Charge!

I know I was a bit early trying to catch the falling knife in this selloff.  Risk management made the losses, um, well, manageable.

If you tried to catch the falling knife without a stop, but rather with small position size, that was also a good approach.  At least you knew if the risk went against you, it was not the end of your involvement.

If you exercised wild abandon and no risk management, shape up, learn from that mistake, or find another way to spend your money.  Yes, I mean you.

Friday seems like a really good indicator that, at least for a while, selling may have abated.

I am ready to charge out of the foxhole with significant position size risk, but as always, a plan to retreat and exit if the market does not hold last week’s lows.

Look at the following charts.

This first chart is the T2108 from Worden. It graphs the percentage of stocks above their 40 day moving averages.  We just hit a low that is as ugly as the throws from the crash of 2008-2009.  This chart is really a good tell that we are at some sort of inflection point, in the short term.

T2108 Bounce

This chart of the daily SP-500 shows the significant price and volume reversal to the upside, very bullish, on the daily SP 500.

SPX Bounce w Vol

Finally, the weekly SP-500 shows a bounce off the 200 week moving average and a reversal higher with pretty good volume.  This tells me the time has come to take this hill and charge without fear.

Get greedy when others are fearful, as the saying goes.

Of course, if this is a trap, I will live to fight another day, retreat, and maybe even go short again if the SP-500 weekly fails to hold the 200 period moving average.

Oh yeah, it is really risky, to hold substantial index short positions here.  The decision to get short again will come, when and if we see this bounce run out of steam.

SPX weekly bounce w vol

Trade Alert

This is a gut wrenching trade considering how strong the selloff has been, but if you have mastered the skill of getting out of a position when wrong, this is an opportunity.

The IWM has been out of the lower Bollinger Band for so many days now, a relief rally seems highly likely.  The IWM has also pierced the 200DMA for the first time since 2011, which should bring some snap back buyers into the market.  I will participate with a position in TNA and close it if it drops below my entry price.

I will exit to the upside on stages at IWM price levels indicated by the solid black lines punctured by the green line.

Do not overstay your welcome, and admit that you may have been wrong and take a small loss before it becomes a gargantuan loss.

Good luck to us all!

 

UPDATE at  3:55 PM Friday Jan 8th.

No sign of a bounce, but getting in to a TNA position at the close.  Risk reward proposition seems to be too good to deny.

MONDAY will tell the tale.  Enjoy the weekend!

IWM oversold

Update Tuesday Jan 12th.

Needless to say, the market is very weak and the trade idea failed.

I will be waiting for another shot at a counter trend rally.

 

Update Wednesday Jan 13th:

Back in the TNA counter-trend trade at the open, stop at the low of today’s trade.

What have I been doing?

Not much happening on my desk since the start of the year.

I am like a hunter perched in a tree blind waiting for that ideal shot to emerge.

It will come, save your ammunition.

Shorting the index has been working, and that will end when the sellers get exhausted.

It is generally not wise to believe the headlines attributing a market move to a specific cause, but this time, they may be on to something.

CHINA

Panic is setting in due to the seeming inability of the Chinese government to get control of their markets.  The correlation of that action and global market moves seems strong enough to believe.

I am ready to go long when the selling abates.