Monday, June 22, 2009

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.

Thursday, June 18, 2009

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.

Wednesday, June 17, 2009

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!

Monday, June 15, 2009

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.

Saturday, June 13, 2009

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.

----

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.

Friday, June 12, 2009

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.

Thursday, June 11, 2009

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,..."

Tuesday, June 9, 2009

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.

Monday, June 8, 2009

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.

Wednesday, June 3, 2009

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.

Tuesday, June 2, 2009

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