Comments on: S&P 500 forming “W” Bottom ? http://www.ritholtz.com/blog/2008/10/sp-500-forming-w-bottom/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Sat, 21 Nov 2009 19:03:21 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: Colder http://www.ritholtz.com/blog/2008/10/sp-500-forming-w-bottom/comment-page-2/#comment-120256 Colder Sun, 26 Oct 2008 03:53:41 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/sp-500-forming-w-bottom/#comment-120256 Barry, looking closer at your Ultra S&P chart (above)... I don't see this as a tradeable bottom. It's still bearish. It's a descending wedge-type pattern, and it appears from the chart that the last candle actually made a lower-low - which would support further bearish momentum - but perhaps not before it retests the red trend-line one more time. I would definitely take the opposite trade and short this puppy on the next test of the red trend-line. It makes no sense to me to go long here. This thing looks like it's breaking lower. Just my 2 bits... Barry, looking closer at your Ultra S&P chart (above)… I don’t see this as a tradeable bottom. It’s still bearish.

It’s a descending wedge-type pattern, and it appears from the chart that the last candle actually made a lower-low – which would support further bearish momentum – but perhaps not before it retests the red trend-line one more time.

I would definitely take the opposite trade and short this puppy on the next test of the red trend-line.

It makes no sense to me to go long here. This thing looks like it’s breaking lower. Just my 2 bits…

]]> By: Colder http://www.ritholtz.com/blog/2008/10/sp-500-forming-w-bottom/comment-page-2/#comment-120255 Colder Sun, 26 Oct 2008 03:43:33 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/sp-500-forming-w-bottom/#comment-120255 Despite what some may say, technicals still have considerable sway. Has no one noticed the pennant formation on the S&P. It's not pretty. Not pretty at all. Anyone whose bullish should look closely at price action. Price closed on Friday BELOW the pennant flag, suggesting we may soon begin crumbling further lower. I shudder when I see what the pennant target suggests is possible (500ish? ouch!) I trade what I see, not what I think - and definitely not what I feel. Be careful out there guys and gals. Capital preservation should always be #1 for anyone with the guts to play these markets. Despite what some may say, technicals still have considerable sway.

Has no one noticed the pennant formation on the S&P. It’s not pretty. Not pretty at all. Anyone whose bullish should look closely at price action. Price closed on Friday BELOW the pennant flag, suggesting we may soon begin crumbling further lower. I shudder when I see what the pennant target suggests is possible (500ish? ouch!)

I trade what I see, not what I think – and definitely not what I feel.

Be careful out there guys and gals. Capital preservation should always be #1 for anyone with the guts to play these markets.

]]> By: Chief Elf http://www.ritholtz.com/blog/2008/10/sp-500-forming-w-bottom/comment-page-2/#comment-120254 Chief Elf Sat, 25 Oct 2008 21:59:08 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/sp-500-forming-w-bottom/#comment-120254 Just for the record, the SDS (opposite of SSO) also had similar volume spikes on the same days. So, you could also say it's bearish or bullish depending upon which ETF you look at for the same trading condition. Just for the record, the SDS (opposite of SSO) also had similar volume spikes on the same days. So, you could also say it’s bearish or bullish depending upon which ETF you look at for the same trading condition.

]]> By: paul http://www.ritholtz.com/blog/2008/10/sp-500-forming-w-bottom/comment-page-2/#comment-120253 paul Sat, 25 Oct 2008 19:51:04 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/sp-500-forming-w-bottom/#comment-120253 Yes, if you are bullish you should short the SDS - bearish, short the SSO. Yes, if you are bullish you should short the SDS – bearish, short the SSO.

]]> By: Muzie http://www.ritholtz.com/blog/2008/10/sp-500-forming-w-bottom/comment-page-2/#comment-120252 Muzie Sat, 25 Oct 2008 18:28:34 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/sp-500-forming-w-bottom/#comment-120252 Funny how everyone cheers Barry when he points out things he did a long time ago, and with everything plainly above everyone cheers for more. But the support wanes quickly when Barry shows he is still a contrarian and calls something opposite of the crowd again. Hint: This blog got popular by being ahead of the ball, not behind it. Funny how everyone cheers Barry when he points out things he did a long time ago, and with everything plainly above everyone cheers for more.

But the support wanes quickly when Barry shows he is still a contrarian and calls something opposite of the crowd again.

Hint: This blog got popular by being ahead of the ball, not behind it.

]]> By: Francis http://www.ritholtz.com/blog/2008/10/sp-500-forming-w-bottom/comment-page-2/#comment-120251 Francis Sat, 25 Oct 2008 13:44:17 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/sp-500-forming-w-bottom/#comment-120251 Well, it does seem to be a W formation given the facts, but it's likely just a minor trend if we look at the timeframe of the pattern and the distance between the "high volume candlesticks". Honestly, I believe that we will have to wait a long looonng time for THE bottom. :| Well, it does seem to be a W formation given the facts, but it’s likely just a minor trend if we look at the timeframe of the pattern and the distance between the “high volume candlesticks”.

Honestly, I believe that we will have to wait a long looonng time for THE bottom. :|

]]> By: AveQ http://www.ritholtz.com/blog/2008/10/sp-500-forming-w-bottom/comment-page-2/#comment-120250 AveQ Sat, 25 Oct 2008 12:36:16 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/sp-500-forming-w-bottom/#comment-120250 Those volume spikes are goverments buying shares and as we all know.... goverments don't make very good financial decisions. Those volume spikes are goverments buying shares and as we all know…. goverments don’t make very good financial decisions.

]]> By: LESLIE P. NORTON and ERIC J. SAVITZ http://www.ritholtz.com/blog/2008/10/sp-500-forming-w-bottom/comment-page-2/#comment-120249 LESLIE P. NORTON and ERIC J. SAVITZ Sat, 25 Oct 2008 11:38:07 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/sp-500-forming-w-bottom/#comment-120249 Friday's volume was relatively light, observes John Roque of Natixis Bleichroeder, suggesting that fresh lows might be tougher to establish. Odds of a short-term rebound are good. The S&P 500 is 25% below its 50-day moving average, something that's only happened five times since 1928. Each time, the S&P 500 has typically rallied at least 14%, says Paul Hickey of Bespoke Investment Group. Friday’s volume was relatively light, observes John Roque of Natixis Bleichroeder, suggesting that fresh lows might be tougher to establish. Odds of a short-term rebound are good. The S&P 500 is 25% below its 50-day moving average, something that’s only happened five times since 1928. Each time, the S&P 500 has typically rallied at least 14%, says Paul Hickey of Bespoke Investment Group.

]]> By: JT http://www.ritholtz.com/blog/2008/10/sp-500-forming-w-bottom/comment-page-2/#comment-120248 JT Sat, 25 Oct 2008 05:51:22 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/sp-500-forming-w-bottom/#comment-120248 With the crowd fighting yu on this on BR, it's got a higher probability of working that not working. JT With the crowd fighting yu on this on BR, it’s got a higher probability of working that not working.
JT

]]> By: fedak http://www.ritholtz.com/blog/2008/10/sp-500-forming-w-bottom/comment-page-2/#comment-120247 fedak Sat, 25 Oct 2008 05:34:37 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/sp-500-forming-w-bottom/#comment-120247 Mark said: All ultra ETFs are for daytrading only. They are not guaranteed 2x the underlying. SSO on high volatility down days trades at 2x the S&P 500. On recent up days it trades at 1 to 1.5x the S&P 500... ____ There are a number of common misconception as to how the Proshares work. They track 2x the DAILY PERCENTAGE move of the ETF and they tend to do this fairly reliably. There is no differential in tracking on up days vs down days. The discrepancies you see are due to two factors: 1) The Proshares close at 4:15 and the underlying indexes are marked at 4:00. This means any movement between 4:00 and 4:15 shows up in day X for the ultra and day X+1 for the underlying. This needs to be accounted for if you are checking the tracking on a daily move. If there was a big AH move during this period the Ultras will appear to not be tracking appropriately. 2) There is absolutely no expectation that these will track 2x on timeframes greater than 1 day. On the contrary, the nature of the statistical compounding of the daily moves make it explicitly improbabe that they will track 2x. (Pull up a spreadsheet and calculate it yourself). In general, the more volitile the underlying ETF, the worse the divergence will be. Proshares covers this in the 1st section of their prospectus booklet. In general the compounding tends to automatically increase your leverage when the ultra gains in value and decrease your leverage when it loses value. This makes them wonderful swing trading vehicles as long as you do not hold them through multiple swings. They should absolutely not be long term holdings as they will decay due to compounding effects over time. Mark said:
All ultra ETFs are for daytrading only. They are not guaranteed 2x the underlying. SSO on high volatility down days trades at 2x the S&P 500. On recent up days it trades at 1 to 1.5x the S&P 500…

____

There are a number of common misconception as to how the Proshares work. They track 2x the DAILY PERCENTAGE move of the ETF and they tend to do this fairly reliably. There is no differential in tracking on up days vs down days. The discrepancies you see are due to two factors:

1) The Proshares close at 4:15 and the underlying indexes are marked at 4:00. This means any movement between 4:00 and 4:15 shows up in day X for the ultra and day X+1 for the underlying. This needs to be accounted for if you are checking the tracking on a daily move. If there was a big AH move during this period the Ultras will appear to not be tracking appropriately.

2) There is absolutely no expectation that these will track 2x on timeframes greater than 1 day. On the contrary, the nature of the statistical compounding of the daily moves make it explicitly improbabe that they will track 2x. (Pull up a spreadsheet and calculate it yourself). In general, the more volitile the underlying ETF, the worse the divergence will be. Proshares covers this in the 1st section of their prospectus booklet.

In general the compounding tends to automatically increase your leverage when the ultra gains in value and decrease your leverage when it loses value. This makes them wonderful swing trading vehicles as long as you do not hold them through multiple swings.

They should absolutely not be long term holdings as they will decay due to compounding effects over time.

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