www.collective2.com
My program is called 3DSNP - search for it - or I'll post a link here on another post.
For the unique and powerful 3-dimensional view of price, volume, and pricing which has given us so many successful trades so far.
You will be able to monitor the trades from there and you can have an account "auto-traded" based on the signals that I enter from my computer. All you do is set up your account and fund it, then subscribe to the signals.
It isn't cheap to subscribe, but then again the profits seem extraordinary.
So far today, the very BULLISH action in all the indicators has been challenging to catch. So far I've taken a couple of trades to catch the rally, but so far missed the move from 858 in the S&P futures up to 882. It required about 10 pts of risk down to 848 before it found traction and rallied.
Good fortune to you
Monday, November 17, 2008
Wednesday, November 12, 2008
AFTER - MARKET COMMENTARY
As we watch the World financial markets strain under the weight of unknown losses and the uncertainty with which the Federal Reserve and the US Gov't will stand behind whatever assets they choose to back - admitedly GM is NOT one of my highest choices of assets to save, but apparently Pelosi has decided it is worth saving. Well, it seems the financial markets have concluded that enough is enough. More market players decided to exit their short positions in the financially much stronger Japanese Yen - and they also exited their long positions in crude oil and gold. So, as a sideline comment to this crazy euphoria-for-change, well "WE'VE GOT CHANGE" happening.
I'll stop commenting on needless noise that the rest of the media handles so well ------
I keep a very close eye on the Yen because it alerts me to what is going on: If the Yen is up, I'm looking for what is being liquidated. Today that was gold and oil.
I saw a legitimate buy signal in the VIX-put-call but I failed to execute the stop and reverse strategy that I have employed successfully on three other occasions. So, after the first hour of heavy, heavy put buying, I waited 3 hours to execute a buy once momentum had turned to the upside - well - that momentum lasted all of about 15 minutes before the bombay doors opened some more to the downside.
So, since Mr. Obama was elected, the SP500 is down 15%. The rally INTO the election was 20%, which to my mind counts as a bull market just as a 20% decline counts as a bear market. So, we are almost back to a bear market again after only a couple of days at a 20% lift from the lows in October.
So, today was a losing day for the Vix-Put-Call Strategy. But I'm posting that here at the end of the day. A loss of 1.00 DIA pt.
4:15PM EST
I'll stop commenting on needless noise that the rest of the media handles so well ------
I keep a very close eye on the Yen because it alerts me to what is going on: If the Yen is up, I'm looking for what is being liquidated. Today that was gold and oil.
I saw a legitimate buy signal in the VIX-put-call but I failed to execute the stop and reverse strategy that I have employed successfully on three other occasions. So, after the first hour of heavy, heavy put buying, I waited 3 hours to execute a buy once momentum had turned to the upside - well - that momentum lasted all of about 15 minutes before the bombay doors opened some more to the downside.
So, since Mr. Obama was elected, the SP500 is down 15%. The rally INTO the election was 20%, which to my mind counts as a bull market just as a 20% decline counts as a bear market. So, we are almost back to a bear market again after only a couple of days at a 20% lift from the lows in October.
So, today was a losing day for the Vix-Put-Call Strategy. But I'm posting that here at the end of the day. A loss of 1.00 DIA pt.
4:15PM EST
SPY - NOT DIA
I am now quoting the SPY and not the DIA. I had to change it on my software (QCharts) when the powers that be moved the primary quoting to the NYSE from the AMEX for the DIA etf. The ETF's are very similar but it makes sense to be in the more liquid, more diversified SPY.
Tuesday, November 11, 2008
PUT BUYING = BUY SIGNAL FOR DIA
Heavy put buying from 9:30-10:00AM was, I think, a function of heavy European hedging and selling into our market.
We want to do a fade trade here and go long and then reverse and go short if the trade doesn't materialize.
What we are seeing here is a global hedging hot potato decline. Russia gets hammered, for example, and sells stocks in Europe. Europe buys, then tries to unload in the US by selling here when we open. If we don't find a home for this new selling, then it will be "OPEN THE BOMBAY DOORS" and let it fly (drop).
So, at this point, we want to be long. Let's pick 1PM for entry. Use a stop of 0.50 DIA pts instead of 1 pt.
If stopped out with a 0.50 pt loss, then go short and risk 0.75 pts so our total risk is 1.25 pts.
If that starts to work, then just cover at the close AFTER dropping your stop down to breakeven after it is up by 1.00 DIA pt. Sound complicated? Not really. Read it again and again if you have to.
12:52PM EST NOW
We want to do a fade trade here and go long and then reverse and go short if the trade doesn't materialize.
What we are seeing here is a global hedging hot potato decline. Russia gets hammered, for example, and sells stocks in Europe. Europe buys, then tries to unload in the US by selling here when we open. If we don't find a home for this new selling, then it will be "OPEN THE BOMBAY DOORS" and let it fly (drop).
So, at this point, we want to be long. Let's pick 1PM for entry. Use a stop of 0.50 DIA pts instead of 1 pt.
If stopped out with a 0.50 pt loss, then go short and risk 0.75 pts so our total risk is 1.25 pts.
If that starts to work, then just cover at the close AFTER dropping your stop down to breakeven after it is up by 1.00 DIA pt. Sound complicated? Not really. Read it again and again if you have to.
12:52PM EST NOW
Monday, November 10, 2008
CALL BUYING today was BEARISH (this morning)
I told all of my IM clients about this market setup today, which was positioned for a FALL due to several observations.
I simply can't continue to give away this information - it is extremely valuable and it is what I have taken years to learn and many losses along the way.
I am considering creating an account at Collective2 where you can follow the signals there and subscribe to the service and you can have an account auto-traded based on what I am seeing with the 3-D view of the market. www.collective2.com Once I get my log-in code I will alert you with a post here so you know how to find me.
Today's closing buy signal was more of a sign that the market had seen enough put-buying on Friday to warrant a strong base in place for today. However, if we test Friday's low tomorrow or later this week, then I will have to wonder how strong this current base is and then I may change my tune to suggest that we will violate the lows seen in the last month.
Let's take one day at a time with this strategy.
I am reading some great books lately - I imagine some of the pearls of wisdom will shine through to this blog.
Enjoy the day.
SIDE NOTE - One last thought - I am married to my wife, my kids, my family, my house, my responsibilities as a father, brother, son, and to God - so I don't have to be married to my investments. There are many ways to view the short-term nature of trading and its impact on the market itself and on ourselves as individuals, so I will assume that all of you are already aligned with short-term trading.
I simply can't continue to give away this information - it is extremely valuable and it is what I have taken years to learn and many losses along the way.
I am considering creating an account at Collective2 where you can follow the signals there and subscribe to the service and you can have an account auto-traded based on what I am seeing with the 3-D view of the market. www.collective2.com Once I get my log-in code I will alert you with a post here so you know how to find me.
Today's closing buy signal was more of a sign that the market had seen enough put-buying on Friday to warrant a strong base in place for today. However, if we test Friday's low tomorrow or later this week, then I will have to wonder how strong this current base is and then I may change my tune to suggest that we will violate the lows seen in the last month.
Let's take one day at a time with this strategy.
I am reading some great books lately - I imagine some of the pearls of wisdom will shine through to this blog.
Enjoy the day.
SIDE NOTE - One last thought - I am married to my wife, my kids, my family, my house, my responsibilities as a father, brother, son, and to God - so I don't have to be married to my investments. There are many ways to view the short-term nature of trading and its impact on the market itself and on ourselves as individuals, so I will assume that all of you are already aligned with short-term trading.
Sunday, November 9, 2008
This Is A Bull Market
The S&P500 has wiped out almost every financial firm that had leverage of greater than 10:1. Leverage in this case is the measurement of ROE/ROA. We don't have to delve deeply into financial statements to get these numbers, but it is fascinating that all of the firms in the S&P500 that were above that level are gone or merged or backed/bought by the US Gov't. SO, I COULD CONCLUDE that the leverage "in the system" has already been taken care of to a large extent.
The S&P500 is up 2% overnight here to get started for the week to confirm the "bull market".
Get ready for a busy day & week.
9:52PM Sunday Nov 9, 2008
The S&P500 is up 2% overnight here to get started for the week to confirm the "bull market".
Get ready for a busy day & week.
9:52PM Sunday Nov 9, 2008
Friday, November 7, 2008
BEARS ARE GETTING SQUEEZED (BUY SIGNAL)
This is a "squeeze the bears" day in the market.
Those who have overpaid for very expensive put protection are selling out their bets on lower prices and effectively putting a floor under stock prices today. I think what is happening is people who owned the puts are liquidating them and turning around with the proceeds and putting that money to work in the market. The successful pricing of the WFC 2ndary today at 27 is another positive sign for the market. Anything is interpreted as bullish news in a bull market. We can call this a bull market by some definitions. #1 reason - we have rallied 20% from the low. #2 reason - VIX peaked over 80. That will happen once a decade and it happens at bottoms. #3 reason - very low interest rates. #4 reason - very low investor sentiment implies that people have sold stocks down to their comfort level. #5 reason - massive mutual fund redemptions mean that the little investor is already OUT of the market now. #6 reason - all the markets of the world went down together, this was NOT a US-only decline. #7 reason - I'll think of another 50 reasons and put them on this blog - perhaps - stocks are cheap, very cheap and so-called "experts" fear now that the #'s reported by companies are not accurate.
Let's stop this line of thinking to explain this bull market and just get on with it.
Buy 88.72 last. 89.72 target. 87.72 stop.
Raise stop to breakeven after 1 hour (after 30 minutes raise to 88.22)
12:53PM
Those who have overpaid for very expensive put protection are selling out their bets on lower prices and effectively putting a floor under stock prices today. I think what is happening is people who owned the puts are liquidating them and turning around with the proceeds and putting that money to work in the market. The successful pricing of the WFC 2ndary today at 27 is another positive sign for the market. Anything is interpreted as bullish news in a bull market. We can call this a bull market by some definitions. #1 reason - we have rallied 20% from the low. #2 reason - VIX peaked over 80. That will happen once a decade and it happens at bottoms. #3 reason - very low interest rates. #4 reason - very low investor sentiment implies that people have sold stocks down to their comfort level. #5 reason - massive mutual fund redemptions mean that the little investor is already OUT of the market now. #6 reason - all the markets of the world went down together, this was NOT a US-only decline. #7 reason - I'll think of another 50 reasons and put them on this blog - perhaps - stocks are cheap, very cheap and so-called "experts" fear now that the #'s reported by companies are not accurate.
Let's stop this line of thinking to explain this bull market and just get on with it.
Buy 88.72 last. 89.72 target. 87.72 stop.
Raise stop to breakeven after 1 hour (after 30 minutes raise to 88.22)
12:53PM
Thursday, November 6, 2008
MORE BULLS AT THE OPENING
Call buyers showed up in the first 30 minutes of trading today to pay UP for Call options just in time for the stocks underlying their calls to plunge in value.
Well, I can presume that this is the perversity of the markets and the better question to ask yourself is "HOW DO I MAKE MONEY FROM THIS PATTERN?"
Due to other duties outside of posting to this blog, I missed posting a sell signal at this morning's opening 10AM trading window. Remember, we watch the first 30 minutes (9:30-10:00) to watch and wait for a trading setup.
Either way, at 10AM a very clear sell signal was in place and it worked for well over 1 pt down in the DIA.
As of 12:21PM now - we are inching towards a very low risk buy signal, much like yesterday's buy signal which was really just a resting period before the next leg down.
Either way, we can take a shot at this trade because it will work some of the time and enough of the time to warrant the risk taken.
Pay close attention to the next entry.
Be well.
12:23PM DIA 88.47 last
Well, I can presume that this is the perversity of the markets and the better question to ask yourself is "HOW DO I MAKE MONEY FROM THIS PATTERN?"
Due to other duties outside of posting to this blog, I missed posting a sell signal at this morning's opening 10AM trading window. Remember, we watch the first 30 minutes (9:30-10:00) to watch and wait for a trading setup.
Either way, at 10AM a very clear sell signal was in place and it worked for well over 1 pt down in the DIA.
As of 12:21PM now - we are inching towards a very low risk buy signal, much like yesterday's buy signal which was really just a resting period before the next leg down.
Either way, we can take a shot at this trade because it will work some of the time and enough of the time to warrant the risk taken.
Pay close attention to the next entry.
Be well.
12:23PM DIA 88.47 last
Wednesday, November 5, 2008
BUY SIGNAL
Price is down to key support at 93.37 here @ 12:47PM
Put-call volumes suggest heavy put buying.
VIX surge to 51.6 from 48 suggests near panic.
So, if we can panic while we fell to support, then we should buy.
RISK = 1.00 pt in DIA.
EXIT: 1.00 pt profit.
Raise stop 1.00 pt after 30 minutes.
12:48PM NOW
93.37bid-93.38 ask
Put-call volumes suggest heavy put buying.
VIX surge to 51.6 from 48 suggests near panic.
So, if we can panic while we fell to support, then we should buy.
RISK = 1.00 pt in DIA.
EXIT: 1.00 pt profit.
Raise stop 1.00 pt after 30 minutes.
12:48PM NOW
93.37bid-93.38 ask
Market Is Extremely Weak
I am glad we have NOT gone long here.
Will await a signal to go long or short.
The DIA is off nearly 3 pts from yesterday's high, which is quite a drop.
Something may set up here shortly.
12:32PM DIA 93.69 last
Will await a signal to go long or short.
The DIA is off nearly 3 pts from yesterday's high, which is quite a drop.
Something may set up here shortly.
12:32PM DIA 93.69 last
BEARISH SIGNS SHOWING IN FIRST HOUR
10:40AM right now.
The first 30 minutes of action revealed heavy call buying, which when coupled with the drop in the DIA in that time window = is extremely bearish.
The next 30 minutes has shown heavy put selling, which when couple with the fact that we are still DOWN on the day, is even MORE BEARISH THAN EXTREMELY BEARISH.
The question I have here is exactly how to put this info to work:
This could take 3 hours to set-up or this could be a sell signal right here- I'm tempted to just put the sell signal right on, right here and take the risk that it is wrong because I don't want to miss the decline.
OVERALL - VIX is 47.5 now, which shows tremendous illiquidity is still present in the market = THEREFORE, I'm aware that this signal could be wrong or early.
It is what it is - we never know.
I definately don't like the signs that I see here.
SELL DIA 95.34 bid here now at 10:44AM EST.
RISK: 1.00 PT.
STOP LOWERS TO BREAKEVEN after 1 hour (11:44AM).
It is possible that we don't break until the close, then fall dramatically overnight - that is the likely scenario as I see it from here (intuition) to keep our "intra-day strategy" from capturing the profit.
95.45 bid now.
95.35 bid....
95.27 bid...
95.35 bid...
10:47AM
The first 30 minutes of action revealed heavy call buying, which when coupled with the drop in the DIA in that time window = is extremely bearish.
The next 30 minutes has shown heavy put selling, which when couple with the fact that we are still DOWN on the day, is even MORE BEARISH THAN EXTREMELY BEARISH.
The question I have here is exactly how to put this info to work:
This could take 3 hours to set-up or this could be a sell signal right here- I'm tempted to just put the sell signal right on, right here and take the risk that it is wrong because I don't want to miss the decline.
OVERALL - VIX is 47.5 now, which shows tremendous illiquidity is still present in the market = THEREFORE, I'm aware that this signal could be wrong or early.
It is what it is - we never know.
I definately don't like the signs that I see here.
SELL DIA 95.34 bid here now at 10:44AM EST.
RISK: 1.00 PT.
STOP LOWERS TO BREAKEVEN after 1 hour (11:44AM).
It is possible that we don't break until the close, then fall dramatically overnight - that is the likely scenario as I see it from here (intuition) to keep our "intra-day strategy" from capturing the profit.
95.45 bid now.
95.35 bid....
95.27 bid...
95.35 bid...
10:47AM
Tuesday, November 4, 2008
VIX HAS FALLEN TOO FAR = SELL SIGNAL
[11:16:43 AM] Tim West says: I am very close to a "VIX HAS FALLEN TOO FAR" signal to go the opposite way
[11:16:59 AM] Tim West says: VIX is down o 45 from 50 at 10am...vs 55 yesrday
[11:18:50 AM] Tim West says: 10 point moves in VIX are pretty rare = a sign of extreme changes of opinion
[11:19:44 AM] Tim West says: and a 15 point move from yesterday's high of 60 in VIX = even more extreme
[11:20:11 AM] Tim West says: extreme changes in opinion can leave a vacuum under price action
DIA @ 96, now 95.84 over this time frame....
SELL SHORT DIA, 96.40 stop, vs 95.90 last
TARGET 95.00 (gain of 0.90 pt)
11:24AM NOW
[11:16:59 AM] Tim West says: VIX is down o 45 from 50 at 10am...vs 55 yesrday
[11:18:50 AM] Tim West says: 10 point moves in VIX are pretty rare = a sign of extreme changes of opinion
[11:19:44 AM] Tim West says: and a 15 point move from yesterday's high of 60 in VIX = even more extreme
[11:20:11 AM] Tim West says: extreme changes in opinion can leave a vacuum under price action
DIA @ 96, now 95.84 over this time frame....
SELL SHORT DIA, 96.40 stop, vs 95.90 last
TARGET 95.00 (gain of 0.90 pt)
11:24AM NOW
10AM (post-dating a signal here)
From my Instant-Messaging today:
BUY SIGNAL: 10AM:
Target: 1 DIA pt.
Stop: 1 DIA pt.
Target reached already:
Awaiting new signal setup.
11:09AM now as I type.
CODE: CV,VD
BUY SIGNAL: 10AM:
Target: 1 DIA pt.
Stop: 1 DIA pt.
Target reached already:
Awaiting new signal setup.
11:09AM now as I type.
CODE: CV,VD
SEP-OCT RESULTS = GAIN OF 26%
The profitability of this analysis is so strong that I am losing interest FAST in giving it away - so I will be working on how to design and charge for this advice.
September and October produced gains beyond my expectations and given the very high volatility in the market averages, it is logical to assume that returns are higher than normal.
However, the gain of 27 pts in the DIA when the average DIA trade price is 101 implies a gain of 26% for those two months. The largest drawdown was 2%. The profits were 18 pts on BUYS and 9 pts on SELLS, which is even more interesting given that the DIA dropped over 25% over the time period of this analysis - from DIA level 114 to a low of 85.
This is perhaps the largest reward to drawdown that I have ever seen with the exception to the Equity Market Neutral Fund that I managed in 2003-2004 which had a 1% max drawdown on a 13% return over the time window of that fund.
The INTRA-DAY ONLY time frame of this strategy is also extremely interesting in that it removes the higher risk, although higher potential of the overnight movements of markets. Lately the measurement of first 30 minute movement in the market is EXTREMELY HIGH.
On average, this method is signalling approximately 2-3 times per day and I am doing the analysis starting at 10AM and then in 30 or 60 minute increments. It is challenging to build the blog on every hour to update any changes and there are certainly enough distractions, but the overall performance is still extremely strong given this reality = that all signals were not taken.
I chose to stop publishing last week due to my interest in building the plan to charge for this lucrative advice.
Tuesday, November 4th 2008 11:00AM
The
September and October produced gains beyond my expectations and given the very high volatility in the market averages, it is logical to assume that returns are higher than normal.
However, the gain of 27 pts in the DIA when the average DIA trade price is 101 implies a gain of 26% for those two months. The largest drawdown was 2%. The profits were 18 pts on BUYS and 9 pts on SELLS, which is even more interesting given that the DIA dropped over 25% over the time period of this analysis - from DIA level 114 to a low of 85.
This is perhaps the largest reward to drawdown that I have ever seen with the exception to the Equity Market Neutral Fund that I managed in 2003-2004 which had a 1% max drawdown on a 13% return over the time window of that fund.
The INTRA-DAY ONLY time frame of this strategy is also extremely interesting in that it removes the higher risk, although higher potential of the overnight movements of markets. Lately the measurement of first 30 minute movement in the market is EXTREMELY HIGH.
On average, this method is signalling approximately 2-3 times per day and I am doing the analysis starting at 10AM and then in 30 or 60 minute increments. It is challenging to build the blog on every hour to update any changes and there are certainly enough distractions, but the overall performance is still extremely strong given this reality = that all signals were not taken.
I chose to stop publishing last week due to my interest in building the plan to charge for this lucrative advice.
Tuesday, November 4th 2008 11:00AM
The
Tuesday, October 28, 2008
CHOP CHOP
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...
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...
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.
Tuesday, September 30, 2008
VIX-PutCall Signals BULLISH ALL DAY
High put/call readings and falling VIX today suggested a rising price environment.
Thankfully the volatility contracted from 69 pts every 5 minutes down to 36 pts now, which is still up from its average of 15 pts.
Consequently, the market environment is still higher-than-normal risk.
Going into the close here at 3:40PM - I view the high put/call and falling VIX as still a buy environment and a potential for a short squeeze into the close.
Buy DIA here:107.63. Exit at 4PM. Risk 0.50 (just bigger than our profit from this morning)
3:43PM
Thankfully the volatility contracted from 69 pts every 5 minutes down to 36 pts now, which is still up from its average of 15 pts.
Consequently, the market environment is still higher-than-normal risk.
Going into the close here at 3:40PM - I view the high put/call and falling VIX as still a buy environment and a potential for a short squeeze into the close.
Buy DIA here:107.63. Exit at 4PM. Risk 0.50 (just bigger than our profit from this morning)
3:43PM
10:02AM - BUY SIGNAL - RISK 1.00 DIA pt
Put/call is 2.07 in the first half hour and VIX is falling to a level of 41.66, down 5.07 on the day. Falling VIX at least implies that fear is subsiding from very extreme levels. This is bullish, short term.
Risk is very high now mathematically because the average 5 minute range on the Dow futures contracts for yesterday was a whopping 69 points! Compare this to an average closer to 15 points. Consequently, the volatility is over 4 TIMES HIGHER, which means we have to cut our trading size down to adjust for that.
In the case of stop placement, it means I should place my stops that much further away from the market in order to risk an equal dollar of capital.
Hence, I have used the same 1.00 pt stop in DIA, which really means I have a VERY CLOSE stop today.
Target remains 1.00 pt. Raise stop to breakeven after 30 minutes. Raise to breakeven plus 0.30 after 1 hour.
I will decide if reversing on the stop-out makes sense. I think it does, but let's watch what happens first.
10:08AM Now
DIA entry = 10:03AM open of 1 minute bar = 105.82. Stop = 104.82, Target = 106.82. Raise stop to 105.82 at 10:33AM. Raise stop to 106.12 at 11:03AM. That's pretty specific advice.
Risk is very high now mathematically because the average 5 minute range on the Dow futures contracts for yesterday was a whopping 69 points! Compare this to an average closer to 15 points. Consequently, the volatility is over 4 TIMES HIGHER, which means we have to cut our trading size down to adjust for that.
In the case of stop placement, it means I should place my stops that much further away from the market in order to risk an equal dollar of capital.
Hence, I have used the same 1.00 pt stop in DIA, which really means I have a VERY CLOSE stop today.
Target remains 1.00 pt. Raise stop to breakeven after 30 minutes. Raise to breakeven plus 0.30 after 1 hour.
I will decide if reversing on the stop-out makes sense. I think it does, but let's watch what happens first.
10:08AM Now
DIA entry = 10:03AM open of 1 minute bar = 105.82. Stop = 104.82, Target = 106.82. Raise stop to 105.82 at 10:33AM. Raise stop to 106.12 at 11:03AM. That's pretty specific advice.
Monday, September 29, 2008
Stopped out 1/2 pt loss in DIA
I took what I saw was a somewhat low risk trade. The lowest risk trade of the day.
But gave back 0.50 pts in the DIA.
Entry 105.86, stopped 105.36.
Buy SLV (Silver etf) for a 10% gain in the next week.
3:19PM Monday
But gave back 0.50 pts in the DIA.
Entry 105.86, stopped 105.36.
Buy SLV (Silver etf) for a 10% gain in the next week.
3:19PM Monday
2:47PM DIA 105.87 -5.26 No time to be a hero:
I think I can define the risk here in the VERY SHORT TERM to 50 points for a stop loss order.... however...
Buy with 0.50 pt stop in DIA.
Raise stop to breakeven after 15 minutes.
Exit at the close or using a 1.00 trailing stop.
The futures are trading down to the big support level at 1135 on ESZ8....
VIX at 45, down from a peak at 46+ is one reason alone to take a small stab at this.
2:50PM DIA 105.86 -5.29 last....
Buy with 0.50 pt stop in DIA.
Raise stop to breakeven after 15 minutes.
Exit at the close or using a 1.00 trailing stop.
The futures are trading down to the big support level at 1135 on ESZ8....
VIX at 45, down from a peak at 46+ is one reason alone to take a small stab at this.
2:50PM DIA 105.86 -5.29 last....
Fast Market Action Today: Monday Sep 29, 2008
The first 15 minutes of trading revealed a heavy tilt towards call option trading with the put/call under 0.40. Considering VIX up at 40 and put/call low, it suggested that bulls were buying calls or perhaps just bears were hedging their shorts with calls, in either case it meant that optimism was greater than pessimism and prices headed lower sharply from that first 15-minute reading. I couldn't get a post going on this blog in time, and I myself even missed the trade.
Given the uncertainty over the Gov't bailout package, it has nerves on high tension.
Stay posted for high potential, hopefully low-risk trades.
1:27PM Monday
108.92 DIA.
Given the uncertainty over the Gov't bailout package, it has nerves on high tension.
Stay posted for high potential, hopefully low-risk trades.
1:27PM Monday
108.92 DIA.
Friday, September 26, 2008
2.70 POINTS OF PROFIT TODAY IN DIA
9:50AM - BUY near 10,900 on the DJIA, exited 10,970, +70 pts.
11:10AM - Buy 50 pts off the high, exit 1:50PM + 100 pts.
2:10PM - Buy 50 pts off the high, exit 3:30PM +100 pts.
Nice day.
11:10AM - Buy 50 pts off the high, exit 1:50PM + 100 pts.
2:10PM - Buy 50 pts off the high, exit 3:30PM +100 pts.
Nice day.
3 Hour Rule Kicked in @ 12:30PM
I made a mis-calculation. Put buying started at 9:30AM (not 10:30AM)
So by 12:30PM the "3 Hour Rule" kicked in.
From 12:30 to now there has been a nice 1% run up in S&P futures.
Exit.
1:31PM
So by 12:30PM the "3 Hour Rule" kicked in.
From 12:30 to now there has been a nice 1% run up in S&P futures.
Exit.
1:31PM
1 MORE HOUR UNTIL PRICE RAMP UP
1 more hour and it will be the "three hour rule" where if sellers don't show up within 3 hours of buying puts, then they are likely to be orders from speculators instead of holders of shares. We are 2 hours into this very bullish "BEAR TRAP".
12:33PM
12:33PM
BUY SIGNAL IS STILL SHOWING "GREEN LIGHT"
I am surprised, but as the market has held onto these price gains AND the setup which preceded this advance are still in place. A high put/call ratio and a spike up in VIX are symptoms of strong fear and are signs that hedges are building and that investors are protected against further price declines. Every moment that the price of stocks "holds" it is a sign that a significant accumulation is taking place and that a massive price advance is coming. I'll keep making posts as this develops during the day.
Place buys 0.50 under each high in the DIA for the balance of the day. Exit on gains of 1.00 from each price decline.
I think this will work all day.
10:28AM
109.44 DIA last...
Place buys 0.50 under each high in the DIA for the balance of the day. Exit on gains of 1.00 from each price decline.
I think this will work all day.
10:28AM
109.44 DIA last...
BUY NOW: 1/2 SIZE POSITION
Since it is prior to 10AM and the put/call #'s are volatile now, trade 1/2 size.
Low risk buy signal here, risk 0.50 DIA pts. 108.68-.71 is the current bid-ask.
High put/call reading. High Vix reading. Support price cluster.
9:37AM
Target 1 DIA pt. Raise stop to breakeven after 30 minutes.
Low risk buy signal here, risk 0.50 DIA pts. 108.68-.71 is the current bid-ask.
High put/call reading. High Vix reading. Support price cluster.
9:37AM
Target 1 DIA pt. Raise stop to breakeven after 30 minutes.
Thursday, September 25, 2008
SELL SIGNAL 11:38AM DIA @ 110.35
Risk 1 pt.
VIX down 2.24 to 32.95 (low 32.82) down from peak at 36.69 yesterday.
Put/call .54 now, but was lower.
Price forming a double top at 1218 on ESZ8.
Target 1 pt in DIA.
Lower stop to breakeven after 1 hour.
11:40AM now
VIX down 2.24 to 32.95 (low 32.82) down from peak at 36.69 yesterday.
Put/call .54 now, but was lower.
Price forming a double top at 1218 on ESZ8.
Target 1 pt in DIA.
Lower stop to breakeven after 1 hour.
11:40AM now
JOURNAL ENTRY - POST-DATED from 1 hour ago
"""" PREVIOUS COMMENTS"""""
10:11AM - SELL SIGNAL SETTING UP
I took a live trade short and lost 1.00 DIA points equivalent from 10:05AM to 10:19AM.
Based on:
Call activity is strong enough to warrant caution this morning.
10:24AM now as I type this post
DIA @ 110.39 last High 110.72, low today 108.39.
"""""""""""""""""""""""""""""""""""""""
10:11AM - SELL SIGNAL SETTING UP
I took a live trade short and lost 1.00 DIA points equivalent from 10:05AM to 10:19AM.
Based on:
Call activity is strong enough to warrant caution this morning.
10:24AM now as I type this post
DIA @ 110.39 last High 110.72, low today 108.39.
"""""""""""""""""""""""""""""""""""""""
Wednesday, September 24, 2008
SELL DIA 108.92 @ 2:42PM
Another chance to sell.
1 point downside potential.
1 point risk.
Falling VIX coupled with Put volumes alerts me to "put sellers".
Lower stop to 1/2 pt after 30 minutes.
Cover by the close to avoid overnight risk.
2:42PM
1 point downside potential.
1 point risk.
Falling VIX coupled with Put volumes alerts me to "put sellers".
Lower stop to 1/2 pt after 30 minutes.
Cover by the close to avoid overnight risk.
2:42PM
TARGET nearly REACHED: 1 pt profit
2:15PM Posting.
Low 108.15
Last 108.32 bid.
Feels like it has made a great decline from that rally high.
VIX and put/call have barely budged from where they were.
Cover - close enough - 108.25 last.
2:19PM ( I realized it hadn't quite made it the full 1 pt from the posting, sorry)
Low 108.15
Last 108.32 bid.
Feels like it has made a great decline from that rally high.
VIX and put/call have barely budged from where they were.
Cover - close enough - 108.25 last.
2:19PM ( I realized it hadn't quite made it the full 1 pt from the posting, sorry)
SELL SIGNAL: 1:28PM DIA 109.01
Put/call has shifted from calls (.30 reading) all the way to puts (1.2 reading).
Meanwhile VIX, which was UP earlier, is now DOWN to 35.
This action implies there are players "SELLING PUTS" to capture volatility premium. This, of course, is BEARISH. In fact it is extremely bearish.
There could be an issue whereby options expiration last Friday may have had an impact on this week's action, so I wont go out on a limb and declare a massive decline is coming... but I will alert you to this extremely negative situation that is setting up.
I attempted to sell 1198 in ESZ8, but it backed away to 1195 right away.
The DIA is now 108.85, so it has backed off a little after being 109.11 bid as I began typing.
Short DIA, 1 pt stop. 108.94 bid now.
Target, cover at end of the day or 1 pt profit, whichever comes first.
1:34PM
Meanwhile VIX, which was UP earlier, is now DOWN to 35.
This action implies there are players "SELLING PUTS" to capture volatility premium. This, of course, is BEARISH. In fact it is extremely bearish.
There could be an issue whereby options expiration last Friday may have had an impact on this week's action, so I wont go out on a limb and declare a massive decline is coming... but I will alert you to this extremely negative situation that is setting up.
I attempted to sell 1198 in ESZ8, but it backed away to 1195 right away.
The DIA is now 108.85, so it has backed off a little after being 109.11 bid as I began typing.
Short DIA, 1 pt stop. 108.94 bid now.
Target, cover at end of the day or 1 pt profit, whichever comes first.
1:34PM
COVER ALL SHORTS 108.14-108.24 now 11:23AM
I need to leave for an appt and don't want to leave this position open.
Covering for that reason alone.
Be back soon.
11:24AM now
Covering for that reason alone.
Be back soon.
11:24AM now
10:17AM - Put/Call Readings are now coming in
at dangerously low levels, indicating "call buying".
Exit long. Go short. Risk 1 pt.
10:18AM DIA 108.45 now.
Exit long. Go short. Risk 1 pt.
10:18AM DIA 108.45 now.
10:06AM - DIA @ 108.65 - Looking for a bottom
Essentially - Buffett coming to the rescue to drive a private market solution to the financial market mess is a far better answer than whatever the US Gov't will propose and hash out.
So we have retraced the advance overnight on the news of Buffett's purchase, so this is a low-risk buy just based on that observation.
Put/call isn't giving us much insight @ .87 here.
VIX is 36, which is very high and at a level to generate a sizable advance at any time.
Risk 1 pt. Go long DIA. 108.48 NOW.
Reverse if stopped out and risk 1 pt. Reduce stop at that point to breakeven after 1 hour.
10:09AM
So we have retraced the advance overnight on the news of Buffett's purchase, so this is a low-risk buy just based on that observation.
Put/call isn't giving us much insight @ .87 here.
VIX is 36, which is very high and at a level to generate a sizable advance at any time.
Risk 1 pt. Go long DIA. 108.48 NOW.
Reverse if stopped out and risk 1 pt. Reduce stop at that point to breakeven after 1 hour.
10:09AM
Great Comment From Warren Buffett:
May this apply to all of your financial decisions, business decisions and life decisions:
From CBS Radio just now:
Buffett commenting on his $5 Billion buy of a 10% piece of Goldman Sachs:
"The terms were right, the price was right, the people are right, so I wrote the check" (9 zeros in a check that big)
9:39AM
From CBS Radio just now:
Buffett commenting on his $5 Billion buy of a 10% piece of Goldman Sachs:
"The terms were right, the price was right, the people are right, so I wrote the check" (9 zeros in a check that big)
9:39AM
Tuesday, September 23, 2008
CLOSE OUT SHORT SALE: Nice profit.
3:49PM DIA @ 108.55
Nice drop this afternoon off of a very low put/call ratio.
We'll be using a 1 pt stop from now on, as usual.
Nice drop this afternoon off of a very low put/call ratio.
We'll be using a 1 pt stop from now on, as usual.
Short Signal is NOT panning out:
Usual 0.50 stop is not hit yet, but it is close.
VIX is at levels indicative of a MAJOR MARKET BOTTOM with the spike over 42 last week and today's retest of that on the rally to 37. VIX had fallen as low as 28.
The DIA is coming back up in price to a price level where there are 5 hours of trading so far today and it should be a stopping area at least. We shall see.
Put/Call shows there is activity on the call side of the market, which is bearish, of course, especially when VIX is rising like it is today. It shows people are getting aggressive to buy this break in price. I'd prefer to see activity in puts to show people are putting on hedges and driving up the price of those hedges, but that is not the case. This is bearish activity here, despite the high overall level of VIX.
Keep in mind these trades have a short term life, only 1-3 hours, just due to the volatility in the ratios that come across my screen.
Be well. DIA @ 109.96 as I type. It had gone as high as 110.30.
Stop is 110.45
VIX is at levels indicative of a MAJOR MARKET BOTTOM with the spike over 42 last week and today's retest of that on the rally to 37. VIX had fallen as low as 28.
The DIA is coming back up in price to a price level where there are 5 hours of trading so far today and it should be a stopping area at least. We shall see.
Put/Call shows there is activity on the call side of the market, which is bearish, of course, especially when VIX is rising like it is today. It shows people are getting aggressive to buy this break in price. I'd prefer to see activity in puts to show people are putting on hedges and driving up the price of those hedges, but that is not the case. This is bearish activity here, despite the high overall level of VIX.
Keep in mind these trades have a short term life, only 1-3 hours, just due to the volatility in the ratios that come across my screen.
Be well. DIA @ 109.96 as I type. It had gone as high as 110.30.
Stop is 110.45
BUY: DIA 109.26 @ 2:25PM Tuesday
Details to follow:
Stop 0.50 pts....
Would you believe me that I had typed this in... and got hammered on a phone call ... and didn't hit the "PUBLISH BUTTON"?
Argh.
Tim
Stop 0.50 pts....
Would you believe me that I had typed this in... and got hammered on a phone call ... and didn't hit the "PUBLISH BUTTON"?
Argh.
Tim
Monday, September 22, 2008
DIA 111.30, down 2.27
The dollar is tumbling today vs the EuroCurrency and the Yen.
Gold and silver are moving up strongly.
Bond prices hit 8 pts below their peak last WEEK!
Now that is a "bear market in a week" for bonds (technically a 10% drop is a bear market for bonds), but it is close.
The EuroCurrency is, in fact, just bouncing so far from its decline from 160 down to 138. It surpassed the 1/3 retracement level and the popular .382 retracement used by many traders, but is holding below a 1/2 retracement.
Crude Oil is bouncing up near $110, way up from its low near $90 on the Nov contract last week.
That is a 20% rally in crude oil in just a week. Amazing too.
These are volatile times.
I hope you are finding that these "intraday" entries and exits are of interest.
Best regards.
Gold and silver are moving up strongly.
Bond prices hit 8 pts below their peak last WEEK!
Now that is a "bear market in a week" for bonds (technically a 10% drop is a bear market for bonds), but it is close.
The EuroCurrency is, in fact, just bouncing so far from its decline from 160 down to 138. It surpassed the 1/3 retracement level and the popular .382 retracement used by many traders, but is holding below a 1/2 retracement.
Crude Oil is bouncing up near $110, way up from its low near $90 on the Nov contract last week.
That is a 20% rally in crude oil in just a week. Amazing too.
These are volatile times.
I hope you are finding that these "intraday" entries and exits are of interest.
Best regards.
1:05 UPDATE ON SHORT POSITION
DIA short from 111.88.
Now 111.78 ask.
It has been nearly an hour and there hasn't been the kind of action to indicate that we should hold this position.
VIX is back down 0.65 on the day. Put/call is a lowly .48.
Close this trade here for a small profit.
This offsets the small loss from earlier.
111.66 bid now.
1:09PM
Now 111.78 ask.
It has been nearly an hour and there hasn't been the kind of action to indicate that we should hold this position.
VIX is back down 0.65 on the day. Put/call is a lowly .48.
Close this trade here for a small profit.
This offsets the small loss from earlier.
111.66 bid now.
1:09PM
SELL SHORT: 111.88 DIA
Put/call is now at its lowest on the day @ .47 while VIX has lifted back up from -.7 on the day to only -.13.
This is bearish.
It implies "call buying" is bringing option prices back up, which implies people are bullish on this dip in prices.
Lower stop to breakeven after 1 hour. Do not reverse and go long though, if stopped out like we have before. Target 1 pt for 1/2 position, 2 pts for 1/2 position.
ES is at 1230.00 as I type (Dec).
DIA is 111.78 last.
12:12PM (Next update at 1:15PM)
This is bearish.
It implies "call buying" is bringing option prices back up, which implies people are bullish on this dip in prices.
Lower stop to breakeven after 1 hour. Do not reverse and go long though, if stopped out like we have before. Target 1 pt for 1/2 position, 2 pts for 1/2 position.
ES is at 1230.00 as I type (Dec).
DIA is 111.78 last.
12:12PM (Next update at 1:15PM)
Review of Long Position 1 Hour Later:
After 1 hour long from 112.40, DIA has fallen to 112.11 low and lifted to 112.67 high (-.29 to +.27) so this has been a muted response from this "call selling" setup.
We can look for a another entry. Exit at market.
112.22 bid last.
Small loss.
11:04AM
We can look for a another entry. Exit at market.
112.22 bid last.
Small loss.
11:04AM
Higher Risk Buy Signal 10:15AM Monday
DIA 112.50 last -1.14
VIX is down 1.23 to 30.84 now while there is a level of activity in call options (.60 put/call).
This setup implies to me that investors are selling call options to collect premium, which is a short term positive structure for the next few hours.
Buy 112.50 last with 0.50 risk. Target 0.75 to 1.00 upside potential.
112.40 bid now, keep the same stop, but you have a better entry.
10:17AM
VIX is down 1.23 to 30.84 now while there is a level of activity in call options (.60 put/call).
This setup implies to me that investors are selling call options to collect premium, which is a short term positive structure for the next few hours.
Buy 112.50 last with 0.50 risk. Target 0.75 to 1.00 upside potential.
112.40 bid now, keep the same stop, but you have a better entry.
10:17AM
Friday, September 19, 2008
VIX dropped too far, Call Activity too high
After this dramatic advance the bullishness is extreme and likely there isn't much protection against a downside move from this level. The downside support from put purchases this week and last week are at much LOWER levels. So, expect a dizzying test of these NEW BUYERS up here at DIA 113-116. In other words, I'd expect a drop.
VIX has fallen from 42 down to 31 now, which is a dramatic drop in VIX in such a short time. VIX had even extended down to 28 from its peak at 42, which is even more extreme.
Low risk trade here, in my opinion, to go short.
DIA is peeling off a little, but expect to take a little heat towards the mid-point of that stop. In other words, I would expect the market to rally a little to test us, perhaps 0.50 DIA points, but each new high is like a mountain climber searching for oxygen. It will get harder and harder to maintain this altitude. Oxygen levels are low and as any experienced climber will tell you - go down if you can't breath.
12:55PM, DIA @ 114.27 bid.
VIX has fallen from 42 down to 31 now, which is a dramatic drop in VIX in such a short time. VIX had even extended down to 28 from its peak at 42, which is even more extreme.
Low risk trade here, in my opinion, to go short.
DIA is peeling off a little, but expect to take a little heat towards the mid-point of that stop. In other words, I would expect the market to rally a little to test us, perhaps 0.50 DIA points, but each new high is like a mountain climber searching for oxygen. It will get harder and harder to maintain this altitude. Oxygen levels are low and as any experienced climber will tell you - go down if you can't breath.
12:55PM, DIA @ 114.27 bid.
DIA @ 114.39 - SELL SHORT - 1 PT STOP
12:47PM EST, Friday, Sep 19, 2008
Target 1 pt on 1/2
2 pts on 1/2
Lower stop to BE after 1 hr
Target 1 pt on 1/2
2 pts on 1/2
Lower stop to BE after 1 hr
Thursday, September 18, 2008
EXIT LONG - 1 PT PROFIT IN less than 10 Minutes
108.50 bid last.
Up from 107.30 entry.
EXIT - GO FLAT
3:05PM NOW
Up from 107.30 entry.
EXIT - GO FLAT
3:05PM NOW
DIA 107.29 @ 2:57PM
Put-Call 2.26, VIX 38.4
VIX peaked at 42 and with it the DIA reversed up 3 pts from the low, which is equal to a move of 300 Dow points.
Time to buy:
Since VIX has peaked on the day, buy the DIA with a 1 pt stop.
Exit on a gap up of more than 1.00 pts tomorrow.
Hold overnight.
107.29-.30 now
VIX peaked at 42 and with it the DIA reversed up 3 pts from the low, which is equal to a move of 300 Dow points.
Time to buy:
Since VIX has peaked on the day, buy the DIA with a 1 pt stop.
Exit on a gap up of more than 1.00 pts tomorrow.
Hold overnight.
107.29-.30 now
VIX hit over 42 today! Up from 20 last month
VIX rising in an hour from 37 to 40 is extreme - it means something EXTREME is going on - in this case - lack of liquidity.
Markets bottom in these situations and they also can accelerate.
Be extremely careful.
These are huge opportunities, as you can see the DIA rallied sharply from that 42 VIX reading.
Bonds are extremely vulnerable since they didn't RALLY when stocks were dropping off sharply.
Tim
1:23PM
Markets bottom in these situations and they also can accelerate.
Be extremely careful.
These are huge opportunities, as you can see the DIA rallied sharply from that 42 VIX reading.
Bonds are extremely vulnerable since they didn't RALLY when stocks were dropping off sharply.
Tim
1:23PM
Commentary from 12 Noon: High VIX, High Put/Call
VIX is now over 37 (37.40 last) and put/call is again high with spikes over 2.5-3.0, suggesting rampant put-buying. When markets fall on put buying, it means that Portfolio Managers are BUYING PUTS ahead of their stock sales to help them achieve a better average price. The rule on that is 3 hours though. What we always saw was that pattern when I was an institutional block-equity trader at a major NY firm. What we want to see is when they stop selling (for 3 hours) or when they exercise those puts (which is hard to find out, other than expiration).
I am aware that we, at any time, could get a crazy advance.
The Bloomberg alerted me to the fact that "Lehman's Hedge Fund accounts" (Called Prime Broker accounts) were frozen. Not exactly sure when they will release those accounts or what, but it sure is scary. Recall when Refco closed and many accounts were frozen.
Other note: I pushed our Westport Traders Meeting back to Oct 1st. It was supposed to be last night. http://westporttradersnetwork.blogspot.com
Tim
12:00NOON
I am aware that we, at any time, could get a crazy advance.
The Bloomberg alerted me to the fact that "Lehman's Hedge Fund accounts" (Called Prime Broker accounts) were frozen. Not exactly sure when they will release those accounts or what, but it sure is scary. Recall when Refco closed and many accounts were frozen.
Other note: I pushed our Westport Traders Meeting back to Oct 1st. It was supposed to be last night. http://westporttradersnetwork.blogspot.com
Tim
12:00NOON
Short from 10:30AM at 107.70
Following the guidelines established on the post just after the 9:30AM buy signal, the stop on the long position was raised to break-even after 1 hour and a sell was placed in order to "reverse" the position to go short.
We are now managing that short position.
11:38AM
We are now managing that short position.
11:38AM
Lower Stop on Short to Breakeven
Markets are moving quickly.
50 points every 5 minutes, in the futures contract for the DJIA.
11:35AM
50 points every 5 minutes, in the futures contract for the DJIA.
11:35AM
Explanation of Buy Signal
VIX is up to 36, near panic levels.
Put/Call closed yesterday over 2, indicating heavy put volume activity.
Since VIX rose from 30 to 36, we can presume that these are new put options that were purchased. We will see what happens to open interest to see if they were people buying back puts sold.
After reading that PRIME BROKERAGE accounts at Lehman are frozen, it struck me that this was an extremely dangerous situation as that would exacerbate liquidity in the markets, preventing hedge funds (which are the owners of Prime Brokerage accounts mostly) from trading in the markets.
This means we have to have wider than normal stops as the market will move to more of an extreme before exhausting orders.
After 1 hour, raise stop to breakeven and reverse on that stop from the Long position mentioned at 9:30AM today.
9:36AM now, Eastern Std Time
Put/Call closed yesterday over 2, indicating heavy put volume activity.
Since VIX rose from 30 to 36, we can presume that these are new put options that were purchased. We will see what happens to open interest to see if they were people buying back puts sold.
After reading that PRIME BROKERAGE accounts at Lehman are frozen, it struck me that this was an extremely dangerous situation as that would exacerbate liquidity in the markets, preventing hedge funds (which are the owners of Prime Brokerage accounts mostly) from trading in the markets.
This means we have to have wider than normal stops as the market will move to more of an extreme before exhausting orders.
After 1 hour, raise stop to breakeven and reverse on that stop from the Long position mentioned at 9:30AM today.
9:36AM now, Eastern Std Time
Wednesday, September 17, 2008
BUY DIA NOW. 1 PT RISK.
10:53AM
Put/call is a high reading of 2.59
VIX is a high 33.16 reading and at the previous high made yesterday.
Reverse and go short if stopped out and risk 1 pt on that position as well.
10:54AM
DIA now 108.50
TARGET = 1.5 pts.
Put/call is a high reading of 2.59
VIX is a high 33.16 reading and at the previous high made yesterday.
Reverse and go short if stopped out and risk 1 pt on that position as well.
10:54AM
DIA now 108.50
TARGET = 1.5 pts.
Tuesday, September 16, 2008
STAY TUNED! But I Stood Aside Tuesday, Sep 16, 2008
No trading today due to high volatility and expected FOMC news which hit at 2:15 on Tuesday.
The stock market is poised for several trades which will be low risk (1.00 pt in DIA etf), so stay tuned.
The stock market is poised for several trades which will be low risk (1.00 pt in DIA etf), so stay tuned.
Monday, September 15, 2008
Re-Entry LONG - DIA 111.56 12:07PM ET
VIX back up to 28.02. Put/Call a hefty 2.59.
Retesting earlier price lows in DIA.
Buy with 1.00 pt stop.
Raise stop by 0.50 pt each hour.
Exit with 1.00 pt gain.
Retesting earlier price lows in DIA.
Buy with 1.00 pt stop.
Raise stop by 0.50 pt each hour.
Exit with 1.00 pt gain.
Exit Long - 112.00 DIA
VIX dropped to under 28 (from peak near 31) and
Put/Call down to 1.72 from over 2.00.
Exit.
10:36AM
Put/Call down to 1.72 from over 2.00.
Exit.
10:36AM
VIX Near 30, PutCall Near 2, DIA near July-Aug Lows
Long Entry 111.45 on DIA.
Risk 2.00 pts for 1 hour, 1.00 after 2 hrs, 0.00 after 3 hrs.
Will review for a sell signal later in the day.
Exit +2.00 on DIA.
10:16AM ET
Risk 2.00 pts for 1 hour, 1.00 after 2 hrs, 0.00 after 3 hrs.
Will review for a sell signal later in the day.
Exit +2.00 on DIA.
10:16AM ET
Friday, September 12, 2008
DIA 113.87 Friday 1:52PM ET
VIX is up over 26 today, up 2 pts from yesterday's low and now up 7 from the low in mid-August. Put/call activity is in puts, indicating hedging and fear building a base under stocks here.
As I type the DIA is up to 114.13. It doesn't take much time to move these days.
I see upside of 1-2 pts in DIA with 0.75 pts risk.
114.07 Last @ 1:55PM ET
Tim
As I type the DIA is up to 114.13. It doesn't take much time to move these days.
I see upside of 1-2 pts in DIA with 0.75 pts risk.
114.07 Last @ 1:55PM ET
Tim
Thursday, September 11, 2008
Stopped & Reversed! Long from 114
For those of you quick on the trigger and watching news, you would have jumped on board a lot sooner than my advice to cover all the way up at 114, but at this time we lost 0.90 on the short sale and are up 0.76 on the long right here.
With a Lehman buyout (takeover or take-under) potentially reducing the worry on Wall Street, this may create a blowoff peak here on this rally. Therefore, I advise exiting any longs in the following fashion.
1. Exit half at the opening on Friday.
2. Exit remaining half at 114.25 (114.76 last) on a stop.
This way we have a chance to participate on a further rally in the event that the reading of VIX as high as 26 has led to a decent medium-term bottom (fear induces long term bottoms, of course). I would assume that 112 would not be touched for at least a week or two if indeed this 26 reading of VIX has indeed put in a bottom.
What is most interesting to me here now is that the ratio of hard assets to paper asssets is down 50% in the past 28 trading days. I look at the ratio of Silver (SLV) to TBonds (TLT, 20 year bonds). The ratio has fallen from over 0.19 down to nearly 0.10 in literally 28 days. That's a CRASH, in my opinion. Oddly enough, from January this year to March, the ratio surged nearly 50% in exactly 28 days and put in its peak at 0.225. Perhaps there is something magical about 28 days, but I think this is an oddity. The drop is a result of many hedge funds and mutual funds liquidating positions en masse. The long-only ETF's that investors have crowded into have plunged in value this quarter to the tune of 25% or more. If you look at CGMFX, CGM Focus Fund run by Ken Heebner, one of the top performing mutual fund managers of all time, his fund peaked at the end of June and has fallen nearly 25%. His fund mirrors the action of most of the metals and mining shares, particularly FCX. See for yourselves. Even the best can get caught in the worst market conditions.
Stay tuned. Be well. Even though my timing on the last call was terrible, the strategy led to at least only a small loss at the moment.
Be well.
With a Lehman buyout (takeover or take-under) potentially reducing the worry on Wall Street, this may create a blowoff peak here on this rally. Therefore, I advise exiting any longs in the following fashion.
1. Exit half at the opening on Friday.
2. Exit remaining half at 114.25 (114.76 last) on a stop.
This way we have a chance to participate on a further rally in the event that the reading of VIX as high as 26 has led to a decent medium-term bottom (fear induces long term bottoms, of course). I would assume that 112 would not be touched for at least a week or two if indeed this 26 reading of VIX has indeed put in a bottom.
What is most interesting to me here now is that the ratio of hard assets to paper asssets is down 50% in the past 28 trading days. I look at the ratio of Silver (SLV) to TBonds (TLT, 20 year bonds). The ratio has fallen from over 0.19 down to nearly 0.10 in literally 28 days. That's a CRASH, in my opinion. Oddly enough, from January this year to March, the ratio surged nearly 50% in exactly 28 days and put in its peak at 0.225. Perhaps there is something magical about 28 days, but I think this is an oddity. The drop is a result of many hedge funds and mutual funds liquidating positions en masse. The long-only ETF's that investors have crowded into have plunged in value this quarter to the tune of 25% or more. If you look at CGMFX, CGM Focus Fund run by Ken Heebner, one of the top performing mutual fund managers of all time, his fund peaked at the end of June and has fallen nearly 25%. His fund mirrors the action of most of the metals and mining shares, particularly FCX. See for yourselves. Even the best can get caught in the worst market conditions.
Stay tuned. Be well. Even though my timing on the last call was terrible, the strategy led to at least only a small loss at the moment.
Be well.
SELL SIGNAL NOW! DIA @ 113.09
I've been watching VIX & Put/Call for a few days now without much comment -
BUT
Today... with the Lehman news swirling around, an odd event has happened.
VIX went up to 26 today (25.04 as I type)
AND
the put/call is a lowly .67 right now at 3:21PM
Considering the possibilities, this action is indicative of "BULLS IN THE HOUSE" and not a low risk signal for longs. The only way I can see that this could be bullish is if the call activity is from new SHORTS who are using the calls to hedge their short positions. So, what we'd need to see in that case would be upward price movement to be bullish (insightful, right!).
Without hedging, I'll say that this is outright bearish, and here is how to trade it.
SHORT HERE: DIA @ 113.09 LAST
STOP & REVERSE @ 114.00
Risk = 1 DIA pt, potential = 2 pts.
Best to you,
Tim
3:25PM
BUT
Today... with the Lehman news swirling around, an odd event has happened.
VIX went up to 26 today (25.04 as I type)
AND
the put/call is a lowly .67 right now at 3:21PM
Considering the possibilities, this action is indicative of "BULLS IN THE HOUSE" and not a low risk signal for longs. The only way I can see that this could be bullish is if the call activity is from new SHORTS who are using the calls to hedge their short positions. So, what we'd need to see in that case would be upward price movement to be bullish (insightful, right!).
Without hedging, I'll say that this is outright bearish, and here is how to trade it.
SHORT HERE: DIA @ 113.09 LAST
STOP & REVERSE @ 114.00
Risk = 1 DIA pt, potential = 2 pts.
Best to you,
Tim
3:25PM
Friday, September 5, 2008
Stopped out yesterday! Reviewing now for a new buy signal
The VIX has barely budged in the first hour of trading today. 10:50AM VIX is 24.36, up from 24 yesterday.
The put/call is running high, of course, with the move down in the market on the employment number.
The spike in put/call from 3:30pm to 4:00pm yesterday was, in hindsight, put buying to hedge against future sales of stock. But what we are looking for is a sign that potential sellers are hedged with put options.
We have to use tight stop parameters because the market is falling and the news is grim in the headlines. Typically these provide windows of tremendous opportunity AND risk at the same time.
The DJIA is moving 100 pts every hour or so, so that is concerning and makes risk-management more difficult.
Stay tuned.
10:57AM 110.95 DIA (DJIA etf - "Diamonds")
The put/call is running high, of course, with the move down in the market on the employment number.
The spike in put/call from 3:30pm to 4:00pm yesterday was, in hindsight, put buying to hedge against future sales of stock. But what we are looking for is a sign that potential sellers are hedged with put options.
We have to use tight stop parameters because the market is falling and the news is grim in the headlines. Typically these provide windows of tremendous opportunity AND risk at the same time.
The DJIA is moving 100 pts every hour or so, so that is concerning and makes risk-management more difficult.
Stay tuned.
10:57AM 110.95 DIA (DJIA etf - "Diamonds")
Thursday, September 4, 2008
Buy Is More Logical Now:
In just a few short minutes, again, the put-call reading has jumped to 1.28 from under 1.00. This indicates to me that put volumes, coupled with VIX readings of nearly 24, up from 22, show that hedgers have hedged against downside risk and that there is now more upside potential than downside risk.
I have more confidence in this trade now, and we are "in" now that 11,216 has been hit on the way down.
11,220 last @ 3:47PM
I have more confidence in this trade now, and we are "in" now that 11,216 has been hit on the way down.
11,220 last @ 3:47PM
Market is Poised to Rally: Reverse Strategy
11,252 last. From the last post, the put buying led to a further 90 pts down in the YMu8 contract to hit a low of 11,190. The bounce from there of 60 points should have taken you out had you not followed the "cover shorts" at 11,272.
The put/call backed off from 1.00 and dropped back down to 0.74 right after 1pm until 2:10PM. This means that put/call is moving around too much to pin it down for a 3 hour time frame. Based on that, it will require very tight stops and quick fingers on the trigger to exit according to plan.
Vix was just back at 1.00 indicating to me that it is safe to attempt a buy. Now I would look for 50 pts off of a recent high 11,266 (11,266-50 = 11,216) to enter long, and use only a 40 pt stop.
Exit at the close or 60 pts, whichever happens first.
11,224 last. 3:24PM
Exit
The put/call backed off from 1.00 and dropped back down to 0.74 right after 1pm until 2:10PM. This means that put/call is moving around too much to pin it down for a 3 hour time frame. Based on that, it will require very tight stops and quick fingers on the trigger to exit according to plan.
Vix was just back at 1.00 indicating to me that it is safe to attempt a buy. Now I would look for 50 pts off of a recent high 11,266 (11,266-50 = 11,216) to enter long, and use only a 40 pt stop.
Exit at the close or 60 pts, whichever happens first.
11,224 last. 3:24PM
Exit
Market is Now Neutral: Cover Shorts at profits.
As of 1:05 PM with YMu8 @ 11284 (and a recent low of 11270)
The put/call has moved up to 1.00 indicating a more neutral, less bearish environment.
Cover shorts from 11262 earlier low + 50 pts, shorted at 11,312 for a modest profit of 30 pts.
I am tempted to go long, but will wait 1 hour to see how the market absorbs this put volume.
11,274 last.
Tim
The put/call has moved up to 1.00 indicating a more neutral, less bearish environment.
Cover shorts from 11262 earlier low + 50 pts, shorted at 11,312 for a modest profit of 30 pts.
I am tempted to go long, but will wait 1 hour to see how the market absorbs this put volume.
11,274 last.
Tim
Market Timing Using VIPer (VixPutcall) Strategy
11:03AM Thursday, Sep 4, 2008
YMU8 11315 last.
Strategy: Market is bearish. SELL RALLIES of 50 pts.
Call buyers are active and VIX is moving up sharply (now 22.88) today.
50 pt rallies should be sold, use a 40 pt stop. Calculate the 50 pt rally from the lowest low of today's decline.
Cover after 3 hours from the time you fill, or at the close, or trail with a 60 pt trailing stop from the lowest low after you fill.
11299 is the low for YMu8 today. Sell at 11349, stop 11389.
YMU8 11315 last.
Strategy: Market is bearish. SELL RALLIES of 50 pts.
Call buyers are active and VIX is moving up sharply (now 22.88) today.
50 pt rallies should be sold, use a 40 pt stop. Calculate the 50 pt rally from the lowest low of today's decline.
Cover after 3 hours from the time you fill, or at the close, or trail with a 60 pt trailing stop from the lowest low after you fill.
11299 is the low for YMu8 today. Sell at 11349, stop 11389.
Wednesday, June 25, 2008
Monday, June 9, 2008
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