Crater Day for $SPX: More to Come?

Today is a compelling refutation of yesterday’s headline GDP-predicated retracement/rally, particularly given the high live volume vis-a-vis the prevalent low volume program trading paradigm. My ongoing observation has been that small cap growth is leading other areas of the style map around by the nose, and today is no different with $RUT posting a 2.85% decline at 1330ET.

Chart below is of SPX with some key technical considerations and potential target/bounce points based off fibonacci extension levels Wednesday-today’s activity.

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S&P 500: Measured Move Down

Russell 2000: Harbinger of Armageddon

Hmmm. Pretty sure I published this, but it isn’t posted. Trades at bottom are closed in profit at this point….

Yes, one of the four horsemen depicted in Revelation goes by the name of Russell.

Been a few. Think I’ll get up in the middle of the night to check in on my trades, go out under the Perseids meteor shower.

Meanwhile, thought I’d throw this up:

Ominous, no? The worst-case scenario would disappoint more than a few people. Likely? I think not…BUT…. Back to the horizontal line is more than enough to shake out the weak hands.

Short GBP/JPY @ 158.26, EUR/JPY @ 135.72, CAD/JPY @ 86.81, Long USD/CAD @ 1.1017.

More later.

Time For A Breath?

…My thinking.  $SPX has tagged and closed above 1k (yippee for now), but is in the thick of a small, formidable range bounded to the upside ~1014 (38.2% fib retracement from top to bottom).  That may mean nothing: if not, the way up is tall and thin with little to bump one’s head on until 1122 (50% retracement).  Upside resistance there on the equity side resonates with what I think are the terminal fibonacci extensions to be tagged on this move up for EUR/USD, GBP/USD and GBP/JPY: three of a small handful of pairs I monitor to evaluate sentiment.  I may be all wrong (and I’m guarding convictions with fairly tight stops), but I see some backflow out of EUR and GBP overnight, into the morning.  CPCEPI and Consumption out at 0830ET could catalyze or nullify that projections.

Trades for overnight:

USD/CAD: Long 1.0663, Stop 1.0570, TP 1.0763

GBP/JPY: Short 161.63, Stop 162.40, TP 160.64

EUR/USD: Short 1.4403, Stop 144.73, TP 1.4303

EUR/JPY Short 137.30, Stop 137.92, TP 136.29

08/03/09 Overnight Trades: GBP/USD

Last night’s long trades on GBP/JPY, GBP/USD, EUR/JPY, EUR/USD and short on USD/CAD went over well.  Each trade was based on anticipation of attaining a fibonacci extension level, building on last Friday’s substantial movement.  No time to outline each trade, but here’s a snippet, going over the GBP/USD trade.

First, a simple trade I outlined over the weekend, didn’t take for obvious reasons (entry was on 07/19), but on which the trade I did take last night was built:

And last night’s trade.  Basic 1-2-3 pattern: a measured move up, even if it’s a pretty ugly one.  Given that I wasn’t starting this until the beginning of this month, I was a little late to the party.

Picking the low on 07/29 at 1.6338 as Point 1, the swing high early the next morning at 1.6526 and then the low shortly thereafter at 164.56, the original trigger for this trade would’ve been either:

• a close above the corrective trendline at 1000 ET on 07/30 at 1.6492, which subsequently spun its wheels until, the second and more conservative entry point at
• on the close above the range of the first fibonacci study in the 0000 ET 07/31 candle at 1.6542.

With neither of those applying by Sunday night, I entered a couple pips above the 161.8% extension of the green study from the previous chart (the top dashed green line @ 1.6735) at 1.6737. Breaking above the congestion at 1.6760 (the 161.8% extension of the second green study on this chart) confirmed the entry. I then time stopped the trade to take profit this morning at 1.6868 for +131.

If one were to draw a retracement over the congestion from 1200 ET 07/31 to 0000 ET 08/03, they’d find price retraced 78.6%, from which an extension could be drawn that pegs the 161.8% level for each in the 168.50 area. The next area of interest is the 261.8% of these and the latter green study on the above chart, all falling at 1.6937-1.6954.

The trade itself is noteworthy because of the hesitancy I would otherwise have over taking an entry after a parabolic rise like the one that occurred on 07/31.

July Behind, August Ahead

At risk of jeopardizing positive momentum, I’ll say it anyway: July was a great month.  The final two weeks brought the incline of my primary account’s equity curve back to a more reasonable angle, but were still fantastic weeks.  Overall, the preceding 6 weeks have been an amazing streak that have more than doubled my equity from mid-June.

Perpetuating success means looking around for failure.  Bad habits go away, making room for others or become dormant only to return more forcefully than ever.  I’ve elaborated some on what I feel I’ve been doing right in previous posts; but what have I been doing wrong?  Well, the usual answer: ineffectively managing risk.  My win ratio has been through the roof across this 1.5 month period (well, what I regard as “through the roof”: 70-80%), but those times where I have been wrong, especially one instance of multiple pairs on together with a correlated risk profile that I didn’t properly account for, I’ve taken hits that I think are unacceptable.  A related issue is volume: “high probability setups” is just fine, but when you’re taking quite a few of those and managing them a little more shoddily than you’d like because quantity overwhelms your patience, availability, etc., then there is a problem, “high probability” be damned.

This month, I’ll be concentrating on 1) moderating trade volume.  No quotas or that kind of nonsense.  2) In tandem with that, evaluating trades-in-progress (TIP) a bit more rigorously.  I usually time stop any TIPs two times a day (once around 7-8 a.m., the other around 12 p.m-1 p.m. ET) whether in profit or not, but there is always the occasional trade I regret letting go of because of further potential.  Sure, I’ll dip back in later if variables align, but fewer trades and less analysis for re-entry would follow from letting those “winners run”.  Or maybe I shouldn’t screw with a good thing.  We’ll see.

In other news, a randomly answered question over the weekend about fibonacci retracements and extensions rekindled my interest in their application to my own activity.  I’ve never been much for mucking around with indicators, methodologies developed and peddled by others, systems (automated or not).  My toolbox has accumulated odds-and-ends over time, but is relatively lo-tech, simplistic and without novelty.  Thankfully, innate temperament has always dissuaded me from hopping on the custom indicator/EA/method-o’-the-week hamster wheel.  Fibonacci – and Ichimoku – is, really, about as “sophisticated” as gets, and I realize I’ve missed how my use of fib studies complemented those tools I more typically use.  My plan is to use retracements, projections, extensions and fans more extensively, and if I’m inclined I’ll get back into some Gartley and other harmonic patterns.

GBP/JPY: Double Top?

Maybe.  Or not.  I emphatically declare that I am not calling a double top.  But, for the first time since…well, for a couple of weeks anyway, I’m cognizant of short-side potential beyond the quick flick of a countertrend throwback.

In favor of a top we have:

• A rapid return to the 78.6% retracement level of the entire decline from 160 to 147 that played out over the first two weeks of July.  This area around 157 yielded a brief hesitation 07/03-07/06 (holiday weekend ranging?).   A first occurrence last Thursday moved back to the 61.8% before being batted upward once more.
• The 07/23 and 07/27 swing highs occur within pips of each other on a closing basis, creating a violation of the series of 4 higher highs in place since 07/09.
• The Modified Schiff Pitchfork (MSPF) in green (Points: 1) the perpendicular of the 07/22 low and point 3, 2) 07/23 high, 3) 07/25 low) cuts a median line through the 78.6% retracement level where price topped today: confluence reinforces resistance.

In opposition to a top:

• The momentum of a 6 month (still corrective) uptrend favoring further upside.
• A Standard PF (1) 07/17 low, 2) 07/20 high, 3) 07/22 low) with a lower forkline tested unsuccessfully on two and now potentially 3 touches that…
• …looks to produce the lower ascending trend line for an ascending triangle that would break just above 157 (and very soon, I’d add)
• The price objective for the Adam & Adam Double Bottom of 07/08, 07/13 comes in around 158.60ish

But, the converging MSPF median line and Standard PF lower fork line are producing a rising wedge of sorts, which could produce a bearish move down.  Hmm.

(continued below)

Assuming a short confirms: A close below the Standard PF blue line targets the lower MSPF fork at 156, then the 61.8% retracement/07/23-07/25 bottoms at 155.25-50 to move out of a horizontal congestion scenario there.  Also, that would mean a break of the lower ascending trendline for the correction from 07/13, which is itself part of a corrective rising wedge.  Then 154.  And, the price objective measuring peak to trough of the potential double top is ~245 pips from the breakout, coming in right at the 07/22 low in the 152.80 neighborhood.

For now, I watch and wait.  Though I trade against the trend with regularity, dedication to those trades are subject to whatever contingencies arise and are usually cut off if they turn adverse with little leniency.  This trade, if it did fire off would likely play out over a swing timeframe and require a little more perseverance than I’m presently accustomed to.  As usual, trade timeframes open up or contract as each trade evolves.

S&P 500: Reaction High?

By the look of it a brief pullback is in the offing for the S&P, probably to the neighborhood of 925-930 before resuming the current upswing to ~1000-1015.

Pivoting Up?

The corrective pullback channel that the JPY crosses have been working through is just about at an end.  And now I’m just looking for some solid technical justification to prove that intuition isn’t horribly wrong.

What do I see?

• Longish lower wicks on 0300-0500 1H denoting bearish exhaustion
• (At least temporary) floor beneath price at fibonacci retracement levels, dynamic support (e.g. GBP/JPY at 153-153.25)

Not enough.  So I’ll sit on my hands until what amounts to an arbitrary directional bias is something more.  Then I’ll be back with the details.

The Fizzle Point

I fizzled out in early March: inexplicable, terribly sudden disappearances are a bad habit of mine. But really, it’s tax season, though it isn’t about my own taxes. I’m not a CPA, and I do not work at an accounting firm. I’m not a quasi-CPA, bookkeeper, in payroll, etc. All the same, though…. Anyway, I think my spate of early-Spring sinus infections has ended, and my blogger batteries are recharged. So, until they die again….

This is a bit different: every now and again, I dip into the equity side of things, especially as there is occasion to call a reversal and gratify a barely latent desire to prove I’m right that is constantly nagging at me. Well: that’s only half-true.

A few things of note:

The next round, psychological markers occur at 850, 900.

Fibonacci Projection is the topic of the red Fib levels on the right side of the chart (ignore the blue fib levels, though they are an example of the same thing). The red fib lines in the middle, from 800-933 (real body low – real body top) measure a swing low to swing high. The red fib lines are a projection that correlates to the previous move: in fact, you’ll notice 681-816 (again, real bodies, on the weekly) is almost exactly the measurement of the previous swing. Taking the symmetry of those moves as an embarkment point, we can project likely reversal points on this move by measuring 127.2% and 161.8% of 133 (or 135) points. These projections hit at exactly 850 and 900.

AFP registers lower forkline resistance at ~850, median line resistance in the 900 neighborhood.

And (not pictured here) 78.6% fib retracement for 875-666 comes in at 830, a couple points away from where the index topped out Friday (that correlates to 7920 on the $DJIA).

There are a few positive divergence-type items around that make this a little tentative (the time to get very uneasy is when all points of your analysis are completely unanimous), but I do think the best staging point for bears to bring supply back in falls between 830 and 850-900. That’s a broad range, so if pressed I’d collapse it to 830-850ish. Unless there’s significant dislocation to the upside, this remains a bear market rally that I think is just about spent. Above 900 would cause some real head-scratching, and the corrective scenario isn’t really called into question until 1015+.