Trading the Bounce

[peter2]

Local (Aust) CFD provider has increased their margin requirements on their indices from 0.5% to 5%. They're expecting more high volatility to come.

EW practitioners seeing this swing (bounce) with 5 waves (incomplete) making it either a wave 1 (bullish) or wave A (bearish). In either count the anticipated next swing is down (wave 2 or wave B).

The current isolation is giving us too much time to think. I should do some gardening instead.

 

[Student of Gann]

SP500 Top is indicated for the 8th May . Market should remain up to this point . This Date is 45 Degrees from 24th March Low and 77 Degrees from 20th February Top both numbers are at 270 Degrees and 135 Degrees in Longitude from May 6th which is 45 Degrees on The Square

 

[tech/a]

SP500 Top is indicated for the 8th May . Market should remain up to this point . This Date is 45 Degrees from 24th March Low and 77 Degrees from 20th February Top both numbers are at 270 Degrees and 135 Degrees in Longitude from May 6th which is 45 Degrees on The Square

So what’s in store for the markets after 8/5?
That’s the top then what? sideways? Drop to?
And over what timeframe.

 

[Student of Gann]

I haven't yet completed a thorough analysis on The SP500 as yet however for those interested I have prepared and presented two CBA Curves on a seperate thread that outline both minor and Major Turning Points and projected trend direction for that period.

 

[tech/a]

I haven't yet completed a thorough analysis on The SP500 as yet however for those interested I have prepared and presented two CBA Curves on a seperate thread that outline both minor and Major Turning Points and projected trend direction for that period.

Cheers

But indexes particularly those under the influence of trillions of dollars of stimulus interest me more!

 

[ducati916]

So news out of the Fed:

WASHINGTON (AP) — The Federal Reserve signaled Wednesday that it will keep its key short-term interest rate near zero for the foreseeable future as part of its extraordinary efforts to bolster an economy that is sinking into its worst crisis since the 1930s

In its statement Wednesday, the Fed said it will also keep buying Treasury and mortgage bonds to help keep rates low and ensure that companies can lend easily to each other amid a near-paralysis of the economy caused by the coronavirus. It did not specify any amounts or timing for its bond purchases.

Nor did the Fed provide details about the pace of its purchases of Treasurys and mortgage-backed securities. It has tapered those purchases recently as markets have calmed. But earlier this month, it bought as many Treasury securities in a day as it did during an entire month in the 2008-2009 Great Recession.

Stocks lovin it.

jog on
duc

 

[qldfrog]

Just keep your eyes open on this bounce as below the surface all is not as it should (or needs) to be:

View attachment 103031

The S&P 500 is reflecting the bounce in just a number of mega-caps.

View attachment 103032

The equal weight ETF is lagging.

View attachment 103033

In 2009, when we had truly bottomed, and the smaller caps were participating, the equal weight outperformed.

View attachment 103034

Not the case currently.

This is also evidenced via other sectors, Banks, Defence, etc. Tech is leading the charge currently. Therefore narrow leadership makes for a higher risk that we do get a deeper correction from the bounce at some point. Stay nimble.

jog on
duc

The disconnect in the US between a few tech and finance companie and what remains the core of the economy is frightening
Was looking at the very same graph first graph.
Be agile and try to catch the tide or go to cash and gold.temporarily,
I can not believe this will carry smoothly from there.

 

[gartley]

SP500 Top is indicated for the 8th May . Market should remain up to this point . This Date is 45 Degrees from 24th March Low and 77 Degrees from 20th February Top both numbers are at 270 Degrees and 135 Degrees in Longitude from May 6th which is 45 Degrees on The Square

Thanks for your thoughts. I see some sort of top as well in that period

 

[Student of Gann]

For Tech : Strategy would be to wait for Time Cycle validation then trade in direction of the trend . over the course of next week I might try and include some Minor turning points within the projected downtrend from the 8th May to 1st June a time period of 24 days and a possible decline of 7.6% approx.

 

[bluekelah]

GDP 1Q -4.8% for USA. American consumer has basically shutdown. This will be a very bad earnings season. I dont think markets will hold up, probably start crashing this weekend as bad numbers come out China side as well.

 

[aus_trader]

The disconnect in the US between a few tech and finance companie and what remains the core of the economy is frightening
Was looking at the very same graph first graph.
Be agile and try to catch the tide or go to cash and gold.temporarily,
I can not believe this will carry smoothly from there.

My analysis yields the same. Tech giants and a few other bulky caps leading the rally without a great deal of wider market participation.

 

[ducati916]

You can just make out the yellow line (at 300) which is the 200SMA. This is (often) cited as the demarcation point 'twixt bull/bear markets. The market is approaching this test. Often (slightly better than 50/50) a market will pullback on the first test. There will (usually) be a re-test.

Yesterday (at least, unsurprisingly) there was no associated signal to exit, even though we were approaching the test zone. Today, maybe there will be. This will depend on how the market closes.

jog on
duc

 

[qldfrog]

View attachment 103118

You can just make out the yellow line (at 300) which is the 200SMA. This is (often) cited as the demarcation point 'twixt bull/bear markets. The market is approaching this test. Often (slightly better than 50/50) a market will pullback on the first test. There will (usually) be a re-test.

Yesterday (at least, unsurprisingly) there was no associated signal to exit, even though we were approaching the test zone. Today, maybe there will be. This will depend on how the market closes.

jog on
duc

Last night in the US down with the Russel 2000 at -3.5%, as was the FTSE.
confirming the gap with NASDAQ falling less than 0.4pc ..
The unicorns dream is still alive while the rest of us earthlings are not having a great time, yet Australia forges on, producing now only raw materials for some Chinese factories still running and chasing elusive market.
Should i open a company of money incinerators and get a contract with various reserve banks? better i built it virtually, cloud based, green house emission friendly and get carbon credits?
We are living in a surreal world.
But that present opportunities
Imho, my weekly system can only do so much unless they get exposed to too much risk
Only a daily system can try to profit from what i see as little bounces before future falls

 

[aus_trader]

We are living in a surreal world.
But that present opportunities
Imho, my weekly system can only do so much unless they get exposed to too much risk
Only a daily system can try to profit from what i see as little bounces before future falls

Yes, I have to agree with the comments about active management in these times. I think a weekly system will have too much exposure to any downside risks if the market decides to sell down for 4 or 5 days straight at least for my stocks.

I am also looking for opportunities in the Aussie market, but a lot of prospects I come across present too many unknowns at this stage in terms of how much damage is done to the bottom line. So I'd be happy to wait till at least some results reporting comes out. I have only bought a couple of stocks since liquidating the Speculative Stock Portfolio at the start of March. Even those two are monitored on a daily basis. Will be continuing to research opportunities that present limited downside in terms of that company's current financial position. Normally not this pedantic, but I'll have to be very selective with stock picking at this stage.

 

[ducati916]

There is a signal (sell) triggered after today's close. This however is what makes trading bounces difficult, two signals (to exit) being in very close proximity, turns us all into day-traders and we potentially lose our positions.

The temptation of course, particularly on the previous shallow pullback and quick move higher, is to just sit tight. Problem is, what if it just keeps going down to retest the lows or move even lower. Of course if that were the case you would rather be 100% out.

The alternative is to hold your current positions and hedge: either with Options (Puts) or inverse ETFs. If you choose to hedge with an ETF, use an index Option/ETF (SPY/QQQ/DIA or leveraged ones). A Put is the easiest option in that you have a defined risk trade, which you can just let sit there for a little a period of time until things shake themselves out.

That is essentially my plan: hedge 25% of my exposure.

jog on
duc

 

[aus_trader]

Although I don't use this type of protection, I think this is probably a good time to implement Duc. Volatility has died down and it'll be a lot cheaper to buy that insurance as the premium will be a lot less.

 

[ducati916]

Although I don't use this type of protection, I think this is probably a good time to implement Duc. Volatility has died down and it'll be a lot cheaper to buy that insurance as the premium will be a lot less.

It allows you to protect to the downside without closing out all your positions. Losing your position, if the market doesn't fall will have larger opportunity costs going forward than any losses in closing out (or just letting expire worthless) a Put.

Some charts to peruse:

jog on
duc

 

[qldfrog]

One point I did not see discussed much: SPP.
A lot of companies are raising capital, as they did in the GFC;
This tends to distort pricing severely obviously and present some risk and maybe some advantages;
I got offer from OSH, MTS, IVC so far out of a quite small portfolio...
Should I keep a few shares when I sell just to qualify? Is this something people have tried?

 

[Dona Ferentes]

One point I did not see discussed much: SPP.
A lot of companies are raising capital, as they did in the GFC;
This tends to distort pricing severely obviously and present some risk and maybe some advantages;
I got offer from OSH, MTS, IVC so far out of a quite small portfolio...
Should I keep a few shares when I sell just to qualify? Is this something people have tried?

Sadly, the SPP is an 'afterthought' and appeasement only, for retail. The investment banks have pulled a swiftie on the boards, and got a capital raise in the form of an emergency action. These have come at an average of 18% below the last traded price (some were to stop companies go under, such as FLT and WEB) while others are taking advantage of cheaper money to expand.

But the placements are to institutions and the SPPs come after for retail. Gone are the institutional bookbuilds that allocate shares to fund managers prepared to pay the most. But these take time, and don't dilute retail as much - average discount is about 9%.

and now, in this current 'crisis', the ASX has increased placement limits from 15 to 25 % of a caompany's shares. So, you're being diddled.

Most SPPs don't even allow for oversubscriptions, whereas an entitlement rights issue often does. And most SPPs, while they offer up to $30,000 from each shareholder, are likely to be wound back. But the board doesn't tell you the formula as to how this will happen. Proportional, a dollar limit, or graded; Quien sabe?

One of my offers has this

If the Company chooses to scale back applications it will do so
-on a pro-rata basis (determined either by the number of shareholders participating, and/or
-the size of the Eligible Shareholder’s shareholding at the Record Date, and/or
-the number of shares an Eligible Shareholder has applied for under the SPP).

 

[Dona Ferentes]

answering your Q,

One point I did not see discussed much: SPP.

Should I keep a few shares when I sell just to qualify? Is this something people have tried?

you don't know how many shares you'll get, so selling to pay for the new issue can be problematic and may find yourself with fewer shares (and even more diluted) than prior holding. It's a game.

Holding a few shares in every ASX company is a strategy that needs another thread!!!!