Ramping It Up

So I've been trying to ramp up my trading posts lately...And to help with that I finally caved and joined Twitter...It's a lot easier to 'tweet' than to blog when a trade happens (because they happen so quickly)...So, feel free to follow me on Twitter if you're interested in what I see with the markets.

Take note that what I am usually looking at and/or talking about is the e-mini S&P500 Futures contract. "$ES"

LATER!!

Twitter: GMattyJo
http://twitter.com/#!/GMattyJo

Hmmm

I haven't posted to this in forever...

My insight for the day: The markets are falling and Jesus rocks!!!

-Matt J

USD/CAD Currency Pair

Here's a recap of a trade I took last night. It worked in my favor and I thought I would share.

Which Chart To Go With?

Just a reminder to be careful with the charts you use....they can make SUCH a difference...

Who Really Knows, But...

Here's a picture of the SPY, broken down to show 2 different time frames. The top part or "timeframe", is a 20-year monthly chart...and the one on the bottom is a 5-year, daily chart. So looking back 20 years we can see the fat blue line I drew was acting as support until it broke down and through it in October of 2008. If the SPY starts to trade back up to the blue line (which it has), the fat blue line should act as resistance and make it difficult to trade up & over...

The skinnier yellow line that's drawn has been acting as resistance since October of 2007. So, every time the SPY starts to trade around the yellow line, again, one would expect it to be difficult for it to move & trade above it...

Well both lines are intersecting and it 'puts' (no pun intended) things in your favor to take a trade to the downside. Again, your risk to reward is in your favor by going "short" (or trading to the down side). The reason why your risk is reduced is because if you're wrong, and the SPY continues to trade higher from here, your 'stop loss' (or where you should exit the trade) should be right above the yellow and blue lines and that would minimize your loss from being wrong.

I believe we go lower from here...but that's just my opinion.

Happy Trading!!

-Matt J


BTW, the SPY is roughly 1/10th the size of the S&P500 index. And for those of you who don't already know, the S&P500 index is the bellwether for the American economy........and for those of you who don't know what a'bellwether' is, look it up; Wikipedia it or something.

Resistance Line Still Holding

If you look at my post below, back in the early part of June, I said that we were probably heading lower. There was a downtrend line that price action did not want to get above...Now that we've gotten a few weeks of trading under our belt since then, the price still does not want to break above resistance (the red-line). And it actually has tested that line twice, which makes it more significant.

Below is a DAILY chart of the same 'underlying' (ticker 'SPY' (which again, is basically 1/10 of the S&P 500 index)).


My target for the move lower is to the 80'ish level or 800'ish level on the S&P 500; give or take a few points. I base that move on the embedded head & shoulders pattern that started to form since the beginning of May.

We're headed lower

I'm gonna go out on another limb and say that we're probably heading lower in the market(s). It kind of all depends on where this week finishes up.

Below is why I think that. We're looking at a 3 year weekly chart. So each bar represents 1 week of price action (This is ticker SPY...Which is 1/10 of the S&P 500 Index). Where I placed the white circles (going from left to right) is where we previously had 2 instances of support...then it broke support...and now we're on the bottom side of the red-line so it SHOULD act as resistance, forcing price lower.

Just a thought......I could be wrong because I often am.

Bearish Article

Another good article from Mr. E!! Thanks E!

http://online.barrons.com/article/SB124303129632948467.html?page=2

Car Dealerships

Not my article but worth the read. And there's always 2 sides to every story. 

Future historians might well look back on events of the last week and see a milestone of decline in the waning saga of American freedom.

The bridge between the free market and a command economy was likely crossed when, at government demand, thousands of car dealerships all across the country were put out of business. They were profitable, they were legal, they were useful, and the White House ordered them closed. A presidential panel, comprised of everyone except car-industry experts, demanded that Chrysler and GM cut off a third of their dealers' heads.

Hundreds of thousands will lose their jobs. Thousands of businesses will close. Millions of consumers will be affected.

Because the government said so.

If Chrysler and GM want their mandatory bailout money, they must do what the White House says, and the White House says there are too many car dealers. And so, people's lives will be destroyed, massive investments will be lost, family businesses will be annihilated, the life's work of countless honest American business men and women will be flushed down the toilet.

And barely a whimper of protest is being heard. The crown has spoken and the subjects bow and scrape.

The argument is that, in the shadow of bankruptcy, GM and Chrysler need to shed the deadweight of underperforming dealerships. The problem with that is that dealerships are not a financial liability for carmakers and that many of the dealerships that have gotten the ax are among the nation's most profitable.

One Jeep dealer in upstate New York, for example, sells just over half of all the Jeeps in its region. It not only outsells all of the other Jeep dealerships, it outsells all of the other Jeep dealerships combined.

And it has lost its franchise.

Another false assumption is that dealerships cost carmakers money. They do not. They make carmakers money. Even small, low-volume dealerships are a net financial gain for manufacturers. Dealers not only make companies money by selling their automobiles, they have to pay for signs and pamphlets and displays, all of which can only be bought – at exorbitant prices – from the manufacturers.

Further, it is insane for any business to assume that it makes more money by reducing retail outlets for its products. What did Wal-Mart do to make more money? It built more stores. What did McDonald's do to make more money? It built more stores. What did Starbucks to do make more money? It built more stores. What are GM and Chrysler doing to make more money? The exact opposite.

That might make sense in the anti-car fantasies of the ruling regime in Washington, but it makes no sense whatsoever on the balance sheet. It is pure big-government-knows-everything lunacy.

It is also a disservice to consumers.

The Obama dealership closings gut many rural areas, taking away both sales and service. Buying a car, or getting your car fixed, will now require a trip to some far-off city.

Some argue that with declining sales at GM and Chrysler, it is only natural that there should be fewer dealerships. That is true. Of late, some 400 or 500 American dealerships have gone out of business each year. But that has been a function of the marketplace, not of government dictate. Those who can't keep their heads above water have sold out or shut down.

Those who've kept in the black, who have been able to remain profitable, have stayed in business – until now. But now, profitable businesses, which seemed poised to continue to employ people and stay in operation for years to come, are on the way out.

In addition to the impact on owners and employees, the communities they serve are also devastated. In many areas, in states where sales tax is a major part of a community's revenues, the car dealership was the largest single source of local taxes. That loss is huge for municipal budgets. The same is true for the various charities, United Ways, sports teams and school activities that have long relied on the generosity of car dealers.

In one fell swoop, because the White House said so, that is all gone.

Ironically, the government has decided to decimate the only profitable part of the car industry. Not only are the car dealers not operating at a loss, they are the only part of the car industry that isn't being bailed out. So the government is propping up the part of the car business that doesn't work, and attacking the part that does.

It is morally and legally wrong. This is not the way a free country operates. It is absolutely not the American way. This is the first taste of a command economy, of central-government planning of industry and commerce.

It didn't work in the Soviet Union, it didn't work in Cuba, it didn't work in North Korea, and it won't work in the United States. If their goal is to take private transportation away from Americans – and it might be – this is a good idea.

Otherwise it's a horrible idea.

It is an attack on the free market, on the value of investment, on the ownership of property. It is essentially an act of theft. 

This is change we can believe in, and will come to regret.

Bearish Divergence

So I decided to post; which I haven't done in a long time...The chart below of the S&P500 is where we are as of today (4/28/09). Personally, I'm expecting a pull back. And to be honest I've been expecting one for several days. The reason being is because of the divergence between price action and MACD (the middle technical indicator below - it's a measure of momentum). Well, for a long while now, the price of the SPX has been going higher but momentum has been getting weaker and weaker and weaker. Look at the black lines I drew (price goes up, MACD going down)....Also, we're up against resistance at the 875 level and I don't see us busting through that level any time soon. Too much over head supply/congestion....and speaking of congestion, sorry if you can't read my chart because of all the other crap I've got drawn.



To show my observation/thought again....take a look at the 2 year/daily chart below (without all my crap drawn). It might be hard to see it but the same story has happened a few times in the past. Again, the chart below has price action moving up (gray arrow) with divergence on the MACD (black circle(s))...following this kind of divergence pattern, you can see how the price action followed (Maroon arrow - IT WENT DOWN!). Some of the divergences are harder to see than others but the same principle applies. So the questions that pops into my mind is, "Are we seeing this same pattern and should we expect a pullback?". My answer is yes...

All in all, just be careful if your trading to the upside. I feel like there's less risk playing it to the downside but nonetheless, I could be wrong...I frequently am.

-Matt J