Pre Market TAO Tuesday 6-16-09

Trading after a down day?......price will usually bounce up the following day then resume the downward move or trend sideways.....but today may be different.....we have such great news .....but wait! is good news, good or bad today?.....I like to treat this like giving a kid a big candy bar. He'll probably burn of the sugar high by noon....any way.....spy really didn't break down below the 10 day range yesterday so we very well could return to weekly range high. yesterday was a low volume sell off . which leads me to think it was profit taking and not dumping....we have oil up/gold up/dollar is making up it's mind but down for now/ pivot is at Spy 9306....../ overnight es futures printed a 928.80 high / spy should get a small gap up above pivot....we will watch volume and tick very closely first 30 min ...for now i will stay with plan posted last night . and sell in the 93.50 ish area ...watch how price responds to trend line there.

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11:00 et am .......Dollar is weak and below yesterday range...xle is moving in high side of range and xlk is moving to top of range / tick is building a bullish bias in last hour but no big buys....
i dont expect price to hit any hard resistance till 12:30 et...we noodle along till then
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11:34 spy is breaking interday trend to down side next 5 min candle is a short....
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12:06 et pm.....ok this looks a good plact to put a toe in the water.....entered 2 option contracts
July Put 100 strike price ....82% Delta at spy price 92.75...... That is equilivent to 162 shares .....

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12:40 et pm....spy just broke 9242 support and gaining momentum ....good volume spike...and -1200 tick
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12:47 et pm ....all Xl's are back into the May range except XLK but it looks to be headed there as well....and the SPY ..ES futures just broke down through 920 this could mean a new low of 880 on the ES if we close below 920...
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1:00 et pm,,,, we made our 50 cents now we move stop down to 92.25
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1:20 et pm Xlk teck is the only thread holding this market at this level ......if it breaks ....it will be ugly......
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1:30 et pm......moving stop down to spy 92.01
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1:40 et pm ....selling pressure is starting to dry up for now ...so i covered my puts at 9192 .....for an 82 cent day...... so far.......
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2:15 et pm......looks like the bulls are trying to make s stand at spy 9170 ....they just put in a 5 min hammer and the tick is moving toward pos territory and price just broke the 5 min down trend.....price could test the 9242 and the pivot at 9306....
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4:00 et pm.......why not play the counter trend ?.......I find the counter trends on a 5 min day trade chart are too slippery, meander to much and most times short lived for most options trades. Most times you only break even or just lose money.......so on days like this , i would prefer to wait for the top of the counter to make my move .....they are easer to track and less risk ....as well as the price action with the trend is always smother and much more deliberat in direction.

Position Sizing and leverage

I get questions about position size and leverage at times and i must say IT DEPENDS.

......... My very first question every day is How can i make 50 cents.....

I try to asses the goal and risk of the trade first ....then I place a trade based on the fixed amount I am willing to lose should the trade go against my plan......
First i try to guesstimate 2 or 3 scenarios as to what direction the price will move..then decide the most likely path.......then I look for a past pattern structure ie: a resistance point or a flag structure to hide my stop behind.......the distance from my entry to the most reasonably protected stop location is my risk level....let say a stop that is 25 points away from my entry.... then my target needs to be at least minimum 50 points away from entry ..... I dont like to risk more than $200 on a trade.... so if the stop is too far away i will either reduce my size or pass and wait for a better entry....


I like to use front month Options high in the money with a Delta of .75 or better as a proxy for stock........I dont hold for more than a day so i am not concerned with experation time..... i want only the close corolation to the point for point price to value of the underlying stock....if you havent traded with options befor get a demo account and learn to trade with 1 contract and have a goal to make $50 a trade ....the most important goal is to learn to lose money less than you make it .....start with 1 contract which represents 100 shares of stock...Spy is $92 / share @ 100 shares = $9200 ..........whereas 1 option contract is $10 x 100 = $1000 which will have a delta of 1.00 and will move close to penny to penny with the stock price ......so for $1000 you can control 100 shares for the day or two ( I dont hold for more than two days) .... and get all the benifet of a day trade without the $9200 premium as well.....

Be cautious when using live funds with options and dont over leverage . These are great but are akin to Dinamite in the inexperienced hands.......I like to trade SPY, QQQQ, IWM , DIA because
there is plenty of daily volume in the options to easly enter and exit...... be carefull of very low volume options.....you may not be able to get out when you want or need to...

ProphetCharts: SPY

SPY ....probable target levels for Tues sell at 9347 to 9379 and exit at market close or carry to WED target 9180 to 9135....stop placement 94.15

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ProphetCharts: SPY

This SPY 2 Year chart is a study of ATR...Average True Range and Volume....notice when ATR is lowest and price is highest, the sell off is very abrupt....this time we also have 3 months of declining volume against increasing prices.....this has the potential to be explosive...to the down side ....expect wide volital swings and an incerasing Vix....also notice the 2007 Aug to nov price / volume divergence as well...

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Pre Market TAO Monday 6-15-09

It All about Safety vs Growth.........we are seeing the Dollar rally and commodities fall over weekend...this indicates the markets are moving toward safety this AM......Will have to watch how US markets respond ......as for now, Emerging markets as well as Asia and Euro markets are selling stock and buying treasuries....also suggests a move toward safety ..........ES futures are down and testing multi day rang low.......wil be watching opening Gap down on Spy for any sign of further break down below the ascending triangle we have been tracking for the past 8 days ....for now, ES at the "G" spot ....we could go either way .....right now i am long spy ......but ready to bail if market continues to show weekness......

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Havent seen a +500 tick all am...we are clearly in a down trend day ...the bull arem't even putting up a fight......we will see if we get a test of lower triangle trend and if price fails here. it is time to become bearish for the near future.....will consider switching to sell the rallys mode..

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4:02..et pm....very slow trading day.......this week is oxp ( options expiration ) in addition to all the indecision and low volume .....makes for a tough to trade.....this really dosen"t feel like a bearish sell off type down pressure day.......if there where a large bearish sentiment, they would have clearly had the opportunity ......so i really dont think a short play, other then scalp trades, is at this time the best way to go..... right here we are at a major support level SPY 92.00 area if price drops below there then we could be short....but for now the market is esencially directionless..... I have been long sence friday am so today was a bit panefull with a opening gap dow and run down to a stalled market . so i just sat it out and was expesting the crazie buyers to show at the close and they where hiding too...
for now i have closed out all my positions for a loss ...ouch! .... and am sitting on all cash...... we will see how the overnite markets look at todays session............we'll start out fresh in the am

ProphetCharts: $SPX

Wow! something has got to give! This is a Bull vs Bear Slugfest...

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Pre Market TAO Friday 6-12-09

The TAO is neutral this am....After the big sell off at the close Es futures flatlined overnite and resumed selling at 5am et...
Spy will open a little down from close ...dollar is firming up and oil is selling off a bit ....still a buyer of dips so a move to wed's buy zone is a buy ,,,,
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9:40 et am..... financials strong......energy weak.... tick neg bias ....spy gap down but trying to rally

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10:21 et am ....tick is still neg bias ,big buyers havent stepped up to plate yet ...xl's have moved back up into yesterday range.....and just got first +800 tick with increasing volume.....i wouldnt call this a trend yet ...we need to fill am gap and hold above it....
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10:38..et am......looks like xly is selling below weekly lows....all xl's are in a miutiday range and lifting higher ......this could be a rotation of money out of consumer staples to more risker sectors....this makes sence with a low Vix ...

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10;45 et am spy just filled am gap ...now we see if she holds
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10:55 et am ....looks like gap is holding now we need to take out the pivot point at 95.08....and a little more volume , please sir....
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11:04 et ..am ..........es futures have moved above daily pivot and well above overnite lows....xl's are in wed/ thur range and nyse tick is mixed ...so we look to be range trading today......
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12:18 et pm...spy retraced am rally to 62% fib and now on way back up.....this should be wave 3...which should take price above pivot...

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1:12 et pm......the Nyse has been broken and it looks like their desk people are doing all the trades manually.....the market action remindes me of my cat coughing up a hair ball......
we're just dwaddling along......

ProphetCharts: $VIX

Here is a long term weekly trend line of the Vix....the end of June is the target for a bounce.....this is also the end of the quarter.....here is where there can be a major reversal......this also correlates with the Spy projected target high....yesterday i talked about Mutual Fund window dressing buys into the end of the Quarter .....once the qtr is printed expect the big dump....

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ProphetCharts: SPY

This formation is on SPY 5 min interday......looks like a great set up for the big push to finally get well above the daily 200ma and range we have been stuck in the past 9 days

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ProphetCharts: $SPX

Spx ...S&P 500 ....this is a CUP and Handle Pattern which is a very Bullish formation....today was an interday break out of high and the second close above the 200ma...the 1000 target may be the next stop ....we need a break and close above this formation to conferm.

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Pre Market TAO Thursday 6-11-09

The daily TAO is green.....The overnite futures where basicly flat ...due to the June rollover to Sept.... I 'm still in buy the dip mode.....any return to yesterday buy zone is a buy......spy is still in multiday range.....

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10:00 et am.....spy is at or approching range high.....are we going to break away? or start a "F" leg down...I think... we get an "f" and "g" leg ........the tick or the volume supports a big break out this AM......just dosen't feel strong here...

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10:30 et am...if spy test this high and fails it will be a short play to yesterday low 93.50 ish place stop just above high ..
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11:45 et am......short AT 95.30 with stop above 95.50......target 93.50
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12:10 et pm ......covering short at 95.15 very small profit......the bond auction starts in 15 min... will watch for better tick and volume action
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12:35 et pm.......all the XL"S have remained in yesterday range other than xlk and xle.....the xlk is turning back down into range ......xle is still well above range but looks to be turning back down as well.....the naz....dow .....s&p ...russ ....all look like bull flags ........tick is very range bound but leaning to bullish side..............just watching for now....
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1:10 et pm.........looks like the market likes the bond auction yields got a strong tick up ....i"ll wait 30 min's to see how it is digested and wait for a support test to go long....we had a break out to the up side but volume was not huge ....and tick should be slammin the +1200 ....and it's not .........i am reserved here.....
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2:15 et pm ....i am long at support test of 95.70 looks like it is gona hold .....stop below 95.50
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2:40 et pm .... this is a very lethargic break out for a major area..... volume is poor and tick is still weak than expected...
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Ishould have suspected this was a false break out ......these markets are very bi-polar......that's why i keep stops so close to entrys........the last hour of trading i have concluded to be a waist of time ....it seem that the program trade Bots kick in and you just cant tell what they are going to do....i find the last hour of the day is like rolling dice.......there are two options 1. pull off the trade by 3pm or 2. ignore the last hour if you are with the major trend which will re assert itself in am trading.....to day i was long at 95.70......the market sold off inthe last hour 80 points.......I decided to add to my trade at the close and take the am trend up...

Pre Market TAO Wednesday 6-10-09

looking to a early opening gap up ...expect gap to fill down to high 9390 then reverse to up side....the TAO is Green and i am a buyer at 94 or lower
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pre market gap up and sell off has moved back into multiday range .....if price remains below yesterday high we should see move to target buy area as the day progresses...
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2:00 et pm....I 'm in long AT 93.30 with stop below 93.00
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3:00 et pm .....Strong +900 ticks and increasing volume looking good to close....got some hurtles.......s1 @ 9405 , then volume weighted moving average @94.15 , then to pivot 9460 .... then r1 @95.17......got some selling supply at 50%fib too.
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3:46 et pm .......gona take profit here 94.10 ....nice day ...85 points.....buyers are not as aggressive as they have been on these dips........

ProphetCharts: SPY

Ascending Triangle .....are continuation consulidation patterns..I always buy the "E" ....with a stop under the "C"....a good E will rairly retrace all the way to the A-C trend line......This break out has the potential to be very explosive to the up side.
1. Most Bears are heavy short expecting a big down correction...but corrections can be sidways ie: time ....
spy has had 2 time corrections .. the month of May and the first 10 days of June...

2. The Dollar is showing more weakness . This is good for Equities and commodities.

3. Mutual Funds must speng the next 20 days Window Dressing their portfolios ....they will buy any brand name that has outpreformed in past 3 months even if the fundamentals are bad......and they will sell anything that has underpreformed even if the fundamentals look good....

4. SPY is at the 200ma ....any clean break above and hold for a week is very bullish...

5. Shorts are forced to buy back their shares at higher prices which adds rocket fuel to the fire.....

The price target could be 100 to 105

This could be the interesting....

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Per Market TAO Tuesday 6-9-09

Spy has been trading in multiday range 9510 to 9310 ......hard to tell where the market will go ...
dollar is trying to stage a come back but looks to be stalling , oil looks to be topped out ....gold cant hit that magic 1000 mark.....bond yield are rising..... the market is still in buy the dips mode ....so even though all indicators are not looking great for the markets....today i stay with the big money and they are still buying the dips......spy is sitting on the 200ma so the big mutual funds are afraid they will miss any up side and they are buying like crazy cause that is all they can do.........looks like we open flat so the best thing to do is watch the XL's and see who leads in the first 30 min"s...im thinking ... xlk because Texas Inst had a great earnings report............................................................. the plan today is to buy in low 93 ish and with a stop below 92.70 and sell 94.80
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1030 et am ....market has settled into a range day with spy 9500 high ....no significant buying or selling on nyse tick ....no real leader sector this am .....relative volume is low as well...

ProphetCharts: SPY

Todays price action looks very much like a riseing mini Bearish Wedge....notice the falling volume vs riseing price divergence.....

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Day Trade Journal 6-5-09 Thursday

We opened gap up with a test of the jan high 94 at 945 amet.... and sold off to pivot 9351 ...we are just under pivot and noe having any strong neg ticks -800 looks to be a range day ....
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1127 et am we are filled at 94.20

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1156 et am spy is hovering at 9407 ...xle . xlf are leading all others look to be rolling over....tick is neutral
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dollar is starting to show weakness ....xl's stalled took a tiny profit 9387... nervous markets to day... europ is closing down ....hard to say what rest of day will do selling pressure isn't building ...
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130 pmet.......spy has moved up to and through tuesdat low support range .....past support can be future resistance......we are clearly above wed's range ...steady tick +1000 ..... I am skeptical of this rally because the volume has been dropping all day.....

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214 pm et .....spy is about to fill wed's opening gap....this could be a resistance point if not we have wed's pivot to test........ to days price action is really looking like a bearish mini wedge...
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if you read my post on SPX yesterday the close was a very nice looking evening star candle pattern at extreme bollinger band top on the daily chart.....most times the price will retrace back up to 50 % to 99% of the previous day candle ......evening star's are very good sell signals.....the best play would be to short as close to top of pattern9540 with a stop very tight just above high 10 -15 pionts...9550... ......expect price to move sideways for 4- 6 days if price dosent break above the high and watch for a nother bearish candle pattern to form ie: dark cloud , 3 inside down or another evening star to start the price moving down... keep a close eye on the tick and volume..........


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300 et pm watching the Naz and russell .....to see if they hold these highs.....or break down end of day....

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Pre Market TAO 5-4-09 Thursday

The over night action looks to be bullish for the US Dollar.....the ECB voted to hold rates as is...
the S&P futures printed an overnite range of 938 - 923 .....retail store sales are mixed to down...
and continues jobs claims were down slightly 4000 ....which is minuscule in the big number of 624,ooo jobs ..... still less than Horrible .
We are observing the 2 day rule...after a big run up, a decline on the first day should continue the second day and turn back up late the afternoon on the second day or beginning of third day.....
looks like we get a gap up at open .....
I will sell spy up to 94.20 and exit 92.75....stops at94.50

ProphetCharts: $SPX

SPX 500 ...Evening Star pattern ...a very bearish candle signal....with formation at top of bollinger band this is significant.......this could definatly take the steam out of this rally and throw the price action sideways or down with a smaller bearish candle pattern in the next week.....check this out after close ...if it still looks like this we could be in for a reversal

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Pre Market TAO 6-3-09 Wednesday

Four Days up into Resistance all day yesterday....the market scraped every thing it had for the dow Diamond to touch the 200MA on low volume......S&P 500 Futures are trading at Tuesdays lows .....ADP jobs report was a bit better or as expected ( less than horrible) but still on pace for 9% reportable unemployment......the big guys are buying all dips the net NYSE tick is biased to the bullish side.... S&P is stradeled on the 200mA .....the financials are weak....and oil looks to take a nose down today ...the dollar is in a rally against all other currencys....euro stocks are down.....
I think we r in for a volital day....very strong mixed currents.......spy looks to open down to Tuesdays lows and remain in the lower range trading .....I will watch the first 30 mins and see if we break the bottom of yesterday range ....or bounce back to top of range.....keep an eye on the relative volume and nyse tick......the market today will be like a pressure cooker ready to blow....you can almost see the steam coming of the charts......it will be an interesting day...
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954 et am......opened well below tuesday low..... first big neg tick -800 ...xl"S selling...volume is up looke to be a down trend day start... broke s2 support 9359
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1030 et am......tick is not agressively showing sell pressure.....but is starting to lead to bear side....Xl"s are paused and selling volume looks to be letting up.....this could be a transition to the up side .....took short positions off here 9340.... wait for more selling to increase....
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1037 et am Helocopter Ben is still talking .....very hard to read whats next untill he shuts up....

this may be a good place to put on a long trade to top of range ....wait for + 800 tick
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1100 am et spy is sitting at may high......93.23......if we break this to the bdown side we could see that correction the market pros have been touting for the past 6 weeks....... keep your power dry traders..... tick is neutral could see sideways for next few hours.....keep u posted

Day Trading Journal 6-2-09 Tuesday

We have had Three strong up days in a row...today can expect a range day ( yesterdays high and low) or a down day if price breaks below yesterdays low ...right now price it at the pivot of 94.63 and no tick above +800

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10..amet Xl's ar on the move higher ...and we just broke yesterday high.. Financials and Energy the laggards..Just tested Jan high again ....we wait pass or fail......xfl financial is weak and hasn't filled it's opening down gap ....and energy is losing upward mojo....this test may fail
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1021et am ...spy is back under high....if it rises and fails again ..im a seller here..
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1043 et am ....there are still alot more buyers than sellers here....must wait till selling pressure picks up...... no neg ticks -500 or more.... looks like there is some rotation in the Xl"s....to comsumer disc and staples and health care.....Treasuries are also telling us the market is weak...
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1055am et ...XLF financials broke today low ....we could get a fresh wave of selling---
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the Dollar is a victim of Timmy's Big mouth....Every time he opens it the Dollar Drops....
this whole market Rally the past month has been a pure Dollar weakness play.....as soon as Timmy Shuts up the Dollar will go up....
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Pending Home sales Are exactly That...... Question is ,How many of those Are investment co"s and speculators buying for rentals and flips vs Real Home buyers .....and how many will ultimately be actually finalized?
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1145 am et ......spy is back to the daily pivot.... nyse tick is not building up sell pressure -750 convincingly.....light sell vol at pivot......looks like range is going to maintain ... energy is weak as well as financial..Dollar is coming off bottom.
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The biggest market in the world is Bonds, and when Rates go down the Yield goes up.....that means.....the yield component is the gross amount the investor makes over the life of the bond...
This is a good Tell to determine the over all direction of money flow........money always follows the best return......therefore if yields are going up , money wants to move to the higher yields....that equates to less money flows towards equities .......

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Monetizing The Debt?.........That is secret code word for the Government to print more Dollars (funny money) ..to buy down the debt........ AhAA ......Timmay!