Trade Ideas for 04/24/09

Far from abating, the choppiness actually intensified today as the market struggled to fight the widespread expectation that it should go down. Perhaps the short-side setup was too obvious this time, and we had a situation in which too many participants wound up on the same side of the trade. Things got really crazy near the end of the day when the tape painted a very unusual pattern, signaling high emotionality and a market out of control: the expanding triangle.

Note the higher high followed by a lower low followed by another higher high, in quick succession, all on increasing volume. Note also the huge spike in volume right at the close (probably a monster short squeeze!). It seems to me that the market is trying every trick in the book to resist the downward pressure. But until the market clears last Friday's high (and perhaps even then), the bears have the advantage. There's a whiff of desperation to this afternoon's proceedings, but those desperate measures are effective, even if they only end up staving off the inevitable.

Those measures certainly were effective in stopping us out of our SRS position. We also got whipsawed with FAZ—even though it didn't hit its sell-stop, the official rule was to sell by the close. (But if you held, sell-stop is 8.49.) We also bought all the other stocks on yesterday's list. Gold did quite a number this morning, rocketing up in the blink of an eye; but in a gesture of kindness, it did so after the open, allowing us in.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
SDS	69.26	67.19	-3.0%	65.63	N/A	Chart
DGP	18.68	19.07	+2.1%	17.96	N/A	Chart
GOLD	45.56	46.43	+1.9%	42.38	N/A	Chart

Although we've gotten burned so far playing the short side, down is still the direction indicated by Elliott Wave analysis. If anything, the setup now improves (probability-wise) with the late-day capitulation of the shorts and widespread confusion sown by the refusal of this market to fall. So a couple more short ideas for tomorrow.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
DXD (UltraShort Dow)	58.66	56.04	55.19	Chart
TWM (UltraShort Russell 2000)	56.21	53.29	51.13	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.