Comparative Thinking

Today was somewhat dramatic -- we traded our plan by buying our spots which hit near the open, and then sold the rally into the morning bounce and went flat. We posted the exits real-time in our account.

Why did we exit? Because while commodities were trying to bounce most non-commodity tells we watch were acting poorly -- and a true oversold market bounce almost always has good breadth, i.e. all sectors should have participated in the bounce.

Here's an example of AAPL, one of our favorite tells, against WLT (AAPL black line at bottom):





But what does AAPL have to do with coal? Nothing, but real turn-arounds in the market almost always have participation by market leaders such as AAPL.

This was the Plan

As per our blog post we offered our plan free to anyone who emailed us last night. Arrows were the entry point alerts -- some didn't make it, but most did. This was our best PnL day in 2010. However the "buy the support like a crack-addict" trade we think is over for a while as the technical damage to charts are severe. If market cannot hold today's lows then the next strategy might very well be resistance shorts.

We feel like old bank robbers who barely got away from the sheriff -- we won't be buying into blood like this until charts regain their patterns.

We went into it in more detail in the two part newsletter -- if you still want a copy email us at info AT highchartpatterns DOT COM

Position update is we added according to our plan and sold all into the bounce later this morning, as posted real-time in our account. We are completely flat in all accounts.

Charts

Here are some charts we like with arrows as entry points. All oversold and heading into support:

Email if you want Recap

We're writing a two part newsletter and first part is a recap of our positions today plus our strategy going forward.

If you want a copy please email us at info AT highchartpatterns DOT COM

and we will forward you the newsletter.

HCPG

Our positions

We had a list of support spots to buy coming into today -- at first we were going to day-trade them on reversals but noticing how heavy the tape was we decided to put on smaller starter positions swing (our starter positions are always 25% of full positions).

Here are all our positions. We won't add today -- in the unlikely event that we bounce from these lows, great. If not, then we expect to take some pain and add at next support zones sometime this week -- and thus most likely our targets will be rallies back to resistance (which was support today) for the over-shoot strategy.

The most important thing here is not to add any more today in order to reserve gun-powder as this pull-back feels more serious.

Note we already took some profits on RGLD BTU AA












Added starter positions also on MDR AGU

Commodity support love-fest

Look at these charts representing semis, metals and miners, coal, steel, oil companies, and gold miners. Support thus far has held on all of them -- there are the lines of the sand going forward. We buy the first test (today) but never the second test (if immed after) so none of these will be valid if hit again tomorrow. Our regret is not hitting support long trades harder this morning as it is very rare for multiple sectors to hit support and fail simultaneously.

Market Talk

We'd be shocked if SPY didn't visit the 50 SMA -- 113.2 was the support and it's basing on it right now, usually a sign of further weakness.



However having said that we still like the long day-trades on support -- again, it all has to do with time-frame. We won't do any swing longs until we get to the 50 SMA on SPY but until then we've been enjoying some decent day-trades long.

When the time comes that no buyers show up when they should then we'll get worried. Until then though, business as usual. We've traded most (but not all) of these off support today:







Position update: we're currently flat in all accounts but will most likely put on some swing trades on the 50 SMA/SPY

Morning Notes

Decent bounce this morning especially in tech, regional banks, and health care stocks.

CAT bounced on the 20 SMA -- going forward this is an area stock needs to hold.




GS 164 another area we'll be watching as a tell for the market.




Lots of earnings this week so stay on your toes.