The New Year : UpsideTrader

“The pessimist sees difficulty in every opportunity. The optimist sees the opportunity in every difficulty.”-Winston Churchill

Amateur night is almost upon us as people form all corners of the world will try and  channel positive karma and hope for the new year. It’s just a date on the calendar, truth is we can all change ourselves for the better at any second of any minute in any hour anytime we want. We just use this date to try and memorialize it. The liquor industry loves this day as clubs, saloons and gin mills go eight deep at the bar. Teetotalers will break down their wall and do shots of tequila while wearing propeller hats. They will vomit violently at several points as their Gucci’s become ruined. They will also realize during this violent act of reverse peristalsis how little they chew their food. In some rare cases arrests and divorce filings may result. Tomorrow morning, most will wish they just stayed home and ordered Chinese food.

Many Danish leap off chairs at midnight on New Year’s, hoping to ban all bad spirits in the new year.
At midnight on New Year’s, Spaniards consume 12 grapes and try to consume all of them by the time the clock stops chiming. They will worry about solvency on Monday.

In South America, those who wear red underpants, are hoping for love in the new year. Those who wear yellow, are wishing for money.

The ancient Greeks paraded around in the streets with a baby in a basket on New Year’s Day. It’s part of the cradle to grave thingy.

Fire crackers are set off to frighten off evil spirits on New Year’s Day in China. They will create new and exciting ways to cook the books on their public companies on Monday.

The Romans began a tradition of exchanging gifts on New Year’s Eve, by giving one another branches from sacred trees, for good fortune. Berlusconi just sits around with hookers.

88 percent of all New Year’s resolutions end in failure.

As far as the market and trading goes this year, it will be more of the same for me. We are all a work in progress as traders, so to say that there the wont be tweaks and nuances would be a lie.

1- All media is shut OFF during trading. What Mike Holland and Bob Doll think I should do is meaningless. Please realize that when they come out positive on a stock it’s for a three year hold, if that’s your thing then have at it.

2-The hardest thing to do, tell myself every morning that what I think couldn’t be more meaningless. I may think the market will get crushed for a multitude of reasons, but if the tape is higher, I will just be long. Same goes for the short side.

3-I think my longest hold in 2011 was one month. I may extend that time frame on certain names. Almost perfect entries will be of utmost importance.

4-Based on that, more hedging will need to happen.

5- I will have more exposure to global markets both long and short, there will be a lot of action there.

6-No trend no trade. If it ain’t happening I’ll watch and wait. I don’t have to be in it to win it all the time.

Why I’d Steer Clear of Emerging Markets

Why I’d Steer Clear of Emerging Markets… For Now

by Phoenix Capital Research

While stocks continue to float on ether and pipedreams, the commodities, credit, and bond markets are all forecasting another round of deflation. Whether it arrives now or in the near future remains to be seen. But he fact remains that at some point we’re going to have another 2008 event. The most likely cause will be Europe, but with the Middle East heating up, and Bernanke’s loose money policies becoming more and more politically toxic in the US, who knows?

On that note, I expect emerging markets to underperform US indexes going forward. One chart I use to view how these two assets perform relative to one another is to price the Emerging Markets ETF (EEM) via the S&P 500. When this chart rallies, Emerging Markets outperform the S&P 500. When this chart falls, the S&P 500 outperforms Emerging Markets.


As you can see, since August, the S&P 500 has outperformed Emerging Markets with the exception of a few brief periods. I expect this trend to continue with US markets holding up better than their Emerging Market counterparts as we’ve recently broken major support.

Indeed, the long-term chart of EEM relative to the S&P 500 shows that the love affair with Emerging Markets may indeed be ending:



As you can see, we’ve broken below MAJOR support here and have since failed to reclaim this line (indicating that former support is now resistance). This is a VERY bearish chart which indicates that we are very likely entering a prolonged period in which Emerging Markets will underperform US indexes dramatically.

Prepare accordingly.

Nifty : Triple Zig - Zag ?

The recent Nifty moves must have fooled many traders : the intraday breakdown of 4700, but the inability to close below it on the daily chart pointed towards a possibility of a strong upward reaction. We got that as well, can't say how many traders would have caught that move.

Next thought that comes in mind is how much more this rally can carry on, or have we made a short/medium term bottom. I took a look at the kind of pattern that has developed since last year, which in Elliot terminology looks like the formation of a triple zig-zag.

In the above table, I have marked the waves as A, B, C and X. Zig-Zag type of correction generally tend to have a relationship among its counterpart waves. As we see the first 2 wave Bs are around 75% retracement of wave As, also wave Cs are roughly 150% extension of wave A. The lower table shows wave Xs being about 60% retracement of the entire 3 wave correction.

The bottom 2 rows of the upper table is where I have tried to use this relationship to estimate the target of the current upward wave and the target of the next final C wave down. So the target of current rally looks to be ending around 5200 (nice resistance!) and finally a break of all supports to reach somewhere around 4100 (this is currently a vague target, underlying thought being another 1000 point or more massive fall).

The reason I am still suspecting another fall is the fact that we are still awaiting a resolution of all these European s***. The fact that all central banks come together to provide liquidity means there was something very terrible about to happen. The current effort is just another kick on the can. I am expecting market to realize sooner than later the hopeless situation Europe is in and the solution lies in taking the pain rather than buying another dose of the same drug.

The rally is also very technical in nature due to the fact markets was oversold and seasonal factors suggests some kind of year end Santa Claus rally! I feel we are going to make another top in late december or early january and then have a terrible Q1 2012. Hopefully 4000 or roundabout Nifty should find its feet.

Longer Term View : Ichimoku Dependent!

Some time ago, I posted a weekly chart, requesting all my readers to exit out of equities because something happened in the charts which was signalling the end of bull market which started from October 2008. Which meant all rallies should be now sold into. That happened in January of this year, when Nifty after making its first lower high, formed a bearish engulfing candlestick pattern. Subsequently Nifty gave a sell signal on the Ichimoku Cloud as well. Since then Nifty has made a series of lower highs and lower lows.

This week it has broken the 200 week moving average, another confirmatory signal, which the long term players should beware of. Investing now, and giving valuation as a reason, would be foolhardy. The above chart shows how Nifty took some support at the 200 week moving average, and also gave a buy signal in October but the rally soon fizzled out and since it broke the 4700 support, another round of heavy selling could be expected even if there is some relief rally.

I wanted to point out, in this post the beauty of Ichimoku cloud which did not give any sort of buy signal, even though there were strong rallies from February to April and then in October. Ichimoku still believes that the trend is down and because its below the cloud expecting any kind of immediate support would be stupid.

I would like to point out that the monthly charts shows 4000 as support area.


Technically from an investing point of view, I will until there is a higher low formed on the charts and Ichimoku buy signal.