Thursday, November 7, 2013


I have a love hate relationship with stock and option picking services.  Many of them are just absolute rubbish.  Most of them are illegal since you have to be a licensed adviser to take payment for any type of financial advice. Having a silly disclaimer saying you are essentially paying for an 'educational purposes only' service does not absolve them from the crime they are committing.  I got this in my email inbox today from one of those Ms. Cleo option advisory services.  Here are the highlights before the market opened. 

"...I've been saying day over day that market would go higher and make NEW HIGHS"
"...updates were sent FREE and just hope you didn't fight it by shorting the market!"
"...BIG CONGRATS all!"

I'm sure they wished they didn't send out that email just as the SPX had its worst day since late August.  The worst part with these services is the mystery surrounding the analysis they use to make recommendations.  It is proprietary of course. Which is the draw to these services since many of us doubt our own analysis so why not use someone else's and rid ourselves of all accountability and just figure out how to spend all those potential profits that are coming our way.  Pinch yourself because you are dreaming.  

Enough of the bashing back to the markets.  Looks like we broke out of the trading range and it was distribution.  I was expecting accumulation but what I expect doesn't matter what the market does is what matters.  Which is why I react to the moves and don't anticipate the moves.

Looking at the SPX 15min candlestick chart below with the trading range overlaid the market breakdown out of the range was a textbook example.   Support is broken on an increase in volume with a test of broken support on lower volume (lack of demand) to confirm the level as now resistance with price continuing down.  Simple pattern and easy to execute on in real time.  

Lastly, today's close was down right ugly and with the close near the lows on increased volume it looks to be the start of something bigger.  Down days like today don't typically reverse back up the next day.  If the trading range was distribution then the large institutions have unloaded their shares and will only support the market when it seems lucrative.  A drop down to 1700 area is very possible and I will discuss the next levels of support on this move down in the coming days.  If you were short before today then congrats.  If you were a long sorry to here of your loss.  If you subscribe to a stock/option picking newsletter like the one I quoted above Lord have mercy on you! 

Thanks for reading. 

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