Weekly Update

By: Angelo Campione | Mon, Sep 7, 2009
Print Email

9/6/2009 7:54:09 PM

Current Positioning:

SPY: Short 50%
QQQQ: Short 50%

General Commentary:

The system for the SPY is on a Sell signal __ __ __ __

The system for the QQQQ is on a Sell signal __ __ __ __

The markets don't seem quite ready to rollover just yet, but it seems that a corner was turned this past week.

Tuesday marked the start of September and a time when most fund managers return from summer break, you'd think that they'd come back relaxed and ready to put some money to work, but instead they sell!

The selling pressure is even more surprising given that the ISM came in better than expected and actually now shows expansion for the manufacturing sector.

So what's going on?

Well, It's the old "buy the rumor, and sell the fact" scenario. The way it works is that good news gets priced into the market and so when an announcement is made, the professionals sell to those that rely on announcements (the ones that are late to the party).

Where we find ourselves now is that the market has spent six months pricing in all the good news and in the absence of something that is dramatically positive, the market is likely to take a breather and sell when the opportunities present themselves. Remember that the market is rarely rational as the short term is driven by emotions.

To sum it up, even though the market was able to recoup part of its losses from earlier in the week, we now seem to have turned a corner and momentum to the downside should gather pace within the next few weeks.

The week ahead looks like we'll go a little higher early on but lower again by the end of the week.

On to the analysis...

SPX Chart - Bigger Picture

While there was some volatility during the week, the bigger picture is holding steady. We seem to be building up to a point where fireworks will happen (and chances are that those fireworks will be to the downside).

The MACD histogram continues to show negative divergence and the bearish rising wedge also remains in force.

SPX Chart - Shorter Picture

The S&P broke out of the mini bearish wedge to the downside last week with larger volume and finished the week on a positive note, although on very low volume.

This coming week could retest the 1025 - 1030 region but we're not likely to see new highs. So far buying the dips has been paying off, although the dip we had on Tuesday seems to have more conviction this time around, and also the jump on Friday was on the back of the lowest volume we've had all year.

When you add the negative divergence on the MACD to this equation, you get a formula that points to a bearish argument.

For the week ahead, support on the SPX is 980 - 990 and resistance is at 1025 - 1030.

NDX Chart - Shorter Picture

The shorter term shows that we're at resistance here but there is a possibility of breaking higher from here. The most likely scenario is that we go sideways here in the short term.

For the week ahead, support on the NDX is at 1565 - 1585 and resistance is 1640 - 1670

The VIX Picture

The VIX burst out of the blocks on Monday and Tuesday but became complacent again by the end of the week. Two key things happened however, 1. We got a higher high and 2. The MACD got above zero.

If the MACD crosses lower, the markets are likely to hover higher again, although even if that happens, it's only likely to be a short-term move. The mid term for the markets is looking more bearish now.

The VIX measures the premiums investors are willing to pay for option contracts and is essentially a measure of fear i.e. the higher the VIX, the higher the fear in the market place. It tends to move inversely with the markets.

Performance

We're using a starting capital of $5,000 for each market and allocations are based on 25% of this or the remaining balance.

QQQQ

Entered L/S Price Qty Value Closed Price P/L Balance
26 May Short 33.21 37 $1229 26 Jun 36.12 $108 $4,892
11 Jun Short 36.72 34 $1248 29 Jun 36.44 $10 $4,902
31 Jul Short 39.56 31 $1226 24 Aug 40.36 $25 $4,867
07 Aug Short 39.91 31 $1237        
31 Aug Short 40.16 30 $1205        
                 

SPY

Entered L/S Price Qty Closed Price P/L Balance
11 Jun Short 94.05 13 $1223 30 Jun 92.72 $17 $4,976
23 Jun Short 89.47 14 $1246 30 Jun 92.72 $45 $4,931
15 Jul Long 91.81 13 $1194 17 Jul 94.06 $29 $4,960
31 Jul Short 98.65 13 $1282 24 Aug 103.39 $62 $4,898
12 Aug Short 99.56 12 $1195        
01 Sep Short 101.95 12 $1223        
                 

Quote of the Week:

The quote this week is from Stephen Covey, "We are the creative force of our life, and through our own decisions rather than our conditions, if we carefully learn to do certain things, we can accomplish those goals."

Feel free to email me at angelo@stockbarometer.com if you have any questions or comments.

If you are receiving these alerts on a free trial, you have access to all of our previous articles and recommendations by clicking here. If you do not recall your username and/or password, please email us at customersupport@stockbarometer.com. If you are interested in continuing to receive our service after your free trial, please click here.

 


 

Angelo Campione

Author: Angelo Campione

Angelo Campione
"Improved Speculation Through Timing"

About The Advantage Report Trader Alert:

The Advantage Report is a timing service that allows you to maximize profit in both bullish and bearish market, we have a proprietary system that issues buy or sell signals based on several algorithms.


The signals we have are:

BUY - This means go long in your desired investment vehicle.
SELL - This means go short in your desired investment vehicle.
PRELIMINARY BUY or SELL - This means be alert to a potential change of signal and be ready to take action shortly but DO NOT take action yet.
STOP - This means close your positions and go to cash

To Learn more about us: Click Here

Not a subscriber yet? Want to be? Click here and sign up for a no cost trial. Sign up for our TRADE TUTOR weekly newsletter at no cost to get a trading education from Pro Traders.

Important Disclosure:

Futures, Options, Mutual Fund, and Equity trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell Futures, Options, Mutual Funds or Equities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this Web site. The past performance of any trading system or methodology is not necessarily indicative of future results.

Performance results are hypothetical. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as a lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

Investment Research Group and all individuals affiliated with Investment Research Group assume no responsibilities for your trading and investment results.

Investment Research Group (IRG), as a publisher of a financial newsletter of general and regular circulation, cannot tender individual investment advice. Only a registered broker or investment adviser may advise you individually on the suitability and performance of your portfolio or specific investments.

In making any investment decision, you will rely solely on your own review and examination of the fact and records relating to such investments. Past performance of our recommendations is not an indication of future performance. The publisher shall have no liability of whatever nature in respect of any claims, damages, loss, or expense arising out of or in connection with the reliance by you on the contents of our Web site, any promotion, published material, alert, or update.

There is a very high degree of risk involved in trading. Past results are not indictive of future returns. Stock Barometer and all individuals affiliated with Stock Barometer assume no responsibility for your trading or investment results.

Copyright © 2007-2010 Angelo Campione

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com