Wednesday, September 22, 2010

9/22 Daily Commentary

Yesterday's FOMC gave me the opportunity to increase my SDS position from 15% to 27% and make a couple of trades in futures for 70 profit in DJ futures.  I am currently 1% short DJ futures holding under water 50 points.  My current exposure is about what it should be given initial support break.  We got that today with the 30-minute M/A SP futures and the SPX 15-minute M/A.  I am making a conscious decision to stop trading now that further decline is iminent.  I had the opportunity today to buy SDS or cover shorts when SP futures hit their 125-hour M/A.  I posted that we would get up to a 5-point rally SP's from there.  We got 6.  Normally I would have been on that opportunity like white on rice but I have traded out of positions before waterfall moves in the past and I don't like it. 
How do long-running rallies end?  Unless there is a powerful event they end not with a bang, but with a rolling over, taking out levels of support as they go.  I1 has been declining since 9/13, or 7 trading sessions.  It continues uninterrupted for 6 more sessions until 9/30, when it goes up slightly over a 6 session span.  This would play out that by the 30th the DJI would crack it's 5-minute, 380-unit M/A -1.35% confirming weekly trend change in time for an advance back up to broken support.  The initial play of this M/A is to cover some shorts 40 points beneath it, expecting a bounce back before attempting to break it again.

My next trade will be shorting SP futures on a 2.5 point break of the 125-hour M/A.


  1. Chart: DX
    The USD appears to have completed a V Bottom and may well begin its climb in a series of IH&S. Good luck.

  2. Steve,
    How did your I1 indicator do during the 2009-2010 rally? Did it give timely sell signals that correlated with the the June high and the Jan 10 high? I ask because it this market currently "feels" like that same period. It has also been widely speculated that Primary Dealers are leveraging their profits from POMO and buying equities.

    I know the markets tend to confuse, but it sure seems like the markets are very confused at this point. For instance, you would think the equity markets would notice what the bond yields have collapsed, but some how they have managed to hold up pretty well. Franky, I'm very surprised by the massive divergence.

    Something just doesn't feel or smell right.

  3. I use TOS for my broker as well. Commissions are low: $1.50/option contract and $5 for shares in blocks of 400 or less.

  4. Thanks Steve...I'm so looking forward to when you yell Timber!

  5. It begins in earnest today, spot on Steve, well done!