Saturday, May 29, 2010

Financial Reform

Friday, May 28, 2010

Kamikaze Put Option Trades

For Entertainment Purposes: Three charts that are vulnerable to 'air pockets' in the event the markets get extremely non-linear this summer.
right click for enlargement options

Thursday, May 27, 2010

Planetary Alignments and Markets.

Last night I posted a type of chart that has not been seen at this blog to date. The chart that I posted is an astrological 'wheel' for the date August 07,2010*. A friend who has taught me a lot about cycles and trading was kind enough to provide his views on the coming planetary alignment which is known as a T-Square. Many people dismiss astro-economics as irrational chicanery, but people who study market cycles in earnest do not dismiss the subject as frivolously. J.P. Morgan is often quoted as saying: "Millionaires don't use Astrology, billionaires do!"

Norm Winski knows his stuff and is very familiar with Fibonacci theory and the work of W.D.Gann.

* Mr. Winski refers to Aug 01, 2010 in his explanation and interpretation--the above chart is actually for August 07,2010.

Excerpt from Astro Trend (May 2010 issue)

There is a substantial risk of loss in trading commodity futures, options and foreign exchange products.
This is called a T-square and is considered to be one of the most powerful and potentially one of the most stressful and negative planetary configurations. According to Astrological theory, the energy of a T-square usually flows from the top of the T to the bottom of the stem of the T, somewhat like a divining rod. The planet on the stem will usually greatly influence how this energy is vented. To recap, in the 8/01/10 T-square configuration, Mars is conjunct Saturn, both of which are 180 degrees to Jupiter and Uranus; both of these groups are 90 degrees to Pluto, which is on the stem of the T. The only thing I see positive about this is that Jupiter is conjunct (same place) as Uranus, which is a 14 year business cycle peak.
The energy is likely to flow through Pluto in Capricorn, on the stem. This is a very explosive configuration.
Pluto has to do with things underground, drilling, mining, nuclear, or volcanic. Pluto is in Capricorn which is mountains and Coffee. Based on this, during this period, I expect some major natural disaster, explosions, volcanic eruptions, politically driven terrorism or act of war. Please note that although 8/01/2010 represents a peak energy day of this window, this configuration will be in effect intermittently over many months. During the coming months, I recommend avoiding major population centers, politically sensitive or unstable areas, or seismically unstable areas. The ramifications for the financial markets, should the negative scenario manifest, could be cataclysmic. Overall, for the economy, this configuration represents massive cross currents in that the Jupiter conjunct Uranus, is usually a very positive economic influence, at least up to its culmination, while the other major aspects are negative, Most of the aspect components of the T will be phasing in and out intermittently over the next several months. Stay Tuned!

Norm can be reached at (239) 594-3939 or norm@normwinski.com

EMA Convergence

Wednesday's dismal close came close to negating the energy contained in Tuesday's hammer (takuri). Wednesday's close produced a 'shooting star' which suggests the opposite outcome as yesterdays hammer. The length of the hammer was significantly longer than the body of the shooting star--so the 'benefit of the doubt' will be given to Tuesday's reversal--albeit with significantly less power or validity.

The chart shows the exponential moving averages converging. (see previous discussion) When a convergence of the 21, 55 & 200 day exponential moving averages occurs in the time frame of an Energy Date, confusion and indecision is often the outcome. Note that the 21 day ema has crossed below the 55 day ema which gives more credibility to the claim that the intermediate term has rolled over and joined its nimbler counterpart. There is reason to believe that the early part of June might be indecisive and chaotic as the 21 and 55 day emas approaches the 200 day ema. However, it is quite possible that a spirited short term rally may ensue and set up the ultimate test of the moving average convergence.

Caveat: The market is in a precarious state currently and there is evidence that long term cycles may act in concert with shorter frequency cycles and produce what will make a 'flash crash' look like a day at the beach. Events like this can occur with little or no notice--bears are fast and vicious. Rallies should be used to plan and prepare for an aggressive bear campaign in the near future. If short, core positions should be maintained but it will be time to bring out the 'extra guns' when things align.

Speaking of alignment--here is tonight's mystery chart. More on this in future posts.

Wednesday, May 26, 2010

A Technical Perspective of the BP Disaster.

S&P June Time- Price Harmonic Grid

Here is a chart of the SPX indicating Energy Dates, Natural Support Resistance and Time-Price Grid.

Nasdaq

Below is a 'wave count' although I am not a big fan of conventional Elliott nomenclature.Like the S&P, the COMPQ looks to be very vulnerable from mid-June to early September. If the markets do have a meltdown--the NASDAQ could crumble like a sand castle.
click to enlarge.

Takuri

The S&P Cash 'hammered' out a classic takuri candlestick at Tuesday's close. The fact that the market dipped below the February 5th low (1044.50) and then rebounded to close near the day's high is highly indicative of some sort of short term low being established. Plenty of longs were stopped in the morning by the vultures so there is incentive for the street to have a bounce. 'Flash traders' and 'dark poolers' love this scenario.
The market is entering a stage where a short term--albeit impressive--rally may ensue at any time. Don't be seduced--use the temporary withdrawal of the bear's ferocity to strategize--especially if trading options. The moving averages should reveal when the bear will return--this time with a vengeance.

The chart indicates:
  • 21,55 & 200 exponential moving averages.
  • Natural Support and Resistance fan-lines
  • Harmonic Price levels
  • June Energy Dates.
right click to enlarge

Tuesday, May 25, 2010

Approaching the Abyss

The market is beginning to break down in a very serious manner.
  • 200 day exp. moving average has be violated
  • 21 and 55 day emas turned down and are approaching the 200 day ema.
  • wave [2] (1219.80) has been established.
  • Wave [3] underway, with (1) being formed currently.
  • (3) of [3] could occur in July-August in accordance with timing of natural cycles.
  • Wave (2) of [3] should approach 21-55 and 200 day moving averages then collapse.

right click mouse to enlarge



Risk of owning equities is EXTREMELY high. ACT ACCORDINGLY.

Thursday, May 20, 2010

ROCK ON

Some entertainment to lighten up your day.

1078-1079

1078-1079 is a critical level for the CASH S&P to HOLD.

Dancing with the Stars

Although it is too early to tell if this is the start of a major decline, the behavior of the moving averages will reveal what structure the market is going to form. In the event that the current decline is the beginning of a multi-stage decline the interaction of the 21, 55 and 200 day moving averages will possibly indicate when the 'three wave' is ready to unleash its destruction.

It is rare that large sustained declines begin by falling from above the 200 day moving average. It is typical for the market to test the 200 day level--then rally and interact with the 21 and 55 day averages which then provide resistance instead of support. A few things usually occur before 'all hell breaks lose'. I have used a chart of the peak in 2007 with the current chart to suggest a hypothetical extrapolation of how events could unfold.
  • the market makes its original test of the the 200 day moving average.
  • the 21 and 55 day averages approach the 200 day average but turn back up as the result of a brief rally--bear trap.
  • after a brief rally fails, the 21 and 55 turn down and break through the 200 day. THIS IS WHEN THINGS GET INTERESTING. The market is now in a very precarious position.
  • at this point the market is in a position of tremendous vulnerability and when there is a confluence of cycles turning down the market will hit an air pocket--a volume vacuum--then it breaks.
  • often the bear offers alert investors a ride on his back down the steep slope. This opportunity presents itself when--after a fairly serious decline--the market rebounds and kisses the 200 day moving average good-bye. il bacio della morte.
  • it is at this point that the market is ready to collapse and aggressive action is warranted.
It goes without saying that if events do unfold in this manner, the market action will not be identical to the example from 2007--especially since this would be a decline from a intermediate top (2009-2010) and not a long term top (2002-2007). But the interaction of the moving averages will indicate that the structure is similar and that several down cycles are exerting pressure on the market.
right click graph for graphic enlargement options.



The moving averages love to dance with each other and if you watch them carefully they will tell you when its time to boogie. The natural cycles suggests that the period of maximum vulnerability will commence in late June and extend throughout the summer months.


The bullish % volume is indicating some serious deterioration which suggests that any ensuing rally at this point would have to have some incredibly strong up-days to repair the damage. The deterioration continues in an environment of complacency.

right click graph for graphic enlargement options.

Tuesday, May 18, 2010

Two Scenarios

The markets reversed on Monday--the S&P 500 bouncing off the weekly support level 1114--with accompanying Doji. The Japanese interpretation of a DOJI is that the bulls and the bears are conflicting and the market is at a point of indecision. It appears that some form of secondary bottom was made on Monday--which coincides with the mid month Energy Date. The initial bottom at 1065.79 was made at the May 5-7th Energy Date.
Two basic structures can be formed at this juncture--the continuation of a 3 wave corrective rally and then a resumption of the recent downtrend--or the first wave of a 5 part impulse rally which would indicate higher prices in the near future. How the markets behave near the 1158-1162 level may reveal the highest probability outcome. The various volume and breadth ratios will also be important to watch--especially the components of TRIN.
  • Advance/(Advances + Declines)*
  • Advancing Volume/(Adv. Vol +Dec. Vol.)*
  • * sustained readings above 75% will suggest the bullish resolution
The chart below indicate harmonic levels associated with the two scenarios. This should assist with your trading strategy.

right click graph for enlargement options.

Monday, May 17, 2010

An Interesting Week Ahead.

S&P 500
The chart below shows weekly Harmonic Support and Resistance Levels.
Resistance @ 1190-1200
Support @ 1100-1110 and 1050-1060
Breaking 1030: The game is on!

right click mouse for enlargement options


Option Ratio and Volatility.
Plenty of room to move to the upside for the CBOE Equity Ratio
Volatility turning up the heat: Moving averages converging. If the moving averages (21-55-200) rise above 25% they will exceed the 2007 pre-panic VIX MAs Highs.



right click mouse for enlargement options

Friday, May 14, 2010

The Significance of Moving Averages.

Moving averages can reveal a lot about the structure of the market.
  • When the 21 day exponential moving averages crosses its 55 day counterpart, the previous move in the market before the shorter average began to approach the longer term MA--point 3 on the chart, can be considered terminated.
  • When the 21 day ema crosses back above the 55, the corrective wave (4 on the graph) can be considered terminated.
Moving averages can act as a guideline to what length of cycle the analysis is applicable to.
  • 21 d ema : short term daily cycle
  • 55 d ema : predominant weekly cycle
  • 200 d ema : major trend: Bull or Bear Market.
  • Moving Averages act as support resistance levels as well as setting the base for cycle projections.
When moving averages converge at Energy Dates (May 17-19) significant trend setting action often occurs. (i.e. onset of a new structural wave.)
The moving averages are telling market participants to be especially mindful of the price action during the next 4-5 trading sessions. Watch for the market to establish a trading range either above or below the MA convergence. If the market trades below the moving averages the 200 day will be tested next.

INTERESTING TIMES

right click graph for enlargement options

Tuesday, May 11, 2010

Hanging by a Thread

The SSE Composite Index closed at 2647.574 on Tuesday a mere 7.82 points above the August 2009 low of 2639.75. A case can be made for a possible low in the current time-price horizon--with the major caveat that if 2639.75 is taken out all bets are off and the market will be poised to trade at much lower levels. For speculators the risk reward ratio using a relatively tight stop is somewhat attractive to attempt a trade on the long side of the market. Aggressive traders may want to consider a STOP and REVERSE strategy since prices could fall precipitously if support levels are violated..
  • RSI is at 22.67--well within the oversold range
  • the cycle (blue arc) emanating from the 2007-2008 bear campaign is about to terminate which could result in a trend change or acceleration of the current downtrend.
  • Support may be found at the S6 support harmonic.
  • 50% of the range from the 2008 low and Aug 2009 rally is @ 2571.46
If the SSE finds support and begins to rally there will be positive consequences for the S&P. However if the SSE fails to hold current support levels and subsequently breaks lower--the consequences for global equity markets might be dire.

right click mouse for graphic enlargement options

Monday, May 10, 2010

An Impeccable Trading Record.

"Goldman, in a quarterly regulatory filing, said it made it through the first quarter without a single day of trading losses, the first time it had accomplished such a feat. The firm reported trading revenue of more than $100 million on 35 days in the quarter."

If I were presented with such a track record by a CTA I would be suspicious to say the least.

Hanging in Fiat Limbo.

The behavior of the markets will be critical between now and the May 17-19 Energy Dates. A break of the May 6th low (1065.79)--or possibly the May 7th low (1094.15) will be an ominous sign for the markets. Conversely, an impulse wave with confirming volume indicators to new highs would be quite bullish and suggest significantly higher prices. The violent nature of the latest correction appears to be more than a corrective wave and could be the initial break of a much much larger decline that will unfold in the near future. BE AWARE--BE CAUTIOUS--BE OBJECTIVE.

Friday, May 7, 2010

Why Stop Here?

In the midst of the panic on Thursday price levels stabilized and rebounded into the close--albeit at levels significantly lower than last week. Today, the market drifted lower but held above the lows of yesterday. Why would the market stop here?
  • the 200 day exponential moving average is at 1099.51
  • the 2.618: 1 NSL is at approximately 1108
  • the low is in the area of the midpoint of the wave 4 decline that culminated at the February 5th 2010 low. Jan 11 high 1150.45 -- Feb 5th low 1044.50: Midpoint = 1097.48
  • the 4.236: 1 NSL from the July 2009 low is at approximately 1060.00
  • 23.6 pct. of the range of the Feb-April rally is 1085.87
  • 78.6 pct. of the March 2009-April 2010 rally is at 1101.46
Today's range was 1127.04 * 1135.13 * 1094.15 * 1110.88

right click mouse for graph enlargement options.

Caught in the Web of Debt

This graphic presents the disconcerting reality of the world's obsession with debt.
Source: N.Y. Times

Thursday, May 6, 2010

Energy Date !!!!!!!!!!!

GO FIGURE: Today's Range on the S&P was 1167.58-1065.79 = 101.79
61.8 pct. of the range = 62.90
61.8 pct of the range @ 1128.69
Today's settlement price = 1128.15
Monthly Energy Dates are listed on the left side panel of the blog. As can be seen the May 5-7th is the first of four projected Energy Dates (ED) for the month of May. Today's action certainly satisfies the conditions one would expect of an energy date. During ED periods, markets can be expected to make lows, highs or have accelerations either up or down. Today was no exception.


OBSERVATIONS OF NOTE:
  • 200 day exponential moving average and the 2.618natural support line (NSL) (1090-1100), are just above the spike low seen during the Proctor Gamble fiasco this afternoon.
  • Prices closed in the upper half of today's range--@ almost exact 61.8pct of the range.
  • Energy Date--a possible short term market low could have been established as this is the middle of the May 5-7 ED.
  • markets are not yet 'technically oversold'--see RSI and MACD etc.
  • The 61.8 pct. and 50 pct. retracement levels of the Feb 5 - April 26 bull campaign (878.04 and 943.30 respectively) are approximately equal to the pivot points marked 1 and 2. This area should provide significant support in the event that the market declines further in the short term.
  • The interaction of the 21-55 & 200 day exponential moving averages will be important to monitor as this may reveal the wave structure of the current decline.

The weekly chart indicates that the markets were in a technically over bought configuration as demonstrated by the RSI and MACD. It is interesting to note that today's settlement is approximately at the 50 pct. retracement level (1121.44)of the 2007-2009 bear campaign. Note that thie latest rally peaked at 61.8 pct of the 2007-2009 bear market.




NASTY

America and Great Britain: Take Heed.


SOURCE: CIA World Factbook 2010


Tuesday, May 4, 2010

Signs of Weakness


The behavior of the markets will be critical today--especially the Transports--as we are entering the first Energy Date period for May.
  • Transports could have generated a false Point and Figure Buy last night
  • 21 day ema has been broken and the 55 day ema is acting as support.
  • lower highs and lows is the current price pattern, which is bearish.
  • Monitor Fibonacci A-B-C correction levels for further clues about the current market structure.

Dow Transports: Point and Figure BUY

Over the last few entries I have been presenting evidence that a significant high was in the process of being formed. This may be in fact the case but it is imprudent to ignore developments like that being shown below.
The Dow Transports continue to rally--producing a P and F BUY Signal on Monday's close. The price projection is quite interesting. If the Transports were to continue to rally ahead to the 6800 level, all other equity markets would surely participate in the market revelry.
The next week will be very important to discerning where the markets intend to flow.

right click to choose enlargement options

Monday, May 3, 2010

VIX and SPX

When the VIX enters the zone above 27 percent it has been shown that it is usually an excellent time to fade both volatility and to go long the market. Unfortunately markets have phenomena which can be referred to as black swan episodes which can throw a wrench into the strategy. An effective method of filtering the opportunity presented by elevated VIX reading is through the use of the RSI.
It appears that the strategy has a greater probability of being successful if the RSI is at or below 30. Implementing the VIX strategy without the RSI filter can trap traders in black swan episodes like the markets experienced between September of 2008 and March 2009--a definitely frightening time to be using the stand alone strategy without a filter.
Currently VIX is at 22.05 and the RSI is at 49.35--in other words time to monitor the markets with patience and discipline if one intends to put the VIX strategy into motion.

Sunday, May 2, 2010

Timing is Everything!!!!!

TIMING IS EVERYTHING

Light Crude Continuous Contract (EOD) Index
  • This week's minor low was made at a dynamic tend change termination point.(green circle)
  • Friday's close above the 2.618:1 downtrend
  • Point and Figure buy signal with a 95.00 price objective.
  • Fibonacci projections: 97.40--97.80
  • A close above 87 would be further evidence that the Fibonacci objectives will be tested.
right click chart for enlargement options.


The chart below is of BP AMOCO PLC. The interaction with Fibonacci cycles and ratios is incredible.