These sectors outperform

Biotech, chemical and retail are leading sectors in this rally. Bank and semi are still lagging.

SPRD

I added this to the newsletter two days ago, today it flies!

Critical time again!

Trust me, I am confused like anyone else trading this market. I am a swing trader who needs a trending market to profit. Let me put this way, I need some green bars altogether or some red bars altogether, not a green bar followed by a red bar followed by another green bar. The recent volatility frustrated me and I have no solution to it, but decrease trading to a minimium level.

Back to the market. As usual, some positives, some negatives. Let's list the negative first.

1. Tomorrow we will have the non farm payroll number again and we are still trading at the lower end of range. The longer we stay here, more likely we will go lower.
2. Banking index is VERY weak, especially GS.
3. The Hindenburg Omen and death cross etc all point to a steeper decline.
4. The economic numbers are bad, as usual.

Now positives:

1. China is still holding an uptrend.
2. Draw the trend line differently, the banking index is sitting on the support, due for a bounce.
3. Very bearish sentiment according to AAII. I also did a survey at http://www.bespokeinvest.com 64% readers see Dow 9000， 36% see Dow 11000. It also validates the deep bearishness among the investors.
4. I can't think of any reason the market crash here without any particular bad news. The financial crisis happened just 2 years ago, the Euro crisis and BP crisis just a couple of months ago, it is rare we will see another nasty event in a row.

So which direction should we go? After all those sayings, I honestly don't know. All I know is if we have a negative reaction of tomorrow's number, I will cut longs, buy back FAZ for protection!

Another leading indicator I am using

Besides our banking sector, China has played a major role in my analysis. China has grown to a much stronger economic entity, now the whole world is evolving around it, including our stock market. From the chart above, the Chinese stock market is challenging the resistance and forming a bear flag. So it also says caution and lots of cash needed.

Banking sector broke down

Looking back the last post about four months ago, I emphasized the importance of the bank and it is still valid. The weekly chart of the banking index has clearly broken the trend line. That means caution and cash is the king.

Powerful run by Nasdaq

The Nasdaq has enjoyed a powerful run since the New Year. I remain bullish and I don't see an end right now as long as the bank sector performs.

Hello again!

Finally I found another way to crowl over the Great Firewall after the Hotspot was banned in China. So after being absent for the last 4 months, I am here again. While I enjoy the rapid appreciation of Beijing's housing price, I do hope the authority can give the internet some freedom. Afterall the internet is about communications, it is about the freedom!

Hello from Korea

Sorry for the lack of posting for the last 30 days. I have been busy setting up my new venture in China, which will include investing, training and education. Back to the market, it is consolidating the huge gain from 09. Whether it is a top or a resting phase, we shall see in the new year.

Stopped out of my metal shorts

I will re enter when the time is right.

FMCN

FMCN is working its way back up to the high.

YGE

YGE is breaking out.

Trading range

The NASDAQ is back to a trading range.

F

F met the target and the position is closed.

More sectors look bearish

A bear flag shows up on the biotech chart. Also the chemical looks sick.

The banks have not seen the bottom

This is bad for the general market.

Steel

The steel sector just got creamed last week.

Banks in danger

We are oversold, but still no bounce in sight. I've got the sell signal on banks. No good for the general market.

CYOU

CYOU is another short in the newsletter. I expect it will contain more shorts in the coming weeks.

SOHU

I added SOHU last Thurs.

DRV

Almost got shaken out today, it is breaking out in the end.

Final nail on the coffin?

Looking at the slope of each rally, it gets flatter and shorter. Today's bearish engulfing looks like the final nail on the coffin.

VISN

VISN has performed well since added to the newsletter.

Mainly day trade right now!

I can't ignore the strength, I can't fight the trend, so I covered my NUE, SCHN shorts yesterday. I remain a long term bear, but I respect the current bull trend and daytrade the long side nervously.

Stop is too tight

It was a good pick, but the stop was set too tight. Otherwise, 30% gain!

Short candidates

I have been shorting SCHN since last week, now I am shorting another steel stock: NUE.

Critical time

If the bulls can't push the market higher, a possible double top seems likely.

I am right, this time

I know I have sounded bearish a number of times this year, but I did bravely and timely call a market top on Sep 16th on Twitter, which I feel pretty good about it.

NASDAQ retreating

The NASDAQ quickly approaches the bottom of channel. Can it hold?

Builders

Jim Cramer keeps claiming the housing has bottomed, which I am not sure about it. From the chart above, the housing index shows cracks by first dipping under 30 day moving average that also agrees with my bearish outlook for the rest of the year.

What I learned from 19 consecutive losses

As I am doing some catching up for my lack of posting here, I conclude that I had 19 consecutive losses from end of July to mid Sep. Two of them turned out to be big winners, CIEN and LVS. In order to find out why I had losses after losses, I go to the big picture, the NASDAQ daily chart. You can see from the highlighted dark blue area: it was whipsawing, no clear trend. My method clearly failed in that kind of trading environment.

A bullish case for China

If China market stops bleeding and starts to consolidate at this level, we may form a bullish reversed head&shoulder.

Update: MPG

I am kicking myself not taking proft at $3 area.

Sorry for the absense

Since I changed to Windows 7 this Sunday, Hotspot shield stopped working, which has been a must have tool in China to access some blocked foreign sites, such as Blogspot. Finally with my buddy's help, U95, a Chinese software can also do the trick. So now I am back in the game.

Recent additions

I have been long these two since earlier this week.

MPG

I recommended MPG last night, today it was up 50% at one time.

Ignorance is a bliss

First I have to admit I made a mistake, I tried to pick the turn again. I should not start shorting the market before the trend changes that is 30 week moving average starts to point down. Now once again it is proved that we are still in a monster bull market that has rallied over 54% within 6 months! I have been firmly believing that we are in a long term bear market, because the economy is in a bad shape and this time the root is bad, the Americans have to change their life style. Besides, the technical picture did not support a sustained rally: no double bottom or triple bottom. So from the beginning, in the bottom of my heart I was thinking and projecting the rally is just temporary and doomed to fail some day. I still believe that, but this belief makes this year's trading particularly difficult. I have to trade from the long side while holding a chuck of shorting positions to hedge. And as long as the market keeps rallying, the struggle inside my head gets more intense and at some point my belief is going to shake. Maybe this time is different? Ignorance is a bliss. It is so fit in this situation. If I am a rookie, I could be much happier this year.

Paul Tudor Jones

Paul Tudor Jones is betting against Goldman Sachs. Which side do you pick?

Breaking down!

At the end of day, I got sell signals across the board and I am fully shorted right now.

Recent market action

Sorry for lack of posts lately. The market basically moved nowhere since my last post which is boring and not encouraging. The only thing moving in this market are the small financial junkies, like C, FRE, FNM, CIT, AIG etc. Those are good for day trade only and too volatile to be considered swing trading.

So are we going up or down from here? I really have no idea. The bulls could say we broke out and now we are just resting. Even China's over 6% drop could not bring us down today. The bulls reversed the earlier weakness nicely. In the mean time, the bears could argue that the recent breakout was sluggish and we lost China, the biggest economic driver. The breaking out stocks are getting leaner and leaner.

Both sides are reasonable. If I have to choose a side, I think the bears have a chance, though the bears have got killed many times this year.

NASDAQ

I was bearish earlier this week, but I guess the market is playing with me, now it looks like a bear trap. As a trader, you gotta be flexible. I am long some FRE and C from yesterday.

Finally the internet is fixed in China

Due to the earthquake in Taiwan, the internet in China was cut off for the last 4 days. I could not access the foreign sites like Yahoo, MSN etc. Today it is finally back to normal, which makes me feel so GREAT! And I just realize how my life turns out when there is no internet. My life sucks (hope she does not see this!)

Still in a trading range

I don't see a nasty sell off for now, maybe a decent pullback to 1830 at most.

Hedge fund bought BAC

John Paulson's hedge fund is reported having bought 168 million shares of BAC during the 2nd quarter. Do you think you can profit from this almost 2 months' old news? I highly doubt it. The retail investors are probably holding the bag for him to cash in. I think this is just another sign of the top.

But why I am not excited

On this weekly chart, the NASDAQ is right at the resistance. I don't think it can break through it this time.

Transportation index

It is breaking out!

Hard to be a bear right now

With the strength of banks, it is hard to have a bear case.

Update: LEN

LEN still climbs.

CSCO-the party breaker?

Panic button

I am concerned by the speculation on the small cap stocks and I also think the uptrend from March is due for a break. I used the "panic button" today and closed most of my long positions. I will watch from the sideline for the rest of the week.

Lesson from Sol at Xtrend

Among the investing bloggers I regularly visit, I have a lot of respect towards Xtrend gang. The main reason is they correctly predicted last year's crash and made lots of profit from it. Trader Sol grew his account from 350k to 4 million at the end of last year. Today he announced he blew it off.

How can a good trader like him lose it all? I conclude 3 reasons from my observation of his trading this year.

1. Fighting the trend. He has been shorting this market all the way up from March.
2. Picking the turn. He has been trying to pick the top from March.
3. Being stubborn instead of flexible. Though we are in a long term bear market, the inter medium is clearly up after March 23rd. Being a trader, recognize it and go with it.

And best luck to Sol, hope he learned his lesson and recover himself from it. He can be much stronger.

Banks still lagging

Even with recent strength, the bank index is still lagging on the weekly chart by looking at the the down sloped 30 week moving average.

Dow Jones weekly

Dow Jones is at some sort of resistance too.

NASDAQ at resistance

I think we should start closing long positions. It is clearly at a strong resistance. If this is a bear market rally, which I think it is, the downward trend line is too heavy to break through.

Update: HOV

It reached my target today, with 35% profit.