Luna $ Ticks

September 9, 2008

Puts and Popcorn

Filed under: Trading SPX SPY — moontrader @ 3:47 pm

That’s my strategy for the moment: sit and watch – ok, let’s put aside the sarcastic touch, so I’m gonna say “monitor” – SPY in the next days. What should I be monitoring? Well, basically DMA 3×3. Notice that today SPY opened just above it but didn’t make it:

In the following days, if this is a downtrend, you should see prices getting closer and then bouncing back from DMA 3×3. At this point we are far far from DMA 7×5 and 25×5. Also, we should be getting momentum to the downside, maybe we can even open tomorrow with a gap. It’s one of these situations when, if I were a bull with a position, I would barely sleep at night and decide to close my position at the opening – however, there might be a surprise at the opening. Especially considering how the Europeans and Asians are going to react to a huge drop in the biggest market in the world, whose government just came up with the biggest financial rescue in human history.

Another thing I like to monitor is VIX:

The dotted line: we’re heading there and… beyond. Even beyond January’s peak.

To conclude this post, a picture of today’s S&P 100 (S&P 500 was to big for me to fit in the screen so I could grab it):

Just check the redest ones. Mostly financials. Lehman is so red that I thought my computer screen was melting. But no, my computer screen is fine. Something else is melting.

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7 Comments »

  1. Looks like there is firmness in after hours on LEH news. May be LEH will make your monitor glow tomorrow! What exactly do you mean by “you should see prices getting closer and then bouncing back from DMA 3×3. At this point we are far far from DMA 7×5 and 25×5”? I am not clear “to getting closer” term. Are you saying the DMA’s will move closer to each other?

    I have recently started reading your blog, and so far you are 2 for 2 in your calls since then. I am watching for your 3rd call “9/19 or 9/22, not a day early nor a day late” and “115, may be 110”. Till then I have loaded up with puts and have decided to go look for blood on the streets! I hope it will not be me jumping off a high rise building like they did in 1929! I hope you are right!

    Comment by Adam — September 9, 2008 @ 7:23 pm | Reply

  2. Hey Adam, thanks for passing by and welcome. What I post in the blog is what I believe the market will do and the reason. However, I always repeat, anything can happen and I might be wrong, so it’s good to have that in mind and don’t put all your money into the trades based on what I say here. Caution is always a good thing.
    Regarding the DMA 3×3 (displaced moving average: 3 bars average, 3 bars displaced forward), I meant that it should contain the movement down. Which means, there’s a good chance that everytime you see prices touching DMA 3×3, they will quickly bounce back down. A close above that line might mean that the end of the downtrend is near.
    Now the dates: I said that the proportions in yesterday chart point to either one or the other date and that these dates are great candidates for a bottom. It might happen, it might not. When it happen is really great because you can make money to the downside and then catch the reversal.
    Keeping cool is the key for great trading. Don’t let the emotion take control over you. And let us all make money! ;-)

    Comment by moontrader — September 9, 2008 @ 7:48 pm | Reply

  3. Nice blog and interesting charts. It looks like the move in the VIX correlates well with your timing for the next capitulation bottom, just from an eye-balling-it perspective. I also like your S&P 100 10×10, I couldn’t find anything in the green today but as your 10×10 points out, there were a few. What is the most disturbing about this sell off and why I think this could really be THE crash is that all assets are falling now; commodities, stocks, global equities, obviously housing prices, foreign currencies, etc. There is nowhere to hide. The deflationary spiral will lead to a hysteria where nothing is safe but cash, something that the market hasn’t seen in a long time catching many off guard. We’ll just have to see but my guess the fed will cut rates on a Sunday afternoon when the leaves are turning yellow, to end this leg lower and bring about some Christmas cheer.

    Comment by pythagoruz — September 9, 2008 @ 8:17 pm | Reply

  4. Pythagoruz (great nick, btw), I couldn’t agree more. What we saw today with Lehman might contaminate the rest of the financial sector since just a couple of financial institutions are safe from the credit crisis (Goldman Sachs, JPMorgan). When people realize that, which might happen soon, they’ll rush to get rid of their stocks and we’ll see a capitulation.

    Comment by moontrader — September 9, 2008 @ 8:23 pm | Reply

  5. Pyth, wait till we get to 3 of 3 of 3 in mid October-November timeframe.
    but we’ll get a rally to 1220-1240ish from lows 1170-1130 in late Sept early oct

    Comment by Serg — September 9, 2008 @ 9:14 pm | Reply

  6. How did you create/ where did you get that S&P 100 matix? Very cool! Also, great analysis as you have been spot on!

    Comment by shadowzpop — September 10, 2008 @ 12:46 pm | Reply

  7. Hey Shadow,
    I got that from Thinkorswim platform. If you have a different online broker, you can still download their platform for free and use it with paper money.

    Comment by moontrader — September 10, 2008 @ 1:15 pm | Reply


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