Archive for the ‘Chart School’ Category

Revising the Ratio

Courtesy of Tim Knight from Slope of Hope

I did a recent post here which got a lot of views based on the SPY/GLD ratio. Some readers pointed out something that hadn't occurred to me before: the ETF GLD didn't even exist until November 2004, which means the ratio is really only valid starting on that day. (SPY, on the other hand, the first ETF, was created early in 1993).

I assumed incorrectly that ProphetCharts would only begin charting a ratio at the most recent start day for any symbol used. I assumed wrong. This would normally be excusable were it for not one inconvenient truth:

0720-bytim

So this is obviously a bit embarrassing. I decided to try again, this time using data I knew went back the necessary amount. I couldn't find the cash price for gold in the database, so I opted to use a rather obscure symbol, GC1600, which is an unadjusted continuous contract for gold. I also used the cash index for the S&P, as opposed to the SPY, since the latter is adjusted for dividends. Here's the chart:

0720-ratio

The bad news is that the oh-so-perfect trendline that I illustrated in the original chart simply doesn't apply here. The consolation prize is that a Fibonacci retracement for the entire history of the chart yields some mildly interesting support and resistance areas. We are appearing to be in the thicket of some resistance right now, which certainly suggests a reversal, although not as fervently as the former chart did.

I also took a different approach by trying GLD/SPY, and in that instance, ProphetCharts is smart enough to only begin the graph at GLD's inception. Here's what the chart looks like, and as you can see, it has thrust down to an interesting point not seen for about a decade:

0720-gldspy

I appreciate readers calling this to my attention. I wanted to correct the chart as soon as I had time to have a closer look. By the way, these charts include the sell-off in gold today as well as the lifetime highs on the S&P 500.





They simply tire you out, till you give up and sell.

Courtesy of Read the Ticker.


they-simply-tire-you-out-till-you-give-up-and-sellMr Market has many tricks, and one is a marathon. The long wait till are market changes from a down trend to a bull trend or vica versa. The smart operators hold the market till last moment before any change of behavior is allowed.










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 create their own field of action and power; power to attract and repel,which principle explains why certain stocks at times lead the market and ‘turn dead’ at other times”…



William D Gann





..“Bull markets are born on pessimism, grow on scepticism, mature on optimism and die of euphoria.”..



John Templeton





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



Warren Buffett





..“It is much harder to sell stocks correctly than to buy them correctly.” Because of the emotional aspect of trading, if a “stock went up, the average investor would hold because he wants more gains – he’s exhibiting greed. If the stock declines, he also holds on and hopes the stock will come back so he can at least sell and break even – he’s hoping against hope”..



Bernard Baruch





..”Until an hour before the Devil fell, God thought him beautiful in Heaven”..



Arthur Miller, “The Crucible”

 [Contrarian Investing]

















A Ratio Worth Respecting

Courtesy of Tim Knight from Slope of Hope.

From the Slope of Hope: Two months ago, I did a piece called A Fascinating Ratio, which suggested that a major reversal was coming once the ratio reached about 2.0. At the time I did the post in mid-May, the ratio was a little under 1.8, but thanks to the unflagging strength of equities, as well as the unwavering suckiness of precious metals, this ratio is up to 1.95. We're getting very, very close to what I think will be a major pivot point, and perhaps the pairs trade opportunity of the decade:

0717-SPYGLD 
What's interesting is that the last major inflection point wasn't precisely before the financial crisis took hold, as you might suspect. It was precisely a decade ago, in mid-2005. Back then, gold was dirt cheap, and as we know now, equities still had more than two years to go flying higher.

Looking at the individual components, it's obvious that gold has been a piece of trash for almost four solid years now, but we might be reaching an important support point, which is at about 107.50 defined by GLD, shown below:

0717-GLD 

At the same time, the S&P 500 ETF, symbol SPY, has already fractured its long-term ascending trendline. This violation, which took place on June 29, is something I don't take lightly. In my experience, once a financial instrument starts "chipping away" at a trendline, its days are numbered.

0717-SPY

In sum, the closer we get to a 2:1 relationship between SPY and GLD, the more powerful an opportunity is made available to go short the S&P and go long gold. Believe me, I realize what garbage gold looks like right now, and how powerful equities (think NFLX, GOOGL, AMZN, EBAY, etc.) appear to be. In spite of this, this contrarian play could be one of the most potent and profitable strategies in years.





Third Day of Gains

Courtesy of Declan.

Just when it looked like Greece and/or China were going to bring the long awaited decline of substance, along come bulls to bid up three solid days of gains. Tuesday’s rally was enough to register an accumulation day to boot.



The S&P is close to tagging declining resistance from the May-June swing highs. Will bears look to attack here? Technicals have seen some improvement with a MACD trigger and Momentum ‘buy’, although relative underperformance against Small Caps expanded.





The Nasdaq went a step further and has tagged converged resistance of 5,096 (where the bull trap emerged), and trendline of former support turned resistance. Technically, it went a step further than the S&P with a net bullish technical turn.




The Russell 2000 is another index on the verge of challenging the ‘bull trap’. Technicals are not quite as good shape as for the Nasdaq (and the index is experiencing a relative underperformance to the latter index). Prices will inch into the ‘bull trap’ when it gets above 1,278.




The index which may offer shorts the best chance is the Nasdaq 100. It finished today just below the crux of converged resistance of trendline and 4550. The latter is major resistance and a logical place for shorts to get busy. Bulls will be looking to net bullish technicals to drive a break. Lots to play for on both sides.




For tomorrow, watch tech indices and how they react at converged resistance. Weakness here will likely spread to Large and Small Caps. However, if the Nasdaq 100 is able to break above 4550, then things become much more bullish all around.



For those who may be interested, I will be in London as a guest of eToro as part of their Popular Investor program. I believe the session is to be broadcast tomorrow from 5:30 to 9:00 pm GMT.



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







Greece ‘Deal’ – Rally Continues

Courtesy of Declan.

While the new bailout hasn’t been approved by Greece, a new deal is on the table. China looks to have been pushed to the back of the headlines, but it hasn’t disappeared either. Either way, bulls took weekend news to push with Friday’s gains. Indices have closed key breakdown gaps which have overshadowed markets in recent weeks.



The S&P is back at its 50-day MA and has room to maneuver to declining resistance defined by May and June swing highs. Buying volume has dropped after 2 days of gains, so bulls are not yet convinced by the last two days of action, but remember, rallies climb a wall of worry.





The Nasdaq gapped above 5038, creating what could turn into a bullish island reversal (but if true, this morning’s gap can’t close). Technicals are mixed, with bearish technicals but a ‘buy’ trigger in On-Balance-Volume. The Nasdaq is enjoying a relative gain against the S&P.




The Russell 2000 continued its rally in no-mans land. It won’t get to challenge the ‘bull trap’ until it reaches 1,278. However, Small Caps are underperforming against the Nasdaq, so it may struggle from here.




With Greek news out, the worst of the action could be behind the indices. However, a larger consolidation should be welcomed, and a rally from here would simply kick this can further down the road.



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







Scrappy Consolidation, But Greece In Play

Courtesy of Declan.

It’s not looking good for Greece with Germany holding out, and last week’s big swings without any significant change in price is going to change next week. The break down from the end of June looks likely to hold out, and this will keep the intermediate down trend in play. Intermediate trends last from 3 weeks to 6 months, and there is probably enough fuel from Greece and China to keep this going into Autumn.



Bulls are not entirely out of the game. The S&P is defending its 200-day MA, with a new ‘buy’ trigger in On-Balance-Volume, and a continued relative advance against Small Caps. Gap resistance is at 2,085.




The Nasdaq also saw an On-Balance-Volume ‘Buy’ trigger, although the latter volume indicator has flat-lined. Gap resistance for this index sits at 5,038 with the 200-day MA the next target down.




The Russell 2000 defended trend-line support, but next week will be a tougher test. Such support is unlikely to survive a fourth test.




Tech indices will be watching the hard hit Semiconductor Index. The February swing low was defended on Thursday, but bigger tests lie ahead.




There isn’t much to be said until the Greek decision is priced in. The twin storms of Greece and China offer a good opportunity to sit back and let the market wash itself out. Long term investors don’t need to be in a hurry to invest given the length of this rally (from 2009) with only one major pullback in 2011. Short term traders will need to be nimble with all the day-to-day gaps.



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







Technically Strong Charts

Courtesy of Read the Ticker.


technically-strong-chartsHere are two monthly charts, that you can not call bearish. In fact these charts may erupt very soon.



In fact with a Wyckoff eye you would have to call them technically strong. Nice pull backs that have refused to break down. Accumulation building, shorts have a built up a position that can forced to cover, selling looks nearly done. Fertile ground for new bulls to appear.





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

Gold








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…



..”Tape reading is rapid-fire horse sense…The Tape Reader aims to make deductions from each succeeding transaction — every shift of the market kaleidoscope; to grasp a new situation, force it lightning-like through the weighing machine of the brain and to reach a decision which will be acted upon with coolness and precision”..



Richard D Wyckoff





..“Because of the extreme challenge, one must commit full attention to it.” Market speculation is “no different than trying to be a successful doctor or lawyer … you simply must devote yourself full-time to the study of your craft”…



Bernard Baruch





…“To me, the ‘tape’ is the final arbiter of any investment decision. I have a cardinal rule: Never fight the tape!”…



Martin Zweig





..”Until an hour before the Devil fell, God thought him beautiful in Heaven”..



Arthur Miller, “The Crucible”

 [Contrarian Investing]











Novice Traders trade 5 to 10 times too big. They are taking 5 to 10% risks on a trade they should be taking 1 to 2 percent risks.



Bruce Kovner











We’re below the S&P 500′s 200-day moving average.

Josh Brown wrote the post below on July 7. The S&P 500 had dropped below the 200-day moving average. It is now back above it.

Here's an updated chart from Yahoo. The red line is the 200-day simple moving average: 

We’re below the S&P 500’s 200-day moving average.

Courtesy of 

200 day

The S&P 500 has taken out its 200-day moving average to the downside on an intra-day basis as of this writing. The index finished out last month just above this key level of supply/demand by pennies, but we’ve been flirting with it all year as stocks have gone nowhere and the trendlines have flattened. As you can see in my above chart, RSI is “confirming” which means momentum is dropping right in line with price itself.

You can also see that this descent below the 200-day is not a frequent occurrence in today’s stock market.

This matters and it doesn’t matter. Let me explain.

It doesn’t matter because you could just pick another trend line and say we’re above it arbitrarily – say, the 250-day for example. Show me, in the holy papyrus scrolls, where it indicates God prefers the 200-day to all other moving averages? Also, anything as closely watched – by both traders and the financial media – as the 200-day simple moving average (SMA) couldn’t possibly represent a truly actionable signal, almost by definition. When have you ever made money by paying attention to a metric that a child could follow? Could you do it twice? Thrice?

It does matter, however, because a lot of other people believe it matters – the Keynesian Beauty Contest. If the other judges, whose money flows move the market, begin to behave differently as a result of something like a 200-day crossover, then it de facto does matter –  to the degree that others believe it does.

Further, the research we’ve done in-house indicates that a majority of nasty market events have taken place whilst the stock market was below this trendline when you look back through history. As my firm’s director of research, Michael Batnick, showed last


continue reading





Losses Maintained

Courtesy of Declan.

The back and forth continued, except this time pre-market gains could not be held and markets revisited lows. This lows still hold as support, but it’s a tough sell to buyers to want to jump in here.



The S&P finished below it 200-day MA with a big inverse hammer.  Technicals are net bearish, except today’s action hasn’t reversed the net out performance of the Large Caps over Small Caps.





Small Caps also experienced losses, but not enough to break trendline support or revisit yesterday’s lows. It still might offer the better of the long opportunities, but given it’s coming off a ‘bull trap’ I suspect not.




The Semiconductor Index had the worst of today’s losses. It’s action will be critical in the months ahead as a marker for a recovery in the economy (of China in particular).  So far, it has a very ugly chart and is experiencing a major underperformance against the Nasdaq 100.




The damage in the Semiconductor Index hasn’t fully exhibited itself in the Nasdaq 100, although there is little of merit to recommend to bulls. A tag of the 200-day MA might offer more.




Will volatility spike once more? A 2011 style spike would be welcome. With a touch of 20 it’s nicely set to generate such a spike, but as this is a monthly chart it may take a couple of months to deliver (assuming a spike emerges).




I should add, I have a short bias here, but given major lows typically come after the S&P is 10% below its 200-day MA I would be inclined to favour further losses before we have a strong low. Past declines have deceived in the past, and it has been 4 years since the last strong low, but it will come.



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







SP500 Gann Angle Update

Courtesy of Read the Ticker.


sp500-gann-angle-updateTime to review the minor sell off in the SP500 with our Gann Angles.



We are touching the lower 1×1 Gann Angle. However as like last time the SPY was at this level FED Bullard game out and talked up QE. We can assume another Bullard ray of BS very soon one would assume. Otherwise the clerks will be making margin calls if we go lower.



SPY




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…



..”Tape reading is rapid-fire horse sense…The Tape Reader aims to make deductions from each succeeding transaction — every shift of the market kaleidoscope; to grasp a new situation, force it lightning-like through the weighing machine of the brain and to reach a decision which will be acted upon with coolness and precision”..



Richard D Wyckoff





..“Because of the extreme challenge, one must commit full attention to it.” Market speculation is “no different than trying to be a successful doctor or lawyer … you simply must devote yourself full-time to the study of your craft”…



Bernard Baruch





…“To me, the ‘tape’ is the final arbiter of any investment decision. I have a cardinal rule: Never fight the tape!”…



Martin Zweig





..”Until an hour before the Devil fell, God thought him beautiful in Heaven”..



Arthur Miller, “The Crucible”

 [Contrarian Investing]











Novice Traders trade 5 to 10 times too big. They are taking 5 to 10% risks on a trade they should be taking 1 to 2 percent risks.



Bruce Kovner











 
 
 

Zero Hedge

Chess Vs Checkers - John Kerry Edition

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Presented with no comment...

Source: Townhall.com

...

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Sabrient

Sector Detector: Lackluster earnings reports put eager bulls back into waiting mode

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

Courtesy of Sabrient Systems and Gradient Analytics

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Corporate earnings reports have been mixed at best, interspersed with the occasional spectacular report -- primarily from mega-caps like Google (GOOGL), Facebook (FB), or Amazon (AMZN). Some of the bul...



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Phil's Favorites

Europe: Running on Borrowed Time

 

Thoughts from the Frontline: Europe: Running on Borrowed Time

By John Mauldin

“I am sure the euro will oblige us to introduce a new set of economic policy instruments. It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created.”

– Romano Prodi, EU Commission president, December 2001

Prodi and the other leaders who forged the euro knew what they were doing. They knew a crisis would develop, as Milton Friedman and many others had predicted. It is not conceivable that these very astute men didn’t realize that creating a monetary union without a fiscal union would bring about an existential crisis. They accepted that eventuality as the price of European unity. But now the payment is coming due, and it is far large...



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ValueWalk

Whitney Tilson: Berkshire Hathaway Worth $267,000 A Share

By Jacob Wolinsky. Originally published at ValueWalk.

Excerpted from an email which Whitney Tilson sent to investors

1) Below is a spot-on cover story in this weekend’s Barron’s about how attractive Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) is today:

“In effect, the world is Berkshire’s oyster,” Buffett wrote, noting that it “is perfectly positioned to allocate capital rationally and at minimal cost.” Jain’s catastrophe-reinsurance operation, for instance, is doing less business now because alternative sources of coverage, n...



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Chart School

Fifth Day of Selling

Courtesy of Declan.

Sellers in the S&P made it five days of downside in a row. On this last day it closed near the day's lows, but also on its 200-day MA. If there was reason for a bounce, then tomorrow could be the day.  Technicals are all net negative.


The Dow took the selling harder. It undercut the July swing low having earlier lost its 200-day MA. Next up is the February swing low.


Small Caps finished at its 200-day MA, after it lost trendline support on Friday...

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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Why We Fail To Trade Our Plans After We've Planned Our Trades (Trader Feed)

A reader recently asked the question of why we so often don't trade our plans after we've gone to the trouble of planning our trades.  The usual answer to this question is that emotion gets in the way, which naturally leads to strategies for yet more planning, "discipline", and the dampening of emotion.  As an interesting article on motor sport makes clear, however, it may well be that we lose our plans when we lose our concentration.  Instead of working to control emotions, it makes sense to cultivate ex...



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OpTrader

Swing trading portfolio

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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Kimble Charting Solutions

Be aware of these surroundings friends!

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

It could pay to be “aware of these surroundings!”

(1) – Nasdaq Composite Index is back at 2000 highs, with little wiggle room at the top of this rising wedge pattern

(2) – Google shot up after earnings two weeks ago hitting a resistance line based upon its 2007 highs and a 161% Fibonacci extension level, where it made a reversal pattern.

(3) – Red hot Biotech (IBB) is at the top of this rising channel and created a potential reversal pattern with support just below current prices.

(4) – TLT declined, hitting its 38% retracement level and of late is breaking above this bullish fall...



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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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Digital Currencies

Gold Spikes Back Above $1100, Bitcoin Jumps

Courtesy of ZeroHedge. View original post here.

Gold is jumping after the overnight double flash-crash...testing back towards $1100...

Bitcoin is back up to pre-"Greece is Fixed" levels...

Charts: Bloomberg and Bitcoinwisdom

...

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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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Promotions

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 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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