How good are our calls in the trading blog? Below are a few of our big money plays.
Easy money on the SPX on the bearish side in May 2015.
So we finally did breakout to new highs, but barely. There has not been much follow through yet and the market has been pretty boring, which increases the chances of this being a false breakout. We will most likely retest the breakout point over the next week or so.
Last week was slow with the holiday trading volume (big boys don’t trade on low volume days). So we stayed in a tight range for most of the week. This week should be somewhat more active even though we are entering summer trading. I still think there is a slightly more bearish tone to the market this week. Therefore, I think the red 1st target has better chances. 211 is the level to watch, if that breaks we could easily test the 208 area as the next target.
Some volatility came back to the market this week. We hit my 211 target right off the gate on Tuesday and closed the week right at 211.14. We also saw a rally in bonds (TLT) as expected. This week I am a little more neutral as we are currently in a triangle pattern on the 60 minute chart. A close below 210 this week should give us a test of the 207-208 level. Then, we may see a retest of the all time high. However, that may be the fourth push up, and if it is weak, it may be a good risk/reward for a short. I will keep you updated.
We had the NFP report on Friday which was better than expected but the market sold off. Once again, bad is good and good is bad. We hit 66% of the triangle target @ 208.95 so that target could be considered met. The current consolidation is slightly bearish with a 208.5 target. However, some of my indicators are showing that in the short term, bears do not have that much space to run. I think if we do fall in the first part of the week we could see a decent bounce. This may be an interesting quick trade for me to take and I will keep a close eye on it. If this is indeed the case, and the bounce is relatively weak, it may be the fourth push up discussed in last weeks update.
Easy money on the SPX on both the bullish and bearish side in June 2015.
The beginning of this week may play out similar to the beginning of last week. There is a pretty good chance that we will see another decent bounce by Tuesday. That means lower on Monday might be a good buy. However, it is not as sure of a bet as it was last week because bears now have room to run. There is also a small chance that Thursday’s high was actually the final push up. Overall, the percentages during the beginning of the week are in the bulls favor.
After any bounce we will need to see how strong it is and let the volatility of Fed day pass. If the bounce is weak, I may buy some puts which should be a good risk/reward because we may finally see a nice pullback.
On the daily chart, if 209 breaks we likely see 207 quickly afterwards. You can also see how new 52 week lows have been ticking up even though we are near new highs. This is not what you want to see if you are a bull.
Quick update, we saw a little bit of a relief rally at the beginning of the week. As we expected the Greek news was priced in. However, the crash in China has now become the cover story.
As a result the S&P got slammed today but I think we are near a short term bottom. My best bounce model has triggered so look for a short term bounce in the next day or two. A gap down tomorrow could be a decent buy.
The big breakdown in August 2015.
I think we are nearing an end to this long range that we have been in. We should see a quick move either one of the targets if we see a real break out. Internally, the market is very weak, so this puts some more edges to the bears at the moment. I will likely go short if we break bellow 2040 on the SPX. However, if the bulls can break out, they therefore might have more room to run.
In my last post at the beginning of August I mentioned that the trading range we have been in for most of the year should be coming to an end very soon. I also mentioned that bears were gaining the edge in the range. Below is an updated chart which shows that the targets were mostly fulfilled on the down side.
The Second Test of the Panic Low.
We still think we will have a closer test of the panic low over the coming weeks and months. Something to note: at the end of September and beginning of October, we will once again enter the corporate buyback blackout period. If we are still near the current levels this may be the time when the bears attack again.
Still, there is a better chance that the August lows will be tested over the coming weeks. The average time for such a retest after a similar spike is 35-45 days. That puts the timeline sometime in the end of September to the beginning of October.
We have to face the possibility that the 186.9 low was the final retest of the panic low in the medium-term, and prepare accordingly. On the chart we could be forming a double bottom here. We now think the 202-203 level is the line in the sand for bears. A break above that level would confirm the double bottom and we could see a new highs very soon.