Luna $ Ticks

September 30, 2008

The Vortex, Day 2 of 4

Filed under: Trading SPX SPY — moontrader @ 3:57 pm

As noted by readers Sia and DalalStreet, market’s rally today was driven by the suspension of the mark-to-market rule, plus the lift of FDIC limits. Another change of rules in an attempt to calm down the markets, avoid panic which would lead to another decline. Although I didn’t expect today’s rally to be so strong, I would call for a short term bottom only after the 4-day time window is closed. And my caution is based on a couple of points:

Volatility is still extremely high and above January’s peak. That means there’s a predominant sense of fear among investors. Second:

All daily indicators are still down, especially the Stochastics, which is a fast and good indicator on short-term players. Also, notice how volume was low and yesterday’s volume is well below Thursday 18th and Friday 19th. DPO’s are were yesterday also around 18th/19th levels. So, in my opinion, there’s something cheesy here.

The question is: from what point did we rally, what kind of support did we bump into? Here’s my idea:

SPY Sept. 2nd High = 129.96

SPY Sept. 18th Low = 113.15

129.96 – 113.15 = 16.81

SPY Sept. 22nd High = 128

128 – 16.81 = 111.19

SPY Sept 30th Low = 111.11

Pretty close to me. Some might be tempted to call a bottom, but I think today’s rally was just a “reflex” (as MarketWatch properly called it earlier today), something like an echo from Sept 18th/19th rally, and that we are heading lower towards targets coming from different proportions than 1:1 (that I showed above). Retracements have been deep and misleading, whipsawing the faint of the heart or playing in favor of smarter traders. I just like to remind you that I might be wrong and, once again, I recommend caution in the next couple of days, either side of the trade.

Advertisements

10 Comments »

  1. No news? The mark to market rule being thrown away is news to me.

    Comment by Sia — September 30, 2008 @ 4:04 pm | Reply

  2. What is a vortex? Is explained anywhere on the blog? thanks

    Comment by uhh — September 30, 2008 @ 4:29 pm | Reply

  3. Uhh, vortex is like the center of a twister, or twirl, or the internal rim of a hurricane. It’s the point where all the energy of a movement converges, with a lot of strength. Since the dates of important tops this year all point to this 4-day window, I called it “the vortex”, as a figurative metaphor.

    Comment by moontrader — September 30, 2008 @ 5:14 pm | Reply

  4. What Sia said about mark to market rule plus lifting the FDIC limits plus all day re-inforement – starting with the Prez in the morning – those were THE BIG NEWS ITEMS that drove the market up.

    Comment by DalalStreetKing — September 30, 2008 @ 5:14 pm | Reply

  5. Dalal and Sia, thanks for that. I was so much into charting today that I only checked the front pages of MarketWatch and CNBC – been away from blogs. Will edit the post accordingly. This comment is for the records.

    Comment by moontrader — September 30, 2008 @ 5:21 pm | Reply

  6. Missing the big picture moon. PPT let the market fall yesterday to punish the no bailout votes. They raised it today because the message had been sent: don’t pass the bill, and the market will enter freefall. Paulson and Goldman’s hands are all over this one.

    One day, the market will be too out of control for the PPT to control. We’re not there yet.

    Comment by m — September 30, 2008 @ 6:07 pm | Reply

  7. M… or mole… that for me is nothing else than conspiracy theory. However, you were right about PPT: they had something hidden in the sleeves and they might have more. The question is: for how long are they going to be able to keep prices at current levels? Fear building up, banks failing, consume falling, government losing confidence. At a certain point, the market pressure will be so strong that can pull a giant rabbit out of their hat and prices will plunge merciless. If it doesn’t happen in the next two days, then forget about it. I’m just reluctant to call yesterday a bottom.

    Comment by moontrader — September 30, 2008 @ 8:19 pm | Reply

  8. Hi Mr Moon!
    Nice blog and very interesting, found yours via the Slope!
    I never dreamed I would see markets like this, it’s a minefield. If this is a ‘real’ rally, then I think all hell is coming with earnings.

    Comment by Random Canuck — September 30, 2008 @ 10:21 pm | Reply

  9. Interesting work; I usually dismiss this sort of subject area as “hocus pocus” but you have been fairly accurate. Is your analysis based on the Spiral Calendar? If so, what is the best resource/tutorial to read just to gain a conceptual understanding on what this sort of analysis is all about? -Something simple would be great.

    Comment by Steve — October 1, 2008 @ 7:24 am | Reply

  10. Steve, yes, it’s Spiral Calendar. The book is out of print but you can get it at eBay for something like 5 bucks plus shipping. The author is Christopher Carolan.

    Comment by moontrader — October 1, 2008 @ 8:48 am | Reply


RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Blog at WordPress.com.

%d bloggers like this: