Monday, February 28, 2011

2/28 Daily Commentary

In the stock market wave Minute2 completed this morning in the futures and the cash.  I'm still short NQ at 2359 with a stop at 2364.50.  I bought the final 2% SDS at 21.17, bringing me up to 6%, which is the maximum exposure without trend profits "buying" more position.  I'm holding 4% TLT with an order tonight and tomorrow selling at 92.71. 

I'll reiterate why I'm bearish until 3/3-3/4:
a) Last Thursday I1 went into a minor dip from then until 3/4

b) The Elliott wave count was complete for the 5 up from July. This is subject to extension as outlined in the Weekly.
c) The DJI has broken it's critical support and has since rallied back to it.
d) There is what appears to be a 5 down from last week's high and a 3 wave retracement

I expect the market to advance between 3/4 and 3/25 due to rising I1 to a high absolute value of +8.6.  If you review the I1 charts in Intro and Concepts you will see that 8+ is a value for I1 that has always been associated with strong rallies. 

The current market count is "unfinished downside business" but I have been wrong on the count before and I'll use stops beyond today's highs to sell the SDS if the rally continues.

2/28 3:40

Wave (ii) up counts complete.

2/28 3:20

pima posted a comment and I'd like to open a thread mainline. 
It is vital for Americans to understand the origins of the Keynsian doctrine that has destroyed America from the inside over a period of 75 years. Attacking the symptoms is insufficient to the restoration of Constitutional proscriptions over government activity. "

My question is this: Even if we do understand it, what can we do about it? Is there a fix for the mess that the Fed has spent the last 100 years creating? Can America be salvaged or will we have to chuck the whole thing and start over?

In response, I believe that we are a nation in addiction to debt and the appearance of it as a solution to problems.  Only if a substantial portion of the electorate become educated on the destructive effect of endless money creation will they hold politicians accountable over a prolonged period.  Currently political trends last a couple of years and then die out because they are not based on awareness of how the world really works.  The resolution of this problem requires unwinding many of the circumventions of Constitutional law that have allowed unlimited Federal power.  Without this power Keynsian economics could not be employed.  This is a very tough nut to crack and it won't be achieved without rock solid grounding in classical economics.  A proposition that government is not supposed to adjust interest rates would mean the abolition of the Federal Reserve.  A proposition that federal and state government is not supposed to dictate local school policy and curriculum would mean the abolition of at least the Department of Education.  That the federal government is not supposed to intervene between organized labor and company management would mean the abolition of the Department of Labor.  Similar philosophical issues would dismantle a score of federal departments or agencies.  Do we trust politicians to carry the light, even if elected on these issues?  The only protection from the corruption of power is an enlightened electorate.   Now, does that mean that I see it happening soon?  No.  America will be dragged kicking and screaming out of the darkness of ignorance and it probably will take a decade of despair.

2/28 2:45

I know that I don't express my appreciation for the votes of confidence that you post into comments.  While I don't pass all of them along they help me stay motivated to post as much as I can about my trading activities, the strategy and tactics, and general rants on the lack of cohesiveness apparent in the U.S. economy and the society underlying it.  Thanks one and all.
Wave (ii) is in progress and, if it holds to the right look will get to SPX 1326.  I'm still short NQ futures and hold 6% SDS and 4% TLT.  I have an order selling all TLT at 92.74 on a daily M/A.  My stop in NQ is still 2364.50.

2/28 2:15

Looks like the stock market's initial 5 down is complete in cash and futures.
The disparity between Nasdaq and the DJI is jaw-dropping.  I'm still short NQ futures but I'm looking for a bounce back to over 2350.

2/28 1:00

We have a clear 5 down in progress.
A tentative target is 1272.60 SPX.

2/28 11:30

I just wanted to reiterate the reasons for being short-term bearish the stock market.
a) Last Thursday I1 went into a minor dip from then until 3/4
b) The Elliott wave count was complete for the 5 up from July.  This is subject to extension as outlined in the Weekly.
c) The DJI has broken it's critical support and has since rallied back to it.
d) There is what appears to be a 5 down from last week's high and a 3 wave retracement

2/28 11:15

The dollar index is suffering from QE2.  It's sentiment gauge has flatlined for the past week while it has declined.  Cash dollar hit 96.78 this morning, but the gauge starts to rally in 2 days, so it's worth a short long at that time but there is probably another low until then.
Nasdaq futures will confirm the turn at 2353.

2/28 10:30

Entering order selling 4% TLT at 92.74. 
I'm still short NQ at 2359 with at stop at 2364.50.  DJI critical resistance will only be broken on a rally 1.35% beyond the 5-minute, 370-unit M/A, or 12,319.

2/28 10:00

This is the completion of the chart posted in the Weekly.  The wave which should have just completed is more probably Minute B than Minute 2 due to I1 bottom due 3/4.

2/28 9:50

The highest assigned probability on Friday's Weekly was for another high in this rally, which we got this morning.  I'm short NQ at 2359 and 6% SDS along with 4% TLT.

2/28 9:35

Bought another 2% SDS at 21.17 when SPX hit 1325.10, per Friday's commentary.

2/28 pre-open

Stock futures formed triangles to conform with Friday cash indexes.  The breakout covered my short NQ at 2348.  Shorted NQ again at 2359.

Sunday, February 27, 2011

2/27 6:05pm

Shorted 1% NQ futures 2344, stop 2352.25.

2/27 Extension

The current wave count from the 3/2009 low is complete according to the following labelling:
The I1 top date is 3/25 and is the highest probability for final top.  This would allow for a month of topping/churning before the turn down.

It is also possible for the stock market to extend to the I1 top dates of 3/25 and 4/19, thus forming a 9 wave up sequence with 5 waves (Minute1 through Minute5) belonging to it's 3rd.  This is not the highest probability but I'll address it here as a contingency.

This would allow for the Minute4 wave to terminate on another downwave to 1280 and Minute5 to finish by 3/25 at, let's say, 1380.  The problem then becomes time, as wave 4 would likely be a rectangle and completing a wave 4 rectangle and the wave 5 finis by 4/19 is not tenable.  It would require until mid-May for this to fit into normal Elliott "look".   Luckily I1 allows for higher markets until 5/16.  This is the day of the formal I1 sell signal when I1 starts it's fall to lower levels (below 3.25).  
Corresponding to the following wave labelling:

Saturday, February 26, 2011

Inside The Mind of Bernanke

Ben Bernanke's career has not included a moment outside of academia and government.  Bernanke taught at the Stanford Graduate School of Business from 1979 until 1985, was a visiting professor at New York University and went on to become a tenured professor at Princeton University in the Department of Economics. He chaired that department from 1996 until September 2002, when he went on public service leave. He resigned his position at Princeton July 1, 2005. 
Bernanke served as a member of the Board of Governors of the Federal Reserve System from 2002 to 2005.
To understand this man I first had to understand Keynes.
John Maynard Keynes was an academic out of Cambridge. He published his General Theory in 1936, although informal versions circulated in academia prior to that. In the 1920's he was a neo-classical economist, utilizing Marshall's neo-classical Quantity Theory of Money to explain economic activity, unemployment, price levels, and interest rates. He changed his orientation due to British economic stagnation and high unemployment from 1918 through the 1920's, which was unexplained by neo-classical theory.  Keynes never spent a moment outside of academia and government as well.

To understand why the United States and Europe in general seized upon Keynsian theory one must understand the desperation that drove these countries and many others far to the left. At almost any other time in history Keynes would have been dismissed as a loon. The tenets of Keynes' theory follow:
1) Keynes advocated interest rates as close to zero as possible. His rationale was that interest hits the poor disproportionately and discourages marginal investment projects. Once set close to zero they should never be raised.
2) Keynes felt that an economy with no savings would function more efficiently with government directing investment rather than the rich investing their savings. Thus zero interest rates fits right in to discourage saving and thus encourage consumption.
3) Keynes advocated debt creation by government to the extent that full employment does not exist. His definition of full employment was literally that anyone wanting a job had one.
4) Spending by government is investment and there is little or no distinction given to the target of the spending.
5) Taxation should be progressive just out of fairness. Once the economy was freed from the rich directing investment there was little need for the rich to accumulate savings, which were mal-directed especially during economic slumps (they just sat there due to fear).
6) Keynes had no fear of inflation because he believed that government boards should exist to control the pricing of commodities and import restrictions on nonessential products.
7) According to Keynes, state planning was not to be confused with Fascism or Communism. There was still plenty of room for the private sector to operate. "I believe the right solution will involve intellectual and scientific elements which must be above the heads of the vast mass of more or less illiterate voters."  That was a direct quote.

Bernanke is the perfect Keynsian. He espouses all of the principles by applying them to our hides to the extent that his mandate allows. Zero interest rates, unlimited credit creation, espousing public purchase of floundering banks and other companies.  What more evidence is required to acknowledge his profound allegiance to a fellow academic? We mere mortals cannot hope to understand or administer the brilliant theories of the elite.
In one of his first speeches as a Governor (2002), entitled "Deflation: Making Sure It Doesn't Happen Here," he outlined what has been referred to as the Bernanke Doctrine. Bernanke emphasized that Congress gave the Fed responsibility for preserving price stability (among other objectives), which implies avoiding deflation as well as inflation. He states that deflation is always reversible under a fiat money system. Where currency is under a monopoly of issuance, or where there is a regulated system of issuing currency through banks which are tied to a central bank, the monetary authority has the ability to alter the money supply and thus influence the interest rate (to achieve monetary policy goals). Bernanke asserted that the Fed "has sufficient policy instruments to ensure that any deflation that might occur would be both mild and brief" .
In order to combat deflation, Bernanke provided a prescription for the Federal Reserve to prevent it. He identifies seven specific measures that the Fed can use to prevent deflation.
1) Increase the money supply (M1 and M2).
The U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost." "Under a paper-money system, a determined government can always generate higher spending and, hence, positive inflation."
2) Ensure liquidity makes its way into the financial system through a variety of measures.
"The U.S. government is not going to print money and distribute it willy-nilly ..."although there are policies that approximate this behaviour."
3) Lower interest rates - all the way down to 0 per cent.
Bernanke observed that people have traditionally thought that, when the funds rate hits zero, the Federal Reserve will have run out of ammunition. However, by imposing yields paid by long-term Treasury Bonds, the central bank should always be able to generate inflation, even when the short-term nominal interest rate is zero ...[this] more direct method, which I personally prefer, would be for the Fed to announce ceilings for yields on all longer-maturity Treasury debt."
He noted that Fed had successfully engaged in "bond-price pegging" following the Second World War.
4) Control the yield on corporate bonds and other privately issued securities. Although the Federal Reserve can't legally buy these securities (thereby determining the yields); it can, however, simulate the necessary authority by lending dollars to banks at a fixed term of 0 per cent, taking back from the banks corporate bonds as collateral.
5) Depreciate the U.S. dollar. Referring to U.S Monetary Policy in the 1930s under Franklin Roosevelt, he states that:
"This devaluation and the rapid increase in money supply ... ended the U.S. deflation remarkably quickly."
6) Execute a de facto depreciation by buying foreign currencies on a massive scale.
"The Fed has the authority to buy foreign government debt ... [t]his class of assets offers huge scope for Fed operations because the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt."
7) Buy industries throughout the U.S. economy with "newly created money" In essence, the Federal Reserve acquires equity stakes in banks and financial institutions. In this "private-asset option," the Treasury could issue trillions in debt and the Fed would acquire it, still using newly created money.

The full text of his speech is here.

Bernanke, the academic, has embraced the concepts of another academic, Keynes, and has used this as the philosophical and strategic basis for his actions.  The similarities between the theories of the two men is striking. Both had a goal of 0 savings, driven out into spending by protracted, ultra-low interest rates.  Thanks.  The last Fed chairman bereft of private sector experience was Arthur Burns.  What a disaster that was. 

What is outside of Bernanke's scope Congress fulfills. I posted previously about the ego of legislators and how Keynesian economists dove-tailed with them. Congressmen and senators get scored in elections based on how well they satisfied their constituents' desires. In addition, bringing home the bacon aids re-election even if nobody asked for that particular pork. Finally, a senator waking up is like a CEO, preening in the mirror and reaffirming god-like status. In the old days, to be reminded by classical and neo-classical economists in committee meetings that the public accounts must be balanced is castigation and therefore insulting to their image. No more, the pols are enabled by the economists.

Now, in America, the factories have fled, the tech miracle faded, and the service economy is evaporating. What was laid bare was the fact that there was a shortage of actual physical product that America could export. Without building "things" then permanent, good-paying jobs disappeared, replaced with pseudo-jobs and government jobs. Now there is no place to hide. QE3 is a political impossibility. Stimulus is a political impossibility. The options were squandered by the latest ratchet down the rabbit hole. Each crisis comes quicker than the last and tacks another "0" on the price tag. Finally at 100% debt/GDP the Tea Party was voted in and Congressional oversight of the Fed is in the hands of it's mortal enemies.  Unlike the experience with Arthur Burns, the tolerance for unlimited debt creation is ending.

Bernanke is rapidly being discredited around the world and Americans will be surprised how quickly he will be discredited here.  In the next crisis the Fed will be prevented from significantly expanding it's balance sheet by Congress. 
It is vital for Americans to understand the origins of the Keynsian doctrine that has destroyed America from the inside over a period of 75 years.  Attacking the symptoms is insufficient to the restoration of Constitutional proscriptions over government activity.

2/26 I Digress

I don't often discuss my trading philosophy.  Trading, for me, is performed with an irreplaceable resource, my capital, which was built by a lifetime in the proverbial mines. When I trade I protect my capital.  I enter into small positions, even when I believe larger trends exist, until my profit allows me to increase position size without increasing risk beyond my initial tolerance.  For instance, my initial maximum risk is less than 1% of capital.  If a loss on any position reaches .5% then I shift stop-loss to just beyond the nearest support/resistance moving average that limits the risk to no more than .2% additional loss.  Entering positions in ETFs is almost always 2% unless the trend is already in force and I've achieved and closed out profits in that direction already.  I tolerate initial entry once trend has been established to 6% on any ETF until profit builds and I can expand beyond that.  When I'm in multiple positions with strong correlations I limit overall size to 25%.  The stock market has not yet entered it's down phase so my position size is much smaller than it will be then.  Even though I1 is rising and I've made money on the long side I do not believe in the trend and will keep positions small until after March 25.  I1 stays at a high absolute level until May 13-16 so I will not really ramp up my short position until that time.  This is the first I1 formal sell signal of the year.  This view also allows for the effect of QE2. 

If you inspect the posted  Trade History you will find 2 spreadsheets, the second is entitled Trade History Profitability.   This provides profitability of every trade that I have undertaken since this blog was created.  Column J, Profit, is the net profit/loss of each trade from initial entry to ramp-up to close-out.  The next Column K, is a cumulative account balance, assuming $100,000 starting capital.  Looking at the Profit column any losses incurred are well under 1% of the running account balance and only 2 trades registered anywhere near .8%.  So, while I'm ahead 28% on capital since I started the blog this is remarkable in that I normally have 80% of my capital in money market instruments!  The interest on the money markets is not included and brokerage commissions are not included (at $5 a trade they balance out with the interest accrued).

Friday, February 25, 2011

2/25 Weekly Commentary

I went short last Thursday and took profits Monday near initial bottom.  I1 shows only a minor downward move to 3/4.  What caused me to short was primarily the wave count, which was completed 5s at multiple levels.  My re-entry Tuesday was perfect but I closed out the short when consumer confidence came in 4 points better than expected.  Since then I've waited for the first 5 down to complete, which happened Thursday in DJI and Wednesday for the other indexes. 
TLT was bought last week as well and has been a very good position thus far. 
Today started with 4% TLT and no stock position.  I bought 2% SDS when the 5 up to complete the irregular flat in SPX completed.  At that time I expected an extension because the important M/As were all above the market.  I bought another 2% SDS when SPX hit it's first 15-minute M/A and DJI came close to it's critical M/A.  At the same time a standing order to short NQ futures was filled at 2349.50.  I still show potential to SPX 1325 for a final leg to complete the extension. There is a count that counts c complete but I prefer to expect a rally from the congestion this afternoon.  Neither count agrees with EWI.  Monday I plan to buy another 2% SDS at SPX 1325.20 if it makes it that far.

I covered my short NQ at the close 2345.25 due to my expectation for a final pop.  Breaking down below 2345 Sunday evening will get me short again.

March 4 is the end of the continuing resolution for interim spending.  2011 budget has not passed even though we are 5 months into fiscal.  The House passed a TeaParty-fueled $61 billion cut to their draft of the 2011 budget and lobbed it over to the Senate.  GOP passed a 2-week continuing resolution today so if Senate Dems like it we get another 2 weeks.  March 4 is also when I1 bottoms so it is a good time for a bottom.  With only 5 days remaining in the decline it is probably going to be another 5 down to complete an abc at a new low.  I do not expect the stock market to fall apart until after mid-May, even though I expect a final top either 3/25 or 4/19.  Of course, if oil runs to $120 it will be due to a supply squeeze, not demand, and stocks will remain under pressure.

The stock market has reacted to the world tension rationally. 98% of the time the crude market is demand driven and oil tracks the stock market. In recessions demand falls and producers are chasing prices downward. In expansions demand rewards production, which can be increased to accomodate it. When the oil market is supply constrained due to unforeseen production cutbacks then the normal relationships with other markets inverts. Crude price rises sharply past the point where world economies are in equilibrium and their demand and GDP fall over time. Oil past $100 is not priced into oil and byproduct consumption. As opposed to Egypt this supply disruption is real and may be prolonged, so the Saudis will become the swing producer to make up the shortfall, stretching their capacity near it's limit. However, the Saudis need to produce more than the Libyan shortage to bring down the speculative fever. As long as Qaddafi stays in power the stock market is vulnerable to sharp downdrafts because the crude spec fever will remain. Hedge funds are gaming crude.

2/25 2:30

DJI got within 8 points of it's critical M/A but I shorted early because the SPX hit it's green M/A. I'll short another 2% sds on the SPX white line.  Currently 6% SDS and 1% short NQ futures.  NQ tapped it's 90-minute M/A precisely on a second attempt.
I'm keeping my stop on NQ at 2352.25, a tight stop.

2/25 1:20

Bought another 2% SDS 21.35

2/25 11:25

I checked my NQ futures order and I shorted it at the 90-minute M/A which I used as the basis for an order posted in yesterday's daily.  The M/A is at 2350 and I have been adjusting my order to fit it -.5 points which is currently at 2349.50.  This was my fill.

I put a stop in at 2352.25.

2/25 11:20

Here's where I see the wave count:
If it does extend it will be composed of 2 more upward waves, hitting my orders to buy SDS.

2/25 11:05

I'm  looking to go further short at higher prices.  The first entry point is the critical resistance M/A:
The second entry point was going to be the is the green M/A on the SPX, but I have changed it to the blue since the green and the DJI critical M/A will trigger close to each other.  So my second entry point is near 1325.50:

2/25 11:00

2% SDS and 4% TLT.  Buying 2% SDS at DJI 12,164 and SPX 1321.6.  These numbers are gradually declining.  My stop is beyond SPX 1330.

2/25 10:20

I don't know if this was the correct wave count to complete the abc up but I bought 2% SDS 21.46.  I have orders buying 2% at DJI 12,166 and SPX 1322.1

2/25 pre-open

The first 5 down is complete and the c wave is in progress.  The market broke support M/A and I want to short on a return to it, which starts the day at 12,169.

I'll short more at SPX 1322 (green):

Thursday, February 24, 2011

2/24 Daily Commentary

Just got home.  SPX and SP futures have completed a 5 down and are in the process of an irregular flat upward correction.  DJI and DJ futures have completed their 5 down at the new low today.  Nasdaq comp and ND futures completed their 5 down yesterday and today and held above their lows.  I1 is in short-term neutral and the DJI critical support M/A was broken at 12,135 and has become resistance currently at 12,167 and gently falling.
SPX with a 1318 target for wave c
Overnight I have an order working to sell NQ futures at 2348.50.
No end in sight for the bond rally. 

2/24 12:30

DJ futures double-bottomed at 12,000 and are so far 30 points above.  SP futures, ND futures, and their cash indexes held above their lows.

2/24 11:15

DJ futures bottomed overnight at 12,004 and the 5 down should be considered complete unless this is taken out.  Round-number support should hold for a decent  bounce and my chance to pounce..

This morning ES futures hit their 30-minute M/A. 

2/24 pre-open

Stock futures finished 9 waves down to mark their first 5 with an extended 3rd.

Cash indexes completed 5 down yesterday.

Fib retracements SP futures .38 = 1312.40  .50 = 1318.21
Yesterday DJI broke critical support by a wide margin when it traded under 12,135.
For the first time in months I've got a clear short-sale for bigger stakes.  12,210 looks like a good target but I'll be looking at the structure as it rallies.
I'm in Albuquerque but I'll be posting all morning.
I'm holding 4% TLT with no target.

Wednesday, February 23, 2011

2/23 12:20

Critical support broke at 12,134 so I'm free to step into shorts.  Strong support at 12,090 so a bounce from there will suffice.  The wave count is extending so I believe we are in the 5th wave now. 

2/23 10:15

Looks like an irregular flat correction upward in progress.  The critical support break is still DJI 12,135.  I will wait for the correction of the 5 down to short again.

2/23 pre-open

Stock futures have not corrected enough of the decline to be considered as done with wave ii.  They can be counted as 5 up overnight, so I can expect more upward correction today.  The alternative is that wave i downward is extending.

Tuesday, February 22, 2011

2/22 Daily Commentary

I came into today long 1% DX futures, long 2% SDS, and 4% TLT.  Shorting stocks last week was something I ordinarily would not have done with such a tiny downmove in I1 until 3/4, but the wave count and other indicators said it was a low-risk trade.  All 3 positions were trades that correlated with a return to safety and away from risk, at least temporarily.  Still, trading the uptrend in stocks and commodities was a bit of a knuckle-biter.
I sold DX at 78.19 for a good run from 77.82, SDS at 21.14 for 30 ticks, and held onto TLT which has done well throughout the day.  All in all, a good day.  I blew an opportunity to re-enter the short, having calculated the re-entry price perfectly due to a mis-count of the early morning recovery rally.  Until the stock market breaks critical support I'm using my chipper, not my driver.  A few hundred dollars on a trade is my chip shot.  Critical support will be broken at DJI 12,135.  After that I'll step up the size of the position.  Until then the market has to show me.  The 5 down reached 12,176 so the 3rd wave could break critical support.
I have a completed 5 down from the high Friday in SPX, midcaps, and Nasdaq so I'll get another shot at shorting back at the SP futures 30-minute M/A (blue).  This time I'll use futures instead of ETFs.
Bonds were up as a result of flight to safety and an over-sold condition along with a rising sentiment gauge.
The dollar is bullish until a 90-minute close below 77.62.  I'm not in this market at this time.
Precious metals were sharply higher but I can't short until mid-March at the earliest. 
In summary, did a lot of things right and blew a couple of opportunities. 

2/22 3:35

My wave-counting muscle is not flexing today.  Had an extension of the 5th wave so here is current count:
The key level for me is still DJI 12,135.

2/22 1:10

We just completed  5 down in SPX and SP futures. 

2/22 12:20

If the SPX is making a 5 down from it's high last week then it will rally here to complete a lesser-degree 3rd and make another low. 
I must have miscounted the Nasdaq to take me out of my short position.  Too bad, the market retraced perfectly to the 30-minute and hourly M/As.

2/22 noon

I missed a trick on the DX dollar index.  It is still in bullish mode vs. it's 90-minute M/A which has an envelope that will only be broken on a decline below 77.62.  DX hit 77.635 on it's decline this morning but I did not buy in.
In the stock market DJI and XMI have held above their lows and I'm bearish again on a break of 12,135.

2/22 11:25

Only a new low will invalidate the 5 up in Nasdaq.  Bonds are taking off to the upside today, so I have a virtual short with my long bond TLT.  DJI is right at it's critical support M/A at the moment.
The DJI has to hit 12,134 to break critical support.

2/22 10:50

I'm trying to reconcile the clear 5 up in Nasdaq with resistance at 30-minute SP futures M/A.  Sold 2% SDS 20.95 to stand aside.

2/22 10:25

SP futures hit 1334.50 which is right at the intersection of 2 M/As, the 30-minute (green) and the hourly (blue).

2/22 10:13

Bought 2% SDS 20.94.  I'm not waiting for the 30-minute M/A.

2/22 10:00

SP 30-minute M/A is 1334.25.  I'll buy 2% SDS when it rallies to 1334.

2/22 9:45

DJI held 25 points below it's critical M/A.
SPX is a 3 down so far and caught support on one of it's key M/As. 

This is a news market again, with the contagion hitting young, unemployed people facing rising food and bleak futures.  Since I have indications of a down through 3/3-3/4 I want to get short again.

2/22 9:35

I'll be selling on a rally to SP futures 30-minute M/A or after a decline below DJI 12,132 the critical support envelope.

2/22 9:10

Oil is up sharply due to the supply squeeze in Libya and is holding those gains.  PMs up as well.  Silver was up over $2/oz at one point.  These riots are starting as people lose hope with food taking up to 40% of their income.  It's hard to see a future in that. 
I hope for the stock market to bounce up to meet the 30-minute M/A (blue line) where I will short again.  So far it is a 3 down.

Dollar is having a hard time getting an impulse wave going to the upside.  Standing aside.

2/22 pre-open

I sold DX futures at 78.19 at a confluence of M/As.  I isolated 78.20 as "stiff resistance" in yesterday's Daily.
Stock futures show a clear 3 down so far.  DJI cash closed at 12,390 with it's critical support M/A at 12,300 for a 90 point spread.  I've sold the SDS position at 21.14 which corresponds to that 90 points in YM futures.  I did not get the best price due to ARCA opening 8am EDT. 
I'm holding TLT for a longer period.

Monday, February 21, 2011

2/21 Daily Commentary

I'm long DX futures and hold 2% SDS and 4% TLT.
Futures traded for a half session today.  I need 16.5 cents above this M/A to confirm the next leg of an extended run.  Currently that's 77.915 but this will be declining overnight.  The dollar is only forming 3-waves up so it could be an extended base. 
The decline to the low on the 18th was key.  The key 90-minute M/A has an envelope of .55% on a 90-minute close.  Price crossed this M/A (blue line below) at 78.05 and the computed envelope limit is 77.62.  The low 90-minute close was 77.625.  This is still the key stop value, a 90-minute close below 77.62 will get me out.  Resistance at 78.20 will be stiff.
The stock market is playing out according to script, with a strong decline breaking significant futures M/As.  The next stop for the train is SP futures 1323.  I will probably exit ETFs at that point if it occurs during the day session and wait for a bounce to short again.  If not then I'll hold through the bounce.  The time horizon is as long as 3/3 and as low as SP 1280. 
My stop is .5% above the 30-minute M/A on a 30-minute closing basis (blue line below).

Bonds are benefitting from stock declines around the world so I'll keep holding TLT.