Luna $ Ticks

September 3, 2008

Time to short

Filed under: Trading SPX SPY — moontrader @ 3:43 pm

Today the market opened on a weak tone, tried to react, dropped below 127, bounced back up and, towards the end almost went positive. Trading was most of the day below DMA 25×5 while Stochastics kept pointing down, peeking into negative territory. Yesterday we also had a failed rally, which adds to the bearish short-term scenario. Therefore, I bought some September puts because I thought it’s worth the risk considering all these aspects.

The next chart is an important one:

I’m using 12/10/07 top with 07/15/08 bottom. That’s a significant top since it preceded a sharp fall. Notice how many important tops and bottoms happened at these fib retracement lines. Today’s reaction off lows happened because we’re approaching one of these lines @126.56. As I said before, prices kept revisiting DMA 25×5 in the last couple of weeks, and today it was sharply pierced, even if SPY managed to close above it towards the end of the day.

Another interesting thing to notice, regarding sentiment:

Yesterday, Vix broke out of the marked channel. Even if today, towards the end of the session, Vix had quite a drop considering that the market closed negative, looks like some sort of sharp movement is in the oven.

In terms of time proportion, September 2nd did produce a top as I was hoping according to my date projections. The significance of this top remains a question which will be answered in the next couple of trading sessions.

All in all, today’s action gave a number of consistent clues about where the market is heading. We should see results before Friday, otherwise we have to reassess the scenario.

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12 Comments »

  1. Don’t forget the other important indicator, bonds. They continue to work higher, even with inflation and the pathetically low interest rates!

    Looking to short IYR and IYF…most likely this week.

    Comment by Joe Drake — September 3, 2008 @ 4:01 pm | Reply

  2. 12/10/07 top was wave 2 top of 1st fractal
    if 1313 holds it will be wave 2 top of 2nd fractal

    Comment by TObject — September 3, 2008 @ 4:48 pm | Reply

  3. Hi,

    Just wondering what indicator is DMA? I assumed it is some kind of moving average, but why does it have 2 parameters? Thanks.

    Comment by John — September 3, 2008 @ 6:06 pm | Reply

  4. John, DMA means Displaced Moving Average. It’s a regular moving average (1 parameter) displaced in time (number of periods, which is the 2nd parameter, and it can be either positive or negative).

    Comment by moontrader — September 3, 2008 @ 6:20 pm | Reply

  5. Joe, thanks for the reminder. I’ll start adding commodities and bonds to the analysis.

    Comment by moontrader — September 3, 2008 @ 6:20 pm | Reply

  6. Well done Mr. Brazil.
    Very sound charting.

    Comment by T.B.A. — September 3, 2008 @ 6:43 pm | Reply

  7. how high do you think spy can go tomorrow? i’d like to exit my current spy calls tomorrow and go short. thanks

    Comment by aymon — September 3, 2008 @ 9:33 pm | Reply

  8. Hey Aymon,

    I prefer not to answer that question directly, since my outlook can be wrong. But there’s potential for a bounce up tomorrow, especially because today was the third consecutive day down.

    Comment by moontrader — September 3, 2008 @ 11:53 pm | Reply

  9. Moontrader

    Your blog is very interesting and helpful- good luck with your move to Brazil-will you be continuing your blog ?

    Comment by bill108 — September 4, 2008 @ 7:40 am | Reply

  10. Do you trade any options on the nasdaq 100?
    Which ones do you find the best ?

    Comment by bill108 — September 4, 2008 @ 7:46 am | Reply

  11. Hey Bill, thanks for the compliment. I’ll sure continue the blog from Brazil. Right now I have the moving company all around my place, while I’m crouched in my corner writing this response and following the market. BTW, I’m not trading Nasdaq, but once I’m down in Brazil I’ll start following closely on that index too.

    Comment by moontrader — September 4, 2008 @ 7:57 am | Reply

  12. Moon, glad to see your blog getting more followers. Good luck in your move to Brazil and thanks for keeping us all up to date

    Comment by Jigsaw — September 4, 2008 @ 8:44 am | Reply


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