Author: Evan

bears take the spotlight, now don’t choke

Admittedly, while the markets continue to remain extremely resilient, especially in light of the recent global headlines, I do have a slightly increased level of bullish unease at these new highs. Leadership, breadth, some of the market internals that I pay attention to have some warning signs flashing. Does that mean i’m running out and turning into an uber bear? absolutely not. My opinion means nothing if the market clearly exhibits strong up-trending tendency’s. What it does mean is that I have lowered my long positions considerably, and I am more interested in just seeing how the market acts at these new highs for a few days before I add any new positions.  I think price is fairly vulnerable up here, and if we lose 187.50 support we could sink back into the previous range pretty quickly, perhaps this upper level range is a bull trap?

$SPY that was taken straight from my market overview from last sundays review, can this resilient market continue its grind? The fact that the market did breakdown from short term support this past week is not anything I am trying to boast about because it could have just as easily done the opposite. They key is to never stubbornly fight the market based entirely on your own opinion. Always allow the market to objectively confirm your ideas. On friday there was no real reason to have bearish bets beyond complete speculation or as a hedge. This Friday, things are a bit different. While Wednesday’s gap down was impressively met with some eager buyers they would ultimately turn into underwater bulls just one day later if they were not quick enough to exit or use some tight stops. Thursday the market opened with a small follow through gap to the upside and the bears capitalized on it and sold all day long slicing through 186.8 support and ultimately wednesdays lows. You can see we just about settled in on some intermediate support in the low 184s on Fridays session. This 184 level becomes pretty important because there’s really not a whole of strong support underneath us if that gives way. Of course we are still in a long term uptrend on the larger time frame charts but for the short to intermediate term we definitely could see some pressure here if bears continue to press and ultimately challenge those longer term rising trend line support. On the flip side it’s also possible this 184 level can ultimately hold as support and offer the next launch pad to higher prices. Time will tell, but for next week we really need to keep an eye on Fridays lows and this near term resistance the market was respecting on Friday ~185.80. Because I was eagerly waiting to put on my bear suit last Sunday I was fortunate enough to react quick enough to catch much of this downside action on Thursday/Friday and I continue to hold a speculative SPY april 187 put position in my swing account over the weekend with 0 longs. Short term bearish trends within the context of long/intermediate term uptrends are always tricky to capitalize on and typically require a bit more precision and flexibility as apposed to trades that have all timeframes aligned in the same direction. Keep patient and build up a watchlist of stocks to own or add too if you rather just wait for the return of the bull. Charts below have all been expanded to 60 minute timeframes to better show some of the more intermediate term support levels.

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can this resilient market continue its grind?

$SPY i always like to start off my analysis referencing last weeks review, the bull & bear cases at all time highs, so readers can relate to the analysis laid out the week before and compare it what actually took place. This past Monday we were welcomed with a ~1.5% gap down on the the Russian/Ukraine actions that were unfolding over last weekend. Nevertheless, 4 days later, everything was recovered, and then some. We made new all time highs this week and chopped around in a new near term base between 187.50 and 189. We laid out the bull and bear cases for the markets last week and I still believe all of those bullet points hold up one week later. Admittedly, while the markets continue to remain extremely resilient, especially in light of the recent global headlines, I do have a slightly increased level of bullish unease at these new highs. Leadership, breadth, some of the market internals that I pay attention to have some warning signs flashing. Does that mean i’m running out and turning into an uber bear? absolutely not. My opinion means nothing if the market clearly exhibits strong up-trending tendency’s. What it does mean is that I have lowered my long positions considerably, and I am more interested in just seeing how the market acts at these new highs for a few days before I add any new positions.  I think price is fairly vulnerable up here, and if we lose 187.50 support we could sink back into the previous range pretty quickly, perhaps this upper level range is a bull trap? Again, I don’t want to predict price, rather just keep an open mind. If we chop around here and firm up, and then continue higher then so be it, I’ll add some more long exposure at that point. Keep an eye on this upper level range going into next week.

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How to Emotionally Manage Winning and Losing Trades Splash Image

How to Emotionally Manage Winning and Losing Trades

How to emotionally manage winning and losing trades dives into the much less discussed, mental side of the equation around trade management.

Your specific trading strategy is going to be a key determining factor in how you manage positions, but it’s your emotional state and internal dialogue, that will ultimately dictate whether or not you manage trades as your strategy suggests.

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the bull & bear cases at all time highs

$SPY ding ding ding new all time highs. If you’ve been following my weekly posts this shouldn’t have come as too much of a surprise as we’ve been on top of this bullish bias grind type action (last week: february bulls banging against all time highs) in the broader markets. So let’s take an objective look at where we are now that we have broken above the December/January all time highs in the S&P.

THE BEAR CASE: we aren’t exactly effortlessly trending higher as of the past two weeks. The leadership overall has been a little more narrow and the overall  volume on this February rally has been much lighter than the January pullback we experienced to start off the year. The overlapping back and forth type grind action demonstrates the indecision and significance of these price levels as a possible inflection[turning] point. Fridays final 1 hour candle goes to show you how ‘on edge’ the market appears to be when the bears chomped off almost 2 SPY points before the bulls stepped up and bounced it higher.

THE BULL CASE: first and most importantly, we’re at all time highs. Any objective analysis should realize the importance of a market at an all time high. Second, while we may have just slogged through two weeks of grinding type action we have literally V-shape-snap-back-rallied the January pullback in 18 days with 0 consecutive back to back down days. There has been no pullback to speak of since we reversed higher at SPY 174 on February 5th and I am willing to bet the majority of bulls have missed this snap back OR are not as invested as they may otherwise want to be.

Taking both sides into account I find it hard to be an objective bear at this given time. That’s not to say i’m suggesting being stubbornly long because I DO think there is a very real chance the bears can come out of the woodwork and hit this market (as demonstrated on fridays close) especially on some well timed headlines (hmm Ukraine?). The point is the market is STILL acting well, it’s still grinding the wall of worry higher. I remain with 6 longs and a SPY put position on as a hedge. Until the market starts breaking support and acting crazy I will remain long.

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february bulls banging against all time highs

$SPY last week in my recap, bulls driving higher on cruise control I talked about the likelihood we continue in motion higher to tag all time highs set at 184.94 and if that happened we should carefully asses the markets reaction around those levels. It took until Wednesday when we traded 1 penny above those all time highs before getting violently rejected for the remainder of the day. That was a bearish event, however. Thursday we completely reversed all of that downside action and fell just shy of tagging those highs for a third time before pulling back again. Overall I consider this relatively constructive action for the bulls, but for a true second wind of momentum they really need a definitive break above 185. Until we see that we have immediate risk all the way down to Wednesday’s lows at 182.60ish. The bulls really want to put in a higher pivot low above 182.60 to keep the pressure on the bears and keep banging against these all time highs. Meanwhile the bears really don’t want to see the bulls test 185 again, the more tests, the more likelihood of an eventual break. The bulls still have the ball at this point and it’s not going to change until the bears prove themselves and take it away. If you are bearish then you want to see a breakdown with authority come sooner than later. I added one more long to my swing portfolio this week and I covered my two shorts. I’m about 60% long right here.

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bulls driving higher on cruise control

$SPY 7 straight sessions of strong bull daily candle bars printed in the indices as unconvinced traders sit on the sidelines and non believing bears dig deeper in their short positions. We closed Friday about 1 $SPY point from all time highs as the bulls have basically had cruise control on the entire trip up here. Last week I wrote in my weekly recap bear bounce to sell or V shaped rally to buy I outlined some of the criteria I would be looking for this week to help decide which direction to lean. The 181 level I talked about was essentially the battleground I wanted to see resolved to help decide if this rally was for real, and hindsight shows us that the bulls had a clean victory. So what happens now? I wish I knew, so lets break down the action for clues. We are in an immediate term uptrend with a level of interest (expected resistance) 1 point above us coinciding with all time highs. We have short term support about two points below us at 182. One would expect this near term trend to continue to all time highs where the price action will once again need to be assessed. We need to plan out the scenarios, will we rocket by the old highs creating a mini buying panic to higher prices? Will we stall out and tread water for a little time? Or maybe a violent rejection back into the range? Time will tell, until then , trade your plan and don’t get caught flat footed. Being long is paying right now, being short is not, all we know for certain is the now.

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bear bounce to sell or V shaped rally to buy?

$SPY the markets came full circle this week after starting off on a bad foot immediately breaking down below last weeks multi day support line of 177 on Mondays session. Tuesday and Wednesday we chopped around carving out a new and tighter 1.5pt trading range from 174 to 175.50 until Thursday where the bulls finally rallied together to put what would become the first of two consecutive trend up days where we managed to close right at last weeks resistance zone near 179.50ish. Looking ahead to next week we have a few things to consider whether you are a bull or bear.

Lets take the bull case first. Take a look at Thursday’s and Friday’s sessions together and think back to 2013. Anything look familiar? Is this the start to the classic V shaped rally off a 5% pullback? If you are a bull you want to see the market kick off next week with a gap up and ignore this resistance level and continue its advance higher into the 180s. I think if that can happen, the bulls may have something more substantial to hang their hats on going forward.

The bear case simply states this is a “bear market” snap back rally, right into resistance that ought to be sold into. Standard oversold conditions getting worked off and just barely at a 50% retrace from where the impulse down leg started at $SPY 184. Thinner leading stock participation on the way up and key sectors still lagging after getting hit hard such, ie the financials. The bears want to see price contained below the 61.8% retracement from this recent down move to keep the selling pressure on. As you will see in a number of individual stocks below, many names are at short to intermediate term resistance levels which seems likely to cause some pause in the near term bull advance.

Bottom line I think the markets at an interesting spot here. If you were knife catching or keen enough to jump on board this 2 day rally early then I think the “easy” money has just been made and it’s going forward from these levels that will be an important gauge to the markets intentions for the month of February. I would not advise being overly exposed one way or the other at this point. The higher we climb from here, the more bullish I lean and the longer we stay below 180-181 the more neutral to cautious I remain.

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market unrest despite pockets of strength

$SPY so last week I laid out three scenarios going forward for the indices after the initial breakdown. Here we are 1 week later and the only scenario we can write off at this point as not possible to play out is the 1-2 day shake. So lets recap what we got:

If this is a true breakdown and intermediate trend reversal then the selling is not over, there’s more overhead supply to be offered out in the coming week and 175-176 can easily be the first rest stop.
If this is a 1-2 day shake brilliant, it certainly capitulated many weak longs and turned enough technicians bearish, perhaps to get short or throw in their bull towel for at least the next week or two. This was a fairly obvious support level breakdown and lets not forget this past year of trading is notoriously noted for its 1 day wonder false breakdowns, think November 7, 2013, January 13, 2014.
If this is a start to new market character of high magnitude thrusts followed by slow grinding basing action, perhaps we stabilize around these levels early next week, move sideways for 7 – 10 days before pushing back towards all time highs once the bulk of earnings season subsides.

The market caught its footing this week as bulls and bears wrestled it out throughout this 177 – 179.50 range in sessions of elevated volatility and increased volume. It’s positive that the bulls have at least paused the steep downtrend of lower prices however any bullish reversal attempts have been met with stiff resistance despite some key individual stocks moving higher off earnings reports. It seems like I am stating the obvious at this point but there seems to be a growing number of individual names diverging both on the down and upside from the major indices. Looking ahead to next week we should remain conscious of this new range in the indices and make it a point not to get whipsawed between the lows and highs of this past week while the market churns up both bulls and bears alike. Fight for your prices, remain cautious of the headfakes, and be weary of chasing breakouts and breakdowns, this is not the optimal environment to be aggressively chasing. I came into this week light long in my swing account and I closed out Friday stopped out of all but one of my positions. I will focus my attention on intraday setups, and despite the volatility and beating some stocks took, my day trading account managed to eek out some small profits. Want a way to generate additional day to day cash flow or idea generation? check out my performance, and then my day trading alert service.

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boom! market breakdown. here’s what you need to know.

$SPY so lets set the scene in the indices after this weeks breakdown. We spent the past 30 days trading at/near all time highs ping ponging between ~182-185 until Friday when we gapped below support resulting in an absence of new interested bulls and an increasing number of scared and soon to be panicked  longs. Here are some of the scenarios going forward:

If this is a true breakdown and intermediate trend reversal then the selling is not over, there’s more overhead supply to be offered out in the coming week and 175-176 can easily be the first rest stop.

If this is a 1-2 day shake brilliant, it certainly capitulated many weak longs and turned enough technicians bearish, perhaps to get short or throw in their bull towel for at least the next week or two. This was a fairly obvious support level breakdown and lets not forget this past year of trading is notoriously noted for its 1 day wonder false breakdowns, think November 7, 2013, January 13, 2014.

If this is a start to new market character of high magnitude thrusts followed by slow grinding basing action, perhaps we stabilize around these levels early next week, move sideways for 7 – 10 days before pushing back towards all time highs once the bulk of earnings season subsides.

Whichever camp you are in, I think Friday’s action is a day to stop and take notice, and assess how the changing market environment affects your trading strategy. Here’s how I managed my swing portfolio this week. Because I am a day trader at my core, a swing position for me is much more actively managed than most might suggest. Nonetheless, I really didn’t like the weakness we saw in many names on Thursday and the fact that we struggled for much of the day trying to stabilize on weak market internals swayed me to become an interested seller in some of my longs. I went into Thursday with 6 longs, and I left with 2. I sold my Amazon into 405 on Thursday for a 10 point gain, I sold my GS at 171.4 for a 70 cent loss. Fridays mess unfolded and what did I do? I bought back some of my positions I sold the day before. Amazon I jumped back in at 390, GS back in at 167.80, and so on. Can the market continue against me in the near term? absolutely. None of these positions are full size, as an experienced trader I understand the risks of buying pullbacks (a la knife catching). So this rant is to just describe how I personally navigate the markets, and how I manage risk during changing market environments without a stubborn predictive bias. Onto next week I go, with continued light long exposure with an open mind to any of the three above scenarios to play out. Price action is my guide.

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trade setups in preparation of earnings

$SPY managed to tag new intraday all time highs this week despite the bears break down attempt kicking off the week on Monday’s session. The bulls couldn’t quite hit the ground running as new all time high prices in the index was met with some mild profit taking and aggressive shorts causing a sideways to down flag to develop into the end of the week. The bulls didn’t necessarily have the momentum to push us through the highs on the first retest but that doesn’t mean its time to pack up your bags and join the bears. It’s really tough not to have a bullish bias at current levels so close to all time highs. The clear action area for the bulls is a break and close above 185, and until that happens the market is in danger of dripping lower back towards the bottom end of this 182-185 range. The biggest catalyst right now is earnings season and we are going to be hit with more releases this week which should start influencing price action on a sector by sector basis. I am going into next week with an overall bullish bias and a light long lineup of swing positions.

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