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

  #51 (permalink)
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tigertrader View Post
I believe the relatively light volume in the equity market is more the result of options expiration than a slow holiday trade, and that the possibility of price exhaustion at these levels is very possible. Monthly R2 target has been reached on the daily and a TD perfected 9 count is evident at the top of the move. We are starting to see a series of lower highs on the 144min chart as the market signals waning momentum. As you stated, the bond market is selling off and the attendant rise in rates will have severe implications on servicing the nations debt going forward. There is also reason, once again, to be concerned about the euro, due to the troubles in Spain. While the bulls are in charge for the time being, a close under 1227 would signal a potential top for the year and another cyclical leg down.

Great analysis! I didn't look at the monthly pivot levels yet on this. Very interesting. This last surge up looks like a classic pump and dump right up to R2.

Regarding bonds, could we be seeing the first step to debt deflation? Obviously Treasuries are getting hammered but take a look at Muni's and MBS. Very concerning.

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ES and the Great POMO Rally-muni-s.jpg   ES and the Great POMO Rally-mbs.jpg  

Last edited by Private Banker; December 16th, 2010 at 01:46 PM. Reason: Typo
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  #52 (permalink)
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( MUNIS and MBS)...WOW!!!

I'm beginning to scale into some shorts between 1238.50 - 1240.75 basis ES 03-11.

Top Ten Reasons I'm Getting Short

10) VIX on lows
9) Spain/ eurozone
8) rising interest rates
7) rising energy costs
6) 25% equity rally since July 1
5) bullish sentiment at its highest level since the Nasdaq bubble / put-call ratio indicates longs are un- hedged
4) low volume on upticks
3) NYSE TRIN at its lowest since before the 1987 crash
2) Relentlessly negative NYSE TICK action / one of the lowest Cumulative TICK closes of the year
1) economy still sucks


Last edited by tigertrader; December 16th, 2010 at 03:45 PM.
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  #53 (permalink)
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tigertrader View Post
( MUNIS and MBS)...WOW!!!

I'm beginning to scale into some shorts between 1238.50 - 1240.75 basis ES 03-11.

Top Ten Reasons I'm Getting Short

10) VIX on lows
9) Spain/ eurozone
8) rising interest rates
7) rising energy costs
6) 25% equity rally since July 1
5) bullish sentiment at its highest level since the Nasdaq bubble / put-call ratio indicates longs are un- hedged
4) low volume on upticks
3) NYSE TRIN at its lowest since before the 1987 crash
2) Relentlessly negative NYSE TICK action / one of the lowest Cumulative TICK closes of the year
1) economy still sucks

Those are some great reasons and I agree with every one of them.

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  #54 (permalink)
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tigertrader View Post
( MUNIS and MBS)...WOW!!!

I'm beginning to scale into some shorts between 1238.50 - 1240.75 basis ES 03-11.

Top Ten Reasons I'm Getting Short

10) VIX on lows
9) Spain/ eurozone
8) rising interest rates
7) rising energy costs
6) 25% equity rally since July 1
5) bullish sentiment at its highest level since the Nasdaq bubble / put-call ratio indicates longs are un- hedged
4) low volume on upticks
3) NYSE TRIN at its lowest since before the 1987 crash
2) Relentlessly negative NYSE TICK action / one of the lowest Cumulative TICK closes of the year
1) economy still sucks


Private Banker View Post
Those are some great reasons and I agree with every one of them.

Now, list all the reasons why the short will fail and it will continue bullish...

I'm just saying. First, thanks for sharing the rationale for the trade, I really appreciate this. But I think there are two really important things to remember. 1) If "everyone's" sentiment is bearish, and the market is moving bullish, there is likely to be a short squeeze coming and a continued bullish move because the bears couldn't move the market and will capitulate. 2) Always approach the trade knowing that you cannot possibly know or control the outcome, all you can do is position yourself properly with great risk management and great trade management so you have the opportunity to make money.

One thing I try to do is ask myself, once in a trade, what are the good reasons this trade will now move against me (opposite direction). Dr. Brett mentioned this in one of his books and I like the rationale, it is not second guessing so much as it is reinforcement that you've not let sentiment get in the way.

Mike

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  #55 (permalink)
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Big Mike View Post
Now, list all the reasons why the short will fail and it will continue bullish...

I'm just saying. First, thanks for sharing the rationale for the trade, I really appreciate this. But I think there are two really important things to remember. 1) If "everyone's" sentiment is bearish, and the market is moving bullish, there is likely to be a short squeeze coming and a continued bullish move because the bears couldn't move the market and will capitulate. 2) Always approach the trade knowing that you cannot possibly know or control the outcome, all you can do is position yourself properly with great risk management and great trade management so you have the opportunity to make money.

One thing I try to do is ask myself, once in a trade, what are the good reasons this trade will now move against me (opposite direction). Dr. Brett mentioned this in one of his books and I like the rationale, it is not second guessing so much as it is reinforcement that you've not let sentiment get in the way.

Mike

Dr. Brett's books and advice are so valuable to new and experienced traders. I greatly appreciate his work.

A short at these levels would be considered a failure if, as you stated, the bears fail to push the market back down, generally speaking. Keep in mind, the term "fail" is subjective to each individual trader. Some have tighter stop loss orders than others. Some realize profits quicker than others would prefer. Some average into their positions, for example, their goal is to establish shorts in a certain range with a specific stop level that no longer makes the short valid.

To what I've been referring to in this thread is swing trades where I'll hold a core position in the direction I "think" the market will go however, I'll utilize intra-day trades to hedge or enhance my core position via a core-satellite strategy. Example being, establish core short ES position based off of a large time frame chart interval, trade intra-day long's or short's in multiple markets to enhance total returns of portfolio based off of shorter interval chart settings. The core being a majority portfolio position with the intra-day trades being minority positions that follow smaller/shorter trends. Obviously if the core trade is rendered invalid, you would need to unwind it but you've at least participated in the intra-day opportunities that would off set any realized losses on the core.

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  #56 (permalink)
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Private Banker View Post
... To what I've been referring to in this thread is swing trades where I'll hold a core position in the direction I "think" the market will go however, I'll utilize intra-day trades to hedge or enhance my core position via a core-satellite strategy. Example being, establish core short ES position based off of a large time frame chart interval, trade intra-day long's or short's in multiple markets to enhance total returns of portfolio based off of shorter interval chart settings. The core being a majority portfolio position with the intra-day trades being minority positions that follow smaller/shorter trends. Obviously if the core trade is rendered invalid, you would need to unwind it but you've at least participated in the intra-day opportunities that would off set any realized losses on the core.

Interesting. Core-Satellite is pretty popular among the private bankers I know. Out of curiousity what is the average hold in your Core? And is your Core an asset class-based, mean-variance optimized portfolio or is it more a discretionary macro Core?

Thanks for sharing.

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  #57 (permalink)
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Big Mike View Post
Now, list all the reasons why the short will fail and it will continue bullish...

I'm just saying. First, thanks for sharing the rationale for the trade, I really appreciate this. But I think there are two really important things to remember. 1) If "everyone's" sentiment is bearish, and the market is moving bullish, there is likely to be a short squeeze coming and a continued bullish move because the bears couldn't move the market and will capitulate. 2) Always approach the trade knowing that you cannot possibly know or control the outcome, all you can do is position yourself properly with great risk management and great trade management so you have the opportunity to make money.

One thing I try to do is ask myself, once in a trade, what are the good reasons this trade will now move against me (opposite direction). Dr. Brett mentioned this in one of his books and I like the rationale, it is not second guessing so much as it is reinforcement that you've not let sentiment get in the way.

Mike

1) The current sentiment for equities is overwhelmingly bullish, if not downright frothy... I'm fading that sentiment.

2) When I enter a trade, I assume it's going to go against me and I am going to have to take some heat on the trade. When I initiate a trade, I also realize that I'm going to be wrong about the trade 25-30% of the time. The reason I'm wrong is irrelevant at the time; it's either because there are more buyers than sellers, or more sellers than buyers coming into the market and I'm the wrong way. All I'm concerned with, is how far is it going to go against me and at what price do I no longer want to be in that position.

Of course, in retrospect, I'll analyze my losers, and consider whether they are due to faulty analysis, poor trade management, poor timing, or some other factor(s), but when I enter the trade, I am always thinking positive about the trade.

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  #58 (permalink)
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tigertrader View Post

....
3) NYSE TRIN at its lowest since before the 1987 crash
2) Relentlessly negative NYSE TICK action / one of the lowest Cumulative TICK closes of the year

Hi Tiger,

I look at a TRIN and TICK chart on daily range.
Where would look look for 3 and 2? That is there a place to see historical TRIN - lowest since before 87 crash?

Many thanks!

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  #59 (permalink)
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aquarian1 View Post
Hi Tiger,

I look at a TRIN and TICK chart on daily range.
Where would look look for 3 and 2? That is there a place to see historical TRIN - lowest since before 87 crash?

Many thanks!


Try...

Market Tells - Stock market timing and research

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  #60 (permalink)
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tigertrader View Post

...
The reason I'm wrong is irrelevant at the time;

...
I am always thinking positive about the trade.

I think these are very good points, Tiger.

We can get caught up too much in "reasons" - bullish sentiment or bearish sentiment etc.
I think it is sometimes more valuable to just look at the chart. For example, we've had a couple of tops recently at about the same level. It is important for the bulls to take out those tops at the third try.If they fail, then one can compute a downside target and one has a clear place to enter a stop.

So it is before the trade not after entering it that one assess the risk reward ("what can go wrong" "what can go right.")

Analysis done, one needs confidence in one's decision and courage and so visualizing a positive outcome ("thinking positive about the trade" as you said) is key.

Jesse Livermore's
"it was by sitting and waiting [in the trade] that I made big money."

(not an exact quote!)

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