Archive for the ‘Chart School’ Category

A Positive Divergence at Last

Can it be, possibly, something other than awful going on in the stock market?

A Positive Divergence at Last

Courtesy of Joshua Brown, The Reformed Broker

Technicians don’t crack snake eggs into a bowl and whip an elongated pinky fingernail through the yolk to make proclamations about the market’s future.

That would be kind of cool, but it probably wouldn’t be very effective.

Instead, they study the behavior of their fellow market participants to detect the possibility of turning points or meaningful change. There’s no mechanical equation or formula, which leads simpletons to the conclusion that “It doesn’t work.” But when used appropriately, TA can give you a good feel for how other people are acting and whether or not something different might be starting to happen.

Studying divergences is one way this is done. At turning points, it is not the headlines in the news that matter, but the way they’re being reacted to. Livermore understood this a century ago. It’s not magic.

Here’s a notable divergence worth pointing out, with positive implications for at least a short-term bounce: The NYSE Hi-Lo Index has reversed to the upside and is not confirming the new index lows for the NYSE Composite – a measure of all stocks that trade on the exchange. In other words, as the average falls, internally there are less stocks making new 52-week lows. This could be the beginning of a bottoming process – again, at least for the time being.

nyhl

Something to consider.

 





Power of Mean Reversion

Courtesy of Read the Ticker.

power-of-mean-reversionThe power of reverting to the mean. Life time buys, or miserable bust! The rubber band does smack back eventually!



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NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net



Investing Quote…



..”There is a time for all things, but I didn’t know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. Not many can always have adequate reasons for buying and selling stocks daily – or sufficient knowledge to make his play an intelligent play.”…



Jesse Livermore





..”A market is the combined behavior of thousands of people responding to information, misinformation and whim”..



Kenneth Chang





..“One must search through a maze of complex and contradictory details to get to the significant facts … Then he must be able to operate coldly, clearly, and skilfully on the basis of those facts.” The challenge for the successful speculator is “how to disentangle the cold hard facts from the rather warm feelings of the people dealing with the facts.” Moreover, “if you get all the facts, your judgment can be right; if you don’t get all the facts, it can’t be right”…



Bernard Baruch





..”It’s easier to fool people, than to convince them they have been fooled”..



Mark Twain





Unless you can watch your stock holding decline by 50 per cent without becoming panic stricken, you should not be in the stock market.



Warren Buffett











S&P 500 Approaching Significant Levels

Courtesy of Dana Lyons

image

The correction in the equity markets has brought the S&P 500 down close to a confluence of key technical levels.

People ask us all the time what we view as the important “levels” in the stock market, e.g., “what is our target level for the Dow?” or “what level will put an end to the correction?”. To be honest, while we do have our areas on the various charts that we view as significant, we are less focused on price levels than we are on the behavior of various market indicators and investors. Levels can be helpful, but sometimes prices overshoot what they “should” and sometimes they don’t quite make it “there”. That’s why we rely on a set of indicators based on market internals, momentum, investor positioning, etc. to help guide our investment posture, i.e., aggressive, defensive, etc.

That said, as I mentioned, we do view certain levels on a chart as significant if prices do happen to reach, or breach, them. And since A) people are most interested in the S&P 500 and B) that index is approaching some potentially key levels, we thought we would present it as our Chart Of The Day.

One thing of note that we have mentioned several times before is that, of all the securities and indices, etc. that one wants to chart technically, the S&P 500 is one of the most unreliable. We have found that typically, the degree of adherence to technical levels is inversely correlated to the number of participants trading it. That is, the more people attempting to technically trade a price series, the less apt it is to conform to traditional technical analysis.

This is not a scientific conclusion but rather an observation of ours. But it does make sense because A) the more competition there is, the more difficult it will be to win, and B) the more participants there are watching the same thing, the more likely it will be that HFT’s, computers or large institutions will be “gaming” that “thing”. And perhaps no instrument has more eyes on it than the S&P 500. That means it is a relatively…
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You Are Owed Nothing

Look at the bar chart at the end of the post and ask: Do markets move in cycles? What are my long term objectives? And, is this time different? 

You Are Owed Nothing

Courtesy of Michael Batnick, The Irrelevant Investor

People invest their hard earned dollars to earn a return above and beyond inflation.  At a three percent inflation rate, your purchasing power would get cut in half over twenty years. As the value of your dollar diminishes over time, the goal when investing is to maintain and even grow the value of your money.

You’ve seen this chart before, it shows that $1 invested in 1926 would have grown to $5,386 today, a whopping return of 538,547%, or 10% a year.

growth

What you don’t always see is the real growth of $1, or what the returns would be after you factor in inflation. Once this is accounted for, stocks have returned 40,670% over the last ninety years, or 6.9% a year (I used an arithmetic scale here for affect, the chart above uses a log scale).

growth 2.jpg

The chart above clearly demonstrates how much inflation eats into returns. Still, an 8.5% average real return, or 6.9% compounded is pretty darn good. If an investor earned 6.9% for twenty years, their total return would be 280%. Sounds good right? Here’s the kicker. Real returns aren’t owed to anybody, they’re earned the hard way.

Over all ten-year periods, the real rate of return for stocks has been positive 85% of the time. While these are pretty good odds, you probably wouldn’t feel invincible if somebody told you there was a 15% chance that you could lose money investing over the next decade. The image below illustrates that investing is not for the faint of heart.

cap 3

As you’re probably painfully aware, the S&P 500 hasn’t made any progress over the last two years. If you’re feeling a little frustrated, I have some bad news for you, this is how stocks works. The stock market doesn’t owe you anything. It doesn’t care that you’re about to retire. It doesn’t…
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Further Losses But No Breakaway

Courtesy of Declan.

The Asian session had set up for big losses, but markets were able to defend against such losses even if finishing with a lower close.



The S&P tagged the January low, but it’s hard to see it holding out if there’s another challenge on 1,810.




The Nasdaq was able to register a higher close (although below the prior day’s close). It probably did enough to negate what is normally a bearish black candlestick, but bulls won’t have any confidence until the bearish channel is broken.




The Russell 2000 was the index feeling the most heat. The gap down didn’t manage to do more than leave a small bullish hammer. The MACD trigger ‘sell’ expanded, and new lows keep pricing action on the side of bears. As the relative market leader, what goes here goes for other indices.




Tomorrow is a chance for bulls to buy a change in fortune.  After five consecutive days of losses it’s time for bulls to apply the squeeze.



You’ve now read my opinion, next read Douglas’ and Jani’s.







SP500 Gann Angle Update

Courtesy of Read the Ticker.

sp500-gann-angle-updateGann Angles and Cycles guide the market like road signs! Read the Mark Twain quote in the image, are you one of the fooled and still holding your FANG (Facebook,Apple, NetFlix and Google) portfolio!



Here is the latest view.



Gann Angles





Click for popup. Clear your browser cache if image is not showing.

SPY1




Hurst and Fixed (Kitchin Cycles)



Click for popup. Clear your browser cache if image is not showing.

SPY2






NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net



Investing Quote…



..“Stocks, like atoms, are really centers of energies.Therefore they are controlled mathematically”….”There is no chance in nature because mathematical principles of the highest order lie at the foundation of all things”..



William D Gann





..“Investing should be like watching paint dry or watching grass grow. If you want excitement…go to Las Vegas.”…



Paul Samuelson





..“If it’s obvious, it’s obviously wrong.”..



Joe Granville





..“Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars.”..



Bernard Baruch





..“By failing to prepare, you are preparing to fail”..



Benjamin Franklin











Bears Win Day – Just…

Courtesy of Declan.

There wasn’t a whole lot of change by the close of business, but intraday strength was clawed back in worrisome fashion. The end result was to leave spike highs in markets.



The S&P finished with a MACD ‘sell’ trigger, but on lower volume. The ‘sell’ trigger was below the bullish zero line, which makes it a strong signal.





The Nasdaq closed with a ‘black’ candlestick, which would be more bearish if it occurred at a swing high, but it’s still a warning. Technicals are all in the bear camp.




The Russell 2000 also closed with a spike high and a MACD trigger ‘sell’. The index had attempted a relative advance against the Nasdaq, but this looks ready to turn south. And as the lead index for bears, having touched the January low, it could get ugly real quick.




The semiconductor index lost almost 1%, but it hasn’t yet tagged the August low. As with other indices, it registered a strong ‘sell’ in the MACD, but it also registered a ‘sell’ in the relative performance.




For tomorrow, it will probably come down to the Asian session. A weak overnight with a gap down could see a difficult day ahead. Fresh, strong ‘sell’ triggers in the MACD add to the trouble.



You’ve now read my opinion, next read Douglas’ and Jani’s.







Honors Even

Courtesy of Declan.

The gap down had set up for a big bearish move lower, but the collapse never appeared. Instead, lows held as support. On the flip side, an attempt at a rally couldn’t get off the ground, but markets were able to do enough to register a close above the open.



The S&P closed with a spinning top below support. Watch for a strong ‘sell’ signal in the MACD as other technicals remain bearish.  The only positive is the strong relative performance against the Russell 2000.





The Nasdaq experienced a big gap down yesterday, and today offered a brief move to test the gap. Bulls need a gap higher to leave what could be a very good bullish ‘island’ reversal, combined with a ‘bear trap’. Can they do it?




However, the Russell 2000 is knocking on the door of the January spike low. Unlike the Tech and Large Cap indices, it had difficulty mounting a bullish advance and the outlook for tomorrow looks more bearish. Should the latter come to pass it will hurt all indices.




Tomorrow is a toss up between a bearish break-and-run in the Russell 2000, or an ‘island reversal’ in the Nasdaq. Sentiment lies with bears, which marks a significant level of danger as markets toy on the borderline between a bullish correction or a bear market.  Further losses this week would suggest an acceptance for a new bear market, and place a target for a 40-60% loss from December’s highs.



You’ve now read my opinion, next read Douglas’ and Jani’s.







The Economy In Pictures: We’ve Seen This All Before

Courtesy of Lance Roberts of Real Investment Advice

Last week, I gave a presentation discussing the current market environment and the economy. As I was preparing the slide presentation, I noted some concerning similarities to a presentation that I gave in 2007. At that time, I was regularly discussing the potential onset of an economic recession, and then like now, I was dismissed as being a “perma-bear.” There was no inverted yield curve, the vast majority of the media saw no recession in sight, and the Federal Reserve continued to tout a “Goldilocks” economy. Yet, a year later, it was quite evident. 

Currently, there is a plethora of commentary strongly suggesting that the U.S. economy is nowhere near recession currently. That may very well be the case, however, by the time the data is revised to reveal the recession it will be far too late for investors to do anything about it. The market, a coincident indicator of economic recessions historically, may already be revealing future economic data revisions will eventually disclose.

With the economy now more than 6-years into an expansion, which is long by historical standards, the question is: “Are we closer to an economic recession or a continued expansion?”

How you answer that question should have a significant impact on your investment outlook as financial markets tend to lose roughly 30% on average during recessionary periods.  However, with margin debt at record levels, earnings deteriorating and junk bond yields rising, this is hardly a normal market environment within which we are currently invested.

Leading Economic Indicators

LEI-Coincident-Lagging-012016

Durable Goods

Durable-Goods-020816

Durable-Goods-020816-2

Investment

GDI-Real-020816

Private-Investment-GDI-020816

GDI-SP500-020816

ISM Composite Index

ISM-Composite-020816

Employment & Industrial Production

Employment-Pop-Claims-020816

Capacity-Utilization-Production-020816

Retail Sales

Retail-Sales-012016

Retail-Sales-EconomicCycle-012016

PCE & Imports

PCE-Imports-012016

Corporate Profits As % Of GDP

SP500-NetProfit-Margins-012016

The Broad View

GDP-6-Panel-Chart-020816


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Sellers Start Day, Buyers Finish It

Courtesy of Declan.

Tech averages had the weakest start, Powerful gap downs had set things off, but buyers were able to make a comeback into the close. However, morning gaps remain. Volume climbed to register as distribution, which for the Nasdaq was the second day of distribution in a row.




The Nasdaq 100 is on the fiftth day of selling in a row. The August swing low wasn’t fully tested. Bulls will be looking for a bullish ‘morning star’ where today’s candlestick ‘hammer’ is followed by an opening gap, then a rally for the rest of the day. Should this emerge, then a move to test 4,300 is next. If there is a weak open, then any chance for a bullish ‘hammer’ based on today’s action is significantly weakened.




Losses in the S&P, while comparable to the Tech indices, didn’t see a loss of January’s lows.  Today’s spike low did fall inside the range of January’s spike low. This will offer grounds for a positive response tomorrow; today’s lows will likely see a cluster of stops.




The Russell 2000 has been leading the move down, although the past few days have seen a positive relative response (against Tech averages).  However, today’s low marked a new low for the year. Additional losses has the potential to pull other indices down with it given this leadership role.




Tomorrow’s action will be heavily influenced by pre-market action.  If there is a gap down, then whatever confidence built by bulls today will quickly dissipate. A gap higher, and there will be a scramble between value buyers and short covers.



You’ve now read my opinion, next read Douglas’ and Jani’s.







 
 
 

Zero Hedge

The Negative Mortgage Rate Program

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Ramsey Su via Acting-Man.com,

Something Needs to be Done – A Glimpse of the Future

In the summer of 2016, US and global economic growth rates are nowhere close to estimates.  In fact, a global recession, or worse, is imminent.  At home, student loan defaults are now close to 100%.  The unemployment rate is climbing, as minimum wage workers finally realize that the financial pain of working or not working is identical.  In Euro-land, as the weather warms up, the never-ending flotillas from Northern Africa resume swamping the Southern shores.

A bl...



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Phil's Favorites

$100 Trillion Up in Smoke

 

Thoughts From the Frontline: $100 Trillion Up in Smoke

By John Mauldin

“We aren’t addicted to oil, but our cars are.”
– James Woolsey

“The greatest asset, even in this country, is not oil and gas. It’s integrity.”
– George Foreman

If energy powers the world, then whoever owns that energy must have power over the world. That’s certainly been the case for the last century or two. Ownership of our primary energy source, crude oil, is what made billionaires of John D. Rockefeller, H.L. Hunt, and assorted Middle Eastern kings, emirs, and sheikhs.

Oil in the ground is wealth only on paper – you may own that oil, but it earns you nothing unti...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Global trade is worse than it was during the financial crisis (Business Insider)

"It is worse than in 2008. The oil price is as low as its lowest point in 2008-09 and has stayed there for a long time and doesn't look like going up soon. Freight rates are lower. The external conditions are much worse."

Bond Investors Looking Out for Stimulus Hint in Draghi Testimony (Bloomberg)

Investors will look next week for a whiff of confirmation from Mario Draghi that they weren’t wrong to push bond yields to record...



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Chart School

Power of Mean Reversion

Courtesy of Read the Ticker.

The power of reverting to the mean. Life time buys, or miserable bust! The rubber band does smack back eventually!

More from RTT Tv




NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net

Investing Quote...

.."There is a time for all things, but I didn’t know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks h...



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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Kimble Charting Solutions

Big test for those that have been wrong, says Joe Friday

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

In May of last year, the S&P hit a key level and stopped on a dime. We applied Fibonacci tools to the highs in 2007 and the lows in 2009, to the chart above. The 161% Fibonacci extension level came into play in the 2,150 zone last year and when hit at (1), the markets stopped on a dime.

If your tools or adviser has suggested to be long and strong since May of 2015, that advice has been costly.

Our take, “Free advice that is wrong, is expensive!!!”

Below looks at stock i...



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OpTrader

Swing trading portfolio - week of February 8th, 2016

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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ValueWalk

Why Most Investors Fail in the Stock Market

 

Why Most Investors Fail in the Stock Market

Courtesy of ValueWalk, by  

Throughout the past 30 days of wild volatility, here’s what I didn’t do.

Panic. Worry. Sell.

In fact, the best I did was add to a couple of positions yesterday. The world was already in an uncertain state for the past 3+ years. It’s just that with the market rising, we pushed the issue to the back of our  mind and ignored it.

If you read Howard Marks latest memo, ...



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Digital Currencies

2016 Theme #3: The Rise Of Independent (Non-State) Crypto-Currencies

Courtesy of Charles Hugh-Smith at Of Two Minds

A number of systemic, structural forces are intersecting in 2016. One is the rise of non-state, non-central-bank-issued crypto-currencies.

We all know money is created and distributed by governments and central banks. The reason is simple: control the money and you control everything.

The invention of the blockchain and crypto-currencies such as Bitcoin have opened the door to non-state, non-central-bank currencies--money that is global and independent of any state or central bank, or indeed, any bank, as crypto-currencies are structurally peer-to-peer, meaning they don't require a bank to function: people can exchange crypto-currencies to pay for goods and services without a bank acting as a clearinghouse for all these transactions.

This doesn't just open t...



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Sabrient

Sector Detector: New Year brings new hope after bulls lose traction to close 2015

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Chart via Finviz

Courtesy of Sabrient Systems and Gradient Analytics

Last year, the S&P 500 large caps closed 2015 essentially flat on a total return basis, while the NASDAQ 100 showed a little better performance at +8.3% and the Russell 2000 small caps fell -5.9%. Overall, stocks disappointed even in the face of modest expectations, especially the small caps as market leadership was mostly limited to a handful of large and mega-cap darlings.

Notably, the full year chart for the S&P 500 looks very much like 2011. It got off to a good start, drifted sideways for...



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Promotions

PSW is more than just stock talk!

 

We know you love coming here for our Stocks & Options education, strategy and trade ideas, and for Phil's daily commentary which you can't live without, but there's more!

PhilStockWorld.com features the most important and most interesting news items from around the web, all day, every day!

News: If you missed it, you can probably find it in our Market News section. We sift through piles of news so you don't have to.   

If you are looking for non-mainstream, provocatively-narrated news and opinion pieces which promise to make you think -- we feature Zero Hedge, ...



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Pharmboy

Baxter's Spinoff

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).

The Baxalta Spinoff

By Ilene with Trevor of Lowenthal Capital Partners and Paul Price

In its recent filing with the SEC, Baxter provides:

“This information statement is being ...



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Mapping The Market

An update on oil proxies

Courtesy of Jean-Luc Saillard

Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself. 

Since...



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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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