2013-03-19

$ES_F : 1544-1556 : Market Recap


Cyprus problem is not a small problem.

Short Set-Up held and markets looking weak.


The worlds is changing. I feel it in the water, I feel it in the earth, I smell it it in the air. I was suspicious of the market price action yesterday to the bad news from Cyprus and wrote this reply to a bullish tweet on twitter.  The problem which started at the tiny island of Cyprus is deteriorating. The banks are closed until Thursday 21st March 2013. They cannot open banks without passing the bail-out bill or else it will result in tremendous bank run and will collapse the banking system in Cyprus and along with that in Europe. The government is not able to pass the bail-out bill which imposes punitive raid on bank deposits. There are rumours that Finance Minister has offered to resign as if that is going to help the situation. UK is sending a plane full of cash to Cyprus to assist British personnel in case the banking system is not operational. These are the kind of news which cannot be brushed away. Coupled with the fact that we are near the resistance levels in markets, it is ripe for a decent pull-back or correction. And whatever the politicians say, grabbing bank deposits sets a very bad precedent. Once a vampire tastes blood ..... Here is the 5 minute chart of today's day session trading.



I came in the day bullish as per this trade plan. Yesterday market had reacted very well to bad news from Cyprus and for a while it appeared that the markets drunk on cheap money will continue their inebriated walk forward and higher discounting all sense of reality even though price action in VIX and Gold was signalling of protection buying. Market opened gap up and I was expecting the support to hold even though I was very cautious of long positions and keeping a keen eye on news from Europe. I went long at gap fill at 1545.75 first green arrow and pretty soon the second fill came at expected day session low of 1544 second green arrow. The volumes were heavy on the down side and at this time I was getting suspicious of market not being able to hold support and I exited my positions near the first VWAP test, third red arrow. If markets were to remain bullish I was expecting VWAP to be breached and I would have gone long again on next test. But it did not happen and instead markets started crashing immediately after touching VWAP grey oval. I did not take any more trades for the day and instead I watched the market to hold short set-ups and I expect a move to 1510-1505 area has started provided bears can defend 1544-1551 area. The bullish line in sand in the trade plan at 1540 was breached and market has dropped nearly 8 points below that indicating that this market is selling now. You can see the trade and comments here.

With about 1 hr 30 minutes to go before market close, anything can happen but if things proceed as they are set-up now, market could chop around near VWAP levels closing near lows. From the looks of it, it seems day session high and low are already in. However if the lows are breached, a move to 1527-24 can begin. However I am calling it a day now.

In my stock portfolio my AAPL short was stopped at break even. I have also added SPY short as balance hedge to keep the portfolio flat as of now.