Near term top or just a contract roll adjustment?

Friday sold off from $NYMO reading at overbought 86.76 on Thursday, its a good indicator to look at for short term setups. While the open was weak, most expected a bounce back given the recent Fed zero taper, the $TICK didn't hint at the eventual sharp decline either. Also, the declines were not broad based as Mid caps and tech didn't follow along with SPX/INDU.

SPX -12.43 -0.72%
INDU -185.46 -1.19%
RUT  -2.44 -0.23%
COMPQ -14.65 -0.39%

The Fed surprising the market with zero tapering sent us higher but triple witching on Friday, and the markets distrust of this move up took us down erasing all the gains made. Whats useful to look at is that the peak on Friday seems to be approx 0.618 measured move of the recent move up. Along with the House vote on Obamacare and possible Govt shutdown (again!) may lead to some bear action in the coming few days. For the bulls, while we have closed below Aug peak we still are within range for a bounce here, and as always the Fed's got your back :)

(for the conspiracy folks, the PPT usually kicks in at critical levels unless they want to apply some political pressure by a crashing market to get the House in order ;).. enjoy the week

Emerging markets first casualties of Fed policy talk of taper

Most of the time its easy to make fun of the economic collapse brigade out there and other times its really obvious how unstable the world economy is and has been since the financial crisis. Was reading up on how emerging markets and their currencies were collapsing and it seems all too obvious how the Fed taper talk may have been the reason for that.

Sometime in May the Fed started talking about taper and emerging market equities (EEM) began to tank lower, see red line. As the very mention of taper meant bond yields in the US would rally and investing at home becomes more profitable. FDI pulled out of the EM markets led to the slide and their currencies. The FDI pullout has left their markets lower by 13% while their currencies continue to slide. Some of that repatriated dollar fled back into equities and led to the 10% spike in equities on relatively no volume.

Seems indicative of some serious challenges ahead, I mean these are relatively decent size economies (India is the 3rd largest in PPP terms) and yet the impact of US policy is just beyond their management capabilities. What is more of concern is what happens to the US economy when Fed does begin to taper. If equities can move 10% in two weeks what woulds stop from a larger slide down, when everybody is a seller!

Recap 8/22/2013 - Choppy ahead

It's been interesting since the last post, we had a declined on talk of QE taper then ramp up sharply on the Fed calming the markets on tapering. Then bulls seemed exhausted and the SPY moved sideways for a while until the exhaustion played out. In a rather sharp move lower. Seems like price lately is about jumping levels and then consolidation at those levels. We did the grind near the all time highs above the 5/22 peak the jumped lower and for the last four days price has just hugged the 6/18 high. Also, look at the measured move targets, price almost exactly matches.

I posted this chart on TV earlier, price broke 0.38 fib and has bounced higher. Its at an interesting level near the 6/18 high and if tomorrows open isn't higher the bounce gets cancelled and we should move lower towards the 162 target on my chart, we'll find out.

Recap 6/17/2013 - Consolidation looking to resolve

Looking at daily candles for hints into the week ahead. Two short term levels are important here. One is around 1634.8 near the market open on Friday, its same as breakout level "A" market on chart. The other level is near 1646.87 which was the doji reversal level and the break down marked "B" on chart. You can see that prices failed at "A" and must break above it to continue higher. The index closed lower on Friday, confirming a higher low up trend. We are consolidating here in a triangle looking to break out. Two scenarios seem possible -

First is that the rebound continues higher and prices break level "B" tomorrow, I have a preference for this outcome. On the day trading side breakout of "A" would make a good entry for a long position, to close near "B". Break above should give us the second entry as sellers might try to test the bulls resolve near "B". Breakout should also take us further to retest the recent high in the days to come. Failure would create a wedge reversal.

Second scenario is bearish in which case the red close on Friday continues with a break down below, would require a 30pt move or so, now thats possible as volatility is back. But would require some bearish news unless we are reading the price action incorrectly and the bears are charged up. Two news items to watch is the developing story from Syria which could throw us a surprise and off course Economic data, although the latter isn't all that interesting tomorrow.

6/4/2013 - Muni's in focus again, sell off round the corner?

6/4/2013 - "Jefferson County, Ala., took a big step toward resolving its historic bankruptcy case .." reports  NY Times (http://dealbook.nytimes.com/2013/06/04/a-county-in-alabama-strikes-a-bankruptcy-deal/?hp) prompted a look at some Muni bond ETF's. The theme is quite clear on all of them and very bearish, a precedent might set off a bunch of others counties to get out of their situations.

Here is a look at the weekly chart for CMF, – iShares S&P California Municipal ETF. It broke support and has ways to go before the next decent support is tested..

Recap 5/31/2013 - Short term bearish

We've been seeing some weakness on the daily candles for the peak bearish reversal bar near ~1780. Today was a bearish close, the daily bar closed below short term support and it seems we have more downside in the short term. Near term target is about 1.5% lower down to support line drawn on chart around ~1595.

HPQ near term target 29.21

Was looking at HPQ since is bounce from the dismal lows. Seems the measured move target and the resistance make a confluence target around 29.21. I'm guessing this is reachable here.

Also, I've been using www.tradingview.com and its a good charting system, unfortunately uses javascript but works both on Linux and windows.

Switching to a systematic approach to trading

For a few years I have been day trading using technical chart patterns together with an understanding of the fundamentals of the US economy and using discretionary entries. Lately, CB interventions (verbal and actual policy actions), rumors, HFT runs had been making it challenging to read the markets and control open trade positions, so I decided to try algorithmic approaches. My endeavor has kept me busy over the last 6-8 months, building a system and coding the strategies is quite frankly a tiresome exercise. I shall be writing about some of my findings as we go along, at the moment I am finding quantitative work quite exciting.