3.23 – Previewing the week

My bearish friends are getting bullish. But technically, I don’t see it.


Well, I sure welcomed the 3 day weekend. As I prepare for the upcoming week I have a number of thoughts. 1st of all, several of the technicians I follow have turned short term bullish. I just don’t yet have confirmation. And in without confirmation, I just don’t want to go there yet.
Peter (shadow trader) and Tim (slope of hope) have started making significantly bullish calls. They are doing it for some fundamental reasons. Which seems funny to me, being that they are technicians. Peter R. is looking at a monthly SPY forming a bottoming tail hammer. Yet the month has not finished yet. I understand some of their reasoning. I look at the bullish reasoning based around the idea that 4 significant happenings took place last week.
1) The bottom has fallen out of commodities. The hedge funds need to put their money somewhere.
2) Quad witching took place on Thursday. That freed up lots of capital for mutual funds and hedgies.
3) Treasuries offer a very low yield, with the low yield it gives reason to put it to work in equities.
4) The Fed is doing everything it can to promote growth, including 1 pt drop in the discount rate.
Technically:
1) Double bottom has been tested.
2) Big up move on Tuesday, followed by a 50% retracement on Weds, and a 62% retracement and move up on Thurs.
Bearishly, here is what I am looking at:
SPY%203.22.gif
We are buried in a downtrend. There is the entire February Channel above us (lots of supply). How can we possibly be bullish here? This will take time to churn through it the overhead supply. However, when the market finally breaks through the secondary downtrend on heavy volume, I will be getting long all the way the primary downtrend, around 1420. But until then, I must remain bearish.
I was reading a few weekend articles, and listened to a very good podcast, The Disciplined Investor. If you ever wanted to know about Naked Short Selling and its unintended effects, watch this! (it takes about 45 minutes, but it is good info.)
The article I wrapped up the night with was on Seeking Alpha

The article was summed up in it’s final two paragraphs:
Finally, people are being led to believe that things are under control, so instead of doing whatever is necessary to prepare for the worst, they are setting themselves up for an even bigger blindsiding than before.
In sum, while bulls believe that share prices are poised to reverse and move sharply higher, the facts suggest otherwise. In reality, what they are seeing is the set-up for the next leg down. Some might call that a continuation point.

Granted the author did write the book:

So I can imagine his point of view. That said, his article was very well articulated.
MONDAY UPDATES:
The market is flying to the upside. I still find it hard to be a bull. But that is just me.
We have substantially broken the Second downtrend line. Into this up move I have put on a few positions.
COF – 3 unit at a variety of prices. Jun 50/40p between 2.30 and 2.15. With underlying between 54.35 and 55.50. And mental stops at 57.50. I put on a 4th and 5th unit on for 1.80, price 57.35. When I got home, I notice a HUGE topping tail from a previous swing/Wave 4 high. Now, I am ready to make some $$.
cof%203.24.gif
Andrew Horowitz, the disciplined investor, offers a well informed fundamental article on the subject.
IWM – Added 2 units of 70/72c 64/62p for 1.13 and 1.15 @ 69.40 and 69.70 at the downtrend line.
Even with a few good entries, my accts were slapped around today. Down 1.2%. But here I sit with 990 negative deltas. If we can get a good selloff, I will be in very good shape. I have nothing long, only short. The good news is that EVERYTHING I own is still showing positive. But damn, a massive selloff would be nice.

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