Blog URL change

I have changed the URL for my blog.  

The new URL is http://marketowl.blogspot.com/

Please check me out there.  I will be discontinuing posts on this blog. 
I will manually move over my archives to the new blog.

Missing the gap up

I trade to try to catch as many moves as possible, up and down.  But tonight's gap up is a move that I should have captured based on post-election tendencies, pre-Fed, and the European markets having gone overboard on the sell side yesterday.
Also like in 1994, after the Democrats took over the White House, the Republicans had a lot of success in the following election.  In general, there is a tendency for the other party not in the White House to gain seats in the next election.  I should have expected another repeat for the Republicans. And we all know that the market loves Republicans, at least in the short term.

Unless something horrible happens in Europe, this will be a sizeable gap up and will probably not let anybody in unless they pay up.  And I will not buy into a sizeable gap up in the morning just to get long for a few hours ahead of the Fed.  If it dips, I will buy it but I'm not chasing this market on the long side.  In fact, were it not a FOMC meeting day, tomorrow's gap up would be a good short set up for a quick trade. If we trend up ahead of the announcement, I will short right before 2:15 PM to capture the expected initial drop.

Game Plan ahead of FOMC meeting

Ahead of the Fed, I am going to wait tomorrow morning and enter into a long position.  I plan on selling this a couple of hours before the announcement.  I have no idea what the Fed will do, but it won't be anything earth shattering.  Without them moving on rates, it comes down to language, and that doesn't mean much at this point.  The most likely scenario I see is a dip on the initial announcement, and then a strong rally and then minor selloff at the close.

FOMC most likely scenario

4 - 0 Bears

The traders are all bearish for the close on Fast Money despite the recent up move we've made on the market.  I feel like we're going to trend a bit higher and then have a fake out move to the downside and then finish strong.

Looking to get long

I am flat and now waiting to buy at lower levels.  Any sell off from current levels should find support in the mid 1020s SPX.
Once the range bound trading is broken, and there is a bit of fear, I will swoop in to buy. 
Despite the stronger dollar, crude oil is flat and equities are only down 1/2%.   I will have a bullish bias for today and tomorrow as we get set for the Fed.

Still too early to be buying aggressively, so I will wait to get a good price or let it go without me, no worries.  

Flat and waiting to short

Anything around 1042 on the SPX is a great spot to get short, after the gap fill, I expect weakness. As I am writing, the market is already starting to fall apart!  Oh well, that short is going to have to wait.  If they can push this sucker up back to yesterday's close, I will be offering supply.

Berkshire buys Burlington Northern

This was the impetus for the jump up in the futures at 7:30 EST.  This shouldn't have any effect on today's trading.  We went from a big gap down to a small, which is not a common occurrence.  There are willing buyers in the market at these levels.  I don't expect much upside or downside today.  I will be selling rips and buying dips today.  I expect the volatility to be more muted than yesterday.  We may rip higher in the 1st hour or two.  Overall, it should be a choppy day.

Big gap down

The trading yesterday with the heavy intraday volatility/strong close after Friday's strong down move tells me the selling is exhausted.  The Europeans are catching up and selling out of fear ahead of the FOMC meeting, I think the US traders will rally this market higher at the open and we should see this market fill the gap today.  Right below current levels is strong support in the 1020s, so I have initiated a long position. 

High energy day

Usually when a downtrend runs into support, a battle takes place between the bulls and the bears.  There was good volume, good volatility, and the market made slight gains.  It felt like a market that was exhausted on the sell side.  A short term bottom is right around the corner, something that might last a week or so.  I will look to buy weakness in the morning tomorrow.  I have no opinion on gapping up or down.

Got flat

Not much more downside today IMO.  So I am flat.  I am not long however, I think we can selloff a bit more or go up from here, no strong feeling either way. 
If we get down to low 1020s, I will be getting long.

Reversal

We just had a nasty reversal, there were still a few of the Fast money guys looking to get long into the sell off.  It was 2 - 2 bulls vs. bears.  I am holding my short position, I like what I am seeing so far.  Will wait and see what happens for now. 

I have to fade this

Market popped higher on the ISM beat at 10 AM and its starting to fade already after squeezing higher.   I've got to fade this move and have gotten short.  After the carnage on Friday, I can't see a repeat of Thursday on the cards, especially ahead of FOMC on Wednesday.  Let's see where this market goes in a few hours.

Futures are fading

CIT bankruptcy news was probably known by the big boys on Friday and they sold ahead of the news, and were covering in pre market.  What was shaping up to be a big gap up has withered away in the past couple of hours as the US markets get ready to open.  I still believe we will see lower prices than on Friday, but  don't forsee a trend day at the moment, but I am not ruling it out.  We may drop down initially to fill the gap and perhaps test the 1028 SPX area.  That should be strong support and I don't think we can get through it on the first test.  I will be waiting to buy in that zone. 

1974-1975 Analog

The oil shock in 1973-1974 helped to trigger the bear market of 1974.  That bear market ended in December 1974, and a sharp rally in 1975 occurred.  The oil price shock in 2008 was a factor (not the main one of course) in triggering the bear market of 2008-2009.  This bear market ended in March 2009.  Unlike most people that look at stock market history, I think the similarities between 1974-1975 and 2008-2009 are much greater than between the 1930s and 2008-2009.  Taking a page out of Paul Tudor Jones in Trader, the video, I have used the Dow daily charts in 1975 as a guide to trading in 2009.  The correlation is quite high so far for the last 7 months.  In 1975, the market had a furious rally off the December 1974 bottom and topped out in July 1975, which is 7 months.  In 2009, we have topped out in October, which is 7 months off the March low.  Based on the 1975 analog, we should trade down a bit more to around 960-970 and eventually rally very strongly in early 2010.

1975 Dow Chart from December 74 low

2009 ES Chart from March 09 low