The Local's Take: Weekly Wrap Up and Look Ahead

Good Evening,
Let's start out with a little trader psychology discussion. Because volatility is still rather low, I basically wake up each day saying: if they come get me, great. Meaning, I don't have any pre-conceived notions of volatility or opportuinities. The past year of equities grinding higher and years of experience in understanding that the markets breathe in and out and sometimes, they rest! Today was one of those days that you go into thinking: Friday before a holiday, very light economic data, overall the VIX is low. My mindset is to play it carefully. Maybe wait for that extra pip or two, maybe cut back in the trading size as you may only get one opportunity the entire day. That opportunity did come and I was glad to take it, but with smaller size, the eagerness went away, the relaxed nature of how trading should be was evident.
So the bottom line is, if you have discipline and are realistic of what the markets provide, you will trade accordingly, both in your frequency and in your size, allowing you to be in check with your mental state and trade witha clear, un-emotional mind. I am not saying it doesn't come without practice, but that is what experience gives you. You have to be willing to get the experience, which for a new trader means easing into things.
OK - you know I am big on pshychology, so with that out of the way, let's look at the SPY, first with a few months of data and then just the past few days of trading.


You can see how we are bumping up against a trendline that is providing resistance and  directly above that is an old supportive trendline that may act as resistance. Selling rallies anyone? If you wanted to sell rallies this was the week. Twice, we were up over 75 points and both days, we finished well off our highs. I am used to saying that we finished well off our lows - well, we are doing that as well. So overall, a relatively technical, choppy week of trading that did provide for good opportunities, both with standard deviation trades and retracement trades.
Today in forex, here was your BUFFALO BOUNCE:

The look ahead part: I protected the portfolio as we have 4 days until unemployment data is released. Lots of data before that, so stay on the economic calendar folks.
Happy Trading and Be Environmentally Cool
Coach Brian

The Local's Take: Matchmaker: SPY and EUR/USD

Good Afternoon,
This is the second post of the day as we had some great intraday movement in both equities and forex.
First up, an intraday look at the SPY:

Past performance is not indicative of future results

Next, an intraday look at the EUR/USD on a 5 minute bar:

Past performance is not indicative of future results

Understanding the inter-market relationships between the USD and equities is crucial!
Local Tip: Free Webinar tomorrow evening at 9pm Eastern.
Happy Trading and Be Environmental Cool
Coach Brian

Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.

The Local's Take: Inside Day Commentary

Good Afternoon,
We had a relatively quiet day in the financial markets, but with the "above average" volatility, we still saw some action in the forex markets.
Overall, I am still to neutral to bearish, knowing the risk is to the upside. As I was talking to a trading buddy, I told him I am not trying to call the direction of  the markets from their current levels - I am just looking for really oversold opportunities or to play defense at the right levels.
Here is a look at the "above average" VIX:

Since it was an "inside day" and pretty quiet in the equity markets, let's go right to the forex markets and show the BUFFALO BOUNCE that occurred:

Let's see what happens over the next few days - maybe we get a "false rally" heading into next week's unemployment report which would be just fine by me!
Happy Trading and Be Environmentally Cool
Coach Brian

The Local's Take: Chinks in the Armor Commentary

Good Afternoon,


A quick update is in order as I have been absent from the blog as I had a quick vacation to New York - looks like good trading markets though.
We had the whipsaw effect with the bottom trendline in the SPY, which gave us good retracements. Ultimately, the trendline failed and the bulls took over, but are the buyers lurking as they have been? Or are "chinks in the armor" starting to show up. Go ahead and look at trendlines connecting the bottoms as this one does on the SPY. Are the support lines becoming resistance? Again, you can see the headfake in the SPY, but in many inividual stocks, the trendline is acting as resistance, providing a nice bearish opportunity with low risk, high reward and best of all, chart based reasons.


Another point supporting the "chink in the armor theory" is that commodiites have sold off so hard, you may be able to use fibonacci retracements as a bearish entry as the commodities will "fail" in their bullish sequuence, giving us a lower high for the first time. Are lower lows next?

Moving into forex, as I stated above, all of the whipsaw action in the equities has given us great retracements and DOUBLE FALL LINE TRADES. And add in some volalitility and the Average Trading Ranges pick up giving us BUFFALO BOUNCES. The GBP/USD chart shows DOUBLE FALL LINES and BUFFALO BOUNCES on Friday and a BUFFALO BOUNCE today:

The AUD/USD shows a BUFFALO BOUNCE today:




You know that I am looking forward to next week's unemployment report, but will the fun be taken out of it if we continue to sell off?  Is a larger percentage moving to cash/defense these days?
Local Tip: Free Wednesday Webinar on Average Trading Ranges on Wednesday at 9pm.

Happy Trading and Be Environmentally Cool
Coach Brian

The Local's Take: Evening Commentary

Good Evening,
Just as I suspected in last evening's post, the bulls took control. There is no lack of "good levels" for the buying to come back in and support the markets, We are now back above the trendline that we broke for the past 2 days - talk about whipsaw! I am glad I wasn't a part of it in the equity markets, but the whipsaw/headfake action has been giving us great moves in the forex markets.
Let's start with a look at the AUD/USD where we had a DOUBLE FALL LINE TRADE:

We also saw the GBP/USD get massacred today - probably due to the change in unemployment count for the past month.
Moving into equities, let's show that all important (cough, cough...) trendline in SPY that has been support, then violated, then resistance, then violated. Which way did he go....

Let's see where the US unemployment claims come in tomorrow. It it is a big miss to the upside, we could see another change in direction if the markets listen to fundamentals.
Happy Trading and Be Environmentally Cool
Coach Brian

The Local's Take: Evening Commentary

Good Evening,
Just a quick post with SPY and the trendline we have been eyeing. Two consecutive closes below it - will that signal more selling?


Next up we have our forex chart and due to the huge comeback in equities today, we had yet another DOUBLE FALL LINE TRADE, this time in the GBP/USD:



With the furious rally, I still have to give the benefit of the doubt to the bulls, but I am looking forward to the May unemployment report if claims can average 425k and above.
Happy Trading and Be Environmentally Cool
Coach Brian

The Local's Take: Afternoon Commentary

Good Afternoon,
First off, I am not related to the Kahn who is making the headlines.
With that out of the way, we are getting dangerously close to a trendline on the SPY, so buyers beware or buyers jump in? With a relatively light data week, technicals will take over, so trendlines and chart patterns are of key importance.
Over the last few weeks, we have seen volatility creep up, so it is great timing that next week's webinar will be on average trading ranges.  Here is the link. And if the markets have you worried, then you better jump over to YouTube to see last week's all important webinar on inter-market hedging!
To the charts we go. Let's start with forex, with BUFFALO BOUNCES first and DOUBLE FALL LINES second:


And into the equity markets we go. Let me show you that trendline on the SPY:

Speaking of trendlines, will the long term trendline on Ford (F) hold? Let's look at chart of the socially responsible investment of the day:

Let's go from highs to lows and start with AXP - is it satisfying a 5th wave and maybe the target won't be taken out? Will there be a double top? If nothing else, a good place to buy protective puts and/or generate income with covered calls.

Now the lows and we will move into the commodity sector. First VALE and then SLW.  VALE may be looking good for some cash secured puts to pick up a stock at a 27% discount. Boy am I glad I sold some ITM calls when it was in the mid 30's. I think I made up the entire move down in 5 months of covered call selling.


With SLW, you can see the trendline has been broken. Will it act as new resistance?


Finally, to the really, really lows: RIMM. I think I should do a blog about how every single day my Blackberry malfuntions in a new, interesting way. Can you say: DROID?

Is there a bottom in sight here for RIMM? Is there a chance of support at this level? Would selling puts be a way to pick it up cheaply? I am liking the June 37.50's for 1.5 percent in 32 days. BUT, I would put stops in place (like all trades).
Happy Trading and Be Environmentally Cool
Coach Brian

The Local's Take: Afternoon Commentary and FREE WEDNESDSAY WEBINAR

Good Afternoon,
One down-day almost takes back three up-days, hence the phrase: "buy a creeper, sell a leaper." Even with today's down day, we didn't close on our low and we are only about 300 points from a new high, so I am not ruling out the bulls yet. I am glad to see that the 61.8 area held and we sort of "double topped". It is a very messy top, but so far, it is holding and we have stronger resistance just below "the top" from early May.
On a side note, I am looking forward to tonight's Interbank FX Webinar at 9pm Eastern - click here for the link. I will cover those ever-impressive inter-market relationships that came back in play today as we had a very large selloff in equities and a very large rally in the USD. I will take it a bit further than the past webinars and dig deeper into optionsXpress showing you option plays that can protect your long term equity investments. I will also explain the "back to basics" theme, which is easily proven with today's EUR/USD move versus the GBP/USD move.
As I lead into the charts, the big question is should we be buying at these levels or are there too many chinks in the armor. Again, the risk is to the upside, so if you aren't picking the very tops to be bearish, it is hard to become bearish down here. On the other hand, there are some trendlines that have been broken and you have to go back to the thinking: "is this deal really a deal". I compare it to real estate: If I buy the house now, I could get it for 500k. If I am patient and wait 6 to 9 months, I may get it for 400k. To the charts! and the first one is DIA, showing you the short term resistance:




Like I said, it is messy, but you can see the tops from the past 10 days. Next up is the SPY - check out that trendline. If we can break it, we may have some room to go on the downside:

The SPY chart shows you: "is a deal really a deal". And to further prove that, check out SLW - it didn't bounce off the trendline that much and I warned that if we sell off in equities, this seems to be acting "weak". How so? Well, I call it a laggard because the broad equity market indices climbed back towards their highs and SLW stayed right on last weeks low. Sell off in equities equals larger sell off in commodities. Plus, the dollar was staying strong, so either equities were wrong or the dollar was wrong. I guess equities were wrong today!

Into the socially responsible investing realm we go and I just love the covered call play with WFM and a sideways stock like TSL:


TSL gives you a good look at a MACD and how it works nicely in sideways markets. Is this a buy down here at support?
As I mentioend, the dollar stayed strong - let's prove that with a longer-term chart of the EUR/USD:

Then you combine that with a large sell off in equities today and look at the intra-day chart, showing BUFFALO BOUNCES:

Looks like volatility is picking up and the average trading ranges are starting to expand. We still don't have rocking markets everyday, but you can count on more than one trading opportunity per week - today we had about 8 across the 6 USD pairs. Another BUFFALO BOUNCE:


And finally, a DOUBLE FALL LINE TRADE:

These last two charts show you a great reason for calling the webinars "Back to Basics". Look at the early morning divergence where the GBP had incredible strength against the USD and the EUR couldn't rally much at all.
Should be a great webinar this evening and I look forward to your participation.
Happy Trading and Be Environmentally Cool
Coach Brian

The Local's Take: Afternoon Commentary

Good Afternoon,
I had a feeling the markets would find a bottom as the bulls are still in charge. BUT, I am not a buyer. I hope we do rally so we can have a positive April-May period, but I don't want us to rally every single day as we did after the correction during the Japan episode.  We still have a lot of time until options expire next Friday and I could use some time decay. Remember, as of right now, the SPX is only about 30 points from its high - that could be taken out in a half day of trading. So I could use some "indecision", but as I have always said, the risk remains to the upside.
The "BUT, I am not a buyer" is an important statement and I will get to that in just a moment, but that is basically the theme for today, which is PATIENCE!
Let's quickly talk fundamentals:
**retail sales - I expect them to be supportive of the markes as people are spending
**tail end of earnings - it has been a very good earnings period
**CPI - I don't think this can have an effect on the markets even if it does come in high (I hope it does come in high and does have an effect on the markets - here's to wishful thinking!)
**Bernanke - ever the dove (dove means accomodative and hawkish means inflationary). Think of a dove as flying up (equity prices go up due to low interest rates) and think of a hawk as swooping down (equity prices go down as the fed raises interest rates to fight inflation).
To the charts we go and first up is the SPY with local resistance around Friday's high's, which is also the "Line of Death" in the Fibonacci Retracement around 76.4:

So the question is, do we buy the dip or sell the rally. Well, so far buying the dip has been the correct trade and the selling the rally trade remains to be seen. I think it will work on a number of stocks, especially ones that corrected very deeply. The SPY did not correct deeply and is very close to its highs, even before the rally began, so I am not ruling new highs out.
To prove to you the "sell the rally" game, let's see if WFM (also one of our socially responsible investments of the day) can get back above the line of death - not so sure and as a holder, I am looking to generate income.


Let's move to the "patience" part of the talk. Remember, these commodities have run and run and run. So ask yourself: "Is a deal really a deal?" If you ask yourself that, you understand:
**the big picture
**patience

First up, CNX:

Not liking it? I think you would have liked USO at 61.8 and a 14% discount.


Moving to a real laggard and RIMM and I do have a Blackberry and I can attest that product wise, it is brutal. See the text box on the chart below, but 1.2% isn't bad in 39 days and I actually may want to own RIMM in the mid 30's.


Moving to a true retailer, EBAY:

Retailers have been very strong and the trend is up and we do get retail sales later this week. I expect them to be good, but is this enough of a buying opportunity at thest high levels? It definitely is in reach of taking out its old highs.
Finally, on the equity side we arrive at our second socially responsible investment of the day with Ford (F). Again, read the text box as this is a classic uptrend:

Again, is this buying opportunity as good as it was a few weeks ago or have fundamentals changed (they haven't), but have technicals?
Let's cruise into the forex realm - a very, very active day where you needed your Fibonacci Retracements for your DOUBLE FALL LINE TRADES:



And since volatility picked up, our average daily ranges have picked up and we got a nice BUFFAL BOUNCE out of the EUR/USD today:

Click here for the link to Wednesday's Free Webinar.
Happy Trading and Be Environmentally Cool
Coach Brian

The Local's Take: Afternoon Commentary and Week End Wrap Up and Look Ahead

Good Afternoon,
Yes, that is a long title to this article, isn't it!
Who is having fun in these markets! You have to love a market that reacts to news, moves too far and then retraces. I haven't said that mouthful in one day in a long time. Until a few weeks ago, it has taken months to complete that sentence. I will break it down:
**a huge miss in the non-farm payrolls as more jobs are added
**a market that reacts to it and jumps up and then, oops, are things really that rosy?
**retracements as the marets moved too far
These are great markets folks! You should be taking advantage of them!
Let's first talk fundamentals and then take a look to what's coming up next week regarding those fundamentals and then we can fly into the charts.
Non-farm payrolls came through. We had initial claims pointing to a lower than expected report, but then, somehow, we blow expectations out of the water. Doesn't make sense to me, but let's go with it. BUT, I think in 4 weeks, there will be a lot of tension, especially if the markets are at new highs, which, wait for it....puts an emphasis on the economic calendar. Yahoo!! No, not the stock, just the excitement!
Earnings are for the most part behind us and we are getting closer to summer. As I said earlier in the week, if we are at or near highs, it could be a low volume, leak to the upside as we have seen during past slow periods (last summer, the summer before and Christmas time).
Next week, we have:
**retail sales (should be supportive according to what I see out and about)

**Bernanke and
**CPI - could CPI give us an inflation scare?
To the charts and let's look at the SPY. I don't care how high we got as I was selling that rally by buying the dollar. So that high is resistance and it comes in at 61.8 - let's use that for local resistance with local support at 1330ish.


Hey, let's all buy commodities. No, that is not a recommendation, that is a segway to the next chart: Silver (SLV):

As they say in Bravehart, hold, hold, hold hold, NOW! What do you think?
To our socially responsible play: Ford (F). Got to love the trendline - who can argue with 10 to 20 percent moves in the stock - imagine your option you savvy option traders!



Into the forex realm we go and as I said at the beginning: moves, countermoves and counter-counter moves.
Let's start with the DOUBLE FALL LINE TRADES:

And onto the BUFFALO BOUNCES:



Let's hope the economic calendar gives us enough surprises and let's hope the volatility stays in this range. Remember, we still have 2 full weeks left until May options expire and the SPY is only 30 points from its high - that could happen Monday morning.
Local Tip: Inter-Market Relationship Webinar on Wednesday

Happy Trading, Be Environmentally Cool and Have a Safe Weekend,
Coach Brian