Ciena Update and Silver Comex margin adjustment

I still stand by what I mentioned yesterday that I probably should have sold my put options a couple of weeks ago as there was more "time value" on them.  However, looking at the overall markets which had a slight pull back today, which could be the start of a bigger move down, however, I am not jumping on the short side yet as the first POMO of QE2 is tomorrow and if they want to halt big move down they have the ability.  Upwards of 10-15 billion could be injected tomorrow maybe more.  If there is some more selling I will ensure that i have a post explaining bear arguments and any positions I take.  The issue is that the rules of the game have changed, with the size of QE2, it is hard to predict downside movement as every other day the FED has the ability to pump in a massive amount of liquidity into the system.  But I do believe in free markets and that free markets will always win out in the end so a 10%-15% sell off is not off the table.  The issue right now is Europe as there is a lot of negative news coming out from countries such as Ireland, Spain, Greece again.

 Lets look at Ciena isolation.
With this move to the upside on QE2 announcement, we see that it has found resistance at the 50 and 200 MA.  I mentioned in a previous Ciena review that I doubled my position on Oct 25th when we retouched the 50 MA.  These levels are quite important and will continue to be heavy resistance unless bulls take charge in a decisive manner shortly.
For candle stick formations you can see that yesterday there was an inverted hammer formation with today being a confirmation that that signal is valid.  Again, if 20 billion of liquidity enter the market tomorrow all bets are off. 
The stock is also overbought on the slow stoch (not shown) which means a pull back is likely.

The main indicator I wanted to demonstrate today is the MACD.  The histogram has positive ticks which means to me that short term momentum is up, however, you need to be aware of where the MACD line is in relation to the 0 level.  When the MACD line is below 0, the momentum is technically to the down side.  Just like technical levels in price action, the 0 level is very important as if there is still bearish momentum, the MACD line will fail to break the 0 level.  This is what I believe we are seeing now (again in isolation as FED injections are holding prices up).  This will be the first attempt to break the 0 level since the downtrend started.  So i would expect over the next couple of days that the histogram starts to have lower positive ticks.  For anyone that doesn't know the histogram is measured by the difference between the MACD line and the signal line.  If the MACD line is trading under the 0 level like it is now and we get a negative tick on the histogram it means that the MACD line and the Signal line have crossed which is interpreted as a sell signal.

Now for something completely different

  Say it ain't so Silver???
I was just telling some friends about silver and how it is at $29 and how I have maintained a target of $32 since it was in the $17-$19 range.  Then I get home, check my silver / gold mining companies and all my stops were hit.  Lucky me I moved up my stops yesterday night to lock in a solid profit but looking at the Asian market and how silver is now on the climb back up I am a bit annoyed since the stocks could / should rebound quickly.  Due to a busy schedule I am not sure if I will have time to find solid entries into these. 
Also all precious metals got hammered, gold dropped $40 in a few hours.

Remember the silver manipulation case with JPM and HSBC.  The main stream media has finally blown this out of the water.  Anyways, without them suppressing the market, silver has had a hell of a run last few months.  What is interesting is there is some collective knowledge that a massive amount of silver shorts are about to get margin called.  This was around the 28-29 dollar range.  This means that the shorters would be forced to cover, by buying at a very high price resulting in a massive loss.  This buying will result in a short squeeze  causing the price of silver to sky possibly to 32-35 in days.  Well the Comex which is the major exchange for commodities today decided to raise their margin requirements.  This effectively delayed the short squeeze by increasing the price that the margin calls will occur.  The immediate effect is that it allowed more shorts to be entered into the market.  Very curious timing as two large banks are being charged and sued for manipulation that involves massive short positions.  Connect the dots anyway you like but something doesn't seem right with this announcement especially as the margin requirement was only changed for silver.

However, I have not lost faith in silver at all, looking at the 24 clock you can see a gain of $1 from the lows has already occurred, and we are ending Nov 9 higher than Nov 7.  It will be interesting to see how the market reacts in the North American hours.  And how the overall stock market and precious metals correlation holds as QE2 begins and bearish news comes out in Europe. 

As I am effectively out of all long metal positions except for TXG which didn't hit my stop yet, I still have put options on CIENA and the Euro which is also looking weak.  If there is a turn in the markets I am decently positions now, to go short however, if a decoupling occurs, where metal prices continue to rise on debasement of the USD but that debasement of the USD isn't enough to hold the markets up, I may want to go long mining stocks and hedge with a index short.  Possible making money on both trades. 

Lastly, There is an argument that the index has terminated a 5 wave, and a corrective ABC is expected.  Again it might be best to wait on what the size of QE2 POMO tomorrow and the market reaction.