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 Stock indices : the finger on the "short" trigger

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Sauros

Sauros


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PostSubject: Stock indices : the finger on the "short" trigger   Stock indices : the finger on the "short" trigger Icon_minitimeTue Jul 07, 2009 11:52 am

As I've the finger on the "short stock" trigger waiting for the right moment to pull it (soon I guess !), I put a link here to the latest S&P analysis Snapman posted recently on the Eye of Sauros blog, for discussion :
http://blog.thelordoftrading.com/2009/07/s-weekly-market-commentary-july-6th.html

So let's discuss!!!
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Sauros

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PostSubject: Re: Stock indices : the finger on the "short" trigger   Stock indices : the finger on the "short" trigger Icon_minitimeTue Jul 07, 2009 2:30 pm

So I'm starting the discussion!

As written above, I may belong to the "brave souls" that may short the stock indices soon... I'm considering it.
Before, I need to mention that Technical Analysis belongs to my trading arsenal but I'm not really considering myself as a technical analyst (actually I don't know what I consider myself as...). This being said, I find TA quite useful to time a deal entry, like now..

A couple of comments here :

- The 200-SMA is definitely a strong indicator and generally considered as the threshold between the Bull and the Bear : "the Bulls live above the 200-SMA, the Bears live below". That's why I expect strong evidence on the breach to consider it to be broken as you can be sure there will be fight around! To some extent, I still consider the 200-SMA as a resistance and not a support : I base my argument on the Average True Range ATR(14 days) I generally use as a measure of the volatility and I like to consider a move as noise below 3-ATR. In the case of the S&P. Looking at the data on the 11 June when it reached a top of 956.23. The 200-SMA was at 913.27 and the 200-SMA at 18.43 : the breach of the 200-SMA of 956.23-913.27=42.96 points accounted for 2.33 (42.96/18.43) of the ATR : not enough for me to consider it the resistance broke.

- One thing about RSI : I don't use it that often as I didn't find a reliable way to use it but in my experience, I was better off when I shorted when oversold and buy the overbought... It looks like everytime it gets oversold (overbought) and rebound, you can be pretty sure it will get oversold (overbought) again. Probably something about the strength of the move...

- I agree with the volume analysis : in the stock market, an increase needs to be fed by volumes and on the other side the stock price can fall without volume
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Sauros

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PostSubject: Re: Stock indices : the finger on the "short" trigger   Stock indices : the finger on the "short" trigger Icon_minitimeWed Jul 08, 2009 9:36 am

We're seeing hard fight around the 200-SMA here
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Sauros

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PostSubject: Re: Stock indices : the finger on the "short" trigger   Stock indices : the finger on the "short" trigger Icon_minitimeMon Jul 13, 2009 2:21 pm

I'm still aside and haven't shot yet...
I may have miss an opportunity to short but the thing is if I was bull, it would be probably a good time to enter
I believe that the correction last week was just fear before the Q2 earnings those 2 coming weeks IBM, GE, JPM, BofA, J&J, Intel, Coca Cola,... (50% of the Dow will be done by 21 July) and my bet is we might see the same things as for Alcoa happening : less bad than expected results that will bring the prices up.

For the time being, I link here the S&P Daily Comment Snapman posted last week (9 July) : interesting reading
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Snapman

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PostSubject: Re: Stock indices : the finger on the "short" trigger   Stock indices : the finger on the "short" trigger Icon_minitimeMon Jul 13, 2009 4:31 pm

just curious what do you use as evidence to support your short term bearish play?
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Sauros

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PostSubject: Re: Stock indices : the finger on the "short" trigger   Stock indices : the finger on the "short" trigger Icon_minitimeMon Jul 13, 2009 9:26 pm

Snapman wrote:
just curious what do you use as evidence to support your short term bearish play?

Actually it depends how you define short term, but short term I'm not bearish else I would be short...
Some traders tend to say "When I'm not short I'm long" but here it would be in contradiction with my bearish longer (let's say a few weeks to a few months) view. The only thing I don't want is to be right and lose money...
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Sauros

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PostSubject: Re: Stock indices : the finger on the "short" trigger   Stock indices : the finger on the "short" trigger Icon_minitimeTue Jul 14, 2009 10:19 pm

OK, I entered today into a short position on stock indices (DJ Eurostoxx 50 @2370) a bit after Goldman posted record profits beating all estimates, before the US open. A difficult contrarian play as I'm against a strong bullish move and have a train coming at full speed in front of me...
What's the rationale ??? My initial intention was to wait the earnings from the main component of the Dow and S&P to unfold, betting that they would drive the prices up after last week's correction that reflected to me fear before those earnings.
I changed my mind on the timing of my short further to the rally yesterday and this morning in Europe fed to a very large extent to expectations on Goldman and decided to go in a few days (week ?) earlier. The main reasons for this were :
- The very bullish overall sentiment regarding Goldman before the release sent me a strong signal : it was highly expected that they would post outstanding profits, if you work with them you know they need to show off versus the others IB and the compensation figure sounds to me in a way provocative. The last couple of days everybody around me was strongly bull on GS, it just means that the surprise was highly anticipated before the announcement and more importantly that the price was likely already too expensive.
- The first point in mind, the important moment to follow closely is the market reaction just after the announcement. After a positive surprise, if the price doesn't soar that strongly, it generally just ... falls. Why ? My humble opinion : I personally happened to make good bets on this kind of positive surprise : what happens if it appears that you were right and you see the price soar but not that strongly and then it starts fading ? Well... you just cut it and take your profit : you did the right bet, you can't lose money now!

OK I recognize, it sounds like mainly scalp psychological arguments, but for the entries I tend to use (very) short term arguments.

Now, there's a net between the train and me : I have a 3-ATR stop I may trail, roughly equivalent to 950 on the S&P, my bet is the 900-mark and the 20-SMA on the S&P and the 20 and 200-SMA on the Dow [/size][size=9]will resist, if they don't : well there's the upper BB.

Now I expect the net will be strong enough to stop the coming train and launch it in the opposite way, before I'm too hurt.... Let's see what will happen
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Sauros

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PostSubject: Re: Stock indices : the finger on the "short" trigger   Stock indices : the finger on the "short" trigger Icon_minitimeWed Jul 15, 2009 1:06 pm

Well. suffering a bit here with the train in front of me coming closer... as Intel posted 0.18 earningd (estimated 0.084, it's a 114% surprise up), positive jobless claims in the UK this morning and now good Empire manufacturing figures -0.55 (est. -5).


Last edited by Sauros on Wed Jul 15, 2009 3:55 pm; edited 1 time in total
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Sauros

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PostSubject: Re: Stock indices : the finger on the "short" trigger   Stock indices : the finger on the "short" trigger Icon_minitimeWed Jul 15, 2009 3:54 pm

Ouch !!!!
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Sauros

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PostSubject: Re: Stock indices : the finger on the "short" trigger   Stock indices : the finger on the "short" trigger Icon_minitimeThu Jul 16, 2009 10:58 am

3 white soldiers against me ...
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Snapman

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PostSubject: Re: Stock indices : the finger on the "short" trigger   Stock indices : the finger on the "short" trigger Icon_minitimeThu Jul 16, 2009 4:55 pm

do you think you jumped the gun ? S&P500 nearly over 3% yesterday!! it looks like people selling on gains taking before possibly fueling the fire for higher. JPM was def good news may have lagged effects as an overall financial sector effect.
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Sauros

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PostSubject: Re: Stock indices : the finger on the "short" trigger   Stock indices : the finger on the "short" trigger Icon_minitimeFri Jul 17, 2009 3:22 pm

Snapman wrote:
do you think you jumped the gun ? S&P500 nearly over 3% yesterday!! it looks like people selling on gains taking before possibly fueling the fire for higher. JPM was def good news may have lagged effects as an overall financial sector effect.

Indeed. The way the things are unfolding shows that I definitely jumped the gun and was way too early on this. My bet after GS results was definitely wrong and I should have stuck to my initial analysis. The current chart lanscape shows a lot of strength on the bullish side. This being said I was wrong but didn't do any mistake : it's normal thing to make some losses, but you make a mistake only when you don't follow your system.
If you know me a bit, you know that the strongest signal I have is when I feel that the general sentiment is on one single way. The famous "buy when everybody sells and sell when everybody buys"... Here with the strength of the rally before Goldman, I had that feeling that we had this sentiment signalling that the stocks were overpriced and that the following results were discounted : I was just wrong.
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Sauros

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PostSubject: Re: Stock indices : the finger on the "short" trigger   Stock indices : the finger on the "short" trigger Icon_minitimeSun Jul 19, 2009 11:30 pm

Hey, in order to show even more publicly how bad was my last entry Wink this is the topic of my latest post in the Eye of Sauros (that's me!) blog : Naive to think the Crowd is not naive
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Sauros

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PostSubject: Re: Stock indices : the finger on the "short" trigger   Stock indices : the finger on the "short" trigger Icon_minitimeFri Jul 24, 2009 11:30 pm

OK, I got burn on this one and stopped out the beginning of the week from what appeared to be a very bad entry deal. When I'm stopped so quickly (less than one week while my stop was a 3-ATR of 14 days) I tend to reverse my position as it implies a very strong movement against my initial position. Moreover here the chartist and technical analysis landscape clearly shows as I write a strong bullish trend that would be crazy to fade. Actually I didn't go long as my current strategy allows me only to short the stock indices as I'm already long stock on another side : said differently, when I'm not in a short stock indice position, it means I'm long stock.

In the pain of the loss on the short stock indices part Sad let's have a look to the (few) positive aspects :
- I put 50% of the intended stake as I knew the entry very risky. The bullish move is so strong that even if I stuck to the initial plan, shorting higher, I could doubled my loss (actually we don't know yet)
- The pyramid system allows to keep the loss small
- This kind of situation are enough to justify having a stop loss set up at all time

Negative aspects : I lost money...
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Sauros

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PostSubject: Re: Stock indices : the finger on the "short" trigger   Stock indices : the finger on the "short" trigger Icon_minitimeWed Aug 05, 2009 2:53 pm

The trade I described here and particularly the speed at which I was wiped out made me revert my position for the next few weeks and re-assessing my longer term view : actually we may see a few years of rally before we see things going really bad. I detailed all this in the blog
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