... so I rolled back the driver, and it crashed again.

    The USB ports also randomly stop working sometimes.  Like they go to sleep and don't wake up or something.  I have to reboot to get them working again.

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  44. I wasn't gloating, actually.  Kinda the opposite. :)

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  45.  over 06.25 ES breaks an important down wave and we go higher

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  46. What part of your Karma leads to Annon20?

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  47. Market is likely to rise from here until at least mid-morning or noon.  Then (pure speculation), move back down to mid-afternoon, before rallying into the close ahead of AAPL earnings.  That would imply a "W" shape for the day.  Again, this is pure speculation - no guarantees...

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  48. Maybe, except for the short covering part.  We'll see if the bulls can drive it higher, but I doubt the 27 people who are short will have much effect on the market if they decide to cover.  :)

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  49. ...but, this could be the last head fake before a real down move begins tomorrow.  The question is: will tomorrow pop and drop on AAPL or just gap down and drop due to something negative out of AAPL earnings?

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  50.  mrkt will reveal its true direction now, I think (arrow pointing down)
     1
     1
     1
    V

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  51. NO I AM WRONG UP watch for break of 1306.50 area, if so tgt 08

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  52. I agree with down, but after this correction. Sure looks like the 1318.25 from yesterday will end up as the top.

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  53. I'm going with ....Too many bodies, not enough souls. But I've seen guys who have violated every decency in the name of their "duty" turnaround and become the biggest champions of decency. These are all SpecOps and alphabet agency vets who did the deeds, and now regret the stupidity of it all. They pretty much all became strict Constitutionalists who deny the label of R. or D. ... Well I'm just full of it today...I better just go and fill some orders.

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  54. I was expecting this up move, but I think my stops are tooo tight on ES, I keep getting knocked out.
    What do others commonly use for a day trade? 1 point, 2 points, greater, variable?

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  55. Godd morning all! Link to Grannville interview/predicting 4000Pt drop in Dow in 2012!
    http://karleggerss.com/?p=2519&utm_source=rss&utm_medium=rss&utm_campaign=djia-to-fall-4000-points-in-2012-granville-says

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  56. 1.5 to 2.25, depending on how I feel about my analysis

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  57. I typically use 1.5 and 2.5, but in the first half hour or so in the cash market, the volatility can stop you out quick.

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  58. He's just got to channel his energies better. I had a preceptor once who was a bit abrasive. She had a lot of knowledge to share, but didn't know how to share it as well as she could've.

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  59.  ...but, this could be
    the last head fake before a real down move begins tomorrow. The question is:
    will tomorrow pop and drop on AAPL or just gap down and drop due to something
    negative out of AAPL earnings?

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  60. I'm pretty sure you have that backwards: I'm part of his Karma.  :)

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  61. Wave 4 of a of this correction happening now?

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  62. thanks guys...I've been using between 1 & 2, so I guess it's just the chop...both times I got stopped out, I got stopped on the extreme tick of the move (frustrating!)

    1min MACD about to turn bearish, 5 min MACD about to turn bullish....is a partial gap fill possible? I have no conviction for direction right here so I'm going to stay out.

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  63. Point taken...I was gloating a bit. I neglected to see the "?".

    I shall shut my trap in 3..2...

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  64. I typically use 1-2.5... it can vary though, depending on what the market's doing.  For example, if the market moves up to *just under* my stop and sits there bouncing ever so slightly up and down for a while, and it makes me *really really really* want to cover, then I might move my stop up a bit, because I assume that's exactly the purpose of the move... make the shorts cover.

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  65.  think 06.5 held, down possible now

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  66. The entry stops are the hardest by *far*. If a move goes in the direction you anticipate, I use the EW rules and guidelines to move my stops down as the count works its way out.

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  67. there are some who just play the opening bell til 10:30 ish, then close down, they like the volatility then... gotta be real quick tho and TAKE profits when offered. . .

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  68. watch now, should really drop

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  69. I’m still seeing 4 of a of this correction right now, then wave 5 on up to 1308ish.

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  70. If it breaks 1304.5 down, then lookout below.

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  71. There it went, wave 5 of (a) up. Now should get a (b) wave down starting at the 1308ish level.

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  72. Just to air the bull view here:  keep in mind that if the black alternate count is in play, that could have been it for the decline -- with new highs above 1322 coming soon.  SPX above 1318 would be a big red flag for bears. 

    Don't think that's going to be the case, because this morning bounce looks very corrective so far. 

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  73. there is my 08 ES, tough read today. . . 

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  74. Flip side of the coin:  If this is an impulse move down, then this is a nested second wave right now, and the next move down will be fast when it starts.

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  75. Nothing is safe...

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  76. Interesting call..  Have you seen his previous calls to see if they hold any weight?

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  77. Here is my first attempt at a chart...

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  78. PL,  you most likely have a faulty motherboard at this point (as a result of overheating), and HP will NEVER admit to it.  The same way you ardently use stop losses in the market... you should employ a time/frustration stop loss on your laptop.

    Please recall my experience (which I posted a couple days ago) regarding my HP i7 processor desktop PC...

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  79. Went short at ES 1308.  I'm going to give this trade some room, because I need to get to sleep soon.  6 points or so doesn't seem like an unreasonable risk to me -- if this is a nested 1-2, i-ii, there'll be a solid drop after this little rally ends.  If not... well, there's always tonight/tomorrow if I get stopped.

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  80. So you're viewing this as a leading diagonal?

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  81. I’m short at 1308.5. Hopefully, this rally won’t exceed 1311.75, then downhill from there.

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  82. Well, that I’m not sure of. I’m in my EW infancy. Looking at 1318.25 as the top, this was what I thought…

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  83. Labeled degree is *possibly* sub-minuette.

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  84. Wow, nice fill. Top tick so far. :)
    Subject: [pretzelcharts] Re: Pretzel Logic's Market Charts and Analysis: SPX Update: Bears' Turn Now?

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  85. Yeah, got lucky. I’m going to cover at 1305.5 ish (if we make), then see if my chart holds up, then re-enter at 1309-1311.

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  86. ES/120

    http://www.screencast.com/users/katzo7/folders/Jing/media/5ff204d7-051e-4c83-8fe4-6615a835acfa

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  87. Well, your fourth wave crosses the territory of your first wave, which is only allowed in a diagonal. Looking at the cash market, the two obvious options are either an a-b-c (complete) down for the alternate fourth wave count, or a nested 1-2, i-ii, due to the overlap. :) Subject: [pretzelcharts] Re: Pretzel Logic's Market Charts and Analysis: SPX Update: Bears' Turn Now?

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  88. It would seem like most, he has his moments. From an article in moneynews.com:

    "Granville told newsletter readers to “Sell Everything” on Jan. 6, 1981. The Dow fell 2.4 percent the next day. He correctly forecast the bear market of 1977-78 and the burst of the Internet bubble that began in 2000. In March 2008, Granville said the Dow would end the year near 9,000, more than 27 percent below its level of 12,392.66 at the time. The gauge finished the year at 8,776.39.
    His predictions proved less prescient during some of the previous bull markets. He failed to foresee the rally that started in 1982 and lasted for five years. He also called for losses in 1995 while the S&P 500 rallied every year till 2000."

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  89. Great chart, katz.  Ty.  I think that it will form a right shoulder that may be higher than the left shoulder, just to get everyone to capitulate.

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  90. thnx, dunno, everything is pure spec. until neckline is broken

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  91. Check out a one-day, one-minute SPX chart.  This little rally today looks like a pretty good fractal of the rally since the Dec. 22 on a 10 minute chart (like the one in the article).

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  92. Romney's tax return and Obamas state of the union, should do it.....lol

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  93. Maybe part of my count was one degree lower...still practicing.  Might be blown now anyway with the price action since.

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  94. It's a steep learning curve. No shame in trying... happy to help you figure it out. :)Subject: [pretzelcharts] Re: Pretzel Logic's Market Charts and Analysis: SPX Update: Bears' Turn Now?

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  95. How did that second chart look (it was attached to the last post)? Still way off?

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  96. SPY (cash) = 131.43 is 50% retrace of the down move from yesterday's high.  We're hovering right under it.  If it holds, morning top is in, but could be broken to the upside in late afternoon.  If it breaks decisively higher, then it is likely up from here on until the close.

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  97. exact back test of triangle on the 120 candle is 10.25 ES

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  98. Ed Carlson, the George Lindsay timer we discussed yesterday.  His latest twitter post from  Sunday Jan 22:

    "Market Top this week. Best estimate Monday but may have been last Friday"

    Potential to back test his calls from the twitter history.

    http://twitter.com/SeattleTA

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  99. And this possibility that the correction is much steeper...(chart attached).

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  100. I don't know why it keeps publishing the subject line... I have to reply by email 'cause your posts aren't on the blog yet. Anyway, you really have to watch that 1 and 4 don't cross the same price territory, or the count is invalid unless it's a leading or ending diagonal. Also, I'd recommend tackling the cash market first -- ES charts are very messy to begin with. Subject: [pretzelcharts] Re: Pretzel Logic's Market Charts and Analysis: SPX Update: Bears' Turn Now?

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  101. Fitch in Italy offices have been raided by italian police?

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  102. We should be headed down to test yesterday's low at SPY = 131 (ES = 1305.50)

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  103.  down to 06-7 ES now
    add 5.5 to ES for SPX

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  104. Ok, last chart attempt for a while.  Wish I had your wave labeling capability with eSignal.  Labeling by hand is a huge pain, and time consuming.  If this chart plays even partially out, donation to PL.  Now I know...(a tad on the *effort* of just drawing the chart).  :)

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  105. Many times I hand label rather than auto, it is not always correct. Could come true but I am still wondering about the H&S idea.  This mrkt has been so complex that it might be a while to break the spirit, and I am talking days, before we break out of my yellow triangle. Put out a theory, sit and watch mrkt validate or invalidate, adjust if necessary.

    You do good work Michael.

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  106. As always, thanks for the feedback.

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  107. Thanks.  :)   Yeah, it's quite time consuming, especially when the count's unclear and you have to keep analyzing every little waveform ad nauseum as you label.

    Time wise, it gets even worse on days I try to get fancy, like yesterday, where I combined two charts in Photoshop after labeling them... then had to keep redoing them to get the dates to line up in each chart.  That one stupid chart took like an hour and a half.  :D

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  108. I sense an Italy downgrade coming...

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  109. Alright, on that note, I need to get some sleep.

    Goodnight and good luck!  :)

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  110. Love that movie!

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  111. Ed Carlson forcast for today (30-day free look):"Equities played out pretty much according to
    script on Monday. A new high followed by the beginning of a pullback -
    although the pullback certainly didn't get much traction. At this point
    we see no reason to become concerned about our 1/23/12 forecast for a
    top to the bear market rally. Having said that, we won't have any reason
    to become concerned if we're off by a day or two, either. This week, we be chillin'."

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  112. Possible H&S break?

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  113. Thanks for the update.

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  114. break down you mean, yellow arrows? Not in my opinion, the 120 chart wil overrule other charts, until proven wrong.
    What time frame is that?

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  115. Here's the daily VIX Option report on the  activity.  noticeable trade :  Bought Feb 26  and sold March 35 calls ,   45,000 times. 

    http://www.youtube.com/watch?v=qyiymPlbOkM&feature=plcp&context=C33df8f9UDOEgsToPDskI34taj0Z9dAhnClITeAwyO

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  116. Disregard arrows. 5 min. Still getting used to flipping through all the time frames.

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  117. 1313-14 is solidifying as resistance now.  Even if it breaks during the bear's silicone break I very much doubt we would close above 1316.

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  118. think it will head down to 02-3 ES area once this shoulder is finished. Then up, still more shoulders to build me thinks.

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  119. Market will likely begin to move by no later than 1:15PM (ET).  No guarantees...

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  120. thefirstnamethatworkedJanuary 24, 2012 at 7:56 AM

    cool site. i saw that we go down maybe once in a month. lets see what  the pros do last hour though.

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  121. Did you know that if you click on the printer buton, located between the "Symbols" and "Reset" buttons that you can "Take Picture" ?  What that gives you is a capture of only the chart portion of your screen for posting.  Try it. 

    Nice to see you posting those charts, keep it up.

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  122. Neither up nor down.

    What is it waiting for? Any idea?

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  123. Thanks for the tip!

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  124. If Fitch wasn't going to downgrade them before the raid, they will now.  LOL!

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  125. LOL, LOL, LOL. I placed a 130 SPY put yesterday and every time I watch the market goes up; and when I don't watch it goes down. No kidding! So I ain't watching anymore, so you all have some luck!

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  126. For everyone to lose their patience...  On a serious note... maybe AAPL earnings after today's close.

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  127. Question for ES trading gurus --  Does ES has a time premium built into the price like options?  When trading options, even if you're on the right side of a trade, you can  still lose money on that trade if you hold your calls/puts a bit too long.

    Or, do you always gain (or lose) the same amount for every point of ES?  If so, this can be one reason why ES is a better trade than options.

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  128. I'm an ES newbie, but I haven't noticed any degradation or read about it anywhere.

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  129. Another high-flyer setting up for the short side with a clean head and shoulders top:  GOOG led the way, AAPL and CMG to follow?

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  130. There is no time decay because the expiration is quite different. There is a rollover period toward the end of one contract to give people a chance to "rollover" to the new contracts. The new contract does have a different value, but the gains from your original remain in tact.

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  131. there is no time decay in es. 

    it will gradually move closer to break even with spx as it gets nearer to expiration. 

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  132. On a 2$ SPX range chart we spent Monday in the ultimate pain zone for individuals holding IT shorts.  Will the recent highs become resistance or will they also be broken?  I'm still looking for more negative fundamental numbers to start coming out to really roll the market over.  I like to look at a range chart in addition to everything else as it sometimes filters out some of the noise.

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  133. Thank you all for your comments.   I've a small AmeriTrade account that I've forgotten all about it until recently.  Requested an upgrade to trade futures yesterday, and will try to be an ES newbie later today / or tomorrow.  I'm hoping for beginner's luck!

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  134. Make sure to do your homework on the margin required for each type of contract, tick size, and the dollar value per tick. When you log into your TDAmeritrade account, click on Trade->Futures then look at the tabbed table at the bottom of the page. Some of the contracts are more highly leveraged than others, so be careful. Good luck!

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  135. Hi,

    there is difference, in this case a discount.  In the market now we see the e-mini futures for March delivery (ESH12) with a discount of about 4-4.25 points.  This is a reflection of two things, based on the 'cost of carry' futures pricing model.  In the future, you don't have to put up the up-front cash of buying the securities, so you save the interest on that principal amount to the maturity date of the future (i.e. cost to borrow the money to buy the stocks).  Money is cheap now (low interest rates) so this cost is currently pretty negligible.  With the future, you don't get any of the benefits of owning the underlier, in this case the dividends associated with the index.  So, since the dividend yield of SP is around 2% per year or .5% per quarter and .5% of 1300 is 6.25, the future started with about a 6.5 point discount when it had 90 days to maturity.  The gap will close to zero as the maturity date of the future approaches.

    Options are both a future (they settle at a future expiration date) and have the optionality component (the right but not the obligation yada yada yada).  The optionality premium (or implied vol) fluctuates as demand for options changes.  It tends to go up when underlying prices go down, and down when underlying prices go up.  the latter is not always true in takeover plays for example.

    How an option's price changes with respect to changes in the underlying's price is called an option's delta.  All other things being equal, the higher the implied vol of an option, the higher the delta.

    So for example AAPL implied vols will be through the roof today (and have been for a while) for Feb options in anticipation of the earnings announcement tonight.  Tomorrow, unless the stock totally craters, implied vols WILL come in (because the event risk is over).  So today maybe you are long some puts and they are up a dollar with the stock down three.  The stock may be down six more dollars tomorrow but your put may only go up another dollar due to the contraction in implied volitility in the market for AAPL options.

    All the market makers are always short options, so the implied volatility of the prices is always higher than the actual volatility seen in the underlying in the recent past...

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  136. Battle royal at the 1313 and change area... 

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  137. be careful t winn, I would just sit and wait. When you hear PL, Michael, & me  getting all hot then maybe do something. Again, feel we are building a shoulder, not a good time to explore. I am flat now after playing the down and up, and prolly will not do anything else today

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  138. AND trade only ONE contract.

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  139. Thanks for the thorough explanations!

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  140. bear seem to be losing here

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  141. I think we are now on wave 3 up. No?

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  142. Volume picked up on that last 5 min doji.

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  143. Also, SStochs on all time frames from 3 min to 60 min are rolling over.

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  144. And look at your futures commission structure. You pay commissions per contract per trade, so the strategy is slightly different from day trading an equity. With an equity, you can buy 10,000 shares for $9.99, let it move $0.01 and make a profit. With futures, they need to move a little since you can’t just load up on contracts for a flat fee.

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  145. back and forth it goes...

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  146. Unfortunately, I can't wave count to save my life... or money apparently... 

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  147. Thanks Whoa_Nellie!  I too, am thinking about starting to trade the SPX futures.  Very helpful explanation.

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  148. Great Post Pretzel. I commented yesterday that bears should not take their eye of the big picture of indicators. Thats what's keeping me in the market. From a only technical perspective, with heavy fundamentals backing things up. I just can't get my head around this market going higher. Ok, it happened in 1995 catching all the bears of guard. The year 2000 was crazy and 2007 was all hype. The conditions are not right for another run up like that in my opinion. I may be proven wrong. 

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  149. it is easy 1, 2, 3, 4, 5.... just ask

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  150. Looks it it wants to close green. VXX is sinking.

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  151. 1312 ES it the triangle TL now, line is angled up so that point has come up, for back test or break

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  152. I am seeing a definite shift in momentum that is favoring the bears.  In the past three days the strength and duration of the rallies have diminished as compared to prior days.  We may still be a few days away from any strong declines, but bully looks noticeably weaker in recent days. 

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  153. Still reading up on EW... but I am playing with the counts to see if I come up with anything like PL and others do... I will post and ask when I'm more EW literate... thanks

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  154. Thanks.  I'll definitely wait until the top is confirmed.

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  155. I just noticed something very interesting.  I'm watching the $VIX Time n sales n charts and it just did a huge single down candle  (18.63) to close the gap from yesterdays close. It was at 19.25 when it spiked down and returned.  Gap filled and ready for Headline news to run up clean!

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    1. Everyday the same script. The VIX always pop and then drop. The best strategy for TVIX seems to be buy at close and sell at open 15 min. I am still waiting for my 30% gap up day for this baby.
      So what you are seeing is that VIX ready to skyrocket?

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  156. We're pinned right around the 50% retrace from yesterday's high to today's low.  Nobody wins, except the market makers.

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  157. It was a little flash crash

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  158. man that just about tapped my TL, trying short again.

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  159. Apple is struggling to move up.  Somebody is probably betting on Apple not making the numbers?

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  160. I’m just back to BE at my original entry of 1308.5. Seems like days ago now. K

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  161. AAPL and AMZN were my best shorts last earnings season and I believe will be good plays this go around.  AMZN is likely to report a loss and iphone sales have been slow in Europe and I think they stopped selling in China.  These are sell the news plays.  With Fed day tomorrow and in my opinion, NO QE which I think may be priced in:  I've put on a handful of shorts about 1/2 hr ago including a VIX play.

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  162. Interesting that the RUT is looking stronger than the SPX.  Does this mean anything?  Will the SPX catch up to the RUT or will the RUT come down to the SPX.  RUT looks like it wants to test yesterdays high while SPX is trying to get back to yesterday's close.  2$ range charts of SPX and RUT..

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  163. Interesting article on the hedgies' moves during the past week:

    http://blogs.barrons.com/focusonfunds/2012/01/24/merrill-hedgies-short-sp-500-aggressively-buy-treasuries-stick-with-tech/

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  164. I think that RUT would trail SPX just because any new money coming into the market is going to find the larger cap companies first, then trickle down to mid and small cap.

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  165. 2$ range charts....RUT 

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  166. SPX has a lot of dead woods. Today, the market leaders (relatively speaking) are tech, financial, industrial, basic material, discretionary and semiconductor.

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  167. SPX closed at 1314.45.

    It was as exciting as watching paint dry. :)

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  168. Closed EXACTLY on the neck line of the H&S that's been forming since Jan 9th.  Amazing.

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  169. Wow, market sees odds of a messy Greek default go up and barely bats an eye.  Will be interesting to see how AAPL stock / es react to the earnings.

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  170.  AAPL earnings out yet? From chart looks like AAPL with jump.

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  171. As I understand it, RUT outperforming SPX implies a "risk on" trade since RUT is made up of much smaller and speculative companies than the SPX.

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  172. Scheduled release time is 4:35PM (ET).

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  173. That has always been the most logical thinking, as most smaller companies rely on the strength of the larger firms as many of the SPX firms are their customers. RUT (being schizoid) often seems to flank the major indices...it makes me crazy. Anyone else have similar experiences?

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  174. AAPL just blew away their estimates.

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  175.  AAPL

    http://www.businessinsider.com/live-apple-earnings-2012-1

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  176. I'm up to page 32...I think DD said that page 81 is the most exciting page ever...I can't wait. :)

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  177. Analysts are modeling $39.14 billion in revenue and $10.16 per share in profit. Apple’s own forecast, offered back on October 18th, had called for $37 billion in revenue and $9.30 per share.

    Update: Apple reported revenue in the three months ended in December rose to $46.3 billion, yielding EPS of $13.87 per share.
     

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