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  • Confluence of TAs 0 comments
    Oct 21, 2011 4:30 AM
    Traders and/or Chart Technicians are starting to understand what has been going on for the last 5+ months as SnP500 produced more price patterns that can be interpreted with some clarity.

    At least the Fog of War among the bulls and the bears are starting to clear out with both sides starting to draw their own lines in the sand as supports and resistances become much clearer these days than they did several weeks ago.

    For the Bulls:

    Monthly:
    -   img38.imagefra.me/i5al/aarc/12xv_af2_ubk...
        img38.imagefra.me/i5al/aarc/12xv_e86_ubk...
    Weekly:
    -   img38.imagefra.me/i5al/aarc/12xv_05a_ubk...
    Daily:
    -   img38.imagefra.me/i5al/aarc/12xv_5a8_ubk...

    For the Bears:

    Monthly:
    -   img38.imagefra.me/i5al/aarc/12xv_248_ubk...
    Weekly:
    -  
    img38.imagefra.me/i5al/aarc/12xv_c5d_ubk..
    Daily:
    -   img38.imagefra.me/i5al/aarc/12xv_28e_ubk...

    How do we know which one is the higher probability, down or up?

    The general concensus is that if SnP500 is able to rally back to the 1370 high of May 2nd, 2011;  then highest probability is that the rally that has started since March 6, 2009 is still intact.  However, IF SnP500 goes down and touches or breaks below the July, 2010 low of 1011;  then highest probability is that the rally of March 2009 to May 2011 has already ended and either a prolonged consolidation range or further meltdowns are going to happen.

    As
    in always, the struggle is still far from over and never will be for the active tradersTraders can always go long or short at anytime and at any time frameSome of the more seasoned traders carry both longs and shorts at the same time depending mostly on how they interpret the markets and/or how they manage their accounts/portfolio.

    For the very short-term;  this is the developing story on the 60min chart:

    -   img38.imagefra.me/i5al/aarc/12xv_37f_ubk...

    Spx pullback is considered still too shallow for many traders.  However, there are no hard and fast rules of how shallow or how deep a pullback should be.  Enumerable times in the past I regret chasing rallies with  shallow pullbacks when the patterns later morphed into deeper pullbacks or worse actually went into meltdowns.  Many times I regret not buying shallow pullbacks and got left behind with nothing to show for my efforts while the markets just kept going up for days and weeks on ends (and sometimes months) before the rally finally reached it's final or intermediate top.

    For long-term investors: A 10% or more discount can be considered good value20% or more discount a better value buy30 to 40+% discounts to hope for but not to expect since they happen rarelyand 50% or more discounts may happen only once or twice in a lifetime

    During the 1965 to 1982 Secular Bear Market for the Dow JonesDow lost a maximum 47%.  So, for market participants still alive todaythe SnP500's March 2009 maximum loss of 57% for the Secular Bear Market of years 2000 to the Present could be their very first bigger than 50% discount and may proved the biggest drop they witnessed until they dieNote that Dow Jones was the dominant index during the last centurySnP500 is now the dominant index presumably for the 21st century.

    Dow Jones was still a young index during the early 1900's and it suffered 90% loss during the 1929 to 1932 meltdown.  The young Nasdaq suffered 80% haircut during the dot.com bust of 2000 to 2002.  The Financials or XLF, which could be considered 'coming of age' with the invention of (or rather prolific production of) derivatives can also be considered 'young' in this initial stages of Globalized Economy and thus it also suffered almost 85% loss from it's 2007 high to the 2009 bottom.  We call them Grand Super-Cycle Corrections.

    SnP500 is so broad-based it is not practical to expect it to suffer the same fate as the smaller Dow Jones of the 1930's (and the Nasdaq and Financials of modern times) now and into the far future as long as it remained a well-diversified index. 

    As
    a long-term investorI still hold 90% long portfolio with approximately 60% of that bought in Feb/March 2009 and the other 30% bought during dips as the rally from the March 2009 bottom progressed.

    As a traderI usually buy SSO and YM/NQ during the dips on the weekly chart for Swing Trades to the long side.  Most of those buys were initiated and immediately posted in previous Instablogs with weekly, daily, and intraday chart illustrations on most occationsI also use YM/NQ Intrepid and Guerilla Trades as supplementary trades during consolidation phases on the daily and intraday chartsMost of those extremely short-term scalps and day-trades were not posted in Instablogs.

    -----------------
    I was 115% longs at the Sept 8-9 bottom and 135% by Oct 3-5, 2011 false breakdownThen reduced them to 110% as SnP500 struggled with the 1,220 and 1,230 resistances

    Am now 'hunting' for possible entries to buy some additional short-term long trades using SSO and/or YM and NQ

    Will try to reduce the medium to long-term portfolio down to 80 to 70% if Spx goes for the daily 200ma resistance or go short ES to protect the portfolio just in case SnP500 decides to go into an Armageddon Meltdown.
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