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.

Recap: QE3 price not value or dodging a bullet?

This week, 9/13 Fed announced QE3 $40b of MBS purchases a month until further improvement in Labor market condition is visible. So that's it, detractors have been shouting about the breakdown of the transfer mechanism or saying flat out that money printing doesn't do anything for the economy, while Keynesian think even this action is bit too small. I don't think QE has done much for the improvement in the labor situation, and I just dislike this kind of manipulation, not saying anything about the politics of it. Also, I'm getting a bit concerned about the way both ECB (Draghi's bazooka) and now the Fed have touted unlimited intervention. They're moving a lot of bad assets onto their balance sheet which only makes me worry about the banks going BK.

That said, it is the world we live in and we trade prices and let investors (missing in action so Fed then?) decide on the value. SPX broke a major resistance level this week. I'll start with the monthly chart: 5/31/08 high of 1440.24. If you look at the chart, that peak doesn't look too prominent in the scheme of things, the move down was huge, 1576.09 to 666.79. If you look at the chart since 1997 onwards, we've moved into the monthly ATR of 100pts, So breaking up to the peak of May 08 doesn't seem too far fetched, given that we've moved 76pts this month and we've had QE and a major resistance has been broken. On the other hand I would have been happy to have SPX turn lower into the lower price channel support from here. So the market must turn lower this week or it would confirm my upward target however incredulous it may seem.

Weekly chart below you can see that the move above was on good volume and the fact that we had a second day continuation only makes us believe that it might have legs, only time will tell. With that said, maybe first ever bullish view, I'm not positioning long here. Also, I think Friday's price action of giving up mornings gains, might be hope for the bears of a possible return to sense.

Recap 8/13/2012: SPX weekly moving higher

Last post was a while back, I have been investigating some quantitative approaches, but I thought I would update the SPX weekly chart and my thoughts on the market.

First, in April the market was on the upper channel resistance and we dropped about 10% from there the possibility of Central bank intervention kept us from moving any lower. At this time the bounce off that low seems to have formed a bullish flag which targets the near term highs in the SPX. Now, thats a bit too bullish for my taste but I have a few participants that I believe are better at this than me who believe that might be were we are headed. So take a look

Right now i think the markets have the bulls wondering why they should buy and the bears worrying about getting stopped out of their positions. Everybody is waiting for news to clear the air a bit, last couple of days the volume has been pathetic and I think might continue to be so. (Maybe the volume has been this pathetic all this time, we just don't have Knight Capital fooling us anymore?)

Anyways, near term targets seem to be the 1440, 5/08 high and it that breaks then we're going all the way up to 1600 (I doubt this level will be reached this year)

On the Central Bank front the Fed's next meeting is in September and will probably decide on a mortgage twist type intervention and while Europe is on vacation now, more news or decisions on the Euro front will be forthcoming in September. And it seems likely that news would support the market with some kinda of Greek exit which is already priced in. I heard a comment "Lehman has taught us that loosing a few billions in bailout is better than 100 or more times that in case of bankruptcy", that makes sense and after all paper money has no limits on capacity. Anyways, its the world we live in.