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The 3 month T Bill is 4.44% and the 30 right now is at 4.50%. So there is no inversion.
http://www.pimco.com/TopNav/Home/Default.htm
THERE IS NO INVERTED YIELD CURVE!!!!! It's absolutely amazing how WRONG everyone is in the press regarding this. Especially on CNBC. The 2 year inverting over the 5 and 10 is NOT CONSIDERED AN INVERTED CURVE!!!!
A true definition of an inverted curve is when the 90 TBill inverts over the 30 year. Right now, the 90 is at 4.42% and the 30 is at 4.52%.
Hey Double,
In regards to your first question, that's a reason why I hate IB's charts. The MA's lag the current candle. If we're in a 5 min period, say 3 min into it, the moving averages are plotted on the previous candle. So, you might get stuck behind. Although that's a good way to insure you're definitely getting the cross instead of guessing 'will it or won't it', it's still better to be able to have a current MA within the current candle. That's why I use Qcharts.
Second question - yes, simple, not exp.
Third - This is more of a subjective issue because some breaks are more powerfull than others. Remember, what you're trying to do is get on the train as it leaves. So, you have to judge whether or not you think it's in fact breaking out. It's one of those things that 'you know it when you see it'. But also know that about half of the time you'll get a breakout over that downtrend line, and then the price will drop to hug the upper part of that trendline. Usually that means you are in the midst of a new wave count with the price dropping on a second wave correction. But to answer your question - you really need it to close above with the next candle hopefully opening above also. Just like on the daily charts.
Fourth - I do this by using the MA cross as the signal. If it occurs after the break of the trendline that's fine and actually easier to gauge your entry because it becomes far more obvious of what's about to happen.
Fifth - Again, it's kind of arbitrary depending on how the day is going. The worst thing you can do is not get most of the run. You might get a 100 points on the YM if you let it go and don't get scared out of it because you second guessed a potential cross. You'll see that many times there will be 'fake outs' where it looks as if they are going to cross with the 3 touching the 8 and then the move shoots up. That's why when they are converging, you have to really focus on it closely to gauge all things - you really should look at what Nas and the S&P are doing. The rule is that for every 1 point in the S&P, you get 10 on the DOW. If you are seeing the S&P moving and you are trading the YM and in a trade, then you want to use that to judge those pending crossbacks. However, if you want to make it purely mechanical, then just use the crossovers again to exit. You'll never miss the large runs but you might get churned out of crisscrosses. However, those large runs will more than make up for the small losses on churn days. Trust me.
Sixth - Yeah, I don't constantly go with all directions - meaning that if I'm long and it turns I go short. You can, but I can't stand being in a trade at all times. I'm happy with 20 points a day or so with 5 to 10 contracts on the YM. I don't need every point.
I have to apologize to both Ken and Poker. The reason I left the CS board was because of the same thing I got caught up doing here tonight. I don't want anyone to connect me with that garbage, yet after reading my jabbering between Poker and I, it sure sounds like that.
So, let's get back to making some money. I think I have a lot of experience that can benefit wildly some of you. You can't learn this stuff from books. Trust me. Just look at my bookshelf! I have read almost all of them and none of them have taught me what I do on a daily basis. None. I have learned a lot of technical stuff as to the inner workings of the market. But that doesn't make you money. (actually I do recommend 'the market maker's edge)
This stuff is learned one way - LOSING MONEY. Either you take your losses and go pout in the corner and go back to work at McDonalds, or you take those losses and try to figure out why they hell it happened. Most of the time you're answer will be simple - DUh! Why the hell did I do that?!?!?!?!
I love trading because it really is the last bastion of Darwinism - survival of the fitest! There's no welfare here. No racism, no politics, no any of that crapola. It's just warfare and you better understand the concepts of Sun Tzu because if you don't, you might as well just give your money to charity.
I have had some pretty damning losses over the years with the most AMATURE of mistakes. Even having been so successfull as I've been, I make them bigtime every now and then and it is always the same BS - too impatient and believing it 'just can't keep going up'(or down). I mean, c'mon - be honest - how many of you have done that? That is probably the most commonly made mistake in trading.
So, sorry for the ramble and especially sorry for the bitching at Pokersam. I'm sure he's a nice guy and I don't mean to start trouble.
Now let's make some money!
Being that MRK is both a DOW and S&P component, if it opens big on Tues on that lawsuit news (2 points maybe?) that would possibly get Nas out of that downtrend. If so, then the party has just begun.
My prediction for the year stands until otherwise proven wrong - Nasdaq breaks out here shortly and runs to between 2500 and 2900. Somewhere in there. The Q's should run to between $45 and $48 by June. Then between Sep and Oct we will see the mother of selloffs as the 4 year cycle low hits. Then, Nov through next Jan will be a mother of a run again as Nas guns toward it's 50% retrace level off it's high.
If i'm even remotely correct in that, there will be some serious money to be made.
I have gotten a bunch of questions privately about trading eminis. I will try to explain here as best as I can to hopefully help some of you who are interested in making some pretty good short term (either day or weekly) money trading futures. I have slowly over the last few years become a big fan of emini future trading because after you start to get a system going, it becomes almost the perfect cash flow machine you'll ever have.
Many I know don't have a clue as to what e-mini futures are or how to trade them. It's so easy, you'll wonder why you ever traded stocks again.
Back in I think it was 2002, the federal reserve was so concerned about retail investors daytrading their money away, they imposed Reg 'T', which forced all brokers to prevent their clients from daytrading stocks unless they had at least $25k. Big brother if you ask me, but hey, whata ya gonna do?
So, in order to make up for the lack of trading volume (and commissions), brokers started to allow futures trading to online retail traders. The CME and CBOT had been trading futures for years, but in order to fill the demand by most online brokers, they created smaller versions of the main futures contracts called 'e mini's'. Basically, they are 'mini' versions of the big futures contracts.
Here's how it works - Let's say you are a DOW lover. You know the DOW and that's all you care about. But what do you do? You can trade any of the 30 stocks of course - or worse, you can focus on the DJX or DIA options. But as I posted before, that's dangerous. (unless you're trading spreads - which I'll get to at a later time). So, the perfect way is to trade the YMs. You think you know the S&P very well? You got the ESs. You like the Nasdaq (actually the NDX)? No prob - you got the NQs. If you really like to gamble, then you got the Russell 2000's ER2s.
Many online direct access brokers will allow you to trade them and many of them actually are focusd on trading them. I personally trade with Interactive Brokers, but MBTrading is also a perfect broker for them.
Here's how it works - They are very similar to options in that they have expiration dates, however they don't have time decay. Every three months (dec, march, june, sep) has a future cycle and each cycle has a letter that represents that month.
Dec = Z
March = H
June = M
Sep = U
So, to get a future symbol for the current cycle, (currently March), you put the Index first - i.e. YM for the DOW, and then month and then the year - *some brokers revers it*
So, the current E-mini DOW future symbol would be 'YMH06', or 'YM06H', or even possibly 'YM6H'.
How do you make money?
Each point move in each index has a dollar value.
(e-mini dow) YM= $5 per point
(e-mini NDX) NQ= $20 per point
(e-mini S&P) ES= $50 per point
(e-mini RUT) ER2= $100 per point
That means that if you buy say a YMH06 at 11,125, and it goes in the next 5 minutes, 10 min, 60 min, or whatever, to say 11,150, you make 25 points profit multiplied by $5 per point, or $125.
The S&P ES trades in 1/4 point moves. So, you can make $50/4 as it trades between a full point. Remember, the S&P is a large index and it doesn't just trade in 1 full point increments. So, as it moves between say, 1260 to 1261, the ESs actually trade 1260.25, 1260.50. 1260.75, and finally 1261. Therefore, you make $12.50 per quarter point move.
The best part of all this? Well, actually there are two. They trade so liquid that you can get fills on either shorts or buys many times faster than any stock you'd ever trade. You don't even need to place limit orders unless you are targeting an exit at a specific level. Most of my trades are market orders as specific events happen such as breakouts etc.
But you only need to open an account with I think it's $5000. Then, the minis themselves are only a few grand. If you're in and out intra day, they only cost typically around $1000. Here's a broker I used to use that I think it one of the best for this. I changed awhile ago to Interactive because of online spread trading that only them and optionsexpress allow.
http://www.mbtrading.com/ratesFutures.asp
As you can see, to daytrade a YM future, it costs $1219. If you buy them to hold them for a swingtrade because you are trying for a bigger gain on a larger move then you would get intraday, then it costs $2438.
Just imagine that - you know how the DOW moves. It can move 100 points in two or three day easily. But let's say you think it's moving 100 points in the next month. You buy 1 for $2438. Every point is $5. If it goes your way 100 points, that's $500. That's a 20% return with hardly any money put up for risk. And the commissions are hardly anything - $2.25 each.
So, now how do you make money?
Here's how I make between $200 and $500 a day -
Take a chart that will plot futures - I use Qcharts. I think Prophet.net will do it in their gold package, but since that almost costs as much as Qcharts ($110 a month), I think you're better off with either Qcharts or Esignal. If you trade with Interactive Brokers, realtime futures charts are free. But I don't like their charts. That's why I use Qcharts.
The intermediate level package will plot daily and weekly pivot levels automatically. So, you want to do that.
Then, plot both a 3 period(fast) and an 8 period moving average.
Make sure they are different colors.
Because intra day moves are so fast when they get moving, you want to be ALWAYS trading in the direction of the trend. What's the best way to know the direction of the trend? That 3 period moving average is your signal. When it crosses that 8 period, you're ONLY looking in that direction. Take your opinion somewhere else.
If it's moving up, then you are looking for confirmation of that crossover by both a higher high candle and higher low, and a breakout over the downtrend line that you draw tying the tops of all the downtrending candles in the previous wave.
Remember that all this happens in seconds.
You get in immediately as all that happens. The pivot points are simply used as levels to focus on as the price moves closer to them. Because so many people use them, they are areas you have to watch closely, especially if you're in a trade and it's getting close to one of those levels. Since you never go broke taking a profit, you can bail at those levels and count your money. But it's been my experience that you're wasting a lot of profit by not letting it run.
You really want to time your exits to a 3/8 crossover in the opposite direction. But if it appears that it's going to happen based on the weakening price and obvious rolling over of the moving averages, then you have to take your profits.
On a 5 min chart(which is what I trade), you will get about 4 to 8 crosses a day. If you get 4 to 10 YM points per crossover, you will easily make $200 to $500 a day doing this with only a few contracts per trade.
You can do the math on any of the futures.
You might have noticed I didn't mention anything about any Oscillator or indicators. They just confuse me with too much info. I only trade the moving average crossovers because that's the direction of the move.
You can do this on any timeframe. Plot a 3 and 8 period moving average on any timeframe chart and then confirm the move AFTER the cross with a higher high and low (or reverse for shorting) and then an apparent break over a downtrend. Use those levels signals and then focus on the apparent reversal crossover to exit and you will not only be in every major run, you will also ride most of them all the way through most of the runs. Even when you think that it just can't keep going, it does and you're in it! That's another reason I hate MACD and ADX and Stochs. They peak even when the best runs keep going. This way you never miss that.
Somedays you'll make $50, somedays $1500. You will have losers because sometimes the market churns back and forth and the MAs criss cross. Those days you just get pissed and don't trade every signal. The way you play a day like that is you take the losses (which will be small because you are mechanically exiting on reverse crosses) and as the market churns back and forth, it will create major obvious support and resistance levels. Those levels become even more powerfull breakout/breakdown levels that again - you will be on as they break. But sometimes it will take until the next day to happen.
Just deal with it.
My attitude is that it's what you end up with at the end of the week, not day.
Later, I'll show you'all how to make 4 to 7% a month with 2 to 3 trades max with credit spreads. I think they are the best way to make a living and it's what I most do now. The emini trading just keeps me busy during the day because I think it's fun. Credit spread trading is where you get wealthy. And it's probably the best kept secret in the biz. The beauty is that both InteractiveBrokers and Optionsexpress(too expensive!) allow you to do it online now.
Chris
Sad? What in the world are you talking about? I just showed you the real count we're in thinking I'd help you to understand this stuff which you obviously don't and you attack me?
You know, I'm not even going to respond anymore. I am probably one of the only few here that actually make money doing this and I think I have a lot to offer to those who are trying to learn. If you're just going to blow off everything I say, then go ahead. It's your money.
I bet I am paying more in capital gains this year than you made last year at your job. Hell, I probably made more in just Oct than you made all last year. But hey, I guess you're the Zen Master of the board. I will bow before you. I'm sure you can teach me alot... hehe
Here's how you count an ABC. The "A" is broken down like this:
POKERSAM, you can't count a 1 through 5 within an ABC on the same period chart. Go read your books again. We are currently ending (on the daily chart) the ABC correction off of the 1st (daily). That makes our current wave a 2nd. The mini 1 through 5s that make up each ABC are on smaller timeframes, not dailys like you posted.
Hope that helps..
Pokersam, first of all, you're completely full of sh't if you say you make 10% a day.
I also think you're full of sh't because your posted 'wave' chart has you counting off of the 5th high a new 5 wave count. That's not how you count elliotwaves.
10% a day??? You'd double your money every week and a half and we all know you're not doing that!
Your current post about how you're too busy to talk on here because you're too tied up in your concentration I think says a lot about how full of it you are too. I daytrade eminis and most of the day it's boring because not much really happens during the day other than the first 2 hours and last hour and half.
All daytraders know the '2 oclock turn' rule. Between the end of the first two hours and that time, the day mostly is pretty boring and leaves nothing to do excpet talk on boards like this.
Daytrading options? That's pure suicide and you and everyone knows it. Very rarely on an intra day basis do you get a move in a stock that allows the option to get you in at the ask and make a profit from the spread. It just doesn't work that way. Sure, maybe a few times a week? Maybe. But no where near everyday. Even if you were shorting them you still have the spread problem.
You have to be careful what you claim on a board like this because most likely there are those who know this stuff enough to catch you. I've seen a few other have already.
Honestly, it sounds to me like you're a bitter trader who keeps getting caught short as the market just won't stop going up. Your negativity just spews a losing trader.
Thanks for all the responses guys. I wasn't sure if anyone was listening out there. Sometimes it feels like you're talking to yourself. Now I know some of you are paying attention.
Now back to the fun...
Merck today had some pretty damn good news about winning that lawsuit. It remains to be seen on Tuesday, but that could be a very good catalyst to push the markets higher next week and nudge the Nasdaq up over it's downtrend line....I think that would cause a final blow to shorts and thus a squeeze of all squeezes. We'll see. But for now, we got to deal with what's at hand and that's this downtrend that's yet to be broken.
Pokersam, I think you're looking at your charts upside down.
Or worse, you're paying for Elliotwave.com's $59 a month service where Robert Prechter and Hotchburg do nothing but ramble on about the huge decline about to come. Robert Prechter, who is labled as the all mighty zen master of Elliotwave, predicted last Jan, that it was the 'best time to short the market probably in history'. DOH!
Then, he came roaring back in Sep screaming from the hilltops that the DOW was going to crash 2000 points in between then and Oct. DOUBLE DOH!
I'm amazed he has any money left.
You see, they make a good case for their point of view. Honestly, anyone can take the same chart and make their case in both directions at any given time as to why you should go long or short.
But what all the technicians out there fail to look at is who moves the markets. It's not the technicals, it's the fundamentals. That's defined by companies ability to make money in the current financial environment based on interest rates, debt service ability, and growth potential.
The S&P right now is trading at a forward PE of about 16 to 17. We are around 200 points from its all time high in 2000 when the PE was 32! That puts in perspective why the market keeps marching forward and NEVER breaksdown! Large investors and fund managers who hold the holy grail as to what direction the market goes because they have all the money know that the market is currently undervalued. That's why they constantly buy the dips. That's also why the bears keep getting snookered. Just when they think it's about to go down, BAMN!
If you read or watch the news, it 'seems' the world is going to hell tomorrow. But good news doesn't make news, so you don't see what's really going on out there and that is what is really moving the market. People are spending money (whether they have it or not to spend!) and that's what's keeping companies constantly beating estimates quarter after quarter.
The bad news is old news. As I've said before, people are MORE AFRAID OF MISSING THE NEXT RALLY THAN LOSING MONEY. With the real estate market starting to fall, that party's over. All those speculators are going to start to see the stock market start to run again here shortly. They are going to be the fuel behind this next massive rally over the next few months.
But don't get me wrong ---- large rallies ALWAYS lead to busts. And this one will be no different. A crash in the market is always preceeded by a major rally. So, the 4 year cycle low this year (Sep through Oct) will be a doozy. Remember the last 4 year cycle low? Oct 2002! That selloff will be fed by the huge amount of profit taking created by this upcoming rally. HUGE.
So, enjoy this next few months and then around mid summer, I'll yell again from the IHub mountain tops that it's time to sell sell sell.
This is one of those years where you can literally make 1000% on your money if you time it right. All with options. I very rarely only trade straight calls or puts. But this year is one of those where it's imperative you take the risk I think. A decade of gains can be made in a very short time here.
Don't sit out crying about how the sky is falling. Just go with the action, whether you agree with it or not. Price is the ulitimate oscillator.
ps- does anyone listen to my posts and charts? Am I just wasting my time?
Chris
LOL Keith. That was damn funny...hehe
NEW QQQQ CHART--->>>
Today is a perfect start to a potential flag correction. It will be this small (probably 3 to 7 day) 'drift' backwards forming the 'flag' that will gun Nas right through 2300 and beyond!
Hey Metal, I get that info from my Qcharts. But the best way is to go to cbsmarketwatch.com. As far as indicators you mentioned- the problem I have with them in terms of using them as a trading signal is that they are lagging. For my longer term swingtrades, such as the one I'm proposing here with my purchases of the June $43 calls on the Q's, I look at MACD and CCI to confirm each wave in the wave counts. Each complete wave pattern consists of 5 waves and each one has a typical characteristic in terms of fibonacci retracement/projection levels they usually peak at and the strength of the highs/lows of the MACD and CCI oscillators. For example, a 5th wave top will usually show a divergant lower high in both of those indicators. That's how you know you're not in a 3rd wave and mis-counted the previous wave.
As far as daytrading, I actually make much of my income trading emini's and since so many people here are into systems, here's one for ya'll======
This also works in any timeframe depending on your trading style - plot a 3 and 8 day simple moving average. When they cross, use the 3 day as your signal and short/buy based on which way they cross. I dare anyone here to simply take a daily chart, 60 min chart, 30 min chart, etc over the last year and see how much money you would have made on the just the Q's. Once you buy based on the 3 crossing over, you're sell target would be a combination of weakening volume and an apparent new cross down. Or, you can simply use the crossdown back under to sell.
I use fibonacci projections (which only a few paid for services have such as Qcharts and Esignal) to better time my exits, but you don't have to. By trading this way, you'll NEVER miss the big runs, no matter what timeframe you're trading in.
I personally think you're better off sticking with trading an index like the Q's or the NQ's (futures) because indexes trade in very clear waves with very clear fib targets.
If you use too many indicators (and all sell themselves as the holy grails) you always end up getting conflicting signals that always keep you out of the trades. That's why by simply using a short term moving average crossover (which is kind of a hybrid MACD anyway) you're trading the price direction, not anything else. That way you're not left to guess anything. You're just going with the flow no matter what your opinion is.
And let's face it, the market always proves your opinion wrong, just look at the bears...
NEW CHART--->>
NEW CHART ---->>
I know people just can't bring themselves to believe what I've been pounding the table about here regarding my belief that we are on the cusp of a MAJOR breakout on Nas in the next few months, but I think the facts are the facts. Of course there are at least 1 million reasons to short the markets now. But that time will definitely come later in the year. Probably around August. But between now and about June or July, WATCH OUT! As you can see by the chart below, the NDX as represented by the Q's has some serious catching up to do with the rest of the market. It's the ONLY index that hasn't made at least a 38% retracement from it's all time high in 2000. And look at where that is! $58! Yoowza!
WOW - Check out this Crude Oil chart!
NEW WEIRD CHART ---->>
It appears that NDX 1690 is the level to break being that it is the 50 day MA and as you can see by the PnF charts below, the area of a new buy signal should it be breached. So, until that level is out of the way, we are technically in a downtrend.
BUT - the Q's are actually on a buy signal. Go figure. It's probably wise to focus more on the NDX eventhough they are both the same thing.
As long as we close ANYWHERE within the current range of today's high and low, we will have made yet another higher high and higher low.
As an old chineese proverb says, 'all oceans began with a single drop'.
As mentioned before, we need to break out over that downtrend line(see previous post for chart) before we move into a new 3rd impulse wave.
But today is the second day of new higher highs and lows off of this ABC decline.
There's still more time in the day to screw it all up and come crashing down - and it's not out of the question because the Q's are still technically in a downtrend. It's funny though how that downtrend line is exactly where we stopped today.
Referring to a previous poster, technical indicators and oscillators are not 'breadth' charts. Breadth is a measure of underlying strength or weakness in terms of up or down volume and new highs and lows. As it stands right now as I type this, the Nasdaq shows 1585 advancing stocks to 1282 declining with 69 new 52 week highs compared to 14 lows. Up volume is twice that of down volume at 752mill to 358mill.
So, breadth today is positive but not 'great'.
The last hour of the day today is going to be a great forteller of what's to come I think.
NEW CHART --->>
Ooops. I yes, I meant $41.35. If we close above that, my weekly chart is going to be what we're going to see I think
2 NEW CHARTS --->>
If Q's close over $43.35 in the next few days, see ya!
Note - regardless of these charts, the Q's need to close above that downtrend. $43.35 will do it.
NEW CHART --- I think this chart shows pretty clear what's going on - at least in my mind! You'll notice I made the target possibilities of the 61% and possibly even the 70%. I don't think it'll get that far because the smaller time frame wave counts (like we just ended) will do that, not the larger ones (like we're currently in). These larger 2nd waves usually at best hit or breach a little more than 50%, which is where we are now. But, hey! who knows? If you really want to know, just wait for confirmation of the next wave count starting up with a close above the 'b' wave high. Then you're most likely on the train without the pain.
The volume on the Q's is almost anemic. That snap back rally on Friday had 112 million shares. Today, we are only at 34 million so far. So much for a massive selloff.
I'm telling you'all, this is only an ABC correction and is apparenty working to sucker in shorts as most 2nd wave corrections do.
We are on the verge of something quite profound. I'm counting this wave pattern and the impending triangle completion.
Fundamentally there is nothing to justify a breakdown. That's why I don't concern myself with it. One thing I have learned over the years is that ALL markets eventually trade to the mean. People over invested in real estate are going to soon learn that too. Here in Orange County, Ca, it's estimated that the median price home is almost 2.5 times the standard deviation mean price - which is based on a 20 year average price home rising with both inflation and income growth. Considering where I live the average household income is just under $100k and the average home is close to $900k, you can see how there's some serious downside there. By normal lending standards, a couple making $100k should only be able to buy a $400k house with 20% down. Maybe 10%.
In 2000, the price of stocks as measured by the S&P was 2 times standard deviation which again is a calculation based on interest rates (cost to carry debt on companies balance sheets) and growth rate. At an average of almost 32 times earnings, even that market had to eventually catch up to reality in terms of what they 'should' be trading at.
And of course as with anything, when a market gets going, it usually over shoots in that direction, up or down. We over shot way above where the market 'should' have been valued and thus corrected and way over shot on the downside. Currently, we are still undervalued as measured by the S&P's PE and are converging both those fundamental undervaluations and the technical breakout levels.
That's why I am looking at this as just a typical "ABC" correction and nothing more. We possibly could get down to a 61% retrace level of the entire first wave which would be around $40 on the Qs. But all that does is contract the rubberband even more.
I'll post some charts later showing how I am viewing things...
It appears to me that the telecom sector is going to be the one to watch.
Usually it's a sector or two that gets the attention and the ball rolling. Not all sectors will do as good as each other. Lately as everyone knows it's been oil and oil services. Also you can add in Gold. But I think those days are history. I think the gold guys are going to be sadly suprised this year. The market can't go up when it's oil and gold making new highs. High oil prices are tax increases on the consumer and no one is going to risk a ton of money in the market when that's happening.
That's why I think you're seeing this major selloff, or 'sector rotation' as 'they' call it from Oil to -- what?
That 'what' is going to be the key. I think specific tech sectors are going to be the next bubble and look to the telecom sector for that. It seems to be the only place where new stuff is happening. Everyone knows and needs wireless stuff and that's where all the companies are that do it.
Just my opinion. I trade the Q's mainly. Mostly spreads and daily NQ and YM futures. But being that I am expecting this major rally here, I am going all in in the June Calls. Very rare thing for me and usually a very dangerous play to go only in basic calls or puts. But every now and then you get the opportunity to make a killing. This is one of them.
For those here who are fairly new to this stuff, I think it's usefull to understand why 'cycles' work so well if you understand them. I know many here are experienced enough to understand this stuff, so just bear along.
The reason why Sep through Oct is such a typically bad time is because Mutual Fund's fiscal years end Oct 31st. For tax purposes, they will all typically sell their losers in unison between those times. If the market is moving well into Oct, they will wait until Oct to sell their losers. If there are many losers to sell, the overall market internals will show major breadth weakness eventhough the major indexes aren't really moving much. That usually will bring in all the technical traders to short the market's 'apparent' weakness.
Then Nov through Jan is the time the funds start buying back. Jan is always the test because many amature traders will see these hugh runs going into Jan and think it just can't keep going higher. Or worse, they see all the oscillators (macd, stochastics, etc) peaking and think they can time the tops with those at those levels. Then they get killed as the market keeps going higher into late Jan or even early Feb. That's why the first 2 weeks are known as a short term cycle low in the market. April to May is also a mid term cycle low as many sell stocks to pay taxes.
This year will be different though. We are right now in the last gasp of a Feb low, probably this week!
To answer a question, the catalyst for a move in Nas to 2900 is simply a combination of a 3rd wave imulse which breaks out of a 3 year ascending triangle. But all that stuff means is that it will be the technical reason for the breakout. The money behind it is this-
Everyone knows the real estate market has sucked the speculation money out of the stock market over the last 5 years. Now, everyone knows the real estate market is showing its signs of dying. I live in Southern California (Huntington Beach) were prices are actually starting to go down. Here, the average home price is down $50k since June. That means speculators need a place to invest. Smart money always makes money. Bonds are way overvalued and everyone knows it.
That leaves only the stock market. Just look at how everyone and their mother has been throwing money at Japan - namely the ETF EWJ. It's always one the most active stocks in the market. Why? Because everyone sees it going up and up and up and doesn't want to be left behind. Remember, the Nikkei was at 42k in 1989 and now everyone's excited that it's 16k! Just imagine when the nightly news starts talking about the Nas moving higher.
We are going to see a MAJOR move higher here and it's going to start any day. I say within the next 2 weeks. All we need is a move higher into 2300. Then, a close above 2340 to 2350 and it's gone!
All the technicians are going to run to their charts and see that monthly chart I posted with the next resistance level way above at 2900.
Will it go that high? I don't know. But there is definitely enough money and short positions out there to push it there. Justified or not.
But don't confuse what I'm saying here with the fact that I do believe eventually the market is going lower. This housing bubble is gonna kill everything. It's going to be ugly I think in the end.
But that just means we go short (puts)!
As stated in my clearstation posts, I am averaging into a position on the June $43 Calls on the QQQQs. The goal is to end up with an average on them of about $1. Right now my average is .89. If the Nas breaks out of 2350, the Q's will break $44. If they break $44 they are most likely runing to $46 to $47. If that happens within the next 3 to 4 months as expected, then the calls will triple or even quadruple depending on how fast it happens.
Chris
After looking at those two charts I just posted, I think it's imformative to explain why I am so convinced that we are on the verge of a major breakout right now. If you look at that monthly chart, you'll see that that last monthly bar is a breakout bar that should make this month another continuation bar. Yes, that means THIS month we should see a higher high than last month. Crazy as that sounds, next week 'could' be the last chance to get in before the party starts.
If Nasdaq breaks out above 2340+, it's off to the races and as you can see on the monthly chart, there is NO resistance until about 2900. I think we get between here and there within the next 3 months! You heard it here!
I know it's easy to fall into the trap of thinking that everything 'should' be going down with all the problems in the world and of course the housing bubble about the bust. I am a believer in that too. But sometimes the stock market reality is alot different then world reality because people are MORE AFRAID OF MISSING THE NEXT RALLY then losing money.
The S&P right now is trading at a combined PE of about 16. At the high of 2000 when the S&P was at 1500+, it was trading at a PE of 32! The companies that make up that index right now are in a much better financial position by a factor of 10 with much more cash on hand and are trading at half the PE! That's why so many 'experts' have been yelling for S&P 1300. But with that massive ascending triangle about to complete this month, the breakout and subsiquent short squeeze will gun it far higher, probably to around 1400. The Nasdaq will lead the way with it's hugh breakout.
There are so many reasons to short this market, but if you've seen in that chart over the last 4 years, every decline has been met with a massive rally completely confusing the shorts. Each time that has been a higher low thus creating that ascending triangle.
What's going to happen I think is that we spike up over the next 3 or so months, and then ---- get this ------
A MAJOR Oct low! A major selloff from about June this year to Oct! Oct this year is the 4 year cycle low. And they are BIG! The 1987 crash was 20% decline in one day and that was a 4 year cycle low with the first year of the new Fed - Greenspan. What do we have now? A new chairman and a 4 year cycle low! Hmmmmm..
But be careful between now and summer if you're planning on shorting!
Chris
This chart tells all....
Since I'm new, I'm going to first post a chart to show where I stand.. Let's see if this works....
Hey! Is this the CS board everyone keeps telling me about? How do I post charts here?