Late Day Sell Off Deja Vu
by Chart School - December 14th, 2010 7:24 pm
Courtesy of Tyler Durden at Zero Hedge
Just like yesterday, shortly before 3 pm the market started selling off, amid substantially higher volume and notably larger block size, indicating that while the melt up during the day was due to the now traditional liquidity-rebate HFT crew (funded ironically in large part by the same Chinese IPOs that pay NYSE bills then promptly spontaneously combust a few months later), the selling was primarily by real money. And while the catalyst for the selloff most certainly was not the FOMC decision, many are wondering just what is it about the close of trading that is forcing a market correction (ignore the Dow: it was materially higher only due to IBM which is majorly skewing the index) at about the time when the ETF rebal trade traditionally pushed stocks higher. According to some, the recent surge in SPY shorts may have something to do with it, due to the distribution of rebalancing estimates ahead of time by brokers. If ETFs are indeed creating a feedback loop that now leads to selling instead of buying, very soon we may see a very unique battle between the two main market momentum vehciles: the HFTs which their upward bias, and ETFs, which may now be a downward pressure vehicle. That particular duel may end up being far more interesting than the endless polemic of whether or not fighting the Fed is worth it. Today, the market closed green by a whisper. Yesterday it was not as successful. Tomorrow may prove to be a very informative tie-breaker.
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The Shocking Selloff In Muni Bonds That Has Investors Running Scared.
by Chart School - December 9th, 2010 1:58 am
Courtesy of Gregory White at The Business Insider
Today saw a massive selloff in the broader bond market, but the muni bond situation may be the most alarming.
The threat of the end of the Build America Bond program looms large, and it is scaring investors into selling out of the muni market.
It could be the next black swan looming, ready to cause an even larger problem for states already overburdened with debt.
Just check out the down move in the Muni bond ETF today. It may be off its lows of the day, but it still doesn’t look good.
Originally published at The Business Insider, CHART OF THE DAY: The Shocking Selloff In Muni Bonds That Has Investors Running Scared.
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Long Downside Wick…Dollar testing support
by Chart School - October 15th, 2010 2:25 pm
Long Downside Wick…Dollar testing support
By Chris Kimble
Downside wicks usually take place at market lows or at support. The chart below, highlighting several downside wicks and a bullish falling “PATTERN” was the reasons to go long the 5oo index on 9/1 (see post here).
Click on Chart to Enlarge
The S&P 500 had its best September in 70-years bouncing off this support, after it created these “downside wicks.”
The U.S. Dollar is testing key rising support and created a fairly long “DOWNSIDE WICK” yesterday, in the chart below.
Click on Chart to Enlarge
With the Dollar on support, only 3% Dollar bulls and now with this long “downside wick” taking place, all the more respect for this pattern is at hand and understand that a rally in the Dollar, could be ugly (see post here) for many asset classes!!!
KEEP STOPS TIGHT TO PROTECT GAINS…
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30-Year Fibonacci level at hand for Silver
by Chart School - September 17th, 2010 3:59 pm
30-Year Fibonacci level at hand for Silver
Courtesy of Chris Kimble
I have received several requests for the “Big Picture” on Silver. Here it is…..
Gold finds itself at all time highs…Silver at the 38% retracement level. If Silver can break good ole Fibonacci, the next line (2) is a BIG PERCENTAGE above line (1)!
******
Early Today, Chris posted:
Gold Record/Silver breaking out… Play it how?
In the “Hi Yo Silver” chart below (see post) Silver had created a series of ascending triangles, which lead to higher prices around 65% of the time. Silver is up 13% since this post, in just 30 days! How much is gold up during the same time frame? Just a little over 3%…. All metals don’t perform the same!!!
Silver gained 10% more than Gold in the past 30 days. It was this potential per why I have been suggesting to pick up Silver!
Click on chart to enlarge
Below is an update to that chart, with a snap shot of Gold. Silver is breaking from the ascending triangle and is testing resistance at line (2).
Long-term breakouts can lead to much higher prices in any product, same should apply to Gold and Silver! How should one play it? Nothing wrong with owning the metal itself, yet what about Gold/Silver stocks?
Below is a “ratio chart” created by dividing the Price of gold by the XAU Index (gold and silver stocks), looking to see which one is performing better.
The ratio chart is breaking a three year support line which is suggesting gold stocks (see this post on gold stocks, GDX & GDXJ) are going to do better than Gold for a while.
Game Plan…Own GDX and GDXJ WITH STOPS, due to the rising wedge and resistance at (1) and (2) in the middle chart! Gold and Silver are looking great….yet clear breakouts from these patterns, in my opinion, are still not in place for either metal yet!!!
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US Dollar – UUP
by Chart School - August 30th, 2010 1:48 pm
US Dollar – UUP
Courtesy of Allan
For what it is worth Robert Prechter [of Elliott Wave fame] is very bullish on the US Dollar, suggesting a surge higher in the coming months. The above trend model isn’t so prescient, suggesting only that the trend is up and that should be good enough for now.
It is.
Allan’s “Trend Following Trading Model” is based on his trend-following trading system for buying and selling stocks and ETFs. Most trades last for weeks to months. Allan’s offering PSW readers a special 25% discount. Click here. For more details, read this introductory article.
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DARK HORSE HEDGE
by ilene - July 18th, 2010 10:57 pm
DARK HORSE HEDGE 7-18-10
By Scott at Sabrient and Ilene of PSW
Friday gave us a real-time example of why we use Hysteresis* and confirmations from our technical signals, MACD 12-26-9 and RSI 14-day, to select and monitor the tilt (long-short ratio) of the Dark Horse Hedge’s portfolio.
The SHORT tilt Friday allowed us to make +1.37% from our 6 SHORT, 3 LONG positions while the S&P 500 gave back -2.88%. The economic data out Friday of course played a large roll in the failure of our indicators to turn from short to BALANCED. A sharp decline in the University of Michigan Consumer Index to 65 in July compared poorly with a June figure of 76 and Briefing.com’s estimate of 74.5. Google’s earnings miss didn’t help either as the S&P 500 fell through its short-term support area to close at 1064.88. The MACD reading is currently at -3.56 and RSI 14-day at 42.85 (bullish signal is above 50). The preponderance of evidence heading into the July 19 week is that the market needs to find support in the 1040 range.
Despite the poor economic data that pushed the market lower on Friday, 19 of 23 S&P 500 companies reporting thus far reported better than projected EPS, and 15 of them beat revenues as well.
Earnings reports will continue to flow in this week. In our portfolio Western Digital Corp (WDC, long position) reports profits on Tuesday while USG Corp (USG, short position) and Sun Trust Banks Inc (STI, short position) report their losses on July 22. We will continue to monitor the market action and look for guidance on entering new positions. Key support areas appear to be 1040, 1022 and then 995.
Dark Horse Hedge maintains 10% cash for swing trade opportunities and we are highlighting one for entry on Monday at the Open.
SHORT Terex Corp. (TEX) at the Open Monday.
TEX will report its latest loss figures on Tuesday, July 21. Twenty analysts project losses ranging from -$.15 to -$.44 with an average of -$.30. Looking back over the last four quarterly announcements, we see analysts often underestimate Terex’s losses. For example, in March 2010, analysts estimated -$.52 while the actual loss was $.64. In December 2009, analysts targeted -$.49 and TEX delivered -$.89. In September 2009, the loss was projected to be $.34 and the company came in at -$.77. In June 2009, investors were…
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This Bear Market Is Nowhere Near A “Buying Opportunity,” Says Rosenberg
by Chart School - May 31st, 2010 12:28 pm
This Bear Market Is Nowhere Near A "Buying Opportunity," Says Rosenberg
Courtesy of Henry Blodget at Clusterstock
Some not-so-fun facts from David Rosenberg of Gluskin Sheff:
We went back to the history books and found that at fundamental lows in the S&P 500, whether they be in real bear markets or in severe corrections in a bull market, the index bottoms when it gets 13% below the 50-day moving average and 24% below the 200-day moving average. As of Friday’s close, we are talking about a market that is barely below the 50-day m.a. now and 5% below the 200- day moving averages.
Message — keep your powder dry.
[Note: The chart below from stockcharts.com suggests that Dave has transposed the current numbers: We're about 5% below the 50-day and basically even with the 200-day...]
Image: Stockcharts.com stockcharts.com
See Also:
JPMorgan: Here’s Three Signs That We’ve Hit The Market Bottom
Now Everyone Thinks The Market’s Going To Crash
Is The Recent 10-Year Reversal Also Signaling A Huge Fall In The Market?
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Gold Chart (GLD)
by Chart School - April 30th, 2010 11:35 am
GLD
Courtesy of Allan
I wrote to my subscribers last night about GLD; that it is on a fresh Buy on the Daily chart and is in Buy Pending mode on the Weekly chart. That longer-term Weekly Buy should be confirmed by today’s close. Below is a GLD 240 minute chart:
The most recent Buy on the chart came on April 20th at 111.93. With GLD up above 115 today, that is about a 3% rise from inception of the trade. Taking a look at the option tables, a 3% rise in near-term at the money calls translates into a pro-forma rise in the option of well over 100%, i.e. from about $2.07 to between $4.00 and $4.85:
That’s a healthy return for a ten-day period. But it has to be, as the trade has to make up for the previous whipsaw, where I suspect a loss on the option would be about 30%. Adding it all up, assuming that for any given two trades there is a 30% loss followed by a 100% gain, at the end of the year you are addicted to the trend models.
A lot of assumptions here, including pro-forma and/or hypothetical analysis. But the underlying trading paradigm is not assumed, it is real and based on this rear-view mirror option analysis, is a viable strategy going forward. Daily and Weekly models offer similar opportunity and I’ll eventually get around to posting this same kind of analysis for those time frames.
Allan’s newly launched newsletter, “Trend Following Trading Model,” goes with the trend-following trading system he’s been working on for years. Most trades last for weeks to months. Allan’s offering PSW readers a special 25% discount. Click here. For a more detailed introduction, read this introductory article. – Ilene
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The Best Volatility Play
by ilene - April 23rd, 2010 2:29 am
The Best Volatility Play
by JOHN RUBINO at Dollar Collapse
Take a look at the chart below, and note the unnaturally smooth 80% decline. Kind of makes you think “imminent bankruptcy”. But now consider that the security in question is 100% guaranteed not to fall to zero and about 90% guaranteed to stay above 10.
It’s VXX, an exchange traded fund that, according to its profile, “seeks to replicate, net of expenses, the S&P 500 VIX Short-Term Futures Total Return Index. The index offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects the implied volatility of the S&P 500 index at various points along the volatility forward curve.”
In other words, it reflects the perceived riskiness of stocks as measured by the VIX volatility index. Lately, the volatility/riskiness of the S&P 500 has been evaporating as the Fed hands virtually free cash to pretty much everyone who asks, and the recipients buy suspiciously regular amounts of stock each day. This is leading options and futures traders to get bored and charge lower derivatives premiums.
The result is an ETF with a nice risk/reward profile. The chart below shows that twice over the past couple of decades the VIX has approached 10 before bouncing off. Below 10 is theoretically possible but would imply some kind of uneventful paradise, not very likely in this world. So let’s call 10 our downside risk. For upside potential, considering all the bad monetary/geopolitical/Goldman Sachs-related things that could happen and that it will only take one of them to spike volatility, a return to 50 or so isn’t asking too much.
Full disclosure: I’m long VXX and getting longer.
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CHART OF THE DAY: A SURE BET
by Chart School - March 2nd, 2010 6:39 pm
CHART OF THE DAY: A SURE BET
Courtesy of The Pragmatic Capitalist
There is, arguably, no more important gauge of investor sentiment than the VIX. Market extremes are generally best seen by the extraordinary swings in the VIX. As we’ve recently described, the market has been on a drunken walk that takes it in one direction for a series of weeks and then suddenly reverses with the utmost conviction. This back and forth has been a hallmark trait of the range-bound market of the last few months.
With today’s invincible feeling in the equity markets the VIX has now fallen a remarkable 14 of the last 15 days. That’s a 93% win rate in a three week period. Not bad if you’ve been trading or hedging via the VIX. Unfortunately, this trend is more than unsustainable. This is the longest losing streak for the VIX since the March 2009 rally began and the few losing streaks that came even close were followed by sideways to down markets in the following 4-8 weeks.
The VIX has become a sure bet. As the old saying goes, if something seems too good to be true it probably is. The trend is your friend until it ends and this trend is beginning to look like a mighty bad bet to me. I’m not one to call tops, but as a manager of risk this indicator has me feeling a bit uneasy.
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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...
Ilene is editor and affiliate program
coordinator for PSW.