Oil beginning to threaten SIFs
- Thread starter nitro
- Start date
I will be going to this conference for one day, since it is a 5 minute cab ride from my office at the CBOE. I think it is worth going to, if for no other reason to see new technology:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=110177
nitro
http://www.elitetrader.com/vb/showthread.php?s=&threadid=110177
nitro
"...Thus it is that in war the victorious strategist only seeks battle after the victory has been won, whereas he who is destined to defeat first fights and afterwards looks for victory." - SUN TZU
The test is near: 1400 SPX wants to be tested, badly. It is imperative that you tie yourself to a mast lest the siren songs of all the fear that is perpetuated by the media sway you into panicking.
It is a sad state to be in when you make a trade, turn it into an investment because the market went against you, and then you realized all along that it really was a trade. Those without plans in this market are going to get singed. Know your time frames.
As an investor, we buy until the market says it is wrong to buy. It is very close to saying that it is wrong.
nitro
The test is near: 1400 SPX wants to be tested, badly. It is imperative that you tie yourself to a mast lest the siren songs of all the fear that is perpetuated by the media sway you into panicking.
It is a sad state to be in when you make a trade, turn it into an investment because the market went against you, and then you realized all along that it really was a trade. Those without plans in this market are going to get singed. Know your time frames.
As an investor, we buy until the market says it is wrong to buy. It is very close to saying that it is wrong.
nitro
My long term model gives 1480 SPX as a year end target, with a +/- 10 handle error. We are at 1472.65 as of this writing. According to this model, we are going to be struggling from here on up.
If SPX breaks 1490 to 1500, it could be a monster rally that ensues, with even 1600 SPX not out of question by year end. If we do break 1500 SPX, I will rerun the model, but I am nearly certain that it will then give 1550 SPX as the EOY target (with same error bounds as above). But first things first. If it breaks 1400 SPX, I will rerun the model then too, but it won't be hard to figure out what the end result of that is.
That said, we buy until market says it is wrong to buy.
nitro
If SPX breaks 1490 to 1500, it could be a monster rally that ensues, with even 1600 SPX not out of question by year end. If we do break 1500 SPX, I will rerun the model, but I am nearly certain that it will then give 1550 SPX as the EOY target (with same error bounds as above). But first things first. If it breaks 1400 SPX, I will rerun the model then too, but it won't be hard to figure out what the end result of that is.
That said, we buy until market says it is wrong to buy.
nitro
Strong resistance SPX 1490 - 1500. Trading will revolve around breaking that, or we settle somewhere in the 1480s EOY imo.
As a trader, I sell all rallies into the 1490 - 1500 SPX area, and quickly cover and reverse on a B/O of 1500 SPX. As an investor, you buy 'till the market says it is wrong to buy, which wrong is nowhere near here.
nitro
As a trader, I sell all rallies into the 1490 - 1500 SPX area, and quickly cover and reverse on a B/O of 1500 SPX. As an investor, you buy 'till the market says it is wrong to buy, which wrong is nowhere near here.
nitro
No change in my estimates, but I do have a comment.
One thing that I notice from running my realtime model: This rally is not like the other rallies. There is something distinctly different about it.
Hard to put my finger on it. I notice that there is a great schism between the equities that want to go higher, and the many others that are defying this rally. The SIF is one symbol, and the cash index underlying that SIF is one symbol, but many of the underlying equities that comprise the SIF and index symbols are on strike (or are going higher cautiously) against this rally. Time will tell if SIFs can convince the individual underlying cash instruments to join.
While this may not be useful information, the market action is definitely not "normal". I guess it is to be expected at such an inflection point as this 1490 to 1500 SPX range....
nitro
One thing that I notice from running my realtime model: This rally is not like the other rallies. There is something distinctly different about it.
Hard to put my finger on it. I notice that there is a great schism between the equities that want to go higher, and the many others that are defying this rally. The SIF is one symbol, and the cash index underlying that SIF is one symbol, but many of the underlying equities that comprise the SIF and index symbols are on strike (or are going higher cautiously) against this rally. Time will tell if SIFs can convince the individual underlying cash instruments to join.
While this may not be useful information, the market action is definitely not "normal". I guess it is to be expected at such an inflection point as this 1490 to 1500 SPX range....
nitro
I hesitated to make any sort of response before the FED announcement. To me, it is as close to pure gambling as you come in analyzing markets. All I need to see pre-announcement are FFFs and I shut out the rest. Once the announcement is made, I think about the language, and I see market action, the story is clear.
The market action blew right through the 1490 - 1500 SPX resistance to the upside, then today blew right through that to the downside.
When I see markets that go through S/R levels like this violently on both sides, it is a warning that models need tuning. I believe the trading from here until the end of year will defy many models that trade based on which side of the "SPX contour" we are on. There was a big hump at 1490 to 1500 SPX. To either side of it was relatively simple trading. That "hump" has now been flattened, and it is going to make trading far more difficult. Imo, SIFs are now, to use a physics analogy, "superconducting".
On the FED decision, sheesh, I don't know. I am firm believer that markets lead the FED, and not the other way around. The FED then becomes some sort of exponential filter (a special case of a Kalman Filter) and tries to estimate somewhere in the middle. I believe the FED was slightly conservative today, but not terribly so. The FFs rate cut was fine, the discount window needed to be .50.
If things look like they deteriorate fast, and SPX starts nose diving towards 1400 SPX, be prepared for an emergency rate cut. The importance of 1400 is now even more paramount, and 1490 - 1500 SPX is close to being irrelevant.
These are dangerous trading times, imo. As an investor, we buy until the market says it is wrong to buy, and it is only wrong below 1400 SPX.
nitro
The market action blew right through the 1490 - 1500 SPX resistance to the upside, then today blew right through that to the downside.
When I see markets that go through S/R levels like this violently on both sides, it is a warning that models need tuning. I believe the trading from here until the end of year will defy many models that trade based on which side of the "SPX contour" we are on. There was a big hump at 1490 to 1500 SPX. To either side of it was relatively simple trading. That "hump" has now been flattened, and it is going to make trading far more difficult. Imo, SIFs are now, to use a physics analogy, "superconducting".
On the FED decision, sheesh, I don't know. I am firm believer that markets lead the FED, and not the other way around. The FED then becomes some sort of exponential filter (a special case of a Kalman Filter) and tries to estimate somewhere in the middle. I believe the FED was slightly conservative today, but not terribly so. The FFs rate cut was fine, the discount window needed to be .50.
If things look like they deteriorate fast, and SPX starts nose diving towards 1400 SPX, be prepared for an emergency rate cut. The importance of 1400 is now even more paramount, and 1490 - 1500 SPX is close to being irrelevant.
These are dangerous trading times, imo. As an investor, we buy until the market says it is wrong to buy, and it is only wrong below 1400 SPX.
nitro
Looks like the FED is looking for other means to resolve the lack of confidence in the financial system than blindly cutting interest rates. It is coordinating this effort with other major international financial institutions.
In light of this, the "conservative" rate decision makes sense. However, from a strategical trading perspective, it now becomes clear that the FED is looking really hard for other measures other than rate cuts and the models must reflect that. The market is/has woken up to that fact.
Markets will probably be defensive until it becomes clearer and less confusing whether this new resolution is taking its' intended effect.
As an investor, we buy until the market says it is wrong to buy. As a a trader, we put XLF on our screen, and the models have been adjusted.
nitro
The assassination of Bhutto could have dire consequences for "Asian" markets. During our market hours we need to watch currencies, but we will know better what the reaction of the financial markets from that area is tonight.
I am sticking with a 1480 SPX close by year end, but if this escalates and retaliation ensues, we could see 1450 SPX in a jiffy.
nitro
I am sticking with a 1480 SPX close by year end, but if this escalates and retaliation ensues, we could see 1450 SPX in a jiffy.
nitro