ES channel

Here's the S&P e-mini futures (symbol: ES) channel in play since with th erecent rally. We hit support today after yesterdays big selloff and bounced yet again.

Can it last? Lots of people talking on both sides of this rally now. I think breaking out of this channel will be a big deal when it happens.

Oh...by the way.

The catalyst for the selloff. Chris says Hedge fund redemptions are cutoff this friday. So if you have deep pockets, but you are sick of your hedge fund manager partying in the hamptons while your pockets are getting progressively and significantly less deep, you may want to go to cash. These redemptions beget selling and margin calls which beget more selling and more margin calls and more index dropping and more panic and more redemptions until the market loses more in 2 days than any other 2 days since 1987 (happened last week).

Well all that will come to an end for the year this friday if our information is right. So significant selling pressure should subside.

It would be perfectly natural for saavy pro traders to participate in a final plunging of the market to celebrate and profit from this important deadline. If it weren't a historically awful bear market, it probably wouldn't make much difference. But in this environment, another 10-15% drop would be no problem.

Get ready for the bounce.

2 Pictures of interest:

The first is the big picture of s&p falling since mid may. This one lines up fibbonacci retrace levels with big movements in the s&p. The end point support prediction is the mid to upper 700's. I honestly think this is where we're headed soon.

Also take notice in the above plot of the steeply sloped lines on the right. That's a channel which setup Monday morning to guide a steep fall this week, and possibly longer.

I'd expect S&P movement to be repelled at edges and to be attracted up or down to the center, but generally in a twitchy manner with detail not unlike what we see here.

The edges are what counts. They setup reversals with elevated probability of success.

At some point, I'd expect a pretty substantial selloff. The descent of the s&p will be parabolic on a 5 minute candlestick chart, and the bounce from whatever bottom takes hold will likely be dramatic as well. I'd also expect the VIX to get close to its highs near 90, which seems to be the new panic level these days.

Some good options for bounce buys: I like 2x index etf's SSO, DDM, QLD, UWM, and also the 2x bank etf UYG. Also, oil is heavily beaten down. It has to recover at some point. Oversold is oversold. DIG is 2x oil etf.

There are inverses of all these to profit from the fall if you are so bold. SDS, DXD, QID, TWM, SKF, and DUG, respeectively. But you are absolutely playing with fire if you short without watching for the squeeze in this environment.

Have fun, and good luck!

S&P bottom?

Long term S&P: 50% retrace line is 1175

1 year s&p action. 1170 is channel bottom, and fib bottom too based on some previous reversals.

Still headed up!

Since the last S&P shot, we're still heading up off the channel low.
I want to emphasize that the upper and lower lines are not completely arbitrary. They are equidistant from a linear regression fit to the S&P index data since July 9th or so. And the market has set the slope of the trend line, and the early peaks have set the width of this bigger channel.

The fact that we can find support along the invisible line in the sand weeks later tells me I'm not the only one looking at this. The line can be violated, sure, and if it is, we know we have an event which is beyond the extremes of the last few weeks, which is a big deal to be concerned about for any long postions, and possibly a signal to go short.

But if the lines hold, well, that tells you something different about sentiment and the value of this channel as a predictor as well.

As for the middle zone, one can use shorter steeper channels to define movements across several days, and also 5,8,21, 34, 55, 89, 144, 233, 377, and 610 period moving averages on 5min , 15min, 30min, 60min , and daily charts to look for support/resistance. When one of these lines line up with fibonacci support/resistance across some similar time frame, the setup for a reversal is in place. Its like looking for a needle in a haystack sometimes, but I can't say how many times recently I've analyzed a bad entry/exit and found a good reason in these simple support/resistance lines to come up with a better decision. It just takes patience, practice, and discipline, but the roadmap is waiting there ready to reveal itself.


Here's a near end of day update...things are looking good so far for bulls, and my insanely overleveraged long SPY call position which is coming back on me...hooray!

S&P TA turmoil

Its been a while, but I'm back with new S&P channel shots. We had some amazing volatility since later last week and then after the weekend break. A lot driven by Gustav, RNC VP selection, and just low volume and uncertainty in the market. And you zoom in close enough, you can even see how the intraday bottoms today even follow that uptrending slope to some extent. This gives me some confidence that this picture is still on other peoples radar too.

So which way? Hard to say...I'd like to think up...there are good reasons to buy in here. But people are spooked too, so its pretty hard to really gauge sentiment. The recent history of the past week or so says we are completely range bound from 1260 to 1300 or so. However, impending breakouts always start before you really expect them, so I think its safe to say we are getting ready to jump now.

Breaking outside this channel towards lower values is definitely bearish movement we haven't seen in weeks. So be wary of that. Also be wary of simply hugging that lower trend line...that shows short term bullish behavior that could easily be smacked by a relatively light bad news event, and leave lots of room to fall without a lot of support lines to break the fall. But if we have nice push back into the middle zone, the bulls will have spoken again that they are not ready to lie down quite yet. If we take off, expect resistance again near the middle and the top of the channel. And anything goes in between, but in the channel is still technically "up".

Be careful out there!

SP riding new channel low line

I bought a straddle on SPY at ~1266, and it is losing money slowly. :-(

I was expecting a relatively large jump from this level within a day or 2 given the past history. The S&P hasn't wanted to stay anywhere for too long, and it was poised on channel line.

There are lots of little channels drawn on the chart above, but the longest one is the one I'm concerned with. The peaks and valleys were following a steeper channel until about a week ago when we dropped back hard from > 1300. I identified the shallower channel from the lower group of highs happening since july which also seemed to be in line with linear movement in lte june.

It looks like we resumed another linear movement right along the bottom line of my new shallower channel.

Its not what I would have liked having bet on big move instead of a slow upward crawl, however it is interesting that it is following the trendline so closely. I still think a breakout is imminent, especially if oil makes another big move, up or down. Falling into this narrow range action is rare enough, but much rarer is for it to continue for more than a couple days. So I'm still in my straddle. Just gonna take a little more work to clean up the losing side once it breaks.