Back in the red zone!
It has been nearly 6 weeks since my last update and as promised I have kept an eye on the weekly chart vs the ever so noisy daily chart. What has happened the past 6 weeks is the market moving down for a fake out on the daily yet closing right on the green area i had highlighted and then lifting to the red zone.
Will they score this time or will they turn it over to the bears again for another move down? You be the judge 
Good Night
-K
Noise Noise and more Noise!
The news have been going on and on about how the US economy is back to disappointing data, European countries are all in trouble as Italy is now getting thrown around just like Greece, Ireland, Portugal & Spain.
If you think the market action of the past 4-6 weeks has been on the data then please stop reading and save yourself five minutes which you can use to watch Jim Cramer over at CNBC.
On the July 28th post titled "Deal or No Deal -Debt Ceiling Edition- $SPY" I talked about how the market had been setting up and that no "Debt Ceiling" deals would matter. It was obvious a debt "downgrade" was coming but that should have been no reason for the market to really go skydiving as it did. If you were an great A+ student and partied a bit too hard, if your next grade was an A nobody would treat you with less respect especially when they're getting grades from B+ and lower, (the analogy here being US credit rating vs ratings of many countries in the world).
The market was simply setting up for a technical Head & Shoulders pattern and there was a great chance of it playing out (which it did). Click chart below to enlarge.
The chart above is an updated chart of the previous post. The light yellow represents all the time It took since my last submission to the blog. The Fibonacci retracements drawn on the monthly chart really have helped see that we were about to enter a rangebound market (the area between the Red and Green boxes).
The "crash" from 1300 to 1170's surprised me in terms of the velocity in which happened. I expected it to trickle down for a few weeks but when the dam broke there simply wasn't enough incentive to stay short the weeks following as there was a great possibility for a short cover.
The suggestions I made was to buy some SH shares or SPY puts. I did both and got out with enough profits to allow me to break away from the markets for a few weeks. Now I am back and so are many professional traders and when they fire up their charts they will see what I am showing above. They will wait out this rangebound trade until either a break above 1235 or a break and close on Weekly chart below 1120 which could set up for another 80 point slide.
Right now we are mid range and since Daily is too noisy I'll keep checking the Weekly every few weeks and report the progress.
Hope some of you made money or at least the posts have been helpful to give you a second view from a Freak's viewpoint.]
Till next time,
K
Deal or No Deal -Debt Ceiling Edition- $SPY
The US Debt ceiling could get hit on August 2nd which is 3 business days away. While everyone is struggling to make ends meet, Wall street and Pennsylvania Avenue are business as usual. Wall Street wipes out retirement investments and retail investors while our Elected majesties play games with each other like they are in kindergarten and whoever wins the argument gets a prize.
Wake up because the time to act has passed. Instead of throwing money to bail out banks, and prop the markets for the past 2-3 years (Bubble 2.0) we should have let the "economic collapse" happen and now we'd be either in a hot burning inferno or on a better stage to recovery Worldwide.
Deal of No Deal
A week ago S&P rating agency warned that the USA could lose it's AAA debt rating if things weren't solved for a better fiscally sound future, just today S&P said that it will not likely downgrade US debt rating. BULL$h!t we know full and well that with or without a debt resolution in the next few days that our rating will be cut one way or another. If it's not S&P it will be Moody's etc, these rating agencies are the ones that allowed things to get here when they rated the Credit Default Swaps & junk bonds safe and apparently it was blamed on a "programming code mistake" of sorts.
If we do not reach an agreement on the debt ceiling the economy will go in a tailspin. Stock market will head to the south pole for the economic ice age, USD $ will be worth less, imported goods (Yes Chinese lead painted toys, middle eastern oil and the goodies in between) would become more expensive, US consumer spending would halt, US workers, contractors, aid for people, road work etc would be at a stand still and no money would be moving much if any at all. Unemployment would rise higher, banks would loan no money as they seek to avoid risk and stay liquid. And with a downgrade in our rating which is a no-brainer that would mean we'd have to pay higher interest on future debt we incur (Look at Greece interest rates on debt spike at downgrades, that will be the same here). Anyways that is the doomsday scenario but right now we can do nothing but stick a fork into each politician and have them for dinner when we can't afford food.
Take a look at how all this money came to become the $14 trillion+ debt.-Click to Enlarge- or go to NYT article
Whats in it for me?
Lets take a quick look at how the market might be affected by this uncertainty, but the obvious thing is most of the stocks will head down because on the 10-K SEC filing of every company one Risk factor is "Economic Uncertainty". Two weeks ago I posted the chart of /ES saying that it looked like a head and shoulders formation. This time the chart has the fib retracements that were drawn on a Monthly chart spanning back 20 years and drawn from major peaks to major troughs. The ratios are hard to see but you will immediately notice where a lot converge.
So here we have a market that wants to hit 1250-1268 area in initially but ideally the 1225 in the very near term is last resort for support and thats 70 points below as of this writing. Lets see what our knuckleheads do today, most likely nothing as always.
Possible downside trades would be SPY put options or buy SH shares for a hedge (SPY inverse)
Happy Trading,
K
$SPY $/ES – Head & Shoulders (Knees & Toes) Pattern emerging
The past week or so we expected an oversold bounce and now that it has come and gone more contagion fears have emerged, this time in Mario & Luigi land that makes pasta, pizza and tomato sauce along with the cheeses.
This latest fear-mongering along with recent economic data in the US and worldwide( which have been less than expected) and also the upcoming U.S. debt limit crisis which will get resolved (just not until it has hurt a good chunk of the economy) but not in a timely manner because like their waistlines, Americans cant/don't like to curb their spending.
I was looking at my favorite time frame, the Weekly and on the futures I noticed an early stage but possible H&S pattern. Here it is simplified for your enjoyment, voice in your ideas in the comment box.
Positions: Rolled a July put into a September put.
I was right just not satisfied after the 8 day rally which reignited at the green moving averages above (risk reward wasn't there anymore but I was high on "hopium")
Market Analysis: Quick look at potential $/ES price target
Quick Trivia, what $/ES price target has been touched two dozen times in 5 years?
Answer comes right after a brief chartology interruption.
Let's Have a look at $/ES on weekly chart from 2006-2009 and count how many times we touch a certain area (I should have initially hid the price on the chart to make it more fun).
I have even made it easier for you by placing bright green dots on it. The answer is 19 times. Ok so big deal... why does this matter? Follow me on a journey below this chart.
The last time this number was tagged or gotten close enough to was in April of 2011 at 1373.50 high which led to the correction of over 100 points (of which we have now regained 70 of them again). And so ladies and gentlemen If you checked out the comment in the previous post where I wrote that any shorts should have covered at $131 latest before the melt-up really heated up then you are either sidelined or took a small long position as not to miss the action. This leaves us to tonight's Trivia Target answer which is (rounded) $1375 for possible resistance and last refueling station for future space explorations. Click to Enlarge as the preview looks blurry.
If that oil runs out then Houston to earth Houston to earth do you copy? we are coming down right over the Mediterranean sea. Yeah the European debt crisis is what I meant, I feel the need to explain it because I think faster than I type (who doesn't) and don't want readers to get confused.
So there we have it. Should be some light trading weeks coming up volume wise and the 1375 might not be out of the question if not more. I'd take off some longs near that level and let part ride.
Have a Happy 4Th of July weekend to those that celebrate it (Americans) and good night to the rest of my world readers.
Market Analysis: A technical look at the $SPY
Nearly six months ago I was wired to around 200 news feeds constantly receiving mixed news both from bearish and bullish camps and I sided with one side after doing my own "biased" research. I decided that the market was nearing a top. Ha!! Uncle Bennie wouldn't let the party die down would he? Everybody loves the cool-aid and the party hats on CNBC keep coming back and making weird noises (yes Jim Cramer I'm talking to you haha).
Fast forward to what happened during those 6 months is summed up in one sentence. "Life happened in ever aspect, got very busy and also stopped the information flow to clear my mind".
Now that I got that out of the way I will point out that while I took a break from financial news and focused on life I also shared informal emails with a few InvestingFreak readers.
Lets have a look at a few charts I sent out in early May, keep in mind that I like to mainly focus on the weekly for trends while trading on the daily with an eye on the hourly. I will explain why these are the only 3 time-frames I watch in an Investing School video coming soon.
The SPY on a weekly chart dated May 9th 2011. It shows an uptrend channel with the market at the very top of it poised for a correction. The green lines moving up are EMA's which act as support.
The chart as of today shows the progress for the past 7-8 weeks where a correction did occur and it is bouncing just on top of the Exponential moving averages. There is a bit of "resistance" at 130-130.50 and plenty of support (remember this is weekly and a lot can happen within the week so remember that) at 120-125 area.
Lets have a closer look at how its doing in the daily chart to see what we should look for temporarily. On the daily the Moving averages are hovering right above in the 129.83-130.57 range and causing the SPY to stay range-bound in this box like formation. Notice an added support line on here and its thinner than the others? That is because its drawn on the daily chart and its a way for me to distinguish importance. The past two days the market has bounced nicely but be wary of the impending resistance on top.
Going long two days ago would have been a good risk reward with a stop below 126 but at this stage going short on the daily $SPY is a better risk reward ratio with a stop right above 131.
Whatever your play is just be cautious, do your own research and feel free to use these charts and my numbers (which aren't perfect science) to make better trades. Stops are important to being liquid and getting out when you are wrong, do not move stops if the trade isn't going against you and until we break Pandora's box there might be more sideways action to play with.
The Freak’ing Market Nears The Top ($SPX, $SPY, $USD, $UUP)
Every day we see the market swing higher and higher and higher and then one day it swings lower we tend to get fooled into the belief that the market has topped. If you have never felt that way you either must work for Gold in Sachs (they seem to have a golden goose) or are some genius and my hats off to you!
The charts I will be presenting to you further down I have kept a close eye on for months (yeah months!) but only recently has there been an urge to share the potential move that’s coming. Weekly charts will be used because I am not timing the market by the minute but merely where its heading based on my observations. There is no one way to play the market or so use this in conjunction with your own research and observations. An old saying comes to mind: “Ask 7 or 8 opinions but make your own decision.”
To keep me motivated into watching the following charts I decided to purchase an UUP option call expiring January 2012 with a strike of 23 a good while back. That position is up more than 30% but having it on my position screen has kept me aware on moves that the dollar has made.
In the UUP weekly chart there seems to be a Descending Triangle Pattern in the works which is a bearish formation. That being said this is the weekly chart so I don’t expect UUP to break below $22 range for months and years to come. Short Term UUP has resistance at the 50 week moving average (23.43) and if it is able to break through it has a better chance for a swing to the expected 25 area.
(Click Chart to Enlarge)
Wait! So does this mean the dollar is destined for doomsday in a few years due to this pattern? I will not give an answer to that mainly because on this next chart of the US Dollar Index ($USD) the opposite pattern seems to emerge. The Ascending Triangle is a bullish formation and this points to a break to the upside (suggesting dollar appreciates more in few years). One thing to keep in mind while reading this blog is that lines are drawn differently by different people and if a daily, monthly or yearly chart was used the patterns might point elsewhere but weekly is my choice. As with the UUP short term view, $USD also is stuck just below its 50 week moving average of 80.42 and a break and hold (of the weekly) over that resistance would put the dollar index on a better position of heading back to the top of the pattern which is around 88 area.
(Click Chart to Enlarge)
So far I’ve talked about the dollar and yet the title claimed to be calling a market top. I will not disappoint my fellow readers that easily. On the last of the trio charts I have drawn plenty of lines and will attempt to describe with words what dollar strength and breaking over its resistance would mean for the market ($SPX).
The top part of the chart has $USD again showing its price performance (irrelevant since I’m just looking at the pattern). The top red line has been drawn to indicate an important area where when the USD breaks below (weakens) it tends to send the market into “party” mode and when the opposite is true things go into “doomsday” mode (for the most part). The top green lines are a more reserved prediction just in case the red line acts as resistance and dollar would go sideways for some time but eventually break up since the pattern is the aforementioned Ascending Triangle bullish pattern. If we break out of the resistance zone more rapidly (blue dashed line) then I call a market top late January-February 2011. It could come at the current highs or the market could make one last push for $1300 (since the moves aren’t 100% mirrors of each other).
(Click Chart to Enlarge)
So there you have it! I have called a Freak’ing Market top 700 words and 3 charts later (and many months of patiently observing the weeklies). My conservative guess if I was forced to make one would be a correction to 1030-1075 area. That’s around 16-19% correction from the current highs.
There you have it! I hope you all had a Happy New Year and enjoyed reading this post and many others before it (although they’ve been sparse due to realities of the busy life).
Remember to chant the InvestingFreak phrase whenever in doubt “See it, Call it, Trade it, Buy it” 
Happy trading and money making!
-K
SPY’der Pig Spy’der Pig!
Well it surely has been a lifetime (one month) since I last posted but don't blame me much because life has become much busier and time consuming. Don't worry though I won't leave fellow freaks without some delicious charts before I return to the freakishly busy life of mine .
First off for some humor Here's my Inspiration to the awesome title.
Ok so without even mentioning any recent news because I really don't care if the Economy officially came out of recession last summer or if Larry Summers will finally leave his post at the end of the year because I am a technical trader and I like to trade what I see rather than what I hear. If I traded what I heard then I would be a BOOOYAH Cramerica Fan which would have made me millionaire by now if I had invested billions.
Lets start off with an hourly chart for the past 20 days of the SPY so we can see what happened while the blog was inactive.
I will not reveal the indicators of lines used in the chart but with some trial and error you might be able to figure it out . As you can see starting September 1st the market broke above the blue line while at the same time volume picked up and a special indicator went from red to green. SPY at the time was around 107 and today it reached a high of nearly 115.
Thats great and all as we see what happened in the past but what about the "Freak"ing future? I am not calling a market top yet but I must make my intentions known that if either 115 or 113 are broken on the hourly while the volume is there then that will determine the future. If I were to call it? I would say the volume increased the last two hours of today's trading thanks to Ben Balloonhead and the special indicator below is heading downhill (but still green). My ideal trade would be when SPY cuts below 113 and the indicator turns red. Remember that even if what I am preaching does not happen at least it is a more informed decision than pressing a "Buy Buy Buy, Sell Sell Sell" button. (Click Image below to Enlarge)
Next up we will visit something I like to call the Bollinger Bands and again I will not reveal the inputs but I hope you are understanding (you can always figure it out with some hard work), as you can see I have also shown the signals my system has given to me. I am awaiting for that Sell signal which might send SPY to 110's at the very least if it displays me that lovely red "S". of course there have been times where the market just consolidates along the blue lines and then moves up in which case I wouldn't enter until I see my system print the signals while I also evaluate the chart already posted above.
Are you falling asleep yet? If so you aren't a real Investing Freak because only the elite know that without doing your homework you will go into the market like a headless chicken and come out a loser. Now Time to introduce the updated Investing Freak special chart which I last displayed back in June. If you click on the link and go to that post you will see a "price line" drawn near 1152 (it's really just a bit over 1150 if you get microscopical), I mention that because today the market reached up to 1048.59 and retreated a full 10 points! 10 points is a sweet intra-day move which you can make a killing on if you play it right. Anyways here is the updated chart since I can see you falling asleep. (Click below to Enlarge)
Recap: I've been busy, market has been behaving according to plan and is not showing more negative signs than positive but no definite reversal has been noticed so just use the charts above for reference. If they are helpful, you are welcome to post comments so we can liven up the blog again.
Until next post.... Enjoy Making money!!
-K
BP Cares about the small people
As you might have figured out by now, BP plc (ADR) Chairman and the CEO met with President Obama ONLY two months after the oil spill disaster.
Of course as I mentioned in the previous post BP now stands for Bad Publicity so nothing was unexpected on my end when the Chairman said: "I hear comments sometimes that large oil companies are greedy companies or don’t care, but that is not the case with BP. We care about the small people." Bad publicity this time will cause BP to buy google ads for keywords such as petite, small, midgets, oompa loompa. They needed a leprechaun to give them some lucky charms but now they insulted the small guy.
Did you hear that? BP cares about you so much that if you are in the Gulf of Mexico and for the next century your fishing or tourism business is doomed.. BP has put together $20 billion dollar fund for your damage It is truly truly truly sorry. Oh and If you weren't affected by BP but are part of US pension funds – including Calpers, the Teacher Retirement System of Texas and Ohio Public Employees Retirement System then BP is truly truly truly sorry for you as well because the 12% dividend yield that you saw a few days ago will be reduced to 0% so they can spread that wealth to the victims. You can enjoy your -50% gain in BP stock now.
But wait I forgot to mention one benefit of this disaster. BP has hired cleanup workers to clean things up and this good news for the people of the Gulf. Hey you just got promoted from fisherman to fish rescuer, Congrats!! Just sign here on the dotted line ........... and just make sure to not get sea sick from the delicious fumes because your complaints and health information will never be part of BP's record.
BP attempted to deny and conceal links of its oil spill to illnesses, after initial reports of oil cleanup workers who were getting sick due to extended exposure to oil and dispersants. Fishermen have complained of “severe headaches, dizziness, nausea and difficulty breathing” after working to clean up the spill, and one said BP did not provide protective equipment. But BP CEO Tony Hayward brushed off illness concerns, suggesting “food poisoning” might have been the culprit.
Although Louisiana state records indicate that at least 74 oil spill workers have complained of becoming sick after exposure to pollutants, BP’s own official recordkeeping notes just two such incidents.
You all should feel sorry for BP Because it will take anywhere from 100 days to 365 days for BP to make back the $20 billion in profit while the victims sit at home and receive checks.
Ok fine that's less than a year's worth of profits... But this is just a fund for economic damage, and won't protect it against all sorts of other legal costs. According to NYT legal costs and criminal fees could hit at least $63 billion. WHOOPS! Hey NYSE:BP stock... you will be missed when you hit $19 but on the bright side! You'll be a teenager again full of energy (pun intended) !
And now for a mini change of subject. Senate has now accepted an expanded Fed audit. The House proposal allows repeated future audits of discount window and open market transactions, whereas the Senate proposal had only allowed a one-time audit. Of course this is just a grain of salt and even when it's passed it might be years before we see any audits.
1077 Proves to be $SPX resistance again.
Going into the open today 1077 was on the radar as a heavy resistance. It will now try to become a death cross of two averages i use that can be seen as the blue and red lines in the Special Investing Freak $SPX chart.
As for what happened today I decided it is best to sum it up using this image and text. (Click To Enlarge)
I bought Puts early on then called top of 1077 in a comment at around 10:50 with the top on the market coming at around 11:30 where I decided it was time to make true to my preaching and sell my calls. Sold puts at end of day and am flat for the next day opening so i can sleep well 
Keep checking the comments for latest news and talk and feel free to participate (dont be shy)
-K
Let's just say