Monday, December 19, 2011

Nightly Report. December 19, 2011

One of the pitfalls of my style of trading is that I am always early for a trade. I have been writing for a while that I expect weakness around December 19-20. This has to do mainly with the liquidity flow or lack of it. The Fed is sucking away some US$ 20 billion on coming Wednesday (selling more T Bills) and that kind of stuff normally affects the stock price. But this was expected and known and I twitted my readers in the morning not to chase the rally. I told them that I expect weakness and when it comes I will go long. In fact about a week back I wrote that I expect SPX test around 1200 level before bouncing back. So here we are today.

I would say that everything is going very much according to plan. I went long during the day and added long positions in a staggered manner. I could have waited for the last 30 minutes to go long, but I believe that it is not possible to perfectly time the trade. I am looking at a trend reversal and I have jumped in, albeit one hour early. Yes, I am under water at this moment but that is only to be expected.

Today’s report is going to be short because there is nothing new to add. Once again, like last time, this one is also going to be a very quick trade. The big trade is coming sometimes in January 2012. I will tell you more about that when we come close but for now we have to wrap-up this one in the next eight trading days.
We have only eight (8) trading days left in the year and for reasons explained many times here, I do not think we will end the year in negative territory. One very important reason is the 3rd year of the Presidential cycle and that cycle is very much alive.

For those of you who love Analog, Eric Swarts of Market Anthropology is a master of fractals and analogs. The following chart is from him.

It compares the hourly movement of SPX during the March, April and May of 2011 and that of now.  The blow of top may not be coming in December but we are definitely following the script.

So far so good. Thank you for following me on Twitter (@BBFinanceblog). Please retweet to your friends who may be interested and who might benefit. Visit regularly to profit from the world of finance.