Fortunes were won and lost this week, but more were probably lost. 

But in the SharePlanner Splash Zone, that couldn't be further from the truth. Instead the trades made this week, continued the theme of last week and that was "Profitability". 

It was a quiet week of trading, I only made six trades and today alone I didn't add anything new. But the week was a solid one and sets up nicely for the week ahead. 

Here's how the trading turned out:

february-2016 week 2 swing trade results

As I always do, I take profits quickly on the short side, and that played out correctly with a nice 5.1% gain in JPM, while closing out leveraged shorts in SPXS earlier in the week for a 12% gain and GS for a 4.4% profit. 

So it was a nice week and I would love to have you in the Splash Zone next week, so that we can  profit together. You can try out the Splash Zone for Free for seven days and you'll have all the benefits the members already receive including access to the chat room where I post all of my trades and market commentary real-time, as well as instant email and text alerts (international too). 

With The Splash Zone, you will get my low risk and high probability trade setups that no other trading service can offer.

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going cash

I've made two trades today, and both of them were to cover my remaining shorts. One for a profit and the other for a loss. Overall the week and month of trading in the Splash Zone has been absolutely fantastic. But today, I'm not going to push any more positions into my portfolio. 

Here's why I am going cash this weekend, and it is pretty obvious if you ask me:

1. Three-day holiday weekend. Heck, it is hard enough holding positions overnight, much less a weekend. But throw in President's Day, and you have a lot of additional risk that you're taking on by holding positions over the weekend. 

2. We are oversold and bouncing today, but that bounce could easily be sold off tomorrow, because what gets oversold can stay oversold much longer than what you'd think. 

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This is why I am not a huge fan of holding my short positions for extended periods of time.

Ideally, I like holding a short 2-3 days. Once I get profits in the 4-7% profits, that is where I start getting itchy to cover my position. 

While I embrace shorting stocks when the market calls for it, I recognize too, that I am swimming against the current every time I do. 99.9% of the country wants the market to go higher, so when you are shorting the market, you are fighting a lot of forces, including the companies that want their stock to go up, the federal government, namely the Fed, that wants the market going up, and many more factors. As a result, I don't pretend that somehow I am greater than all these forces at work. Instead, I take my profits when I get them and don't let them run for extended periods of time. 

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Technical Outlook:

  • SPX went all the way down to the 1810 level momentarily, and thereby breaking the critical 1812 level. However, immediately right after a WSJ headline came out that OPEC was willing to consider a production cut and that send futures skyrocketing off of their lows - 27 points in less than 20 minutes. 
  • As a result, you have a near perfect test of the lows from January, but I would not find comfort in this bounce as it seemed manufactured with a headline that would guarantee an algo-generated buying spree. 
  • Instead, for there to be a true bottom and an ideal bounce place for the market, the longs need to get flushed, and that likely means a a dip below the 1800 for panic to set in. A WSJ headline just doesn't do it. 
  • In other words, be suspect of today's bounce. 
  • Be careful how much exposure if any that you take into the weekend. It is a 3-day holiday weekend (President's Day). Remember that China hasn't traded since last week due to their Chinese New Year, and by the time the US equity markets open back up, China will have two trading sessions under their belt. That is a lot of risk to take on!
  • Very important - SPY did confirm the massive two-year, head and shoulders topping pattern yesterday on the weekly chart. That does not bode well for the markets whatsoever! The target on the pattern suggests an eventual 200-300 point move to the downside. 
  • For the bears today, they need to drop price back below yesterday's lows and close it there. Otherwise, the bounce lives on today. 
  • For the bulls today, they need to push price back above the week's highs and create a sense of optimism for a larger scale bounce heading into next week. 
  • VIX stuck just below declining resistance off of the August highs. Again further proof that there is no panic yet in this market. A sustained move above 30, is absolutely necessary. 
  • T2108 (% of stocks trading above their 40-day moving average) dropped 16% yesterday to close at 17.10.
  • Oil is very strong here at the open up over 4%. 
  • Volume on SPY was notably higher yesterday and above anything seen this week. 
  • Insane price movements every day being created by computer generated trading (HFT's) in a highly volatile market marked with enormous headline risk. 
  • There is a lot of stop-loss hunting out there in the market, and being agile with getting in and out of positions quickly has been extremely important. psycho market

My Trades:

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Quick glimpse at the futures. Green for now, but anything can happen once the European markets open. Just imagine how chaotic this week would have been had China been open!

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The Splash Zone is off to a great start for trading in February despite the craziness of the financial markets. Bring some stability to your own trading by signing up for a Free 7-Day Trial to the SharePlanner Splash Zone! With your membership, you will get each and every trade that I make with real-time text and email alerts (international too) as well as access to my chat-room that I trade in each day. Click Here to try it for Free!

Here's today's swing-trading watch-list:

Long Xylem (XYL)

xyl-1

Long Walmart (WMT)

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Alright - it is time to post another update on the T2108 - what is it you ask? (in the case you haven't been following this blog for very long). It is the percentage of stocks trading above their 40-day moving average. 

This is probably the single best predictor I know when it comes to finding market bounces. And by the looks of it, the bounce isn't happening just yet if history is any indication. It used to be that a move into the teens was a great opportunity to get long on the market for an anticipated market bounce right around the corner. But lately that has not been the case, instead driving the T2108 into insanely bearish territory, namely the single digits before getting a bounce. 

That is what happened in January when SPX bottomed out at the 1812 level - the reading was 3.81% - that is insane!

Right now it is hovering in the 16's and unless it is a massive bullish divergence (and that is always a possibility too), then I think SPX has further to go to the downside, and that means breaking those January lows and going sub-1800. 

As for now, I won't consider getting heavily long until the single digits are revisited again.

t2108 february update

SPY again trying to confirm this monumental head and shoulders pattern

And yes, if this pattern confirms, it does not bode well for the market going forward. Simply put, a close below 1820 on SPX or 182.00 on SPY means this pattern has confirmed. More importantly though will be tomorrow, and whether Friday's price action keeps price below 1820 for the week or not. 


I did a post on this earlier this week, and it is worth doing again, because it is that important. Also important is the 1812 level which was the January lows that the market reversed higher for a period of time off of. We've tested that level exactly today and so far there has been a light amount of buying. Maybe it morphs into more aggressive buying, but in my opinion it is probably a reprieve before it ultimately breaks that level either today or tomorrow. 

spy-head and shoulders pattern

market-panic-02

Technical Outlook:

  • Overnight futures are failing hard and fast. There is some pumping of USD/JPY currency pair that has lifted futures off the lows this morning, but still looking at a heavy downward move at the open.
  • Oil sinking again, hard and fast, below $27, and could even see the $25's at some point today.
  • Yesterday's price action saw heavy gains evaporate into the close, as Yellen's speech soured Wall Street.
  • 1812 is a critical level to watch today on SPX. It marks the January lows, and if broken could result in a much bigger move lower for the market.
  • That massive head and shoulders pattern on the weekly SPY/SPX (formed over the last two years) that I have been harping on, looks to confirm today, which is a major problem for the bulls going forward, as it would likely signal further downside for the market going forward. If this confirms, the target on the pattern suggests an eventual 200-300 point move to the downside.
  • If the selling persists throughout the day, there is a strong possibility that SPX sees a move below 1800.
  • Keep in mind though, on these extremely bearish days, they also tend to be the ones that sees massive short covering as well and as a result, some huge intraday reversals.
  • VIX fell 1% yesterday to close at 26.29. Still highly elevated.
  • T2108 (% of stocks trading above their 40-day moving average) fell 2.3% down to 20.31. Still no where near the levels reached back in January, and could create a bullish divergence (but don't get too excited just yet).
  • Strong downward trend-line off of the 12/30 highs. Current resistance sits at 1898.
  • Yellen will be speaking again in front of Congress. This time the Senate Banking Committee. I don't expect her to change her tune from yesterday. But don't rule it completely out.
  • Volume was extremely light yesterday and below average. I don't expect that to be the case today.
  • Insane price movements every day being created by computer generated trading (HFT's) in a highly volatile market marked with enormous headline risk. 
  • There is a lot of stop-loss hunting out there in the market, and being agile with getting in and out of positions quickly has been extremely important. 

My Trades:

Read more...

The Splash Zone is off to a great start for trading in February despite the craziness of the financial markets. Bring some stability to your own trading by signing up for a Free 7-Day Trial to the SharePlanner Splash Zone! With your membership, you will get each and every trade that I make with real-time text and email alerts (international too) as well as access to my chat-room that I trade in each day. Click Here to try it for Free!

Here's today's swing-trading watch-list:

Short International Paper (IP)

ip

Short 3M (MMM)

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