Twice stopped out for a full 1 pt DIA loss, as noted in comment section of each signal.
What is happening now?
12:32PM October 28, 2008 Tuesday
Put/call went from very low in the first 30 minutes as "call sellers" dominated the action. Call selling is bullish as it is usually done by nervous longs and therefore is showing that there is a wall-of-worry.
The only problem with a sharply declining VIX is that it leaves VIX oversold. The drop from 80 yesterday to today's sub-72 low meant that prices were ripe for a correction.
From 10 to 11AM, VIX rose back from 72 all the way up to nearly 79, which of course, shows fear and justifiably so... the stock market futures had fallen from near 8500 to 8150 or 350 points from peak to trough.
While the stock market was dropping sharply, the options volume swung around from the call side over to the put side and this meant that options players are buying puts and driving up the price of options. Rising VIX also means that options market makers are afraid of providing liquidity and they need extra room to maneuver around orders that come in to handle the hedges that need to be placed if a buyer does in fact arrive.
What I am looking at now is the Yen. Because the Yen has broken down under a recent low at 104.60, it suggests that the pressure is OFF of the financial system and prices can rally easier.
I'll make a 3rd attempt to buy the DIA today -
83.11 last.
Risk 1 pt.
Target 2 pts. Once up 1 pt, raise stop to breakeven.
Raise stop to breakeven after 1 hour also.
12:45PM 83.26 now...
Tuesday, October 28, 2008
STILL BULLISH STRUCTURE
Buy the mid point of this rally and risk 1 DIA pt.
DIA 80.44 = yesterday's close
DIA 85.04 = today's high
Range = 4.60 pts
Mid-point = 2.30 pts above 80.44 = 82.74
Entry 82.74, risk 1.00 pt.
Move stop up 0.50 after 30 minutes.
Move stop up to breakeven after 60 minutes.
10:52AM EST
DIA 82.67 last.
DIA 80.44 = yesterday's close
DIA 85.04 = today's high
Range = 4.60 pts
Mid-point = 2.30 pts above 80.44 = 82.74
Entry 82.74, risk 1.00 pt.
Move stop up 0.50 after 30 minutes.
Move stop up to breakeven after 60 minutes.
10:52AM EST
DIA 82.67 last.
10:07AM, Tuesday, BUY SUPPORT
"BUY against support due to HIGH CALL VOLUMES and SHARPLY LOWER VIX = call selling = bull market behavior"
10:10AM
Risk 1.00 DIA pt
DIA 84.10 bid last
10:10AM
Risk 1.00 DIA pt
DIA 84.10 bid last
Monday, October 27, 2008
GLOBAL WEALTH DESTRUCTION
Ok... I'm not going to go there in this blog....
But note today that the following markets are UP:
UP: GOLD, crude, silver, bonds, stocks, corn, EuroCurrency
And the following KEY MARKET is down: JapYen
These are interesting points to make.
OK: Back to VIX & PUT CALL
We have had a retest of the lows on the DIA, which took out the previous selloff low, but did not make a new low overall (although overnight markets did certainly break under that low).
So, this is a decent repeat of how the stock market bottomed in 1974, which is what I've been saying in other venues for some time. There was a more bullish pattern that said the low was already in place last week and that we were due to rally 10-15% very quickly, but this last roll over shut that down, especially when the YEN went on to breakout again and put pressure on the world financial system. The price of crude oil keeps going down (except today, it looks bottomy on the chart) and the trade that is most NOT TALKED ABOUT is the Long Crude / Short Yen trade that we can popularly call the TEXAS CRUDE HEDGE after the famous bull market crash of 1985 where crude dropped from $35 to $10 in a very short time and nearly wiped out the SouthWest of the US and our friends next door in Mexico. Long crude oil in the ground and long crude oil futures is famously called the "Texas Hedge" because it really isn't a hedge at all, obviously. It is a rampant speculation. It was a bubble back then and it is/was a bubble now. That bubble may have already popped and THAT is what will put in this market bottom. A BOTTOM IN CRUDE OIL WILL PUT A BOTTOM IN THE STOCK MARKET = YOU HEARD IT HERE - YES INDEED.
Buy crude oil - buy EuroCurrency - buy silver - buy gold - sell bonds - buy stocks - sell Yen. That is what we should all be doing right here, right now.
1:27PM Monday, October 27, 2008
But note today that the following markets are UP:
UP: GOLD, crude, silver, bonds, stocks, corn, EuroCurrency
And the following KEY MARKET is down: JapYen
These are interesting points to make.
OK: Back to VIX & PUT CALL
We have had a retest of the lows on the DIA, which took out the previous selloff low, but did not make a new low overall (although overnight markets did certainly break under that low).
So, this is a decent repeat of how the stock market bottomed in 1974, which is what I've been saying in other venues for some time. There was a more bullish pattern that said the low was already in place last week and that we were due to rally 10-15% very quickly, but this last roll over shut that down, especially when the YEN went on to breakout again and put pressure on the world financial system. The price of crude oil keeps going down (except today, it looks bottomy on the chart) and the trade that is most NOT TALKED ABOUT is the Long Crude / Short Yen trade that we can popularly call the TEXAS CRUDE HEDGE after the famous bull market crash of 1985 where crude dropped from $35 to $10 in a very short time and nearly wiped out the SouthWest of the US and our friends next door in Mexico. Long crude oil in the ground and long crude oil futures is famously called the "Texas Hedge" because it really isn't a hedge at all, obviously. It is a rampant speculation. It was a bubble back then and it is/was a bubble now. That bubble may have already popped and THAT is what will put in this market bottom. A BOTTOM IN CRUDE OIL WILL PUT A BOTTOM IN THE STOCK MARKET = YOU HEARD IT HERE - YES INDEED.
Buy crude oil - buy EuroCurrency - buy silver - buy gold - sell bonds - buy stocks - sell Yen. That is what we should all be doing right here, right now.
1:27PM Monday, October 27, 2008
I'VE CHANGED MY MIND
It is now 10:55AM and the winds have changed:
Here's how they changed:
Call activity is picking up (putcall went from over 2.00 to 0.78 now) and VIX is lifting back up from 75 to 77. This implies to me that there are call buyers out there paying UP to participate on a rally in stock prices. I don't think that is the best setup for the biggest rally, in fact, I view that as a short term topping measure.
I see what is going on now to drive the bulls into a frenzy = the Yen is breaking down here intraday under the 107 level.
Just as the Yen helped us to turn bearish in recent weaks, it is turning itself around and is saying the opposite now. I am aware of the Central Bank of Japan's interest in pushing the Yen back down too and their statements to that effect. These are volatile times - anything can change at a moment's notice.
I view this as an EXIT LONG opportunity for any LONGS from this last buy signal from 10 minutes ago.
11:01AM
Here's how they changed:
Call activity is picking up (putcall went from over 2.00 to 0.78 now) and VIX is lifting back up from 75 to 77. This implies to me that there are call buyers out there paying UP to participate on a rally in stock prices. I don't think that is the best setup for the biggest rally, in fact, I view that as a short term topping measure.
I see what is going on now to drive the bulls into a frenzy = the Yen is breaking down here intraday under the 107 level.
Just as the Yen helped us to turn bearish in recent weaks, it is turning itself around and is saying the opposite now. I am aware of the Central Bank of Japan's interest in pushing the Yen back down too and their statements to that effect. These are volatile times - anything can change at a moment's notice.
I view this as an EXIT LONG opportunity for any LONGS from this last buy signal from 10 minutes ago.
11:01AM
MONDAY - 10:44AM - Market Environment
Discussion of environment -
Put-selling dominated the first half hour of trading (putcall > 2, VIX down 5) and set up a bearish reaction as INSTITUTIONS are establishing long positions by way of selling puts.
This should be a constructive setup again for the close as institutional support is the most important element to a market advance. From what I can see, you have seen institutions front-running their own customers' orders by way of the behavior I have witnessed in the market. It is logical to assume this is happening too given how much money wealth has evaporated over the recent past.
Here's how I read this. I believe that we are in a constructive day where support holds and you exit on resistance levels. I imagine a stair-step advance for the day.
It is now 10:48AM and the DIA is well above its overnight low by 4.00 pts based on where Dow FUTURES were trading today.
STRATEGY: Buy Here 83.16 last. Target +1 pt. Stop = 82.50 (0.66 pts)
DIA is already 83.33 now. Same 1 pt target and same stop = 82.50 (0.83 pts)
Volatile action.
DIA is now 83.47. Same 1 pt target and same stop = 82.50 (0.97)
I can't even get this published in time for this to rally this much.....
10:52AM now...
Put-selling dominated the first half hour of trading (putcall > 2, VIX down 5) and set up a bearish reaction as INSTITUTIONS are establishing long positions by way of selling puts.
This should be a constructive setup again for the close as institutional support is the most important element to a market advance. From what I can see, you have seen institutions front-running their own customers' orders by way of the behavior I have witnessed in the market. It is logical to assume this is happening too given how much money wealth has evaporated over the recent past.
Here's how I read this. I believe that we are in a constructive day where support holds and you exit on resistance levels. I imagine a stair-step advance for the day.
It is now 10:48AM and the DIA is well above its overnight low by 4.00 pts based on where Dow FUTURES were trading today.
STRATEGY: Buy Here 83.16 last. Target +1 pt. Stop = 82.50 (0.66 pts)
DIA is already 83.33 now. Same 1 pt target and same stop = 82.50 (0.83 pts)
Volatile action.
DIA is now 83.47. Same 1 pt target and same stop = 82.50 (0.97)
I can't even get this published in time for this to rally this much.....
10:52AM now...
I TOOK FRIDAY OFF FROM INTRADAY TRADING
I had other important business to take care of with our automated-systematic-trading business. Also, given that S&P futures had reached LIMIT DOWN in the morning, I could tell it was going to be a ROCKY DAY. I hope you all survived it well and managed to make some great decisions.
For those of you who count on my market calls every day - I'm sorry I was unavailable.
For those of you who count on my market calls every day - I'm sorry I was unavailable.
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