Luna $ Ticks

December 23, 2008

Turning Negative

Filed under: Trading SPX SPY — moontrader @ 6:40 am

Yesterday was an important day, as we got more signs that last Wednesday’s high is a short-term top. Remember that the Spiral Calendar projections shown in this chart pointed to a top between the 16th and the 19th and indeed we had some sort of top on the 17th. Now the indicators used in my set of studies are turning negative, which adds up to the significance of last Wednesday’s top. This is the updated SPY chart with my set of studies:

spy-122208

Notice how the whole scenario is quickly turning negative. Ideally, in the next couple of trading sessions SPY will close below DMA 25×5 followed by MACD going under zero.

On the other hand, what worries me is that volume tends to shrink in the last trading days of the year, and VIX, clearly in a downtrend, is not collaborating:

vix-122208

The puts that I got last Wednesday – btw, when SPY was @91.97 (top was 92.43) – are more or less at the same price, which is very frustrating. They are OTM (80 and 75), and they have been losing time value and volatility.

Remember that the edge is valid unless SPY (or SPX) goes above Wednesday’s top, 92.43.

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5 Comments »

  1. Hate to bother you with such trivial, but what annotation software do you use on your charts? Thanks

    Comment by RPinSC — December 23, 2008 @ 7:18 am | Reply

  2. I knew someone would end up asking about that and I feel proud to have found a great (and cheap) software for screen capture and annotations: SnagIt, by TechSmith. The only thing that bothers me is that they don’t have a Mac version (only PC).

    Comment by moontrader — December 23, 2008 @ 7:28 am | Reply

  3. good post …

    fwiw … while the VIX continues lower … I am only shorting stocks which seems to be working pretty well … I have only one option position (HIG puts) and they are barely moving so I have stayed away from options while the VIX and VXN find their bottom …

    Comment by Little Fish — December 23, 2008 @ 11:33 am | Reply

  4. OK now I agree with your call of a top on 17th Nov………..your 17th Nov should be an IT high and mine on 29th Nov at sp 910 should be a lower high. A good party to the downside imo is going to begin with the new year. A last drop before a rally recovering part of the 2007 losses.

    Comment by giorgio — December 23, 2008 @ 3:57 pm | Reply

  5. Tough time of year to only own options – have you looked at doing some vertical or diagonal spreads? Those are much more conservative in this environment. It’s no fun when you’re right but the p/l says something else.

    Comment by 96wolverine — December 23, 2008 @ 10:54 pm | Reply


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