Archive for the ‘Chart School’ Category

Shorts Rally – But For How Long?

Courtesy of Declan.

A second day of gains keeps pressure on shorts in squeezing them out of their positions, but is also looking to sucker shorts into trying to second guess when this rally will end.

The S&P is heading fast towards 2,044. Given the speed at which it has enjoyed this advance it will be there by Tuesday! In reality, it will likely slow before it gets there. When markets do head lower it will be important they do so slowly to sow further doubt into shorts.

The Nasdaq will be testing resistance tomorrow, and is close to coming up against its 200-day MA.  Those who bought the low will be very happy.

The Russell 2000 enjoyed a perfect bounce off the 10% envelope around its 200-day MA. Supply is not likely to be hit until it gets to 1,189.  Unlike other indices it hasn’t enjoyed the same degree of gains, but this will likely help it in the long term.

Of the indices, the Nasdaq 100 has already reached supply. It’s the index most likely to test its 200-day MA first. This will give an idea as to whether this rally marks a key low, or is just part of a big bear rally.

The Semiconductor Index has also put in the groundwork for a rally. It’s early days, but this index has been one of the hardest hit since May, down almost 28% from May highs.

While markets post gains, the question on trader’s lips is whether these gains are real, or just shorts covering.

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

Gann Angles on the Dow Jones Industrials – Post Aug 2015 Dump

Courtesy of Read the Ticker.

gann-angles-on-the-dow-jones-industrials--post-aug-2015-dumpDow Jones sunk like a led balloon, some fund managers have hot undies now, as margin calls come in. This market will take some time to clear the bad bets. More lows likely, a bounce sure!

Previous posting here on Dow Jones Gann Angles.

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

Investing Quote…

…“I believe that anyone who is intelligent, conscientious, and willing to put in the necessary time can be successful on Wall Street.  As long as they realize the market is a business like any other business, they have a good chance to prosper.”…

Jesse Livermore

Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.

Nobel Laureate for Economics Paul Samuelson

..“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

..”Money couldn’t buy friends, but you got a better class of enemy”..

Spike Milligan

..The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell”..

John Templeton

August 24 – A True Market Washout?

Courtesy of Dana Lyons

It doesn’t happen too often, but occasionally we witness a true stock market “washout.” That is, a selloff marked by extremely one-sided (to the downside) trading action. Such days are exhibited by market participants that just want out at any price. The result is a day in which all market statistics are overwhelming skewed negatively. Such was the case yesterday, August 24.

Here are but a few examples from the New York Stock Exchange:


Yesterday saw the 4th lowest % of NYSE Advancing Issues – 4.1% – since 1965. Each of the other 13 occurrences with less than 6% Advancing Issues saw the market form at least a short-term bottom within a day – except for one: the fall of 2008. That selloff, while not much longer in duration, did suffer extensive damage in subsequent days.


Yesterday saw just 2.38% of the volume on the NYSE go into Advancing Issues. Since 1965, there have been just 20 days with less than 6% Advancing Volume. Again, the market bottomed almost instantly (if temporarily, at times) following most such readings.


New 52-Week Lows Minus New Highs accounted for 40% of all issues on the NYSE. Readings that high have only occurred 15 times since 1970. This series was especially accurate in identifying intermediate-term market lows.

One reason why, perhaps, is that the market was already extremely washed out coming into most of these day. The S&P 500 was a median of 30% off of its 52-week high during these occasions. That makes the current case unique as the index is just 11% off its high. This is not unprecedented, however. In May 1973, the S&P 500 was off 11% from its 52-week high. Instead of putting in an intermediate-term bottom, the market would eventually go on to accelerate its cyclical selloff, suffering a steep drawdown in the longer-term. The parallels to the current case should not be totally discounted.

Based on history, such washed out readings like we saw today should signal a coming end to the initial part of this decline in the next day or two. However, considering the selloff began with the major averages near their 52-week highs, a resumption in downside pressure would not be a surprise following whatever type of bounce materializes over the next few days or weeks.

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More from Dana Lyons, JLFMI and My401kPro.

The Raging Fire Within

Courtesy of Tim Knight from Slope of Hope

I've been trading the stock market for nearly thirty years, virtually non-stop. Today (that is, Monday, August 24) easily ranks in the top five strangest, craziest days in the thousands upon thousands of trading days I've ever witnessed. I felt like I was entering a cage of gorillas that had just ingested a large quantity of PCP. It felt dangerous and really, really unpredictable.

As I mentioned on my lengthy Saturday post:

I expect (and, again, hope – – because, God forgive me, I'm actually long five ETFs in size right now) we get a meaningful relief rally, carrying us up to the psychologically-important 17,000 level. At that point, please don’t be anywhere between me and my keyboard, because I am going to be shorting anything with a ticker symbol in size.

Well, God most certainly did not forgive me. If this permabear's time machine was working, he'd go back to Thursday morning, warn the slightly-younger Tim to not cover a single position, and further warn him not to buy a single thing.

Instead, I waited sleeplessly through Sunday night and early Monday morning for the opening bell to see how big a chunk of flesh those longs would take out of my 55 (much smaller) short positions. Well, the "tax" was quite hefty. Hedging as I did wiped out half of the profits I would have had otherwise, just as covering wiped out half my profits the prior Friday. I had relinquished tens of thousands of dollars of extra profit just to be – – well – – "safe."


I think we can all agree that approximately nobody anticipated the Dow falling 1,000 points right from the start of Monday morning. Frankly, the kind of "lift" I am seeing at the moment I am typing this (with the ES up 42 points) is more along the lines of what I thought would happen.

But the past few days have generated countless stories of triumph or woe, because in a market this volatile, you are going to have some accidental millionaires, and you're going to have some people absolutely wiped out, never to enter the markets again.  Keep in mind the VIX was at 10 – 10!!!!!! – only…
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Selling Pummels Markets

Courtesy of Declan.

The third day of selling pushed markets deeper into oversold territory and potential long term ‘buy’ territory. In my ‘bottom’ tracker, the S&P is priced in the 90% zone (i.e. only 10% of historic prices relative to the 200-day MA have been worse), while the Nasdaq and Russell 2000 is in the 85% zone. It has been 4 years since markets have been this oversold.

The S&P made a picture perfect tag of the 10%, 200-day Envelope. Although with trading restrictions in place at market open it would have been difficult to get a fill at this price. But now is a time to be shopping for value in individual stocks

The Nasdaq closed the breakdown gap in intraday trading, but the weaker finish left this in neutral territory.

The Russell 2000 came close to a tag of the 10% 200-day MA envelope. It too looks to be offering value for those willing to take the risk.

The carnage continued elsewhere. The Semiconductor Index experienced a wide range day, but didn’t lose as much ground as lead indices. Has a trade worthy bottom arrived?

Or will the VXN push another weak month for September.

Short term traders will likely continue to have it rough, but long term buyers may find some valuables amongst the rubble.

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

Jesse Livermore quotes to remind you in times like these

Courtesy of Read the Ticker.

jesse-livermore-quotes-to-remind-you-in-times-like-theseThe man who made and lost, many times has a few words to remind you.


..”One of the most helpful things that anybody can learn is to give up trying to catch the last eighth – or the first. These two are the most expensive eighths in the world. They have cost stock traders, taken together, enough millions of dollars to build a concrete highway across the continent.”..

…“After spending many years in Wall Street and after making and losing millions of dollars, I want to tell you this: It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight!”…

..“The desire for constant action irrespective of underlying conditions is responsible for many losses on Wall Street, even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.”..

..”Tape reading was an important part of the game; so was beginning at the right time; so was sticking to your position. But my greatest discovery was that a man must study general conditions, to size them so as to be able to anticipate probabilities.”…

..”Every once in a while you must go to cash, take a break, takes a vacation. Do not try to play the market all the time. It cannot be done, too tough on the emotions.”..

Jesse Livermore

COMMENT: The market has fallen hard and fast. The leverage has done damage you can not see, it will take some months before the supply dries up. Buyers time to take a vacation, come back in Nov 2015. Any bounce may be a great short. Those with RTT Plus service can follow our RTT Market Timer to help guide you back in to the market. Just like all the other pullbacks over the last 30 years.

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

Investing Quote…

..“In a narrow market, when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big

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Near Term Oversold, S&P and Russell 2000 in “Accumulate” Zone

Courtesy of Declan.

Friday’s action washed out bulls and likely scared off any buy-the-dip players.  Longstanding trading ranges from 2015 were decisively breached on heavy volume. However, selling has reached a point where there is good chance of a rebound on Monday. Both the Russell 2000 and S&P reached the “Accumulate” marker, where long-term buyers can chase value in the market. The last time this scenario played for the S&P was November 2011, although it was October 2014 for the Russell 2000.

The S&P tagged the 5% envelope band of 200-day MA, an area which will give bulls a chance to mount a snap back rally to the 200-day MA, and a place where long term buyers can look to buy value in the market.

The Russell 2000 was one of the better indices on Friday. There was a sharp jump in relative performance against Large Caps and Tech indices., which combined with the “Accumulate” trigger, could offer a longer term (bull) trade. Of the indices, it finished Friday with a ‘doji’; one of the few able to finish the day near where it started.

There was no such respite for the Nasdaq. And having only recently breached the 200-day MA it’s not in an “Accumulate” zone either. While it will likely benefit from any spill over buying (should this happen on Monday), there may be another leg of selling still to be had here.

Nasdaq breadth metrics haven’t entirely reached a bottom zone. The Percentage of Nasdaq Stocks above the 50-day MA finally reached a zone often associated with a trade-worthy bottom, but the Percentage of Nasdaq Stocks above the 200-day MA, Summation Index, and Bullish Percents still have room to run before they get there.

And the Semiconductor Index remains in free-fall.

Volatility traders finally have something to celebrate. This Monthly chart suggests this only the start of the selling.

While there is a good chance for a bounce on Monday, few will expect this rally to last. Those with patience may be rewarded, but watching the day-to-day changes will probably strike fear into many!

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

What the public does not see

Courtesy of Read the Ticker.

what-the-public-does-not-seeThe public end up being lamb chops, as Mr Market does every thing it can to trick you.

The stock market is designed to take your money, not make you money.

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Just a reminder…..


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

Investing Quote…

..”Money cannot consistently be made trading every day or every week during the year”..

Jesse Livermore Trading Rule

..”The stock market is filled with individuals who know the price of everything, but the value of nothing”..

Philip Fisher

..”The first rule is not to lose. The second rule is not to forget the first rule”

Warren Buffett

..The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell”..

John Templeton

..”Money couldn’t buy friends, but you got a better class of enemy”..

Spike Milligan

Was The Most Important Line In The Equity Market Just Broken?

Courtesy of Dana Lyons

The post-2009 UP trendline in the broad Value Line Geometric Composite was violated today.

Most technicians and chartists have what they consider their important levels on a chart. Whether it is a prior low or high, a moving average, a trendline, etc. These are levels that, if violated, mark a significant change in character for that particular price series – or at least it marks a significant change in its interpretation. While our firm is generally more interested in analyzing more comprehensive measures pertaining to the market’s structure rather than a single price point on one specific chart, there are a few undeniably important levels in our view. And perhaps the most important price point in the entire equity market was broken today.

When we consider what, to us, constitutes a significant chart level on a market-wide basis, it must be characterized by two things. First, it has to be an index or security of substantial influence. And second, the price level should preferably be of consequence on at least a cyclical (i.e., years) basis. Well, probably the single most beneficial force in the global financial markets for some time now has been the steady uptrend in the U.S. equity market. Other equity markets around the world have waxed and waned and other asset classes have varied between average (fixed income) and abominable (commodities). But U.S. stocks have been the rock – fortunately too as it is the largest stock market in the world.

And the most important barometer of the U.S. stock market, in our view, may not be the general consensus pick. In fact, many market participants likely have never even heard of it. The Value Line Geometric Composite (VLGC) is an index comprised of approximately 1700 stocks. It is also equally-weighted. Therefore, we feel it provides a better picture into the health of the broad U.S. stock market than a more mainstream pick like the S&P 500, for example. And despite the fact that there are no VLGC products actually trading anymore, it still adheres very well to most chart analyses.

That being the case, today’s break of the VLGC’s post-2009 UP trendline is one of those select price developments that we deem to be important to the macro market – and maybe…
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Buyers Report Absence

Courtesy of Declan.

No denying who took control today. Buyers will have their work cut out if they are going to regain it. Today’s dominant red candlestick will likely see some come back tomorrow, but eating back all of today’s losses will be more difficult.

The S&P lost over 2%, knocking out 2,045 support and returning all technicals into the red. Volume climbed as distribution. The 200-day MA is now the line on the sand for bulls. The loss is significant and will not be easily recovered.

The Nasdaq fell back to its 200-day MA. It finished close enough to this moving  average to suggest bulls will mount a defense here first. Other indices may not be so lucky.

The Nasdaq 100 finished bang on the 200-day MA, so buyers may find some joy for a quick intraday rebound tomorrow. Certainly, it’s the best placed of today’s finishers.

What’s not looking so healthy is the Semiconductor Index. It has dropped out of its bullish wedge and is in panic sell mode. Long term investors may seek value in this sector, but trying to pick a bottom is not something likely to bring success.

Of the lead indices, the Russell 2000 suffered the biggest loss on the day. Today’s finish left it a long way from its 200-day MA.  Small Caps are leading the charge down and it’s hard to see bulls getting it back in any meaningful way anytime soon. A break of declining resistance is the minimum to reverse the rot.

For tomorrow, short term traders will probably look to trade a bounce, but they are unlikely to hold over the weekend.

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


Phil's Favorites

The new 1% regime


The new 1% regime

Courtesy of The Reformed Broker, Joshua Brown

Nicholas Colas, chief market strategist at Convergex, a global brokerage company based in New York, has this to say about the proliferation of “1%” days we’ve been experiencing in the stock market this year…

The surge in volatility over the past week enabled this year’s aggregate number of plus or minus 1% moves in the S&P 500 – currently 40 – to exceed last year’s total of 38. There were nineteen positive 1% or more days in 2014, and 19 ne...

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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

These activist investors absolutely crushed it on huge trades (Business Insider)

Activist investors are putting cash to work like never before, setting their sights on bigger targets and extracting enormous paydays from companies once thought untouchable. 

They’re awash with cash, as investors in search of returns in a low-interest rate environment pump cash in to the strategy.

Some of the boldface names of activist investing have made billions this year alone.


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Zero Hedge

Here's How Long Saudi Arabia's US Treasury Stash Will Last Under $30, $40, And $50 Crude

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

On Friday we explained why the most important chart in global finance may well be the combined FX reserves of Saudi Arabia and China plotted against the yield on the 10Y. 

Here’s the reason that graphic is so critical: Saudi Arabia and China are sitting on the first and third largest stores of reserves, respectively, and if these two countries continue to liquidate those reserves, it will amount to “reverse QE” or, "quantitativ...

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All About Trends

Mid-Day Update

Reminder: David 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

Dangerous Place for a kiss of resistance, says Joe

Courtesy of Chris Kimble.

Anyone noticed its been a wild week? Has anything been proven with all the volatility the past 5-days?

What happens at (1) below, could tell us a good deal about what type of damage did or didn’t take place this week!


The large decline on Monday cause the S&P 500 to break support of this rising channel.

The mid-week rally pushed the S&P higher and as of this morning it is kissing the underside of old support as resistance now, near the 50% retracement level of the large decline over the past few weeks.

Why could th...

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Chart School

Shorts Rally - But For How Long?

Courtesy of Declan.

A second day of gains keeps pressure on shorts in squeezing them out of their positions, but is also looking to sucker shorts into trying to second guess when this rally will end.

The S&P is heading fast towards 2,044. Given the speed at which it has enjoyed this advance it will be there by Tuesday! In reality, it will likely slow before it gets there. When markets do head lower it will be important they do so slowly to sow further doubt into shorts.

The Nasdaq will be testing resistance tomorrow, and is close to coming up against its 200-day MA.  Those who bought the low will be very happy.


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Sector Detector: Finally, market capitulation gives bulls a real test of conviction, plus perhaps a buying opportunity

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

Courtesy of Sabrient Systems and Gradient Analytics

The dark veil around China is creating a little too much uncertainty for investors, with the usual fear mongers piling on and sending the vast buy-the-dip crowd running for the sidelines until the smoke clears. Furthermore, Sabrient’s fundamentals-based SectorCast rankings have been flashing near-term defensive signals. The end result is a long overdue capitulation event that has left no market segment unscathed in its mass carnage. The historically long technical consolidation finally came to the point of having to break one way or the other, and it decided to break hard to the downside, actually testing the lows from last ...

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Swing trading portfolio - week of August 24th, 2015

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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Some Hedge Funds "Hedged" During Stock Market Sell Off, Others Not As Risk Focused

By Mark Melin. Originally published at ValueWalk.

With the VIX index jumping 120 percent on a weekly basis, the most in its history, and with the index measuring volatility or "fear" up near 47 percent on the day, one might think professional investors might be concerned. While the sell off did surprise some, certain hedge fund managers have started to dip their toes in the water to buy stocks they have on their accumulation list, while other algorithmic strategies are actually prospering in this volatile but generally consistently trending market.

Stock market sell off surprises some while others were prepared and are hedged prospering

While so...

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Digital Currencies

Bitcoin Battered After "Governance Coup"

Courtesy of ZeroHedge. View original post here.

Naysyers are warning that the recent plunge in Bitcoin prices - from almost $318 at its peak during the Greek crisis, to $221 yesterday - is due to growing power struggle over the future of the cryptocurrency that is dividing its lead developers. On Saturday, a rival version of the current software was released by two bitcoin big guns. As Reuters reports, Bitcoin XT would increase the block size to 8 megabytes enabling more transactions to be processed every second. Those who oppose Bitcoin XT say the bigger block size jeopardizes the vision of a decentralized payments system that bitcoin is built on with some believing ...

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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. 


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Watch the Phil Davis Special on Money Talk on BNN TV!

Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene


The replay is now available on BNN's website. For the three part series, click on the links below. 

Part 1 is here (discussing the macro outlook for the markets) Part 2 is here. (discussing our main trading strategies) Part 3 is here. (reviewing our pick of th...

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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 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.

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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About Ilene:

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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