Luna $ Ticks

October 23, 2008

What Now???

Filed under: Trading SPX SPY — moontrader @ 3:31 pm

Today everything seemed to be going just as predicted, with SP500 and Dow breaking the triangle support trendline, when they reversed and closed above it. Are we facing a triangle failure? Too soon to tell. We do remain below my beloved DMA’s:

Notice also that the Stochastics is indeed giving a sell signal, while MACD is a buy. When you have mixed signals, you favor the longer trend. The weekly and monthly charts are all sell. We need to see what happens tomorrow to have a better idea which direction the market is heading. Remember that I have an important bottom projected for next week.

UPDATE TO THE POST: JUST A WORD

First of all, as I said before, the important thing in these moments is to keep cool, otherwise you don’t think and you act on your emotions, and that is the main source of mistakes. We are living moments of extreme volatility, maybe never seen in the history of US financial markets. It is common to have wild swings and to see a position with a 200% profit turn into 50% loss in just a couple of hours. You have to adapt yourself to the market, or you just won’t survive. So you better define what kind of trader you are: you carry positions or you are a daytrader? I myself am a position trader, for many reasons, mainly because I find it “easier” and more profitable. I have a set of criteria to enter in a trade, and right now my criteria tells me that we are still in a downtrend and therefore I am positioned as such (when I see a close above DMA 7×5, then I’ll start to be worried). At the very end of the day today, the market turned up and rallied back inside the triangle. Is this a failure? Maybe, but I don’t think so. To start with, it might not even be a triangle. On the other hand I don’t buy the idea that the whole movement down from SPY 105 to today’s low at 86 was a correction in a trend reversal. Because it’s just too deep to be a correction. For me, what happened today was nothing else than a trap. I believe we’ll see the real direction of the market in the next 2 sessions. By Tuesday we should know what kind of market this is. So, stay cool, stay small and try to keep your mind inside your head, and your head on top of your neck.

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16 Comments »

  1. JMO, that we test near the upper trendline in the morning, perhaps even a false breakout to sucker in some more longs before dropping.

    Comment by Jigsaw — October 23, 2008 @ 5:40 pm | Reply

  2. Traps traps traps.

    Comment by moontrader — October 23, 2008 @ 5:42 pm | Reply

  3. I like your trading style and if I was still holding all my long term put, I will be much better off now. The weekly and monthly charts show much clear and consistent pattern,which is down,the day chart is, just like you said, trap.

    Comment by positiontrader — October 23, 2008 @ 6:23 pm | Reply

  4. Great insight, moony. BTW, where are those damn use cases? :-P

    Comment by Molecool — October 23, 2008 @ 6:38 pm | Reply

  5. Hi Moon,

    As always, I like your style and confidence.

    If everything is developed as projected, we should have:
    1. a bottom in next week between Monday (10/27) to Thursday (10/30)
    2. the bottom should be around SPY = 750

    Also I noticed, most bottoms occur in a consequence at least 4 days drop. Base on that, first we need a down day tomorrow (Friday)
    and Monday, Tuesday, as well Wednesday should be all down days.

    Somehow I feel that the window is closing, particular next Monday will a new moon day.

    Please comment on my understanding. Thanks.

    Comment by David YZ — October 23, 2008 @ 7:51 pm | Reply

  6. Hey David,

    There’s this time window which can work or not. I don’t trade based on it, but based on the trend I believe the market is in. It all depends on the timeframe. This week some would say the market has been trading sideways, but if you look closer at intraday charts you’ll see lower lows, lower highs. It takes a while for the market to go up, then it would gap down, like yesterday. Today we went very close to the year’s bottom on SPY, but notice that the Nasdaq made new lows, which is pretty important (I should have mentioned it in my post today). Second, 750 is a tentative bottom. When SPX was around 1200 (even when it was 1300) I said the target was going to be 920, and that seemed science-fiction at the time. Turned out it went way below it. The reaction in the last days doesn’t seem convincing, while the trend remains down – in my opinion.

    As for the sequence of drops, there’s no rule to that. 1987 was a 3 day drop, out of nothing! The market was just fine, then bam!

    It’s tough to trade in a market like this. This is the most difficult environment you can find. If you survive it, you’ll make a lot of money when this crisis stabilize and you have a bull’s market. Believe me, a lot of people already threw the towel, even the most skillful pros. There’s nothing wrong about losing a little bit of money, just try to keep your mind fresh. Sometimes it’s a good idea to close a position just because you’re stressed out: you’ll see how good it feels and you’ll have a better view of the market.

    Comment by moontrader — October 23, 2008 @ 8:25 pm | Reply

  7. Hi moon,
    Good morning. if we get a big open gap down today (most likely). Should we close some puts? Is it any possible market reverse today? Thanks.

    Comment by David YZ — October 24, 2008 @ 8:16 am | Reply

  8. David, sorry for the late reply, I guess it’s too late now. In any case, that’s up to you. I think the worst will come by Monday. But if today we close very very down, then I’ll cover part of my position.

    Comment by moontrader — October 24, 2008 @ 9:17 am | Reply

  9. Hi Moon,

    I am happy with I close all my shorts right after the market open.

    Question: Should I re-enter shorts again?
    New is 12:17pm. (PCT)

    Comment by David YZ — October 24, 2008 @ 2:18 pm | Reply

  10. Hey David, you’re the man! Can’t answer that question straight, but my outlook is pretty negative for next week.

    Comment by moontrader — October 24, 2008 @ 2:28 pm | Reply

  11. Shorted !!!!!!!!!!

    Comment by David YZ — October 24, 2008 @ 2:56 pm | Reply

  12. Good for you!

    Comment by moontrader — October 24, 2008 @ 2:59 pm | Reply

  13. Hi Moon,

    (Made nice profits immediately from those shorts)

    Have nice weekend!!!! (you and your family)

    I want to tell you something which is interesting.

    One person in one of the best Chinese university (Actually the best one) (I am from China too) use this website as reference to make his points on a EMBA class (most students are from big companies, like VP of China Mobile, VP of PetroChina.) about stock market projection. Basically they all agree with that in a long term the stock market goes up. The guy from PetroChina said “…., but both middle term and short are impossible to project”. Then the guy from China Mobile said “…. Short term is possible, look at this moontrade, his accuracy of short term projection is about 95%..”.

    Again thanks a lot.

    Will expect your weekend post.

    Comment by David YZ — October 24, 2008 @ 3:25 pm | Reply

  14. David, you just made my day, both from your profits and the reference your colleague made.

    Have a great weekend!

    Comment by moontrader — October 24, 2008 @ 3:29 pm | Reply

  15. If we charge only $1 from every Chinese guy
    I’ll be rich :)

    David YZ, tell your guys everything can be predicted – short term, long term
    everything is cyclical

    >they all agree with that in a long term the stock market goes up
    Sotck market is a representation of human progress. At the end even a stock market will go down.
    We live in a world with limited resources

    Comment by TObject — October 25, 2008 @ 2:08 am | Reply

  16. Crash Course Chapter 20: What Should I Do?
    http://www.chrismartenson.com/crash-course/chapter-20-what-should-i-do

    Comment by TObject — October 25, 2008 @ 3:41 am | Reply


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