Technical 11/30/11

The last day of 11/11.

This is a very special month. This is so far the only month I took mid-month action since I started Low-Maintenance Portfolio in 2007. Things are changing too fast. We just got the worst Thanksgiving week since 1932. Now we got a super good week right after. At least we can say, we are experiencing the history.  Below is a summary of my thoughts in Nov.

On Nov 1, in Low Maintenance Portfolio - Nov 2011
I put down my plan:

I may think of add equity in the middle of the month if MF turned out to be a plain BK and Europe turn out to be not worse.

On 11/14, in What's going on?

My plan: I still need to cast more due diligence on the possibility of Year-end rally. Currently I still think it will come this year. I want to participate into a rally from 1220-1235 to 1400-1440 if everything is perfect.

In Quick Update 11/19/2011, which is posted on EST 11/18,

Now bulls' only hope is the channel to hold, which is also coincident with 50% retracement at around 1185. I think we will arrive there next Tuesday, 11/22/11 (+/- error term). 

In Art or Science, I posted my state of art chart, and gave a target of 1230s.

Not patting myself in the back, but it is just a detailed flowchart on how I think loud here, refine my plan step by step then execute it. My time series analysis gave me 11/22/11 as turning point, which is 1.5 days off. I don’t blame myself for that. From the chart, best entry point was Friday 11/25/11, yes the half day session on Black Friday.

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My mid-term target to be 1230ish which was reached overnight. To be honest, I don’t know what’s going on next. Quick changes do have a lot of impact to chart reading. I decide to do a technical Wednesday to conclude the month of 11/11.

Here is an update of my channel chart. As I mentioned, I was expecting 50% retracement, but in fact it did a clean 61.8% in the historical thanksgiving week. I tend to ignore the dip as I think it is overreaction from retails with very light volume. On Monday close, we did get a rally to pair out the loss of the thanksgiving week, and closed at 50% level at 1185 again. If we offset Wednesday and Friday loss by Monday’s huge gain, the chart makes more sense. Interestingly now we are at the top of the channel again. In fact SPX took a tiny little peek. Will it be a break out?

Here is my cloud chart. It has a long Japanese name that I can not quite remember. It is a very famous and extremely useful tool. There are tons of discussions, webpages, blogs, traders on it. For a detailed study, please refer to my friend Bob’s wiki page. Here I am showing a variant I picked up online. I always use cloud to check the trend and the quality of it.

Cloud gives a clear view. Ever since fast cloud dip below slow cloud in 11/16, /ES is declining in a clean regression channel. Things changed Sunday night. A gap up based on better than expected Black Friday Sale triggered overdue rebound. Last night fast cloud penetrated into slow cloud and found support there. Early this morning, the Bail Out World news sent ES to my target.
My mid-term target was from 1230 (in the rainbow chart) to 1243.5 above. This morning we did open and hang around 1230 for couple hours then a small wedge sent us to 1245.
Is it good or bad? We still have chance to see 1280 which is my target of extreme, but I won't give high weight on this scenario.
The 2 long, light blue hourly bars are too thin, not strong enough to hold further rally. Check the Price and Volume relation marked in the red box.
Oscillators are also not supporting further one side movement.
I am expecting a correction around 1220 area to digest the recent quick profits.

Ever since I learned volatility couple years ago, it is always my most powerful weapon in my personal arsenal. This is my volatility study by comparing VIX with implied Volatility. I am expecting a volatility dry out to the end of the year.