Twice stopped out for a full 1 pt DIA loss, as noted in comment section of each signal.
What is happening now?
12:32PM October 28, 2008 Tuesday
Put/call went from very low in the first 30 minutes as "call sellers" dominated the action. Call selling is bullish as it is usually done by nervous longs and therefore is showing that there is a wall-of-worry.
The only problem with a sharply declining VIX is that it leaves VIX oversold. The drop from 80 yesterday to today's sub-72 low meant that prices were ripe for a correction.
From 10 to 11AM, VIX rose back from 72 all the way up to nearly 79, which of course, shows fear and justifiably so... the stock market futures had fallen from near 8500 to 8150 or 350 points from peak to trough.
While the stock market was dropping sharply, the options volume swung around from the call side over to the put side and this meant that options players are buying puts and driving up the price of options. Rising VIX also means that options market makers are afraid of providing liquidity and they need extra room to maneuver around orders that come in to handle the hedges that need to be placed if a buyer does in fact arrive.
What I am looking at now is the Yen. Because the Yen has broken down under a recent low at 104.60, it suggests that the pressure is OFF of the financial system and prices can rally easier.
I'll make a 3rd attempt to buy the DIA today -
83.11 last.
Risk 1 pt.
Target 2 pts. Once up 1 pt, raise stop to breakeven.
Raise stop to breakeven after 1 hour also.
12:45PM 83.26 now...
Tuesday, October 28, 2008
STILL BULLISH STRUCTURE
Buy the mid point of this rally and risk 1 DIA pt.
DIA 80.44 = yesterday's close
DIA 85.04 = today's high
Range = 4.60 pts
Mid-point = 2.30 pts above 80.44 = 82.74
Entry 82.74, risk 1.00 pt.
Move stop up 0.50 after 30 minutes.
Move stop up to breakeven after 60 minutes.
10:52AM EST
DIA 82.67 last.
DIA 80.44 = yesterday's close
DIA 85.04 = today's high
Range = 4.60 pts
Mid-point = 2.30 pts above 80.44 = 82.74
Entry 82.74, risk 1.00 pt.
Move stop up 0.50 after 30 minutes.
Move stop up to breakeven after 60 minutes.
10:52AM EST
DIA 82.67 last.
10:07AM, Tuesday, BUY SUPPORT
"BUY against support due to HIGH CALL VOLUMES and SHARPLY LOWER VIX = call selling = bull market behavior"
10:10AM
Risk 1.00 DIA pt
DIA 84.10 bid last
10:10AM
Risk 1.00 DIA pt
DIA 84.10 bid last
Monday, October 27, 2008
GLOBAL WEALTH DESTRUCTION
Ok... I'm not going to go there in this blog....
But note today that the following markets are UP:
UP: GOLD, crude, silver, bonds, stocks, corn, EuroCurrency
And the following KEY MARKET is down: JapYen
These are interesting points to make.
OK: Back to VIX & PUT CALL
We have had a retest of the lows on the DIA, which took out the previous selloff low, but did not make a new low overall (although overnight markets did certainly break under that low).
So, this is a decent repeat of how the stock market bottomed in 1974, which is what I've been saying in other venues for some time. There was a more bullish pattern that said the low was already in place last week and that we were due to rally 10-15% very quickly, but this last roll over shut that down, especially when the YEN went on to breakout again and put pressure on the world financial system. The price of crude oil keeps going down (except today, it looks bottomy on the chart) and the trade that is most NOT TALKED ABOUT is the Long Crude / Short Yen trade that we can popularly call the TEXAS CRUDE HEDGE after the famous bull market crash of 1985 where crude dropped from $35 to $10 in a very short time and nearly wiped out the SouthWest of the US and our friends next door in Mexico. Long crude oil in the ground and long crude oil futures is famously called the "Texas Hedge" because it really isn't a hedge at all, obviously. It is a rampant speculation. It was a bubble back then and it is/was a bubble now. That bubble may have already popped and THAT is what will put in this market bottom. A BOTTOM IN CRUDE OIL WILL PUT A BOTTOM IN THE STOCK MARKET = YOU HEARD IT HERE - YES INDEED.
Buy crude oil - buy EuroCurrency - buy silver - buy gold - sell bonds - buy stocks - sell Yen. That is what we should all be doing right here, right now.
1:27PM Monday, October 27, 2008
But note today that the following markets are UP:
UP: GOLD, crude, silver, bonds, stocks, corn, EuroCurrency
And the following KEY MARKET is down: JapYen
These are interesting points to make.
OK: Back to VIX & PUT CALL
We have had a retest of the lows on the DIA, which took out the previous selloff low, but did not make a new low overall (although overnight markets did certainly break under that low).
So, this is a decent repeat of how the stock market bottomed in 1974, which is what I've been saying in other venues for some time. There was a more bullish pattern that said the low was already in place last week and that we were due to rally 10-15% very quickly, but this last roll over shut that down, especially when the YEN went on to breakout again and put pressure on the world financial system. The price of crude oil keeps going down (except today, it looks bottomy on the chart) and the trade that is most NOT TALKED ABOUT is the Long Crude / Short Yen trade that we can popularly call the TEXAS CRUDE HEDGE after the famous bull market crash of 1985 where crude dropped from $35 to $10 in a very short time and nearly wiped out the SouthWest of the US and our friends next door in Mexico. Long crude oil in the ground and long crude oil futures is famously called the "Texas Hedge" because it really isn't a hedge at all, obviously. It is a rampant speculation. It was a bubble back then and it is/was a bubble now. That bubble may have already popped and THAT is what will put in this market bottom. A BOTTOM IN CRUDE OIL WILL PUT A BOTTOM IN THE STOCK MARKET = YOU HEARD IT HERE - YES INDEED.
Buy crude oil - buy EuroCurrency - buy silver - buy gold - sell bonds - buy stocks - sell Yen. That is what we should all be doing right here, right now.
1:27PM Monday, October 27, 2008
I'VE CHANGED MY MIND
It is now 10:55AM and the winds have changed:
Here's how they changed:
Call activity is picking up (putcall went from over 2.00 to 0.78 now) and VIX is lifting back up from 75 to 77. This implies to me that there are call buyers out there paying UP to participate on a rally in stock prices. I don't think that is the best setup for the biggest rally, in fact, I view that as a short term topping measure.
I see what is going on now to drive the bulls into a frenzy = the Yen is breaking down here intraday under the 107 level.
Just as the Yen helped us to turn bearish in recent weaks, it is turning itself around and is saying the opposite now. I am aware of the Central Bank of Japan's interest in pushing the Yen back down too and their statements to that effect. These are volatile times - anything can change at a moment's notice.
I view this as an EXIT LONG opportunity for any LONGS from this last buy signal from 10 minutes ago.
11:01AM
Here's how they changed:
Call activity is picking up (putcall went from over 2.00 to 0.78 now) and VIX is lifting back up from 75 to 77. This implies to me that there are call buyers out there paying UP to participate on a rally in stock prices. I don't think that is the best setup for the biggest rally, in fact, I view that as a short term topping measure.
I see what is going on now to drive the bulls into a frenzy = the Yen is breaking down here intraday under the 107 level.
Just as the Yen helped us to turn bearish in recent weaks, it is turning itself around and is saying the opposite now. I am aware of the Central Bank of Japan's interest in pushing the Yen back down too and their statements to that effect. These are volatile times - anything can change at a moment's notice.
I view this as an EXIT LONG opportunity for any LONGS from this last buy signal from 10 minutes ago.
11:01AM
MONDAY - 10:44AM - Market Environment
Discussion of environment -
Put-selling dominated the first half hour of trading (putcall > 2, VIX down 5) and set up a bearish reaction as INSTITUTIONS are establishing long positions by way of selling puts.
This should be a constructive setup again for the close as institutional support is the most important element to a market advance. From what I can see, you have seen institutions front-running their own customers' orders by way of the behavior I have witnessed in the market. It is logical to assume this is happening too given how much money wealth has evaporated over the recent past.
Here's how I read this. I believe that we are in a constructive day where support holds and you exit on resistance levels. I imagine a stair-step advance for the day.
It is now 10:48AM and the DIA is well above its overnight low by 4.00 pts based on where Dow FUTURES were trading today.
STRATEGY: Buy Here 83.16 last. Target +1 pt. Stop = 82.50 (0.66 pts)
DIA is already 83.33 now. Same 1 pt target and same stop = 82.50 (0.83 pts)
Volatile action.
DIA is now 83.47. Same 1 pt target and same stop = 82.50 (0.97)
I can't even get this published in time for this to rally this much.....
10:52AM now...
Put-selling dominated the first half hour of trading (putcall > 2, VIX down 5) and set up a bearish reaction as INSTITUTIONS are establishing long positions by way of selling puts.
This should be a constructive setup again for the close as institutional support is the most important element to a market advance. From what I can see, you have seen institutions front-running their own customers' orders by way of the behavior I have witnessed in the market. It is logical to assume this is happening too given how much money wealth has evaporated over the recent past.
Here's how I read this. I believe that we are in a constructive day where support holds and you exit on resistance levels. I imagine a stair-step advance for the day.
It is now 10:48AM and the DIA is well above its overnight low by 4.00 pts based on where Dow FUTURES were trading today.
STRATEGY: Buy Here 83.16 last. Target +1 pt. Stop = 82.50 (0.66 pts)
DIA is already 83.33 now. Same 1 pt target and same stop = 82.50 (0.83 pts)
Volatile action.
DIA is now 83.47. Same 1 pt target and same stop = 82.50 (0.97)
I can't even get this published in time for this to rally this much.....
10:52AM now...
I TOOK FRIDAY OFF FROM INTRADAY TRADING
I had other important business to take care of with our automated-systematic-trading business. Also, given that S&P futures had reached LIMIT DOWN in the morning, I could tell it was going to be a ROCKY DAY. I hope you all survived it well and managed to make some great decisions.
For those of you who count on my market calls every day - I'm sorry I was unavailable.
For those of you who count on my market calls every day - I'm sorry I was unavailable.
Thursday, October 23, 2008
HEAVY PUT BUYING ALL DAY
After an initial surge of put selling this morning which set up a bounce, we dropped dramatically.
Then we saw call buying = bearish. And prices fell further.
Then we saw heavy put buying = bullish. But prices still fell until VIX hit 80+.
We have now just seen a massive rally from DIA 82.40 to 85.33 as I type.
The rally turned after the YEN surged and surged and surged to reach 10460 on the futures, which is up nearly 5% from 5 days ago. This is putting massive pressure on anyone who borrowed Yen to finance ANYTHING in the past few years.
Based on the overall action here today it looks like we could see a MONSTER RALLY.
Why?
Put selling at 70+ VIX is institutional grade BULLISHNESS.
This tells me that the smart money is loading UP on STOCKS.
I want to take buy signals after 3:30PM because that's when they can MARK UP their new purchases to show a profit on the day.
So:
Buy at 3:30PM
RISK 1.00 DIA
EXIT ON CLOSE
3:19PM NOW
Thursday, October 23, 2008
Then we saw call buying = bearish. And prices fell further.
Then we saw heavy put buying = bullish. But prices still fell until VIX hit 80+.
We have now just seen a massive rally from DIA 82.40 to 85.33 as I type.
The rally turned after the YEN surged and surged and surged to reach 10460 on the futures, which is up nearly 5% from 5 days ago. This is putting massive pressure on anyone who borrowed Yen to finance ANYTHING in the past few years.
Based on the overall action here today it looks like we could see a MONSTER RALLY.
Why?
Put selling at 70+ VIX is institutional grade BULLISHNESS.
This tells me that the smart money is loading UP on STOCKS.
I want to take buy signals after 3:30PM because that's when they can MARK UP their new purchases to show a profit on the day.
So:
Buy at 3:30PM
RISK 1.00 DIA
EXIT ON CLOSE
3:19PM NOW
Thursday, October 23, 2008
BUY SIGNAL 12:48AM
DIA 85.00
RISK 1.00 pt.
REASON:
Heavy put buying is driving this market down.
PANIC is happening Japanese Yen.
PANIC is happening in T-Bonds...
YET, stock prices are seemingly holding onto yesterday's lows.....
As it stops and the weakness abates as it has here, at least for now...
Upside = 1.5 pts.
RISK 1.00 pt.
REASON:
Heavy put buying is driving this market down.
PANIC is happening Japanese Yen.
PANIC is happening in T-Bonds...
YET, stock prices are seemingly holding onto yesterday's lows.....
As it stops and the weakness abates as it has here, at least for now...
Upside = 1.5 pts.
10 AM BULLISH SETUP CAUGHT FULL 1 PT PROFIT
Even though the setup went for a total of 2 full points.
At 11AM the conditions changed as prices ran up into the highs and I'll go over that now:
11:59AM
Will have to post shortly. I just wanted this on the board. My IM clients were aware of this signal setup, it just takes too much time to post to this blog sometimes (especially when your computer is frozen)
At 11AM the conditions changed as prices ran up into the highs and I'll go over that now:
11:59AM
Will have to post shortly. I just wanted this on the board. My IM clients were aware of this signal setup, it just takes too much time to post to this blog sometimes (especially when your computer is frozen)
Wednesday, October 22, 2008
JEKYL & HYDE TRADE IS SHORT from 86.20
1 pt stop @ 87.20
(2nd IDEA BUY SIGNAL = Stopped out, the reversal short with 0.50 pt stop also stopped out)
1:53PM EST
86.53 last DIA
(2nd IDEA BUY SIGNAL = Stopped out, the reversal short with 0.50 pt stop also stopped out)
1:53PM EST
86.53 last DIA
2nd IDEA: BUY NOW WITH CLOSE STOP
86.70 last.
BUY HERE, STOP AND REVERSE UNDER THE LOW @ 86.20.
RISK ON REVERSE = 86.70
ENTIRE RISK = 1.00
NOT BAD.
86.75 bid now- 86.77ask
1:30PM EST
WED, OCT 22, 2008
now 86.58-60....
BUY HERE, STOP AND REVERSE UNDER THE LOW @ 86.20.
RISK ON REVERSE = 86.70
ENTIRE RISK = 1.00
NOT BAD.
86.75 bid now- 86.77ask
1:30PM EST
WED, OCT 22, 2008
now 86.58-60....
JEKYL & HYDE SIGNAL
87.37 DIA @ 1:07PM
October 22, 2008 - Wednesday
Here it is in a nutshell:
VIX spiked from 51 low yesterday to 76 today as the put volume dominated in the first 90 minutes of trading.
The DIA dropped from 90-92 range yesterday down to 86.21 low today and bounced to 88.25 high since that dramatic decline.
The YEN's rally is what set this up, in my opinion and was the reason I was nervous about taking long positions yesterday, but I took them anyway, but I still respected the message that the Yen was sending us = monetary strains in the system, deleveraging, etc.
Now here we are at 87.18...
I have very specific instructions:
If the DIA can break under the low today, then you want to go with that breakdown and short the market. If the DIA can break above the high today, then you want to go with that breakout.
WHY?
Because that heavy level of put-buying is from INSTITUTIONS, then that put buying is FRONT-RUNNING their own selling later today, perhaps from mutual fund liquidation orders that they already have or expect to have or are guessing that they will have. That would clearly be bearish and a reason to expect a big decline.
HOWEVER, if the put-buying was from individuals or speculators, then they might very well be wrong and at some point, I've said three hours before with the "Three Hour Rule", the market will see that there is nothing to fear and then run the market back up to squeeze out those new short positions.
SO.
With that "BACKDROP" in mind - I'll leave you to place a buy stop over the high, exit with 1 pt stop or at end of day AND a sell stop under the low, exit with 1 pt stop or at the end of the day.
1:18PM
86.88 bid now.
October 22, 2008 - Wednesday
Here it is in a nutshell:
VIX spiked from 51 low yesterday to 76 today as the put volume dominated in the first 90 minutes of trading.
The DIA dropped from 90-92 range yesterday down to 86.21 low today and bounced to 88.25 high since that dramatic decline.
The YEN's rally is what set this up, in my opinion and was the reason I was nervous about taking long positions yesterday, but I took them anyway, but I still respected the message that the Yen was sending us = monetary strains in the system, deleveraging, etc.
Now here we are at 87.18...
I have very specific instructions:
If the DIA can break under the low today, then you want to go with that breakdown and short the market. If the DIA can break above the high today, then you want to go with that breakout.
WHY?
Because that heavy level of put-buying is from INSTITUTIONS, then that put buying is FRONT-RUNNING their own selling later today, perhaps from mutual fund liquidation orders that they already have or expect to have or are guessing that they will have. That would clearly be bearish and a reason to expect a big decline.
HOWEVER, if the put-buying was from individuals or speculators, then they might very well be wrong and at some point, I've said three hours before with the "Three Hour Rule", the market will see that there is nothing to fear and then run the market back up to squeeze out those new short positions.
SO.
With that "BACKDROP" in mind - I'll leave you to place a buy stop over the high, exit with 1 pt stop or at end of day AND a sell stop under the low, exit with 1 pt stop or at the end of the day.
1:18PM
86.88 bid now.
Tuesday, October 21, 2008
ONE MORE SWING
91.34 bid -
Nice correction in price off of the high, this is the setup from this morning (that I forgot about) to buy.
Buying 1 pt+ corrections off of rally highs in DIA, exiting 1 pt above the correction low (which might end up being less than the 1 pt target, despite a 1 pt stop loss).
The odds are in your favor to buy when VIX is down and call activity shows heavier volume that puts.
91.16 bid now.
Risk 0.7 pts.
3:27PM now
91.28 bid....
Nice correction in price off of the high, this is the setup from this morning (that I forgot about) to buy.
Buying 1 pt+ corrections off of rally highs in DIA, exiting 1 pt above the correction low (which might end up being less than the 1 pt target, despite a 1 pt stop loss).
The odds are in your favor to buy when VIX is down and call activity shows heavier volume that puts.
91.16 bid now.
Risk 0.7 pts.
3:27PM now
91.28 bid....
BUY SIGNAL - 2:46PM
Low VIX and call activity = CALL sellers = fuel for the upmove.
Buy 92.72 ask now.
Risk 1 pt.
Exit on close.
Possible gap UP overnight.
2:47PM
Buy 92.72 ask now.
Risk 1 pt.
Exit on close.
Possible gap UP overnight.
2:47PM
1:28PM UPDATE
DIA @ 90.98 after dropping to a low of 89.99.
VIX is down to 54.50 from a recent double-peak over 56.
PUT/CALL volumes are neutral now, indicating nothing really now. Earlier today there were call volumes and falling VIX on the price decline, which implies a good bounce. We had the bounce and now we are trying to find a base. The base we found was yesterday's price action and it has held so far.
Price action is down, with the DIA falling to YESTERDAY'S price cluster where we saw the "CRAZY CALL SELLERS" driving down VIX by 15 points and setting up for this launch up from that level.
I thought and thought about putting out a new buy against the 90.00 price cluster because YESTERDAY I had said that I thought that level would hold for a LONG TIME and one day is not a long time. I don't want to make "predictions" - rather I want to define low risk entries for trades based on what is happening with this "three dimensional view" of the market.
Let's wait for further clarity to set up a lower risk trade.
1:34PM EST (6 minutes to type out)
VIX is down to 54.50 from a recent double-peak over 56.
PUT/CALL volumes are neutral now, indicating nothing really now. Earlier today there were call volumes and falling VIX on the price decline, which implies a good bounce. We had the bounce and now we are trying to find a base. The base we found was yesterday's price action and it has held so far.
Price action is down, with the DIA falling to YESTERDAY'S price cluster where we saw the "CRAZY CALL SELLERS" driving down VIX by 15 points and setting up for this launch up from that level.
I thought and thought about putting out a new buy against the 90.00 price cluster because YESTERDAY I had said that I thought that level would hold for a LONG TIME and one day is not a long time. I don't want to make "predictions" - rather I want to define low risk entries for trades based on what is happening with this "three dimensional view" of the market.
Let's wait for further clarity to set up a lower risk trade.
1:34PM EST (6 minutes to type out)
Yen Surging = Indicates Financial System Strains
Stand aside.
If VIX picks UP and Call Volumes hold versus put volumes, then we can easily turn into a bearish situation.
We want to see "skepticism" about this rally - any signs of "euphoria" or "bullishness" are dangerous and imply lower prices.
Stand aside here.
91.07 bid now @ 11:56AM EST
October 21, 2008 Tuesday
If VIX picks UP and Call Volumes hold versus put volumes, then we can easily turn into a bearish situation.
We want to see "skepticism" about this rally - any signs of "euphoria" or "bullishness" are dangerous and imply lower prices.
Stand aside here.
91.07 bid now @ 11:56AM EST
October 21, 2008 Tuesday
Buy Signal Description
Conditions once again favor rising prices and the low made yesterday still has a chance at holding for a long time.
We are once again seeing, same as yesterday, that "call sellers" have emerged which are keeping the VIX down at 53 from its peak yesterday near 64. The level of call volume is certainly indicative of heavy interest in generating "income" from this rally in the stock market from nervous longs.
The effect of "call selling" on the market is to see price advances "checked" and stopped for the short term. Hence today we've seen the advance from the initial gap-down halted at the previous close where prices ran into "supply" from call sellers and other nervous longs.
The longer this continues, the more bullish it becomes.
For today, buy dips of 1.0 pts in the DIA, we just had a 1 pt drop from 92.77 down to 91.66 and exit on a rally of 1.0 pts from the low of each correction.
If you are already in based on the buy signal at 91.77, then use 92.66 as your exit target.
REPEAT THE PROCESS UNTIL THE END OF THE DAY.
I am watching the Japanese Yen rally here (at 11:25AM) which is reaching the previous rally high for the day. If the Yen makes it to a new high, then this signal may be reconsidered. Just a heads up.
11:28AM now (many phone calls distracted this publishing)
We are once again seeing, same as yesterday, that "call sellers" have emerged which are keeping the VIX down at 53 from its peak yesterday near 64. The level of call volume is certainly indicative of heavy interest in generating "income" from this rally in the stock market from nervous longs.
The effect of "call selling" on the market is to see price advances "checked" and stopped for the short term. Hence today we've seen the advance from the initial gap-down halted at the previous close where prices ran into "supply" from call sellers and other nervous longs.
The longer this continues, the more bullish it becomes.
For today, buy dips of 1.0 pts in the DIA, we just had a 1 pt drop from 92.77 down to 91.66 and exit on a rally of 1.0 pts from the low of each correction.
If you are already in based on the buy signal at 91.77, then use 92.66 as your exit target.
REPEAT THE PROCESS UNTIL THE END OF THE DAY.
I am watching the Japanese Yen rally here (at 11:25AM) which is reaching the previous rally high for the day. If the Yen makes it to a new high, then this signal may be reconsidered. Just a heads up.
11:28AM now (many phone calls distracted this publishing)
Monday, October 20, 2008
SECRET BUY SIGNAL
I've told many of you who I talk with through the day about this signal - but it is so strongly set-up here that it is possible that we never see these prices again for a long time, perhaps even longer.
When you get a VIX as high as it is...
throw in a rising market....
and throw in a collapsing VIX...
it tells you something big is going on....
that people are SELLING CALLS on this rally.
We might gap-up overnight or just between the close and the open tomorrow - possibly enough that will keep people from wanting to buy at those HIGH prices ... and prices will climb again.
We'll see what the setup is tomorrow, but for now - this is as GOOD as a GREEN LIGHT as you can EVER get, as far as I'm concerned.
How to trade it is the challenging part.
Likely "TO THE MOON" from this setup.
3:18PM NOW
When you get a VIX as high as it is...
throw in a rising market....
and throw in a collapsing VIX...
it tells you something big is going on....
that people are SELLING CALLS on this rally.
We might gap-up overnight or just between the close and the open tomorrow - possibly enough that will keep people from wanting to buy at those HIGH prices ... and prices will climb again.
We'll see what the setup is tomorrow, but for now - this is as GOOD as a GREEN LIGHT as you can EVER get, as far as I'm concerned.
How to trade it is the challenging part.
Likely "TO THE MOON" from this setup.
3:18PM NOW
EXTREMELY BULLISH - BUY 91.26
EVEN with prices up here. BUY.
3:01PM
Risk 0.75 pts.
Upside 2-3 pts.
Exit at close.
3:01PM
Risk 0.75 pts.
Upside 2-3 pts.
Exit at close.
Friday, October 17, 2008
Buy Signal - 1/2 Size
Buy signal - not as good as yesterday - but nothing will ever be as good as yesterday again -
VIX is up to the 75-80 level where it consolidated yesterday -
and put/call is over 1.20, which shows people buying puts at elevated VIX levels = fear
VIX is up 5 from the 70 level up to 75 level, which is a good sign that fear is up, but only up to the level where it was yesterday.
The drop on the opening today in DIA only put us back to the acceleration zone from yesterday afternoon, which is a support area.
As I've typed this from 10:36AM to 10:48AM the ESz8 has rallied from 937 to 950+ so the entry window is behind us now... so I'll review and find a way to enter this trade.
10:50AM now...
VIX is up to the 75-80 level where it consolidated yesterday -
and put/call is over 1.20, which shows people buying puts at elevated VIX levels = fear
VIX is up 5 from the 70 level up to 75 level, which is a good sign that fear is up, but only up to the level where it was yesterday.
The drop on the opening today in DIA only put us back to the acceleration zone from yesterday afternoon, which is a support area.
As I've typed this from 10:36AM to 10:48AM the ESz8 has rallied from 937 to 950+ so the entry window is behind us now... so I'll review and find a way to enter this trade.
10:50AM now...
Thursday, October 16, 2008
5% PROFIT IN DIA TODAY!
Entry 85.80 - Exit 90.00 = Profit 4.2 pts = 5% RETURN = HALF THE EXPECTED RETURN FOR THE STOCK MARKET FOR AN ENTIRE YEAR (and we earned it in one day).
I wish for us all to take advantage of low-risk trading opportunities like this one.
Read the previous comments from my last post.
After the buy signal was published, the Gov't announced it was backing bond insurers - that was annouced at 3:26PM. This is what happens when the price of insurance gets too high, the Gov't comes in and does something to bring the price back down and to get the market functioning again.
I wish for us all to take advantage of low-risk trading opportunities like this one.
Read the previous comments from my last post.
After the buy signal was published, the Gov't announced it was backing bond insurers - that was annouced at 3:26PM. This is what happens when the price of insurance gets too high, the Gov't comes in and does something to bring the price back down and to get the market functioning again.
STRESS LEADS TO BAD DECISIONS
Are you feeling stressed? If you are not, then you are super-human, non-human or just not paying attention.
Are you bearish? Are you fearful? Are you angry about your wealth, as measured in dollars on your account statement? Are you feeling helpless? Are you blaming anyone else for what is happening to you, to us or to the market?
OR
Are you thankful that there is a market? Are you thankful that there are opportunities to buy and to sell? If you don't get a good opportunity to BUY (like now) then you are probably used to normal opportunities to buy (like we've seen for four years from 2004-2008).
Just addressing a key point first - our emotions.
Why?
VIX hit over 80 today. Why is that so amazing? It shows people have NO IDEA what is going on because they have NO MONEY to back up their opinion with an order in the market.
VIX is a measure of the readiness, willingness and ability of INSURANCE underwriters to take a stand in the market. When they are not R,W & A to provide insurance, the price of insurance SKYROCKETS as it has now. This is the same as it was after 9/11 for commercial real estate.
We all know what happened to the price of real estate AFTER 9/11 in 2001. But had you read the history books, you would have thought differently. In other words, the price of "insurance on real estate in 2001 was extremely high" and that ended up marking the bottom for real estate.
The one obvious observation is that the price of "insurance" hasn't come down yet. The Gov't had to step in back then to backstop the insurance so that companies would underwrite it. So, we could still theoretically get to the VIX was had in 1987's crash where we hit 160 on the index.
So, we are EXTREMELY HIGH now, but it is not AT THE EXTREME because, the only way we know we have hit the EXTREME is for prices to back away from that high level.
For now, VIX is 77.82 as I type. The high was 81.12. So, I can say with confidence that this is a time to BUY because VIX is below its highest level of 81.12 at its current reading of 77.51. AND prices for stocks are ABOVE their lowest levels of the day 85.57 last on DIA (versus a low of 82.09). Add into this mix a sharply rising price of VIX and activity heavily dominated by PUT volumes today and that means that people have been BUYING PUT INSURANCE all day today.
Are these smart buyers of insurance? Do they know something that we don't? We'll find out soon enough. If they do know something in advance, perhaps that there are massive sell orders to hit the market later today, then we'll see stock prices begin to fall and we should step out of the way. IF they are wrong and they are not all-knowing and aware of something we aren't, then we have a very tradable BOTTOM in stock prices here.
A LONG DESCRIPTION BUT AN IMPORTANT ONE!
BUY SIGNAL - 85.79 BID in DIA
RISK 1.00 PT.
RAISE STOP BY 0.50 AFTER 30 MINUTES.
RAISE STOP TO BREAKEVEN AFTER 60 MINUTES.
EXIT AT THE 4PM CLOSE
Are you bearish? Are you fearful? Are you angry about your wealth, as measured in dollars on your account statement? Are you feeling helpless? Are you blaming anyone else for what is happening to you, to us or to the market?
OR
Are you thankful that there is a market? Are you thankful that there are opportunities to buy and to sell? If you don't get a good opportunity to BUY (like now) then you are probably used to normal opportunities to buy (like we've seen for four years from 2004-2008).
Just addressing a key point first - our emotions.
Why?
VIX hit over 80 today. Why is that so amazing? It shows people have NO IDEA what is going on because they have NO MONEY to back up their opinion with an order in the market.
VIX is a measure of the readiness, willingness and ability of INSURANCE underwriters to take a stand in the market. When they are not R,W & A to provide insurance, the price of insurance SKYROCKETS as it has now. This is the same as it was after 9/11 for commercial real estate.
We all know what happened to the price of real estate AFTER 9/11 in 2001. But had you read the history books, you would have thought differently. In other words, the price of "insurance on real estate in 2001 was extremely high" and that ended up marking the bottom for real estate.
The one obvious observation is that the price of "insurance" hasn't come down yet. The Gov't had to step in back then to backstop the insurance so that companies would underwrite it. So, we could still theoretically get to the VIX was had in 1987's crash where we hit 160 on the index.
So, we are EXTREMELY HIGH now, but it is not AT THE EXTREME because, the only way we know we have hit the EXTREME is for prices to back away from that high level.
For now, VIX is 77.82 as I type. The high was 81.12. So, I can say with confidence that this is a time to BUY because VIX is below its highest level of 81.12 at its current reading of 77.51. AND prices for stocks are ABOVE their lowest levels of the day 85.57 last on DIA (versus a low of 82.09). Add into this mix a sharply rising price of VIX and activity heavily dominated by PUT volumes today and that means that people have been BUYING PUT INSURANCE all day today.
Are these smart buyers of insurance? Do they know something that we don't? We'll find out soon enough. If they do know something in advance, perhaps that there are massive sell orders to hit the market later today, then we'll see stock prices begin to fall and we should step out of the way. IF they are wrong and they are not all-knowing and aware of something we aren't, then we have a very tradable BOTTOM in stock prices here.
A LONG DESCRIPTION BUT AN IMPORTANT ONE!
BUY SIGNAL - 85.79 BID in DIA
RISK 1.00 PT.
RAISE STOP BY 0.50 AFTER 30 MINUTES.
RAISE STOP TO BREAKEVEN AFTER 60 MINUTES.
EXIT AT THE 4PM CLOSE
Wednesday, October 15, 2008
COVER SHORT - Call it a day
Short from 1:11 PM after BUY BUY BUY SIGNAL failed
Cover here.
1:57PM
88.06 bid DIA
Cover here.
1:57PM
88.06 bid DIA
How to Manage This BUY SIGNAL
After 30 minutes, raise stops to 0.50 DIA pts.
After 60 minutes, raise stop to breakeven.
If this market hasn't rallied at least 1 DIA pt, then REVERSE and go SHORT and risk 1.00 DIA pt.
It is possible that we are in a melt-down scenario at that point in time.
In other words, if we can't rally from this kind of an extremely bullish scenario, then the market is EXTREMELY WEAK and will likely go down dramatically.
Sorry to be extreme, but that's what we have to be prepared for.
Extreme circumstances are here and we have to manage them properly.
1:07PM
After 60 minutes, raise stop to breakeven.
If this market hasn't rallied at least 1 DIA pt, then REVERSE and go SHORT and risk 1.00 DIA pt.
It is possible that we are in a melt-down scenario at that point in time.
In other words, if we can't rally from this kind of an extremely bullish scenario, then the market is EXTREMELY WEAK and will likely go down dramatically.
Sorry to be extreme, but that's what we have to be prepared for.
Extreme circumstances are here and we have to manage them properly.
1:07PM
BUY BUY BUY
12:41PM
BUY SIGNALS ALL DAY LONG HERE -
ALL WOULD HAVE STOPPED OUT SO FAR, IF YOU USE 100 POINTS STOP ON THE DOW FUTURES, but CASH isn't as volatile, so it wouldn't be stopping you out.
MAJOR PUT BUYERS HIT THE MARKET TODAY -
BUT THEY HAVE FAILED TO PUSH PREMIUMS UP HIGH ENOUGH TO INDICATE THAT THEY ARE IN CONTROL.
THIS MEANS THAT THE PUT BUYERS ARE THE LAST TO THIS DOWN MOVE AND IT IS TIME FOR ANOTHER MAJOR RALLY.
RISK 1.00 DIA POINT FROM ENTRY.
12:43PM EST
89.89 bid in DIA
BUY SIGNALS ALL DAY LONG HERE -
ALL WOULD HAVE STOPPED OUT SO FAR, IF YOU USE 100 POINTS STOP ON THE DOW FUTURES, but CASH isn't as volatile, so it wouldn't be stopping you out.
MAJOR PUT BUYERS HIT THE MARKET TODAY -
BUT THEY HAVE FAILED TO PUSH PREMIUMS UP HIGH ENOUGH TO INDICATE THAT THEY ARE IN CONTROL.
THIS MEANS THAT THE PUT BUYERS ARE THE LAST TO THIS DOWN MOVE AND IT IS TIME FOR ANOTHER MAJOR RALLY.
RISK 1.00 DIA POINT FROM ENTRY.
12:43PM EST
89.89 bid in DIA
BUY SIGNAL: 10:05AM: RISK HIGH
DIA down to price cluster support at 90.
VIX up to 60 = recent extreme level.
Put/call 1.50 = bullish.
Risk 1.00
10:10AM (interrupted by a phone call from 10:05-10:10)
VIX up to 60 = recent extreme level.
Put/call 1.50 = bullish.
Risk 1.00
10:10AM (interrupted by a phone call from 10:05-10:10)
Tuesday, October 14, 2008
My IM Comments Timestamped
[12:12:02 PM] Tim West says: put/call suggests to buy dips
[12:12:45 PM] Tim West says: 1.74 put/call coupled with move UP in VIX from 50 to 55 suggests people are buying puts on this rally.. and paying DEARLY FOR THEM!
[12:13:31 PM] Tim West says: so they get 3 hours to prove themselves right or else I'll view them as "johnny come late to the party" bears and they will get squeezed
[12:12:45 PM] Tim West says: 1.74 put/call coupled with move UP in VIX from 50 to 55 suggests people are buying puts on this rally.. and paying DEARLY FOR THEM!
[12:13:31 PM] Tim West says: so they get 3 hours to prove themselves right or else I'll view them as "johnny come late to the party" bears and they will get squeezed
More Signals - Market Volatility Extremely High
[11:44:24 AM] Tim West says: getting buy signal here on vix-put-call
[11:44:32 AM] Tim West says: 1012 entry...
[11:44:34 AM] TPM says: tx
[11:44:56 AM] Tim West says: havn't posted to blog yet... just got the spike up in put volume to trigger that signal
[11:45:25 AM] Tim West says: along with the rise in VIX from 50 to 58 (now 55) equates to a buy signal, risk is about 15 handles
[11:47:41 AM] Tim West says: from the time it took me to type that..then go to the blog site... then ...it had already zoomed up to 1020... from 1012 =
I'll need to come up with a new ALERT SERVICE to get these trades to you ASAP!!!
Best regards,
I'm on SKYPE - Tim West
[11:44:32 AM] Tim West says: 1012 entry...
[11:44:34 AM] TPM says: tx
[11:44:56 AM] Tim West says: havn't posted to blog yet... just got the spike up in put volume to trigger that signal
[11:45:25 AM] Tim West says: along with the rise in VIX from 50 to 58 (now 55) equates to a buy signal, risk is about 15 handles
[11:47:41 AM] Tim West says: from the time it took me to type that..then go to the blog site... then ...it had already zoomed up to 1020... from 1012 =
I'll need to come up with a new ALERT SERVICE to get these trades to you ASAP!!!
Best regards,
I'm on SKYPE - Tim West
Monday, October 13, 2008
SELL SIGNAL - SHORT TERM ONLY
SELL DIA 91.29
3:22PM
VIX down to 57.43, back to support, if you can believe 57 is support.
Put call is below 1.00, all day = too much bull-sided activity.
PRICE CLUSTER at 91 in DIA is resistance to any price advances from here.
EXPECT A Decent Setback from here, but don't risk the house on this as the LONG TERM TREND OF THE MARKET IS UP AFTER THIS WASHOUT to 8000 on the DJIA.
DIA 91.47 as I type.
Risk 0.50 MAX from here.
AGAIN - THIS IS A COUNTER TREND TRADE. WE ARE FADING/SELLING AGAINST RESISTANCE AND NOT GOING WITH THE PRICE UP-TREND HERE.
3:26PM DIA 91.60 last...
3:22PM
VIX down to 57.43, back to support, if you can believe 57 is support.
Put call is below 1.00, all day = too much bull-sided activity.
PRICE CLUSTER at 91 in DIA is resistance to any price advances from here.
EXPECT A Decent Setback from here, but don't risk the house on this as the LONG TERM TREND OF THE MARKET IS UP AFTER THIS WASHOUT to 8000 on the DJIA.
DIA 91.47 as I type.
Risk 0.50 MAX from here.
AGAIN - THIS IS A COUNTER TREND TRADE. WE ARE FADING/SELLING AGAINST RESISTANCE AND NOT GOING WITH THE PRICE UP-TREND HERE.
3:26PM DIA 91.60 last...
DIA 90 RESISTANCE - 87.54 LAST, 88.92 HIGH
The Buy signal near 80 in the DIA on Friday at 3pm worked out extremely well.
The subsequent high at 89.02 on Friday amazes me. Almost 900 points up in the Dow Jones Industrials in under an HOUR!
I hope some of you caught at least a chunk of that rally from the 80 level. That was about as GOOD AS IT WILL EVER GET. The comments outlined when DIA was around the 91 level last week were also alerting us to substantially LOWER prices, which we did see as well. SO, ALL IN ALL, THIS ONLINE JOURNAL describing how to utilize VIX and Put/Call and Price Action in oder to buy and sell the DIA etf has been very successful.
=======================================
New signals pending.
VIX now 67.6 (low 63.78 today). Put/call .73 (but data seems erroneous so far)
The subsequent high at 89.02 on Friday amazes me. Almost 900 points up in the Dow Jones Industrials in under an HOUR!
I hope some of you caught at least a chunk of that rally from the 80 level. That was about as GOOD AS IT WILL EVER GET. The comments outlined when DIA was around the 91 level last week were also alerting us to substantially LOWER prices, which we did see as well. SO, ALL IN ALL, THIS ONLINE JOURNAL describing how to utilize VIX and Put/Call and Price Action in oder to buy and sell the DIA etf has been very successful.
=======================================
New signals pending.
VIX now 67.6 (low 63.78 today). Put/call .73 (but data seems erroneous so far)
Friday, October 10, 2008
BUY SIGNAL @ 3:00PM
The last signal didn't stop out until after 1 hour when you raised your stop to breakeven.
Here's what is happening now.
Put volumes are picking up very strong and this is the sign I have been searching for for a bottom. Put/call is up to 3.83 while VIX is a very high 75+.
I can't be around to watch the final hour of trading, but use the same stop of 2 pts and exit on close.
DIA is 81.76 as I type, but it is moving around quickly.
DIA is now 81.42. The 1 minute volatility is so great I am dubious that this trade is warranted.
DIA is now 81.04 as I type. I can't keep up with the movement. In 2 minutes it has moved almost what I would recommend risking on a normal basis.
It is 2:56PM now as I type. DIA @ 81.00
It is 2:58PM now... DIA 80.41... I can't even type this in to get it posted on the blog.
The entry will simply be where the DIA is at 3:00PM.
2:59PM NOW
Here's what is happening now.
Put volumes are picking up very strong and this is the sign I have been searching for for a bottom. Put/call is up to 3.83 while VIX is a very high 75+.
I can't be around to watch the final hour of trading, but use the same stop of 2 pts and exit on close.
DIA is 81.76 as I type, but it is moving around quickly.
DIA is now 81.42. The 1 minute volatility is so great I am dubious that this trade is warranted.
DIA is now 81.04 as I type. I can't keep up with the movement. In 2 minutes it has moved almost what I would recommend risking on a normal basis.
It is 2:56PM now as I type. DIA @ 81.00
It is 2:58PM now... DIA 80.41... I can't even type this in to get it posted on the blog.
The entry will simply be where the DIA is at 3:00PM.
2:59PM NOW
STOCK MARKET SETUP
VIX is now up to 70+.
The only way to trade now is to pick spots very carefully, then give yourself the chance to let one winner turn into a huge winner.
The signs of CAPITULATION so far are showing themselves in price declines but not in put-activity.
I see a reason to go LONG here, but it is hanging on a weak setup:
Put-call is 1.96 = bullish
VIX is HIGH but below the high of the day. 73.37 last, high is 74.33.
Price action in 65 minutes in the DIA is contracting (compared to extremely HIGH price volatility recently) for the last 2 bars.
9:30-10:35 = first bar
10:35-11:40 = second bar
11:40-12:45 = third bar
We are in the 4th bar today, so the 2nd & 3rd bars were tighter than the 1st bar.
Put-call is now showing 2.50 (at 1:22PM) which is nicer still for a buy signal.
DIA is 81.67 now.
Given that the average HOURLY range on the DIA is >2 pts, our risk has to be at least that much.
CONSEQUENTLY :
BUY 81.54 (last for DIA)
Risk 2 pts.
Target 4-6 pts. Exit 1/2 at 2 pts. Raise stop to entry on 1/2.
Raise stop to breakeven after 1 HOUR.
1:24PM NOW.
(ESz8 865 last for reference)
The only way to trade now is to pick spots very carefully, then give yourself the chance to let one winner turn into a huge winner.
The signs of CAPITULATION so far are showing themselves in price declines but not in put-activity.
I see a reason to go LONG here, but it is hanging on a weak setup:
Put-call is 1.96 = bullish
VIX is HIGH but below the high of the day. 73.37 last, high is 74.33.
Price action in 65 minutes in the DIA is contracting (compared to extremely HIGH price volatility recently) for the last 2 bars.
9:30-10:35 = first bar
10:35-11:40 = second bar
11:40-12:45 = third bar
We are in the 4th bar today, so the 2nd & 3rd bars were tighter than the 1st bar.
Put-call is now showing 2.50 (at 1:22PM) which is nicer still for a buy signal.
DIA is 81.67 now.
Given that the average HOURLY range on the DIA is >2 pts, our risk has to be at least that much.
CONSEQUENTLY :
BUY 81.54 (last for DIA)
Risk 2 pts.
Target 4-6 pts. Exit 1/2 at 2 pts. Raise stop to entry on 1/2.
Raise stop to breakeven after 1 HOUR.
1:24PM NOW.
(ESz8 865 last for reference)
Thursday, October 9, 2008
MUDDY SIGNALS NOW 10:43AM
From landscape turned from bullish at 10AM to neutral by 10:15AM to BEARISH by 10:30AM
Why?
VIX showed that call buyers were coming in because VIX shifted UP when the put/call went from heavy puts down to heavy calls.
Amazing. I think people are looking for a BIG RALLY.
Now on this decline - it is 11:07AM now -
The market has dropped off 4% from its high (measured by SP500) and there is no put buying, only call selling and call activity.
This is remarkable.
I'll see if I can define a low-risk trading plan from this setup.
For now, stand aside.
11:10AM DIA 91.25 last. High DIA 94.50 today at just before 10AM.
Why?
VIX showed that call buyers were coming in because VIX shifted UP when the put/call went from heavy puts down to heavy calls.
Amazing. I think people are looking for a BIG RALLY.
Now on this decline - it is 11:07AM now -
The market has dropped off 4% from its high (measured by SP500) and there is no put buying, only call selling and call activity.
This is remarkable.
I'll see if I can define a low-risk trading plan from this setup.
For now, stand aside.
11:10AM DIA 91.25 last. High DIA 94.50 today at just before 10AM.
BUYERS MARKET
Today I'll call a buyers market.
The backdrop is for prices to rise easier than they fall.
A falling VIX from a high level is bullish, generally.
A high put/call this morning is bullish also.
Buy 0.70-1.20 pt dips in DIA until further notice.
Risk 0.50 from entry.
Exit +0.70 to +1.00 from entry.
Await another dip to re-enter.
9:57AM
The backdrop is for prices to rise easier than they fall.
A falling VIX from a high level is bullish, generally.
A high put/call this morning is bullish also.
Buy 0.70-1.20 pt dips in DIA until further notice.
Risk 0.50 from entry.
Exit +0.70 to +1.00 from entry.
Await another dip to re-enter.
9:57AM
Wednesday, October 8, 2008
WILD RIDE TODAY
Things were so fast today that I didn't even get a chance to update the blog - amazing action -
The extremely bullish setup that happened today at 92 on the DIA was a combination of extremely high VIX (60), very high intraday put volume (2 x's call volume) coupled with diminishing hourly price ranges (65 min chart).
Since rebounding to 96+, the put/call has retreated to 1.3 (taking some bullish steam off) and the VIX has retreated to 54 (also taking some bullish steam off)... so ...
For those of you that know me, my IM's and emails today caught the rally from the 92 level to the 95 level. There is so much volatility/movement in the market that it is hard to believe we could move 60 pts in the DJIA every few minutes.
Tim
3:08PM
The extremely bullish setup that happened today at 92 on the DIA was a combination of extremely high VIX (60), very high intraday put volume (2 x's call volume) coupled with diminishing hourly price ranges (65 min chart).
Since rebounding to 96+, the put/call has retreated to 1.3 (taking some bullish steam off) and the VIX has retreated to 54 (also taking some bullish steam off)... so ...
For those of you that know me, my IM's and emails today caught the rally from the 92 level to the 95 level. There is so much volatility/movement in the market that it is hard to believe we could move 60 pts in the DJIA every few minutes.
Tim
3:08PM
Tuesday, October 7, 2008
DIA 96.39 = BUY
2:04PM
FOMC Minutes due out - so this isn't without risk.
This is the place where stocks found a bottom yesterday, which makes me very leary, however, there is enough put volume to indicate that the smart longs are selling out of their puts and locking in huge gains for this decline. The smart money is exiting their puts, therefore, we should be looking to the long side of this market here.
This morning, however, just for information, the OPPOSITE was true. Their were call sellers all over the market, which implied to me that we were seeing longs capping any advances. Since the DIA had rallied from 95 to over 100 in 3 short hours, it was logical to expect that type of behavior.
Now that we are back at the lows of the day and matching against yesterday's lows... 2:09PM now and DIA is 96.64 bid... it appears that the opposite is true now. Put sellers are booking profits they had bought PRIOR TO their long sales of stock. Very clever players, if you can figure out what they are doing by the "TRAIL" they leave in market prices and volumes....
Buy DIA 96.48 now.
2:10PM
Risk 0.60 DIA pts.
Target 1 hour exit.
Raise stop to break-even after 30 minutes.
FOMC Minutes due out - so this isn't without risk.
This is the place where stocks found a bottom yesterday, which makes me very leary, however, there is enough put volume to indicate that the smart longs are selling out of their puts and locking in huge gains for this decline. The smart money is exiting their puts, therefore, we should be looking to the long side of this market here.
This morning, however, just for information, the OPPOSITE was true. Their were call sellers all over the market, which implied to me that we were seeing longs capping any advances. Since the DIA had rallied from 95 to over 100 in 3 short hours, it was logical to expect that type of behavior.
Now that we are back at the lows of the day and matching against yesterday's lows... 2:09PM now and DIA is 96.64 bid... it appears that the opposite is true now. Put sellers are booking profits they had bought PRIOR TO their long sales of stock. Very clever players, if you can figure out what they are doing by the "TRAIL" they leave in market prices and volumes....
Buy DIA 96.48 now.
2:10PM
Risk 0.60 DIA pts.
Target 1 hour exit.
Raise stop to break-even after 30 minutes.
Monday, October 6, 2008
STILL BULLISH: 98.33 LAST DIA
98.50 on the last buy signal - hit 99.50+ within 30 minutes.
Very bullish setup here for a very big rally, but you still have to be careful, as always.
BUY AGAIN here 98.33 last. Risk 0.50 pts and reverse, then reverse and go short if stopped and risk 0.50 pts again and reverse to go long and risk 1.00 pts on that long position.
I feel strongly that a major rally will emerge out of this environment. It may take some time to get it right and you may suffer whip-saws back and forth as you go long, then short, then long, etc.
The goal is to make trades that have low risk and in the end you will have profits with good probability (not guaranteed, of course).
12:34PM 98.34 last (stuck in a tight range here 98.50-98.30 for the last 30 minutes)
Very bullish setup here for a very big rally, but you still have to be careful, as always.
BUY AGAIN here 98.33 last. Risk 0.50 pts and reverse, then reverse and go short if stopped and risk 0.50 pts again and reverse to go long and risk 1.00 pts on that long position.
I feel strongly that a major rally will emerge out of this environment. It may take some time to get it right and you may suffer whip-saws back and forth as you go long, then short, then long, etc.
The goal is to make trades that have low risk and in the end you will have profits with good probability (not guaranteed, of course).
12:34PM 98.34 last (stuck in a tight range here 98.50-98.30 for the last 30 minutes)
11:00AM BUY ATTEMPT #2
VIX hit over 55 and put/call is over 2.2 =
TOTAL FEAR
Likely "rubber band" bounce from here.
Risk = 1.00 DIA pt.
Potential = 2.00-3.00 DIA pts.
11:00AM now (I started typing at 10:57)
TOTAL FEAR
Likely "rubber band" bounce from here.
Risk = 1.00 DIA pt.
Potential = 2.00-3.00 DIA pts.
11:00AM now (I started typing at 10:57)
MARKET PARTICIPANTS PARALYZED BY FEAR
From what I can see this morning so far:
A neutral options volume in the first 30 minutes with EXPLODING VIX reading to 51.13 high is a sign that everyone is frozen and afraid to sell calls or sell puts.
Either their capital is too much at risk already or the fear makes them back away from the market.
I would view risk as 2% on this or 2 DIA points, but I'm only willing to lose 1 pt hoping that I get it right. It is possible we go into a free fall also for another 5% or 10% today, so I don't want to hang my entire reputation on this buy signal.
Just "calling it how I see it" from the sidelines.
10:13AM
DIA still 100.07 bid, quiet since my buy signal a few minutes ago
A neutral options volume in the first 30 minutes with EXPLODING VIX reading to 51.13 high is a sign that everyone is frozen and afraid to sell calls or sell puts.
Either their capital is too much at risk already or the fear makes them back away from the market.
I would view risk as 2% on this or 2 DIA points, but I'm only willing to lose 1 pt hoping that I get it right. It is possible we go into a free fall also for another 5% or 10% today, so I don't want to hang my entire reputation on this buy signal.
Just "calling it how I see it" from the sidelines.
10:13AM
DIA still 100.07 bid, quiet since my buy signal a few minutes ago
Friday, October 3, 2008
Four short positions taken & removed this afternoon
The DIA has rallied 1.00 pt, then corrected 1.00 pt off of its high on four separate occasions this afternoon for some VERY NICE, low risk profits.
Sold DIA 105.92, covered 105.41 (1.00 off high of 106.41)
Sold DIA 106.20, covered 105.30 (1.00 off high at 106.30)
Sold DIA 105.14, covered 104.16 (1.00 off high of 105.16)
Sold DIA 105.16, covered 104.59 (1.00 off high of 105.59)
If you did something different or thought something different - no problem - there will be plenty of other opportunities.
I'll go into what the indicators are saying now: 3:39PM Friday
Sold DIA 105.92, covered 105.41 (1.00 off high of 106.41)
Sold DIA 106.20, covered 105.30 (1.00 off high at 106.30)
Sold DIA 105.14, covered 104.16 (1.00 off high of 105.16)
Sold DIA 105.16, covered 104.59 (1.00 off high of 105.59)
If you did something different or thought something different - no problem - there will be plenty of other opportunities.
I'll go into what the indicators are saying now: 3:39PM Friday
Two Short Trades: Each Made Nice Profits
Selling DIA 1 pt above a recent low.
Happened twice from 1:45PM on.
2:36PM now
Happened twice from 1:45PM on.
2:36PM now
Market Indicator Update
House Vote Passed: 263 vs 171: To pass the Emergency Rescue Plan for the Financial System
Short positions would very likely have been stopped out on that rally after the news - SO - I'll take credit for that. After big news releases, it often happens that a market will go take out the stop orders on both sides of the market - so first it went up to stop out the shorts and then it came down to stop out the longs. If you look at a chart of the stock market today you will see this happening across the Dow Industrials from 10770 and 10570.
VIX is telling me that uncertainty remains very high at 43.75 (-1.51 today). PutCall is a low 0.46 right now after being a very high 2.00+ this morning.
This is still a very bearish situation overall and managing risk has clearly been the challenging aspect of this trade. Here the DIA is down to 105.00 and yet if you used my close stop strategy you have given back some solid gains made lately.
Sell any rally of 1.00 DIA and use a 1.00 DIA stop. Cover at a 1.00 pt DIA profit.
1:46PM
Short positions would very likely have been stopped out on that rally after the news - SO - I'll take credit for that. After big news releases, it often happens that a market will go take out the stop orders on both sides of the market - so first it went up to stop out the shorts and then it came down to stop out the longs. If you look at a chart of the stock market today you will see this happening across the Dow Industrials from 10770 and 10570.
VIX is telling me that uncertainty remains very high at 43.75 (-1.51 today). PutCall is a low 0.46 right now after being a very high 2.00+ this morning.
This is still a very bearish situation overall and managing risk has clearly been the challenging aspect of this trade. Here the DIA is down to 105.00 and yet if you used my close stop strategy you have given back some solid gains made lately.
Sell any rally of 1.00 DIA and use a 1.00 DIA stop. Cover at a 1.00 pt DIA profit.
1:46PM
SELL SIGNAL still in place:
PutCall is down to 0.63 now from a peak above 3.00 today.
VIX is now lifting from 41.51 to 42.57 as volume comes into calls, signifying "CALL BUYING" on this wave in the last hour.
The market is awaiting the House Vote on the "Rescue Package" which may be announced as soon as 30 minutes (12:30PM EST).
Call buying is not bullish, nor was "put selling" earlier today. This is setting up for more downside in the DIA.
106.84 last DIA.
12:03PM
VIX is now lifting from 41.51 to 42.57 as volume comes into calls, signifying "CALL BUYING" on this wave in the last hour.
The market is awaiting the House Vote on the "Rescue Package" which may be announced as soon as 30 minutes (12:30PM EST).
Call buying is not bullish, nor was "put selling" earlier today. This is setting up for more downside in the DIA.
106.84 last DIA.
12:03PM
SELL SIGNAL STILL SET-UP:
DIA @ 106.86 bid.
The 10AM entry at 106.21 exited at 11:00AM at a loss of 0.60 DIA points.
I still see this as a sell signal that is in place, so take the trade again.
Sell 106.90 bid now.
Risk 1.00 pt in DIA.
Target 1.00 pt on 1/2. 2.00 pts on 1/2.
Lower stop after 1 hour to break-even.
Try-try-try again...
2nd Attempt.
11:23AM 106.87 bid now.
The 10AM entry at 106.21 exited at 11:00AM at a loss of 0.60 DIA points.
I still see this as a sell signal that is in place, so take the trade again.
Sell 106.90 bid now.
Risk 1.00 pt in DIA.
Target 1.00 pt on 1/2. 2.00 pts on 1/2.
Lower stop after 1 hour to break-even.
Try-try-try again...
2nd Attempt.
11:23AM 106.87 bid now.
REASON FOR SELL SIGNAL @ 10:00AM in DIA
DIA entry 106.21 at 10:00AM
Here's what I am looking at this morning:
The Put/Call ratio is HIGH this morning, which indicates that volumes are in put contracts. Most people interpret that to be bullish, but you have to look at what that volume is doing to prices of options. When you add that into the equation, it reveals that the volumes from put contracts are driving DOWN the level of options prices because the VIX indicator is down 2.4 to 42.86 (current reading as I type).
Granted, the VIX level of 42+ indicates extreme fear and uncertainty and is typical of major stock market bottoms historically. HOWEVER, the VIX has hit 40, then continued to 50, 60, 80, and even 160 in the 1987 stock market crash. Yes, 160 is correct. The illiquidity of options and the fact that stocks were closed on the NYSE pushed options prices to the moon.
The point is that you can't just blindly BUY the market when VIX hits 40. If VIX is rising then you have to be careful, you have to know that uncertainty is rising and that people act irrationally when fear is rising and do things that in hindsight seem foolish but at the time seem rational and get justified very easily and logically with facts and figures.
Apologies to drift along here while this sell signal is in place. I'm sure you would like to read what the reasons are for the trade.
The put/call is 1.94 now (at 10:44AM) and the VIX is 42.64 -2.62. This setup occurs when put-sellers are in the market and when you SELL PUTS, you drive down the price. When the put-seller exits a position, the offsetting market-maker has to buy back his short in the underlying security. Hence, the underlying security rises in price from the "short covering". Short covering rallies tend to be short-lived and the 3 hour rule will hold true here too. If the rally lasts longer than 3 hours, then we can presume that the put-sellers are the "smart money" or the "bigger money" and that they have control of the market.
HERE'S THE HUGE TRADE SETUP: If BULLS are SELLING PUTS to establish new LONG POSITIONS then we could be setting up for a big fall once the 3 hour move is over.
I'll work on a deeper explanation to present later.
Put-selling is the most important variable to track, in my opinion and it is put selling that sets up the biggest, most violent moves in the market that I have seen in my 23 years in the markets. 1986-2008.
Feel free to post replies:
10:55AM
106.93 bid last for DIA. Close to stopping out based on parameters listed at 10:00AM, whereby I said to lower stop to break-even (entry) after an hour. At 11:00AM we will therefore be stopped out.
Here's what I am looking at this morning:
The Put/Call ratio is HIGH this morning, which indicates that volumes are in put contracts. Most people interpret that to be bullish, but you have to look at what that volume is doing to prices of options. When you add that into the equation, it reveals that the volumes from put contracts are driving DOWN the level of options prices because the VIX indicator is down 2.4 to 42.86 (current reading as I type).
Granted, the VIX level of 42+ indicates extreme fear and uncertainty and is typical of major stock market bottoms historically. HOWEVER, the VIX has hit 40, then continued to 50, 60, 80, and even 160 in the 1987 stock market crash. Yes, 160 is correct. The illiquidity of options and the fact that stocks were closed on the NYSE pushed options prices to the moon.
The point is that you can't just blindly BUY the market when VIX hits 40. If VIX is rising then you have to be careful, you have to know that uncertainty is rising and that people act irrationally when fear is rising and do things that in hindsight seem foolish but at the time seem rational and get justified very easily and logically with facts and figures.
Apologies to drift along here while this sell signal is in place. I'm sure you would like to read what the reasons are for the trade.
The put/call is 1.94 now (at 10:44AM) and the VIX is 42.64 -2.62. This setup occurs when put-sellers are in the market and when you SELL PUTS, you drive down the price. When the put-seller exits a position, the offsetting market-maker has to buy back his short in the underlying security. Hence, the underlying security rises in price from the "short covering". Short covering rallies tend to be short-lived and the 3 hour rule will hold true here too. If the rally lasts longer than 3 hours, then we can presume that the put-sellers are the "smart money" or the "bigger money" and that they have control of the market.
HERE'S THE HUGE TRADE SETUP: If BULLS are SELLING PUTS to establish new LONG POSITIONS then we could be setting up for a big fall once the 3 hour move is over.
I'll work on a deeper explanation to present later.
Put-selling is the most important variable to track, in my opinion and it is put selling that sets up the biggest, most violent moves in the market that I have seen in my 23 years in the markets. 1986-2008.
Feel free to post replies:
10:55AM
106.93 bid last for DIA. Close to stopping out based on parameters listed at 10:00AM, whereby I said to lower stop to break-even (entry) after an hour. At 11:00AM we will therefore be stopped out.
SELL SIGNAL: 10:00AM Friday, Oct 3
1143 last ESz8
106.21 bid DIA.
Reasons to follow.
Risk 1 pt.
Target 1 pt.
Time frame, estimate 1 hour-2 hours - 3hours.
Reduce stop to breakeven after 1 hour.
106.21 bid DIA.
Reasons to follow.
Risk 1 pt.
Target 1 pt.
Time frame, estimate 1 hour-2 hours - 3hours.
Reduce stop to breakeven after 1 hour.
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