Here is a 60' spy chart

Click for larger, browser back.

Notice the MACD line. Its on a steady downturn. I think I'll be buying the 3x shorts (bgz, faz, tza, etc) on their dips.

Gann Angles can indicate reversals

Here is a recent (just now) hourly Wilshire 5000 chart:

Click for larger, browser back.

Notice that low I circled in green. It was a huge dip! I profitted well by being in FAZ.
By reviewing Price, we can see a double bottom. This is also referred to as a W. Its a huge buy point (obviously). Also notice that I have added in some Gann Angles. The primary line is the major trendline. When the second line was breached, it indicates bullishness. Then there was a bit of fearful retracement. The next morning, the third line was breached and Price never looked back.

We have to start watching for this setup... it is not rare, it is fairly reliable. With this chart in mind, I can confidently place long trades.

For extra bonus points, see how the gann angles react to this 10' SPY chart:


Click for larger... yada yada.

Now, go try it on your own charts.

On another note:
I have accepted a part-time job. I find myself now conversing with lots of cool people in emails and on-line meetings. At the end of the day, I am talked out! That is the reason I have not blogged as much lately.

I do plan to keep recording my finds here (like the post above), but it probably not be as regular or frequent.

The SPY could fall

"This is one of the juciest shorts I've ever seen in my life." DSeven commenting on the monthly Spy chart.... Video here.

In other news... "The fiscal year-to-date deficit is at $1.378 trillion versus $500.5 billion a year ago."

Downtrend confirmed

I could post some charts and discuss them here but it has already been done in this video. In fact, my mentor has done a much better job of it than I could. (The video is highly recommended.)

If, after watching, you have questions, you are welcome to ask here, in the chat room, or in the FTV forums at FreeTradingVideos.com

I enjoyed making 11.74% on my FAZ investment today. I hope you also benefited.



Click for larger, browser back.

As you can tell from the SPY daily chart above, it is too early to totally commit to short positions, but after tomorrow, the support line I drew in should be broken. From there, large shorts will be less risky.

Be long in uptrends

Here is a 5 minute, 4 day chart of the UUP, the Dollar index ETF.
UUP is the candles, and the broad market is represented in the line graph.


Click for larger, Browser back.

Notice that they have an opposing relationship, When the UUP (candles) rallies, the SPY (yellow line) pulls back,

Hotlist stocks are not so effective when the market is in a downtrend. It is not a good thing to expect your stock Price to increase when the markets are falling.

That said, this pullback provides opportunity...

Step one... Hotlists provide resources to scan for stocks that remain relatively unaffected by market downturns. Those are the ones that nobody wants to sell!

Step two... We know that this downturn is related to dollar strength, Who in the room believes that our government has completely stopped flooding the market with dollars to pay their debt? I thought so... this Price dip is very likely temporary. There is no need to panic sell your portfolio yet.

Step three... Buy the dips. Discounted Prices are becoming available.

Once this dip flattens out, I'll be buying again.

Tonights list

Here is the list for today....

apc
atpg
bap
bvn
cno
cnu
fnm
fre
gnw
grrf
gtn
gsic
holi
ivn
kerx
lmdia
mgi
mni
mpet
ovti
pir
pxlw
rad
rdn
tpi
tvl
uis

---
Now, how did yesterdays list do?

stock prev close close
atpg 17.66 20.51
axl 7.66 8.13
cno 5.06 5.95
ctb 15.60 15.84
fire 19.88 21.99
gtn 1.25 1.76
hf 5.86 6.53
holi 7.69 8.78
ivn 12.03 12.67
mgi 3.24 3.29
mvis 3.66 3.9
pir 2.6 2.91
pxlw 3.98 4.06
rad 1.74 2.08
shfl 8.72 9.30
tpi 3.90 4.05
tvl 4.21 5.74

Two went down, the others went up. The best was GTN at 27.5%

Methinks that this list and some good Technical Analysis should make me profits!

Note: No Technical Analysis was used to create my list. Up to this point, it is all about a stocks' fundamentals and how the market reacts to it. This list simply weeds out a few thousand other stocks so I don't have to review so many charts.

The Hot List

In addition to my previous hot list post, this market offers some unique opportunities. I have been gathering up stock symbols via different screeners. The resultant list is now over 100 stocks, way too many to type accurately here, or properly trade. (I have been trying -- and profiting)

I tuned up a google spreadsheet to help me pick the best of the best in the list, and here is today's results:

atpg 17.66
axl 7.66
cno 5.06
ctb 15.60
fire 19.88
gtn 1.25
hf 5.86
holi 7.69
ivn 12.03
mgi 3.24
mvis 3.66
pir 2.6
pxlw 3.98
rad 1.74
shfl 8.72
tpi 3.90
tvl 4.21

I added today's close price just for record keeping. I'll com back in a few days and check the results.

Please do not consider this to be a trade recommendation... just a watch list. Trade responsibly. I can hook you up with training if you are interested.

Buy The Dips!

Don'y have much time.... just wanted to say that it can be a buying opportunity here... I just bot LVS on this dip. (Not a recommendation -- ask your broker)

Minor setback today

Here is today's hourly SPY broad market ETF.
Notice the trendline I have drawn in.

Click for larger, browser back.

This morning, we gapped down below the line and some in the FTV chat room were talking doom and gloom. I kept track of the market internals while sitting on my hands. As I watched the NYSE up and down volume charts, I noticed that some stocks were becoming interesting. With all the discipline I could muster, I only bought (went long in) four of them.

The "buy the dips" strategy has worked many times recently, and according to the internals, it was the right thing to do. As it turns out, Price has improved and I was properly in synch with the markets (see post below).

The SPY daily chart still indicates upward strength and I am enjoying the ride.

We did get a pull-back on the weekly chart, eight candles ago, so this can not be expected to run many more weeks. When the next dip occurs, I hope that I'll be ready -- I am watching for it.

Wisdom from the Tao Te Ching Pt 2 of many

Market wisdom from the Tao Te Ching, Chapter 29, Translated by Derek Lin

Derek made a great presentation today in discussing the chapter copied here in part:

Those who wish to take the world and control it
I see that they can not succeed ...
One can not control it ...

Because all things:
Either lead or follow
Either blow hot or cold
Either have strength or weakness ...

Therefore the sage:
Eliminates extremes
Eliminates excess
Eliminates arrogance

Wow, that's a lot of material in just a few words!

What I am able to understand rite now is this:
- Don't try to catch the absolute bottom or top, just try to own a large chunk out of the natural run in the middle.
- Don't clutter the real story (Price and volume) with excessive indicators, or expectations (news, analysts, fundamentals, etc.)
- Don't trade by emotions, we are incapable of perfectly identify the tops or bottoms in real time.

Sure there's that obvious stuff, and so much more...

We should not allow ourselves to become angered or confused when the markets do not fulfill our expectations. The market is neither bad or good, it simply exists.
Likewise, our strongest hopes can not cause it to change into something else.

The only thing we can do is change ourselves. Our baggage, once discarded, will no longer bind us to making possibly (likely) incorrect assumptions.With baggage removal completed, we can place trades that are in synch with market direction.

My biggest piece of baggage is selling at a small loss and then missing the run my analysis indicates is eminent. What's yours?

---

Don't forget to read my post: Wisdom from the Tao Te Ching Pt 1 of many

Breakout!

Here is the current daily SPY:


Click for larger, Browser back.

The Head and Shoulders pattern I warned about below, has failed. Market action has now turned all of that into a pleasant series of higher highs and higher lows. I cautiously stayed in my long positions, taking profits as was reasonable, and made some great $$$. I hope you did too.

Today, the broad markets formed a recovery high and rallied to the point of being over bought. Trading slowed down, but did not pull back. Therefore, I have begun the process of adding to my long positions with great value stocks. I'll tell you how I screen for these in another post... coming to my favorite blog (here) soon!

Note: There are some perma-bears out there. They add to their short positions on every rally just in case the markets might turn. I feel sorry that they are so determined to place trades that have absolutely no technical reason for support. Several small, "feeler" positions, can add up to big losses and their spouts of negativity can make newbies doubt properly positioned investments. So sad.

Change in the wind?

Here is the current SPY daily chart...

Click for larger, Browser back.

I am a little concerned here.
It is a left shoulder, the head, and maybe a right shoulder in the making.
In checking the volume, I see that one huge red bar, and a few green Pygmy's. This indicates strong downage and weak upage.

Not scary because we can make money from the market moving either direction, but I have a lot of long positions that I want to exit profitably.

Another Bull/Bear Indicator

In my never-ending quest for Market Mastery, I have assembled another indicator. This one is based on the NYSE Up/Down volume ratio. Here's what it looks like:


Click for larger, Browser back.
Here is a handy link: http://www.freestockcharts.com?emailChartID=b5425477-2f4b-448d-a529-7481db3ff95a

Here is another, possibly clearer way to see the same thing:
http://www.freestockcharts.com?emailChartID=a6b0191e-f165-4793-9732-f6280e67c6b6

Tonight's chart shows that Down Volume is higher than Up volume, but closing the gap. This should signal the eventual end of a bear rally... we'll see. Hopefully, with this tool, we'll get better.

And, for no extra charge, here is yet another good one...
This one allows us to the total number of up issues compared to a moving average

Click for larger, Yada Yada.



And... don't forget about the older Bull/Bear index.

Big Breakdown

The $VIX (Fear Indicator) is at about a 6 week high after an abnormal run-up yesterday.

Yesterday's sell volume was at about a 8 week high.

$BANK is at about a 4 week low.

The Wilshire 5000 and the SPY has made lower highs and lows for 2 days.

The SP500 closed below 1000 and the Nasdaq closed below 2000.

All of this happened on relatively good news.

It seems that the big traders (institutions) have simply decided that its time for a pullback: Anxiety about the health of financials and worries the 2009 global stock market rally may have run its course hit U.S. stocks hard on Tuesday and then carried over.

"But the glass is still half empty. Macro data has improved, but we're in a pattern of destocking-restocking, and the outlook for consumer spending is still grim."

Could it be that Cash-For-Clunkers has depleted much of the savings that Americans have amassed? If that is true, then Christmas will not be the retail boon that traders and the economy need.

I am not yet totally convinced that this is the beginning of a Bear rally, but I am remaining open to the possibility. I am actively not re-investing funds made available by profit taking and stop outs at this time.

Just for the purpose of holding a hedge, I may buy one of the 3x short ETF's on a SPY high today.

Situational Awareness

5 minute chart...

Click for larger, browser back.

Just a few candles ago, this was a Trade #1 buy. In fact, it did go up some. Then it pulled back. As I write, I see that it formed an M and pulled all the way back, forming a picture perfect bull trap.

My friend KM was considering buying on the 10 minute up-trend but I was able to talk him out of it. Here's why I did that...


30 minute chart, same stock, same time.

Click for larger, u know the drill.

Notice that the BBands are indicating a HUGE downtrend. Yes, there is recent wonderful strength, yes the trendline has broken (not illustrated here) but its still scary.


Here's the point:
When investing, or even scalping, we must be aware of whats going on in the other charts (and the SPY). A lovely uptrend in the 1 minute chart can prematurely fail because of a downtrend in the 60 minute chart. To say that another way, patterns on the one minute chart are not as powerful as the same pattern on the hourly.

And another way to say it:
If you buy it on the one minute chart, be prepared to sell it on that charts action as well.

This has many implications. The perfect world buy signal would be a signal on the daily, hourly, 30, 15, 5, and 1 minute charts at exactly the same time. I bet it happens, I've never seen it. Oh... and the SPY has to be in synch also. Too much for my little brain to look at all at once!

Here is a theoretical work-around. First, wait for the trade to come to you by observing a reasonable amount of charts. then buy on the one minute chart. After riding that a while, check the next chart up to ensure it is bullish there. Repeat all the way up to the daily and be aware of the weekly.

Now for the sell signal:
Once the opposite of a buy signal is observed on the daily, continuously drill down to faster and faster charts for confirmation.

Who is gonna do this? Not me! Too much work. I will just set a stop under the previous low (adjusting occasionally as needed) and wait for it to trigger.

As always, your comments and questions are welcomed.

short term recovery

Here is a 60' chart of the $tick...



It is pulling up hard.
This could be a good dip to buy a swing trade on!

The dollar

Here is a chart of UUP, the US Dollar ETF.


Don't bother clicking on it, its small.

Notice the volume as Price increases. That's exactly what we want to see in a bullish trend.
Sadly, it explains why our stocks and commodities have been falling, and the poor $TICK indication described in the post below. This might be a place to sock away a few investment dollars... I'll be watching.

OK, this is bad...

In thinking about my previous post (while watching TV), I wondered what secrets the TICK would tell...

Here is a daily/8 month chart of $tick.


Notice that $tick is registering an 8 month low. That's a bad thing for those of us with long positions.

Make that a two week vacation!

I'll be selling my longs and watching for an entry into my favorite shorts next week.

Update

Here is a 10 year, weekly chart of the NASDAQ ETF, the Q's (QQQQ).


Click for larger.... browser back.

As pointed out in this article: stocktiming.com,
we are approaching resistance. Since the Q's are a leading indicator of the broad market, this could have some importance.

I am seeing Price approaching the trend line and Big Red, the 200 MA, so we'll have to trade cautiously. Notice this broad market chart:


Here is the weekly, 2 years, broad market (SPY) chart...

Click for larger.... yada yada.

Since the Q's are in trouble, I took the time to dissect the broad market a bit further than usual...

Downtrend line 1 indicates the power of the exercise. Notice the difficulty that Price had in bouncing off several times (below the 3). Further, notice the strong resistance that line 3 held in the area of the 5. That's some powerful juju! Line #2 is hanging above our heads to become important at some future date.

Uptrend line 4 describes the tops of the uptrend we currently enjoy. Notice that we are quickly approaching it.

Now, with the framework set, here's the bottom line....

Notice the uptrend line #5. It is not parallel to line #4. That's a bad thing because Price hates to be squeezed. We have to expect a breakout, up or down, from the squeeze. It may happen next week, it may come to us four months from now, it is definitely coming.

To my eye, the weekly Price action of the Q's and the SPY, are looking at a pullback_sell pattern.

Bonus points:

Notice the last 4 candles. The first being HUGE, the remainders becoming much more constrained. This indicates a dissipation of momentum. Notice that the same effect occurred on the Q's even more.

The oddball:

The one thing that contradicts all of the above is volume. This week, both the SPY and the Q's enjoyed an increase. It could be an indication of sidelined money entering the market. It could indicate bears waking up but being matched by the bulls. If the second scenario is true, a pullback is more likely.


OK, the real bottom line:
My guess is a struggle next week. The markets are not really convinced that they want to go up. In fact, fundamentals do not predict further increases. Confirmation, the NASDAQ only increased one point last week. We might see some pullback before the lines are broken. If the pull back gets momentum, we could see a test of SPY line 4. Hopefully not any lower.

Have fun but keep a close watch! This is not a good time for a "set it and forget it mentality. If I wasn't watching closely, I'd sell everything, take a week off, and wait for a better market to trade. Hmm... that sounds like fun, my family could use a vacation. Oh well.

Pending breakout?

Here is the 30' SPY...

Click for larger, browser back.


Notice the trend lines, thats called a Symmetrical Triangle. We should break positive from here.
I'm really hoping the SPY can test 100 today. If it clears 100, we will be very bullish.

Here is the 60' SPY chart:



Click for larger, Browser back.

Notice that the recent swing low was a bit lower than its predecessor. Then notice that the MACD made a higher low. That's called a divergence. Such conditions are a prerequisite for some buy signals; to some traders, it is a buy signal.

We'll see. I am holding several long positions, and no shorts... pretty durned trusting!

These days, a consolidation seems to serve as a pullback, therefore, we might be getting ready for another up leg.

We gotta pull back sometime... this many green candles is just ridiculous.

Here is a brief video clip that shows just how hard one of our elected officials is working to represent us.

freedomslighthouse.com

Situational awareness

Here is a 5 minute chart of today's EBAY Price action...



Here is a 10 minute chart of today's EBAY Price action...


The two images were captured at virtually the same time but tell very different stories.

This adds to the complexity of our work. One must be aware of all the timeframes, and what the broad market is doing, and what the sector is doing. All at the same time.

The only option is to trade on a daily chart and ignore the intra-day fluctuations.

The MA crossover trade.

OK... in the Free Trading Videos chat room today somebody reminded me of a stock purchase strategy... the Moving Average crossover. I was able to tease the Finviz stock screener to produce a fairly nice representation of stocks in this category with at least minimal fundamental qualifications.

Here is the link

The goal is to buy when the 20 ma surpasses the 50 ma. Obviously, other MA combinations are also interesting, however, this is the best I can do today.

Yah yah... when to sell? One obvious answer would be when they uncross.

Notes:
- This will obviously only work in a sustained bull market.
- Make sure the 50 ma is in an uptrend, or at least flat, when you buy.
- Make sure the SPY 50 ma is in an uptrend or at least flat when you buy, else, your poor trade won't have a chance... it will be counter the major trend.

Enjoy!

Update:

Extreme Price change can invalidate the signal:

Update on UGA, SLV, and UGA - Humiation

It's 12:40 rite now... I finished my lunch (noodles and a can of sardines) and pause to check up on a few of my favorites... what have they done today?

UGA is up 3.95%
Slv is up 1.26%
URE is up 8.75% today

I sold UGA at $31.31 it is currently trading at $32.58
I sold SLV at $13.22 it is currently trading at $13.63
I sold URE at $3.56 it is currently trading at $4.00

My advice to readers: do as I say, not as I do.

Sheesh.

I have managed to catch the ear of a Tao Master. I hope he can teach me to do better.

Oops

Sadly, I have stopped out of UGA, SLV and URE. I read this as a sign; the market seems to be changing. I'll be waiting a few days for either recovery or correction. After all, it has been a LOT of up days in a row. an unsustainable trend.

Here is a great article: The_Stimulus_Plan_Is_Working_In_China

Well I'm certainly confused!

"As Commander in Chief, I will do whatever it takes to defend the American people...
... That's why I'm grateful that the Senate just voted against an additional 1.75 billion dollars to buy F-22 fighter jets...
... At a time when we are fighting two wars, and facing a serious deficit, this would have been an inexcusable waste of money...
... Every dollar of waste in our defense budget is a dollar we can't spend to support our troops, or prepare for future threats, or protect the American people...
Our budget is a zero sum game and if more money goes to F-22's, it is our troops and citizens who loose.
... Now, I've also said that health care costs are the biggest drivers of our deficit..." Obama on Bloomberg 7-21-9

Well folks, that leaves me with questions...
- Why are we sure that we won't need the F-22 next year? It seems to me that we are fighting two wars. I am also not forgetting Korea, Georgia (Russia), and others.
- Won't the displaced engineers, trades people, suppliers, shippers, writers, logisticians, etc. risk becoming unemployed?

Seems to me that "stimulus" should like employing engineers, trades people, suppliers, shippers, writers, logisticians, etc.

If the F-22 budget is a "zero sum game", then how can we afford to spend a trillion on the health care bill?

Breakout!

Here is an hourly chart of URE the Ultra Real Estate ETF...

Click for larger, Browser back...

Today, was a pretty monumental day in the markets. The SPY broke its resistance line at $95 and held there for about an hour. Only the end of day sell-off was able to cause Price to retreat.

I celebrated by buying a half sized position in URE. Yes, it could risky. Yes, we are still in a recession. Yes, we will still be in one for a while. Yes, real estate problems are still bountiful. On the other hand... can you think of a sector with fewer shorts against it?

It seems in the chart above, that Price is ready to run since there is a breakout here as well.

I'll be maintaining my stops so that risk is under control, but they will (hopefully) be loose enough that Price has room to continue a pattern of higher highs and higher lows. That's what its all about!

Also of note is SLV...

Click for larger.... yada yada

...and UGA with a very similar chart. I have been in them both for a few days now. Funny thing about these, they would be of no use to a day-trader at all yet in a swing, we can make good profits!

Workspace

This is just a handy little spot to post charts as needed for the chat room that I moderate...
Up to 100 traders, most of them are serious, lots of eyes on an ever-changing marketplace.
http://www.freetradingvideos.com/chat/ (note: sign-up is easy and free)

Here is a 10 year $vix chart for my friends in the room...

Click for larger... Browser back

Here is the current SPY hourly chart...



Click for larger... Browser back.

Notice that the downtrend has been broken.

I took the loss in my short positions (article below) and took a few hours off to mourn the loss of my invested capital.

Upon returning, I got to work and recouped some of the loss by daytrading a few short interest stocks.

Market volatility is picking up, therefore, this would be a good time to consider daytrading. Do be careful though, three updays cry out for a profit taking pull-back.

15% of the earnings reports are due this week.... the remainder next week. Be cautious!

FTV Stock Picks... Discount offer

• You receive the rare opportunity to be privy to the highly sought after personal trading list of the FTV analysts so you too can trade what they’re trading.

• You receive a rock-solid trading list that was painstaking put together via sophisticated technical and fundamental analysis. You get both of these important disciplines working in your favor via the work of the FTV analysts.

• You receive the vNewsletter each and every weekend, delivered straight to your inbox so you have time to methodically review each trade idea BEFORE the markets go live the following week.

• You get from each analyst, the powerful benefit that video delivers by seeing and hearing the value-added reasoning and thoughts on particular trades. Instead of merely reading about ideas or worse, not getting any helpful insight at all, you get to be enveloped in a multi-media atmosphere and receive a miniature dissertation of each trade prospect. You get it all here at FTV!

• You get the best value that anyone could ask for. You get a rigorously honed trading list derived by the combined efforts of the FTV analysts for a rock bottom monthly subscription price.

The vNewsletter is available HERE at a special discounted and grandfathered price until Wednesday the 15th. I recommend it.

Nevellier's flawed blog post (and then some)

This may seem unrelated to the markets at first blush. Ultimately, it is connected at the hip.

Typically, I enjoy reading the Nevellier blog. A recent (irresponsible) post offended me. My response to the post follows. I copied it here for posterity. If the moderators at Nevellier do not publish my comment, I will re-submit it again some day.

But here's the thing folks... We gotta start speaking up for America while she is still recognizable. Our dollars, our rights, our businesses, our courts, our Constitution, the best health care system in the world, and more might be at risk of "change." For those of us concerned about these changes, now is the time to begin speaking out.

....
Dear Sirs,
Typically, I enjoy reading your posts. This one is an exception.

"...it seems that we must hope Mr. Obama is re-elected,..."

It is not in my heart to do that.

As a patriot, I vowed to defend the Constitution which is apparently the opposite of the Obama administration. The bailouts, the takeovers, and the deficits hardly seem either Constitutionally or fiscally sound.

Your article seems to have praise for Clinton while totally disregarding the recession he left us. Also overlooked is the fact that President Bush oversaw the Clinton recession recovery and subsequent all-time market high. (I could continue in this direction but shall not.)

It seems that I hope for two things, a fiscal conservative to bring America back to her rightful position of strength, and a less biased newsletter.

----

Something to keep in mind:

"The Cato Institute was strongly opposed to the $787 billion package passed earlier this year, and would oppose additional stimulus packages on the same grounds."

"Once government expands beyond the level of providing core public goods such as the rule of law, there tends to be an inverse relationship between the size of government and economic growth," argues Cato scholar Daniel J. Mitchell. "Doing more of a bad thing is not a recipe for growth."

----

Obamacare does make for an interesting search term.

The Obama administration has sent an email to me! They want me to call my Senators (phone numbers provided) to discuss their support for socailzed healthcare. While I do intend to do just that, my response is a bit different than he suggests. This article, and this one, will be references for the calls. Sheesh... There are tons of references! For those who think that Canada is a great model to follow, here's a great list of references. I gotta "just say no." I gotta let my voice be heard. Can you do that too?

----

In effect, our President can sell "refrigerators to Eskimos" at will. Congress supports this because they enjoy the resulting commissions. Ditto, the "fourth leg" of the government, the media. That leaves the third leg, the Supreme Court. Hmm... is that arena about to receive "change?" Folks, we gotta speak out in support of the Constitution, liberty, and free markets, else, they will be gone.

New Bull Bear Indicator

Update to my bullbear-indicator-recipe
Here is a picture of my updated Bull/Bear indicator...


Click for larger, Browser back...

Its a FreeStockCharts.com chart.
Its a 10 minute/one day chart.
It's the 3x leveraged S & P index, UPRO.
It's a comparison of the 3x leveraged short S & P, SPXU.
The Volume Weighted Average Price (VWAP) has been enabled.

Note the chop and overlap from 9 to 11:00. That is a "no signal" condition... not a good time to try to identify market direction.

Note that the UPRO candles are WAY below the SPXU line graph and the red VWAP... very bearish!

Here is another way to acomplish the same thing.... but without using FreeStockCharts.com

Also see the Alternate Bull/Bear Index.

SPY Daily...


Click for larger, Browser back...

The support line I have drawn has been thoroughly broken. $87.00 has been holding as the next level of support.

The Dow has a similar appearance.

I am expecting further downside, therefore, I have purchased two investments... EFU, and SIJ.
Had to overcome my natural tendancy to buy more ETF's and more shares.

Will but more bear ETF's when the Nasdaq cracks.

Broken support = resistance

Here is a daily chart of the broad market index ETF, the SPY.


Click for larger, browser back.

Notice the big red candle on the far right... she's a Dusey! Today's market action broke through several trend lines and two of the most powerful Moving Averages known to man. The 20 MA was tested and then broken a week ago, both the 50 and the 200 MA's were decisively taken today.

Prognosis, bearish. That said, I again have a small position in SIJ. That said, it is possible for me to take small profits out as soon as tomorrow. Nobody can be sure what will happen but look at the relationship of today's close to the Bollinger Band. Now does anyone think that BBands are useless?

It is possible for the market to recover a bit tomorrow. for two BBand reasons. First, they are about to give the oversold signal. Second, look at the general direction of the big grey band... it indicates an uptrend. The market will have to do a lot of pulling to whip that band into shape.

Of course, the market will be able to do that, perhaps this week, definitely this month. If you have noticed the pattern that Price is making, you noticed a Head and Shoulders... congrats!
Sadly, today's pullback was on light volume. No worries tho mate! in a few days, everyone will get the hang of it and jump on the bandwagon. There is little prayer in hoping for the markets to recover the lost ground in MA's and trend lines that were decisively defeated today.

When the SPY closes below $88.36, I'll be taking on much larger positions in a diversity of short ETF's.

Bull/Bear indicator recipe

Ingredients...
- the SPY is considered to be THE broad market indicator.
- SSO is the 2x SPY
- SDS is the inverse 2x SPY
- VWAP is Volume Weighted Average Price indicator (sort of a moving average)
- FreeStockCharts.com offers them all in real-time

Instructions...
- First, load up the charting package
- Make SSO candles
- Under "Settings", click "Compare"
- Pick an empty box, check it, and enter SDS
- Click OK
- Click "Add Indicator"
- Click "VWAP" (used as a garnish)
- Adjust the time-frame to 10 minute (more or less) candles for 1 day (scroll the mouse wheel)

To consume...
When the candles (2x SPY) are on top of the other stuff, that's bullish
When the SDS line is above it all, that's bearish
Pay particular attention when the two cross!

This indicator told me to sell my SIJ this A. M. I'm glad I did.

Correction... I really goofed.

In the is post: alphatrends-is-out-of-my-scope

I stated that Brian has stopped doing something that he said he would do. For that reason, I stopped linking to his blog.

My mistake. Well, I went to one of his websites for promised content, sadly the wrong one. Had Brian pointed this out in his response email (instead of blowing me off), there would have been no problem.

Ultimately, my fault, therefore, I am sorry.

Watch Lists

As mentioned in my Trade #3 post, I make a list of the top ETF's, here's more on that:

Every weekend I make four lists, three longs and a short list.
For stocks, I always like to have a list of good fundamentals and a list of high short interest.
For ETF's, I need top long performers and top short performers.

The Yahoo screener finds me the top performing ETF's of the quarter. I divide this out into the long and inverse (short) lists. These get culled for volume and then for redundancy. Sheesh, about four of the top 10 were silver. Chili and copper are pretty much the same thing, but then, different enough to keep both.

Stock lists come from an IBD screen (which I further screen) and a short interest screen from Yahoo.

Now, armed with my lists, which do I pull from on any given trade day? That depends on several things, but mostly the broad market index, the SPY. Sadly, the daily SPY rite now gives little clue about market direction. Fortunately, the 60 minute version sends a strong (if not preliminary) message.


Click for larger, browser back.

The last several days of trading have broken the consolidation pattern. (yay!)
We definitely do have a lower highs and lows thing going on but it is still too early to get fully invested. All of that left-side-of-the-chart action could provide powerful support and stall or even reverse the trend.

With that going on, someone would not be interested in covering a short, therefore, the short interest list is passed over. Great fundamentals and high performance ETF's also require bull markets so they are also left to gather dust. This leaves the list of inverse ETF's which are the only way for me to trade a bear market.

Yes, I have tried to go long in a bear market before... it doesn't work very well.

I am holding a small position in SIJ (my top high performing short ETF). Notice that I said small. There are times where the SPY moves up in a bear market. When my SIJ transitions from green to red, I don't get concerned. I know that the overall market is going down so my investment will pay. Since my investment is small, the red numbers are small and do not cause heart failure.

Eventually the market will recover. When the 60 minute chart shows signs of uptrending, I'll look to the fundamentals stocks and performance ETF's. When new highs are experienced, I get to use the Short Interest list and really watch the fireworks!

Have fun with that!

Wisdom from the Tao Te Ching Pt 1 of many

Towards the end of chapter 14 the Tao Te Ching say:

. Wield the Tao of the ancients
. To manage the existence of today

Bingo! The book has some Market Tao in it; other cool things too! I'll be studying it thoroughly.

Chapter 8 includes:

. Governing with great administration
. Handling with great capability
. Moving with great timing
. Because it does not contend
. It is beyond reproach

To me, that sounds like consistently being on the right side of the trade, with an appropriate share size, affordable risk limits, then getting out when appropriate.

I need that.

Hmm... here's one from chapter 9:

. Holding a cup and overfilling it
. Can not be as good as stopping short

Today's wisdom says: Bulls make money, bears make money, hogs get slaughtered. The ancient version sounds much nicer to my ear.

This gives me some things to think about in my current trading paradigm.

Bullish on the daily, Bearish on the monthly

Here's a great video:
Weekend Report
Everyone invested in the market should watch it.


That information, combined with this:
Friday Report
Explains why the markets have been lackluster bullish for several weeks.

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Its been odd...
I have been hanging out in the FreeTradingVideos chat room during trading hours. Nobody there wants to believe their eyes. Even with all of this horrible news, the market still goes up!

Notice this daily $Tick (market sentiment) chart...


I am noticing that the last three highs and lows were lower, and recent action seems to be reaching for a breakout low. What this indicates is that even though Price in the SPY has generally been moving up, there are more NYSE stocks moving down than up. That is somewhat of an apples to oranges comparison, but remember that the SPY only sees 500 stocks. It is expected to catch up some day.

The key here is to not hold any investments long-term, except possibly a small short or two, and only trade what the charts show at the moment.

Beware... the bears are coming.... the bears are coming!

Update: In reading through the last several posts, I seem to have been mixed in reporting market direction. I stand by those reports. Taken as a whole, it indicates a choppy market observed on differing time-frames. This effect may be indication of a topping action, loss of momentum, and pending trend change. As the first video mentioned above points out, the weekly chart is still firmly in the bearish camp. Trade accordingly, but observe opportunities to profit from bull rallies on shorter terms... that's all we can do, other than sit on the sidelines waiting for a better market in which to invest.

Exciting!

Click for larger... Browser back.

Hmm... Is that a reverse Head and Shoulders I see on the SPY weekly?
Yum!

Boring!

Here's the 60 minute, 4 week, SPY chart


Click for larger. Browser back.

It was nice that last weeks pendant broke to the upside.
It was very nice to see yesterday's breakout.
It was not surprising to see today close at resistance (and no further).

But come on folks! We can't trade this! We need volume. We need a trend.

Here's the daily view:


Click for larger. Yada Yada.

We have been without a sense of direction for 10 days.

Reasons to be Bullish?
It has held up without submitting to the bears.
It closed at the high today.
It is testing the resistance line.
It has already broken resistance once.

Reasons to be Bearish?
The bulls do not seem to be committed.
The MACD is in divergence on the daily chart.
The news is bad.
The markets are extended and need to form a higher high.

As for me, I'm flat the market. On Monday, I'll day-trade what I see.
This is definitely not time to be invested in a long term position.

The sky is falling!

From the Ap Morning Brief...

"Chrysler may have been granted a fresh start, but it still faces old problems: how to sell enough cars and realign its fleet.... A 42-day stay in bankruptcy court cleansed the company of much of its debt and labor costs, but many analysts say Chrysler's immediate future is bleak. It lost $8 billion in 2008, and sales are down by almost half for the first five months of this year."

"Japan's benchmark Nikkei index pulling back from its first move above 10,000 in eight months amid conflicting signs about the strength of an economic recovery."

"...crude to fresh highs for the year."

"...the main reason that borrowers default on their home loans, foreclosures likely will remain elevated this year and into 2010. Many economists expect unemployment, now at 9.4 percent nationwide, to rise as high as 10 percent, and some project it will exceed the post-World War II record of 10.8 percent."

"China's trade plunged in May..."

"...confirms steep recessionTOKYO (AP) — Japan's economy shrank at a 14.2 percent annual pace in the first quarter — better than first thought, but still the worst quarterly contraction ever for the world's second-largest economy."

"Australia's unemployment rate rose to a seven-year high of 5.7 percent in May,..."

Prepare for liftoff ?

In this 60 minute/four week chart, we see a high base forming...


Click for larger, browser back.

The base has been tested several times. Each test reduces its strength, therefore, the market may be poised to do great things here. We'll see.

Auto Dealership Thought

"Peter J. Walsh, the owner of Walsh Dodge in Jersey City, N.J., started out selling used cars in his hometown 28 years ago after the birth of his daughter. He slowly built his business, and felt as if he'd finally made it when he earned his Chrysler shingle in 2000. But on Tuesday, Walsh Dodge will lose that shingle — as will 788 other dealers across the country... Chrysler has asked a bankruptcy court for permission to terminate the franchise agreements of about 25 percent of its dealers." from the AP Morning Brief

It occurs to me that Mr Walsh and many others have their entire careers wrapped up in the business of selling cars. He has worked hard to develop a following of devoted employees and customers.

Weather right or wrong, his contract with Chrysler is being dissolved by government decree. Being free from those bonds, he no longer has that business and no ties with any particular auto manufacturer.

He is now free to pursue the business he loves and prospers in, selling cars, if he so chooses. It seems to me that he is free to begin offering Honda's, Toyota's, Suzuki's, Hundai's, Nissan's and a myriad of high quality, popular, less encumbered, products.

The effect is that the courts have turned Chrysler's most powerful assets into their most fierce competitors.

That's how I'll be placing my trades.

Trade #3

I have been missing out!
I just found a whole slew of top performing ETF's that have been going up without me! Sheesh... look at KOL its awesome!


Click for larger... Browser back.

Here is how to find these winners:
(It only works in a bull market)

1. Pick a screener that can limit results to ETF's... I like this one but membership might be required, I'm not sure. Also check here, and the Yahoo offering. There are more.

2. Set the YTD (or quarterly) performance to the highest value available, then run the screen.

3. Sort the list so that the highest performers float to the top.

4. Copy out the top 25 or so.

5. Cross out those with less than 60,000 Average Daily Volume (or pick a higher number)

6. Look for entry points on the 60 minute, 4 week chart. Buy when ready (MACD crossings are nice).

7. Set a stop based on the Parabolic SAR. Update the stop every couple of trading hours or so.

8. Repeat as required.

Optionally, this paradigm could be modified by substituting the word 'Daily' for '60 minute'.

For a lower maintenance version, choose less volitile ETF's. See INP, UGA, and SLV's recent activity.

Priceless

Recently, Michelle Obama went to serve food to the homeless at a government funded soup kitchen




Cost of a bowl of soup at homeless shelter $0.00 dollars

Having Michelle Obama Serve you your soup $0.00 dollars

Snapping a picture of a homeless person, receiving a government funded meal, while taking a picture of the First Lady, with his $500 BlackBerry: $ Priceless

Commodity pullback?

Below is a weekly chart of SLV.


Click for larger, Browser back.

My friend KM makes a good point: Silver should be pulling back some. As we can see, last week's action totally blew through the Bollinger Band. This typically indicates a turning point. The decline should be swift, and result in one ore more red candles.

There is some support nearby, however, $14.00 looks like the first really strong line in the sand.
With my stop in place, I am guaranteed profit and if it does pull back, I'll re-buy with twice the position size.

Happy hunting.

Three long weeks

For a long darn time now, the market has been moving up and down, making and loosing the same dollar over and over. Blah!

Of course, there are hot-spots: Gasoline (UGA), some commodities (SLV, GDX), agribiz (DBC), and more.

"The metal (silver) has gained 33% this year. In comparison, gold has risen less than 10%... The $15 level is a break-out area for silver," said George Gero, a precious-metals trader for RBC Capital Markets. "Silver is not a pure precious metal. It's also an industrial. So what helps silver is the fact that there could be a recovery." (From IBD)

Essentially, the market has been marking time with millions/trillions of dollars moving about with nothing to show for it. (Hmm... that sounds familiar.)

There is a chance of movement though:


Click for larger, Browser back.

The last two highs in this daily SPY chart are lower than their predecessors. The lows are higher also. There are many more down days than uppers; I think I'm seeing a trend develop.

Probably best to wait it out until the market picks a direction. But, as mentioned earlier, there is a direction in several key sectors.

Rats! The FreeStockCharts.com hover widget doesn't work here. Oh well.

Testing...

This is a real-time daily chart of the SPY. I am trying out the widgets at FreeStockCharts.com

Had to chart the SPY because the pull-back seems to have failed... I am somewhat invested in bullish stocks and ETF's now.

My trading friend, KM703, offers us this daily chart of SLV, the Ishares silver ETF. In fact, he offers it just in time!


Click for larger, Browser back.

Since Price is above the 20ma, and above the rising 50ma, this is pretty safe. Further, KM shows that key resistance points have been broken and there is plenty of room overhead for growth. The upper Bollinger Band has opened up, Volume is on the rise, and resistance at $15 seems to be pretty weak compared to the current level of momentum.

I am equally encouraged by the 30 minute chart which shows no intention of pulback.

Here is an interesting article about (among other things) commodities buying in China.

Here is a goldmine of commodity vehicles, some will be great investments rite now.

Update: Here is a great article on copper.

Thanks KM! You can contribute here anytime.

Update: There was a huge pullback this morning. I took advantage and bought in. I have placed a % trailing stop to sell just so I am protected... I don't plan to 'work' this one, I hope to hold it for at least a few weeks.

The Foole has been Fooled... leveraged ETF's have issues.

Here is a chart of SDD the 2x leveraged Ultrashort Smallcap 600 fund...



Click for larger, Browser back.


Here is a chart of SAA the 2x leveraged Smallcap 600 fund...



Click for larger, Browser back.

Notice that these charts do not reference Price, they are referencing position to the SPY, broad market index. Next, notice that they are both below the SPY. I am here to cry FOUL! Since they are opposites, one or the other of them should be in the money.

Sadly, this is not peculiar to this pair. From what I can tell, most if not all of the 2x and 3x pairs are not appropriately balanced. In fact, the Proshares website indicates: "This ETF is designed to meet daily objectives; results over longer periods may differ."

Conclusion:
- These are wonderful vehicles for intra-day trades. They provide access to markets previously unreachable and they leverage your gains/losses.

- It was suggested to use these as long term investments by our friends at the Motley Foole, but they didn't do the math (my friend IIC at SharpTraders.com did).

- It should be good (wonderful) for a longer term trade to short the opposite of the pair.

- Ultimately, to make reliable gains, we should invest in fundamentally sound stocks during a bull market. (I like the book Rule One Investing for this.)

Around the Horn

- SPY, Broad Market Index:
(Daily Chart) Uptrend broken. Overnight action has resulted in Price laying directly on the 20ma
- BGU/BGZ, Large Cap Sector:
(Daily Chart) Uptrend broken
- MWJ/MWN, Mid Cap Sector:
(Daily Chart) Up-trend thoroughly broken. Lower high, lower low.
- TNA/TZA, Small Cap Sector:
(Daily Chart) Up-trend thoroughly broken. Lower high, lower low.
- TYH/TYP, Technology Sector:
(Daily Chart) Up-trend thoroughly broken. Lower high, lower low.
- FAS/FAZ, Financial Sector:
(Daily Chart) Up-trend intact. Lower high, lower low.
- ERX/ERY, Energy Sector:
(Daily Chart) Up-trend intact. Lower high, lower low.

Monday may be a good day to place long positions in short ETF's.

News headlines

http://www.google.com/hostednews/ap/article/ALeqM5jXPJmkJdyKGBu_J5HvhnfYCkYAzgD98B6O7G0

TOKYO (AP) — Japanese stocks fell Friday...

WASHINGTON (AP) — New rules for the credit card industry...

SINGAPORE (AP) — Oil prices stayed above $61 a barrel Friday in Asia as investors sought a hedge against inflation amid weakening U.S. dollar...

BANGKOK (AP) — Asian stocks wilted Friday as the possibility of credit rating downgrades for major economies and bleak unemployment figures in the U.S. added to fears the recent massive rally was built on shifting sands....

LONDON (AP) — British Airways on Friday reported its biggest full-year loss since...

WASHINGTON (AP) — Auto lender GMAC Financial Services will receive $7.5 billion in additional government aid...

WASHINGTON (AP) — The federal seizure of struggling Florida thrift BankUnited FSB is expected to cost the Federal Deposit Insurance Corp. $4.9 billion...

Further: (From here)

"Currently, 46¢ of every dollar that the federal government spends is borrowed, which makes each dollar worth less in terms of other paper money alternatives, or in terms of a basket of commodities."

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Hmmm... Methinks thes headlines may seal the deal for bears, at least for today.

Have fun!

The 20 is broken

Click for larger... browser back.

The chart above is the broad market index, the SPY, daily.

As you may notice, the center line of my Bollinger Band, the 20 day Moving Average, has been breached. In fact, we closed below it. This powerful signal indicates the beginning of a pullback.

There is a lot of support below (see this video) so no one has a clue how deep the pull-back will be, but I'm hoping that it will be significant. The market needs a higher low to draw in basketfulls of sidelined money.

Oops... dinner is ready... gotta go!

Market may be turning

My friend D7 at freetradingvideos.com did a great wrap-up video last night... It's a must see.

http://www.freetradingvideos.com/vlog/Events/default.asp?Year=2009&Month=05&Day=20

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Something that nobody seems to be mentioning is that the last day President Bush was in office, the SPY closed at $92.85. That level was tested on the 7th, and 8th of May. On the 8th, the market actually did close above that level ($92.98). The theoretical line in the sand then failed. Yesterday made a high only 5 cents below that.

Somehow, I can't see how market fundamentals have improved since then. Therefore, I expect a significant pullback.

D7 and I agree that it is early to place your investments... that would be betting. Like he says in the video: "trade with your eyes not with your mind."

Here is a 60 minute chart of FAS:

Click for larger, browser back.

Is this a Head and Shoulders forming?
This could indicate a small recovery and pull-back in the making.
A downtrend in financials can pull the rest of the market.

The Stars Were In Alignment

The TRIN was in the mid 70's virtually all day.
The TRINQ started over 1 but fell to .5's during the day.
The TICK 8ma was positive all day.
The TICK Q 8ma was positive all day.
The VIX fell to new lows.
The Advance/Decline was above 50% all day. (51 to 76 range)
The A/D Q was above 40% all day.
The banking index was improving all day.

The results:
The SPY bounced off the daily 20ma thus reversing its downtrend.
I covered my small short position (sold TZA), bought FAS, and made money for the day.
The markets are, at least for a little while, bullish.

There are plenty of reasons for the markets to fall but for now, let's rock!

Update: This morning is not getting off to a very good start... As I write, the A/D is totally flat.

Note To self (and watchful readers): extreme Tick indications often indicate change in the air... on 3-3-9, the weekly Tick was -576 thus indicating oversold. Odly, there have been several times where the Tick was over 1000 resulting in trend reversals only half of the time.

When the SPY made a Head and Shoulders which failed to fall much, Tick was forming a pendant around the center of the trading range. I had full sized positions in EFU and SIJ... lost WAY too much on that!

AlphaTrends is out of my scope

Brian Shannon is a professional trader and trade teacher. He authors the Alphatrends videos that are abundant on YouTube. It is good stuff... so good that I paid a lot of money for his book, Technical Analysis Using Multiple Timeframes.

That's where the problem begins. When I bought the book, it was under the agreement that I would have access to his password protected Bonus webpages. Page 184 of the book tells me the URL and password. Since then, Brian has chosen to remove this section from the website. Further, his daily videos are no longer accessable without paying a subscription.

I emailed him with my concerns. He blew me off.

Due to this lack of integrity, I am removing his link from my universe.

Mistake? Maybe.

Poopy! I made a newbie mistake....
This TZA chart clearly predicted today's bullish Price action.
The two previous days printed a picture perfect Bullish Harami and I missed it.



Click for larger... browser back.

Had I seen that, I would not have owned TZA today.
Fortunately, my position was small due to my concern about the pullback.

So... am I bullish? No! I may not even exit this position. Here's why:



Click for larger... yada yada.

Depending on how the upper trend-line on this 60 minute SPY chart is drawn, our downtrend may still be in tact.

Oops... the SPY daily chart is a Bullish Harami. Bullishness is expected.
On the other hand, today's volume was low. There is a good chance it could be crying "wolf"; One would reasonably expect that large amounts of volume would be required to reverse a trend.

Tomorrow will be exciting... we get to learn things! Bring it on!

Did I explain that well enough?

New ETF's and Market Status

Direxion has added some new 3x ETF's to their list. I am including two of them here: Mid Cap, and Technology, since they have enough volume to chart fairly well and are so important.

- SPY, Broad Market Index:
(Daily Chart) Closed below up-trend line
- BGU/BGZ, Large Cap Sector:
(Daily Chart) Perilously close to breaking the up-trend line
- MWJ/MWN, Mid Cap Sector:
(Daily Chart) Up-trend thoroughly broken
- TNA/TZA, Small Cap Sector:
(Daily Chart) Up-trend thoroughly broken
- TYH/TYP, Technology Sector:
(Daily Chart) Up-trend thoroughly broken
- FAS/FAZ, Financial Sector:
(Daily Chart) Up-trend intact
- ERX/ERY, Energy Sector:
(Daily Chart) Up-trend intact

Conclusion:
Tomorrow should provide more information.
Before "betting the farm" on a downtrend, I'd like to see all sectors in agreement (well... except possibly energy).

All of these sectors are inter-related. If Large Cap is tanking, those businesses should be doing precious little business with the others. Then (note to self) this places the Real Estate and Financial sectors at risk.

I am holding a small position in TZA, because I think I know which way it's going to go.

Does this help you?