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ES and the Great POMO Rally
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ES and the Great POMO Rally

  #261 (permalink)
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jonc View Post
PB, are you still holding on to your short position or had you unwound your position?

I'm still short but reduced. If I get stopped out on my remaining positions, I'm fine with that as I was able to get some nice profits booked on this move already. I was hoping to see more selling coming in but it seems like there was a rush to converge with the R2K the last few days as it (TF) bounced hard off of it's 100 day MA. Looking at the TF it has moved right back to where it appears to have been previously getting sold into around the 830 level. The volume for the last few days has been an absolute joke so, we'll have to see how it goes but this is looking suspicious to me.

I think many are betting that the Fed will continue with it's liquidity pumping a la QEIII but that remains to be seen. The USD made an interesting spike on Friday. I'm noticing a bullish divergence on the DX daily chart as well. We'll see though, could be just another retracement. I've also noticed quite a few comments coming out of various Fed regional presidents referencing the need to unwind their debt monetization efforts as the economy is showing signs of recovery. Let's see if they actually vote their opinions this time.

Cheers,
PB

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ES and the Great POMO Rally-es_bullish-divergence.jpg   ES and the Great POMO Rally-tf.jpg   ES and the Great POMO Rally-usd.jpg  
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  #262 (permalink)
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Private Banker View Post
I'm still short but reduced. If I get stopped out on my remaining positions, I'm fine with that as I was able to get some nice profits booked on this move already. I was hoping to see more selling coming in but it seems like there was a rush to converge with the R2K the last few days as it (TF) bounced hard off of it's 100 day MA. Looking at the TF it has moved right back to where it appears to have been previously getting sold into around the 830 level. The volume for the last few days has been an absolute joke so, we'll have to see how it goes but this is looking suspicious to me.

I think many are betting that the Fed will continue with it's liquidity pumping a la QEIII but that remains to be seen. The USD made an interesting spike on Friday. I'm noticing a bullish divergence on the DX daily chart as well. We'll see though, could be just another retracement. I've also noticed quite a few comments coming out of various Fed regional presidents referencing the need to unwind their debt monetization efforts as the economy is showing signs of recovery. Let's see if they actually vote their opinions this time.

Cheers,
PB

As PB stated, various Fed governors have recently made references to the possibility of scaling back the Fed's large scale asset purchase program, otherwise known as QE2. Next week will be no different, as there are no fewer than 10 speeches by Fed governors scheduled, which would lead us to believe the final decision has not been made. For now, QE2 is scheduled to end on June 30, 2011. If there were to be an announcement in reference to it's continuation, or the inception of QE3, it will need to be announced in the April 27, 2011 FOMC statement. Until then, the Fed will be monitoring Wall Street's reaction and the market's reaction, to the various Fed governors' comments.

While the markets' price action certainly implies that the bulls are back with a rekindled preference for risk, there are some reasons to be suspicious of this rally. The Fed released statistics for the closing two week bank reserve window, which reveal that banks increased excess reserves held at the Fed by $70,709, while the total QE Treasury purchases during the period was $54, 234 (reported at par). This, along with the Fed Funds rate ticking lower to 0.13% continues to be a sign of risk aversion. (FRB: H.3 Release--Aggregate Reserves of Depository Institutions--March 24, 2011)

In addition, the rally in the major indices off the March 17 lows was not on increasing volume and increasing open interest, but rather on declining to steady volume and flat open interest. The techs, which were the preferred vehicle for the Fed's asset purchase program, are lagging far behind the small caps, and even more troubling is the fact that the financials are not participating in this rally. The implication is the March rally may be a short covering rally, which was aided and abetted by the ever weakening dollar. As PB stated, if the dollar were to bottom and rally, and the negative correlation with equities persisted, the March rally could end up being a massive bear trap. A convincing break of 1290, especially on headline news, would go a long way to convincing the bulls they were wrong.

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ES and the Great POMO Rally-01fb2695421236a26ed203e99693d20a-small.png   ES and the Great POMO Rally-857358acca7c0f3a352fa1008da6a1ab.png   ES and the Great POMO Rally-f1bb3db866e58049ebdfcdb408950a90-tech.png   ES and the Great POMO Rally-aeec8946e38bd4d3358849d13703c3cf-banks.png  

Last edited by tigertrader; March 27th, 2011 at 03:11 PM.
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  #263 (permalink)
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I'm not an expert on this but the Elliot wave people are warning we are at the end of a bear market rally and the subsequent crash could be worse than the first one......similar to the one that deepened the Great Depression.

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  #264 (permalink)
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aztrader9 View Post
I'm not an expert on this but the Elliot wave people are warning we are at the end of a bear market rally and the subsequent crash could be worse than the first one......similar to the one that deepened the Great Depression.


You must be referring to Bob Prechter, and he may be right...who knows.? Doesn't mean the market won't trade 100 points higher, or 200 points higher, etc., basis the SPX, before it crashes.

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  #265 (permalink)
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Monday’s action was uneventful for the majority of the day as the market continued to consolidate recent gains and build value at current levels. The market did sell off late in the day into the close, in what might have been a reaction to the surprise $830MM 7day reverse repo conducted by the Fed and the T+3 prior to Q1 settlement effect. Although the "drain" was only 10% of the amount of money that was added via the earlier POMO, the temporary market operation may have been construed as a shift-in-ploicy signal from the Fed. Nevertheless, traders had to endure another low volume range day bordered by the R1 above and the S1 below. Low volume and volatility have been characteristic of bullishness since the market recovered in March 2009, with HFT churning much greater on market breaks. So, the lack of volume we are experiencing on this rally may be the “new normal”, and not indicative of weak participation. Small cap/large cap leadership continued as the techs, retailers and banks, continued to exhibit weak relative strength. The first of three days of auctions commenced today, with the issuance of $35BB in 2year notes, which resulted in the highest issuance yield since April 2010, just before the market tumbled and the ground was set for QE2. Tuesday and Wednesday sees the slight bearish seasonality associated with the auction continuing with the remaining $64BB dollars in 5s and 7s to be auctioned off, followed by the last trading day of the month on Thursday. As a rule, the last day of a strong month shows early weakness as traders book profits, and late afternoon strength as traders begin to position themselves ahead of the next month. We end the week with the strong bullish seasonality that is associated with the first day of the new month, and the new quarter. This should provide the bulls the shot-in-the-arm they need to take the market to the next level.

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Last edited by tigertrader; March 28th, 2011 at 05:11 PM.
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  #266 (permalink)
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An alternative way of presenting the range, detected by simple expansion bar indicator.

These were two consecutive narrow range days, which increases the probability for a trending day tomorrow.


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  #267 (permalink)
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One thing I noticed in all the Equity indices today was that price was being sold into every time it touched VWAP. That usually is a hint that someone is establishing a short bias with the exception of this morning's initial move. If I were looking to add to my short position today, I would have been selling the VWAP every time.

From a swing trade perspective, I felt today needed to be a reversal from Friday to keep the potential short theme alive. Certainly not out of the woods and would like to see continued selling into the next few days. This could just be some end of Q1 selling however so, I'll be watching this closely.

Cheers,
PB

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  #268 (permalink)
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I thought this was a text book day. with the expected strong selling into the finish.

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VWAP or Pivot Range?

Afterwards the price action always looks meaningful. But were you able to predict, that the VWAP would win against the pivot range?

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Fat Tails View Post
Afterwards the price action always looks meaningful. But were you able to predict, that the VWAP would win against the pivot range?

No doubt, hindsight is 20-20. Today was a range day for the majority of the day until the Fed conducted the surprise drain. I had warned about the bearish seasonality associated with the auction on Friday, but was completely caught off-guard by the reverse repo, and the subsequent sell off. That being said, a sell off at this point in time should be constructive for the bulls, as it will relieve any overbought condition, shake out the weak longs, and trap some new shorts. I believe the bulls will step up to the plate around the POC at 1292.00 and support their position moving froward into the new month and quarter. Sans the Fed announcing the end of QE2 or shift to a tightening bias, this looks like a bear trap to me!

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ES and the Great POMO Rally-es-06-11-daily-8_10_2010-3_28_2011.jpg   ES and the Great POMO Rally-es-06-11-135-min-3_28_2011.jpg   ES and the Great POMO Rally-es-06-11-15-min-3_28_2011-vwap.jpg   ES and the Great POMO Rally-es-06-11-30-min-3_28_2011.jpg  

Last edited by tigertrader; March 28th, 2011 at 04:54 PM.
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