Case Shiller’s Double Dip Has Come and Gone
by ilene - April 27th, 2011 2:25 am
Courtesy of Lee Adler at Wall Street Examiner
The S&P/Case Shiller Home Price Indices reported Tuesday are, as usual, so far behind the curve that not only did they miss the “double dip” that has come and gone, it will be at least July or August before it reports an apparent upturn in prices in March and April. S&P’s view of the data was dour. “There is very little, if any, good news about housing. Prices continue to weaken, trends in sales and construction are disappointing, ” said S&P’s David Blitzer. “The 20-City Composite is within a hair’s breadth of a double dip.”
There’s just one problem with that. Other price indicators that are not constructed with the Case Shiller’s large built in lag, passed the 2009-2010 low months ago. The FHFA (the Federal Agency that runs Fannie and Freddie) price index showed a low in March 2010 that was broken in June 2010 and never looked back. That index is now 5.6% below the March 2010 low. Zillow.com’s proprietary value model never even bounced. It shows a year over year decline of 8.2% as of February. Zillow’s listing price index shows a low of $200,000 in November 2009, followed by a flat period lasting 6 months. As of March 31, that index stood at $187,500, down 6.25% from the 2009-2010 low for data.
The Case Shiller Indices for February held slightly above the January level (not seasonally adjusted). I follow their 10 City Index due to its longer history. It was at 153.70 in February versus 152.70 in January. These levels are still above the low of 150.44 set in April 2009.
The Case Shiller index showed a recovery in prices in 2009-10 only because of the weird methodology it uses. Not only does it exclude the impact of distress sales that have been such a big part of the market, but it takes the average of 3 months of data instead of using just the most recent available month. The current data purports to represent prices as of February. In fact, it represents the average price for December, January, and February, with a time mid point of mid February. These are closed sales which generally represented contracts entered in mid to late November, on average. That means that the current Case Shiller index actually represents market conditions as of 5 months ago. Things can change in 5…
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The Trends Are Extended, Start Thinking Consolidation and Reversals, But Wait For It
by Chart School - October 14th, 2010 2:02 pm
The Trends Are Extended, Start Thinking Consolidation and Reversals, But Wait For It
Courtesy of JESSE’S CAFÉ AMÉRICAIN
The trends are extended on quite a few charts. The action in the US markets is being artificially inflated and supported by monetization and liquidity so it *could* continue on for some time, even until the November election. It is being fueled by the expectation of a large quantitative easing by the Fed shortly thereafter. That QE, when it arrives, is likely to be sold if it is not significant enough to meet expectations.
I am more cautious on short term positions here, and have had some short hedges on in the overnight, but deftly. It is important not to exhaust yourself expecting a trend change before it is ready to happen, and one cannot anticipate exogenous events by definition. Still, the time is ripe for one to have a significant effect should it occur.
The long term trends are all intact, but we have reached a position where we might be looking for intermediate tops and consolidations. The Fed is not infallible or omnipotent, but rather determined and capable within its limits. The combination of government and the monied interests is powerful and ruthless. Manage your money tightly and wait for the market to reveal its intentions if you are trading.
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S&P 500: On a knife’s edge
by ilene - August 23rd, 2010 11:32 am
S&P 500: On a knife’s edge
Courtesy of Prieur du Plessis, Investment Postcards from Cape Town
Last Thursday was a so-called 90% down-day for American stock markets (and many other bourses also recorded downward dynamics). A 90% down-day is defined as a day when downside volume equals 90% or more of the total upside plus downside volume and points lost equal 90% or more of the total points gained plus points lost. The historical record show that 90% down-days do not usually occur as a single incident on the bottom day of an important decline, but typically on a number of occasions throughout a major decline. As far as the very short term is concerned, 90% down-days are often followed by two- to seven-day bounces.
The stock market is on a knife’s edge at the moment as seen in the chart below, showing the long-term trend of the S&P 500 Index (green line) together with a simple 12-month rate of change (ROC) indicator (red line). Although monthly indicators are of little help when it comes to market timing, they do come in handy for defining the primary trend. An ROC line below zero depicts bear trends as experienced in 1990, 1994, 2000 to 2003, and in 2007. And 2010? With the ROC delicately perched just above the zero line, the primary trend is still bullish, but barely so.
Source: StockChart.com.
Regarding seasonality, I have done a short analysis of the historical pattern of monthly returns for the S&P 500 Index from 1950 to August 2010. The results are summarized in the graph below.
Source: Plexus Asset Management (based on data from I-Net Bridge).
As shown, the six-month period from May to October has historically been weaker than the period from November to April as seen in the average monthly return of 1.05% for the “good six months” compared with 0.25%% for the “bad six months”. Importantly, when considering individual months, September (-0.18%) and October (-0.19%) have historically been the only two negative months of the year. (A word of warning, though: one should take cognizance of seasonality but understand that it is not a stand-alone indicator and it is anybody’s guess whether a specific year will conform to the historical pattern.)
Where does this leave us at this juncture? Considering an array of indicators, we are somewhat in no-man’s land regarding whether the bull or bear will…
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VXX Trend Models
by Chart School - June 23rd, 2010 11:04 am
Here’s an update from Allan on the VXX chart, showing a shorter-term chart on a buy signal and suggesting a possible new buy on the daily chart soon. – Ilene
VXX Trend Models
Courtesy of Allan
Below is the VXX 480 min and Daily charts. The 480 minute chart, by its construction, is a good precursor for new Daily chart signals. In this case, its suggesting an imminent Buy on the VXX Daily @ 28.35, which would be a negative signal for the general market.
VXX Daily Trend Model
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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Now’s The Time To Buy Leading Stocks At Low Risk Entry Points
by Chart School - May 23rd, 2010 12:52 pm
Now’s The Time To Buy Leading Stocks At Low Risk Entry Points
Courtesy of David at All About Trends
There is a good possibility we are done with the first leg down. We see tagging some support levels on the charts. The reaction off of those support levels was exactly what we wanted to see. Powerful and with conviction.
Notice in the chart above the 50 day average is at 1100? That’s going to serve and a point of initial resistance.
The blue circle is actually about 5 days worth of market action in a range of 1070-1090 with a spike down to 1050 ish thrown in for good nellie action.
In the first chart we talked about 1100 being the 50 day average. It’s also a 38.2% Fibonacci level as shown in yellow. Note the confluence of the blue 38.2% Fibonacci retracement level and the 50% yellow Fibonacci level. See how close they are? That’s confluence and what is commonly called a Fibonacci cluster. Watch those levels next week or the week after for resistance and stalling.
This doesn’t mean we are out of the woods but we liked the action we saw Friday. So IF we now enter into a period of a Wave 2 (upward bias, or the alt count) then it ought to look like an ABC up. We may see some morning weakness on Monday. The chart below is the S&P 500 in a 1 minute time frequency.
As you can see, we stopped cold on a down trendline. We could
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Trend Following Tutorial
by Chart School - May 17th, 2010 12:20 pm
Trend Following Tutorial
Courtesy of Allan
The SHORT on this SPX Weekly chart was generated at the end of the week of Jun 16, 2008 @ 1317. It was in force until the end of March, 2009 @ 843. That trade gained 474 SPX points, or about 36%. It could have been implemented using an unleveraged index, SPY, for about a 36% gain. It could also have been implemented using a leveraged ETF for approximately double, or triple that return. The key focus for this tutorial is that the methodology was SHORT during a severe and prolonged market decline.
The next signal was a LONG signal, as shown on the chart below:
This LONG signal was generated at the end of March, 2009 @ 843. It was EXITED at the end of January, 2010 @ 1074. The gain on this LONG was 231 SPX points, or about 27%.
These two signal totaled over 700 SPX points over the course of about two years. Such are the market times we are in and unless and until these volatile swings come to an end, this is a simple, mechanical, tradable way to participate successfully in these trends.
The trend line you see on the above charts is based on what is called an Average True Range algorithm. It was written up in the June, 2009 issue of Technical Analysis of Stocks & Commodities. The algorithm I use for these trends is slightly different then the algorithm written up in the article, not that mine is better, but I think it is more tradable.
Daily Charts
The same algorithm works on Daily charts. Below are some examples using the same trend model on the SPX Daily chart:
Notice how the Daily Trend Model works in the exact same way as the Weekly Trend Model. In this case, a LONG signal in early November lasted through late January and gained about 30 SPX points. Below, the ensuing SHORT signal in late January:
Following the late November, 2009 BUY, the daily trend reversed SHORT in late January, 2009. Below, the late February LONG signal:
By now this looks the proverbial greatest thing since sliced bread.
Not so fast……looks what happens next:
The SHORT_EXIT(LONG)_SHORT series of signals in late April is
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Playing the Gap: Identifying and Trading Gaps
by Chart School - April 28th, 2010 9:49 pm
Playing the Gap: Identifying and Trading Gaps
Courtesy of Pharmboy
Gaps are very profitable technical indicators. A gap is an area on a chart where no trades take place and these are caused by fundamental or technical events that usually occur after the market closes and before the market opens, also known as ‘non-regular trading hours’ (NRTH’s). There are four basic gap types: area, continuation, breakaway and exhaustion.
Gaps are significant for many reasons:
- Gaps tell traders that something occurred during NRTH’s. Typical events include: earnings announcements, FDA approvals, analyst upgrades/downgrades, company press releases and other significant events that may cause investors and traders to place orders to buy or sell during NRTH’s, causing an order imbalance.
- The type of gap will help you determine the probability of the stock’s direction in the short and intermediate term.
- Gaps are profitable. Traders can take advantage of the imbalance of orders by either “catching the momentum” or “fading the gap”. When riding a gap, the traders are betting that the stock will continue in the direction it gapped. When a trader fades a gap, they are betting that the gap will “fill” and move opposite of the gap’s opening direction.
Types of Gaps
Area Gaps
Area gaps are usually small and unimportant. They are also referred to as “common gaps” because they occur so frequently. Characteristics of area gaps are that they are fill very quickly. When the word “fill” is used, traders are referring to the gap’s closure. The gaps usually occur in trading ranges and they form on very low volume. Because of the low buying volume of the stock, the gap cannot sustain itself, thus filling relatively quickly.
The easiest way to determine if a gap will fill is to watch the first 30 minutes of the day. If the candlesticks appear to be fading in the opposite direction, it’s very difficult to stop it. This is because many others see the same fade and will jump on board. Remember, a gap does not have to fill on the same day of the gap. These types of gaps are unpredictable and are hard to trade. Figure 59 an example of an area gap.
Figure 59. Area gap.
Continuation Gaps
Continuation gaps are extremely important because they “continue” a trend. They are also known as “runaway” or “measuring” gaps and they do not fill quickly. These…
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Considering XLF
by Chart School - April 26th, 2010 11:25 am
Looks like a "wait" signal. – Ilene
Considering XLF
Courtesy of Allan
This pretty much sums up the dilemma of financials, the GS fallout triggered shorter-term sells, but the weekly trend is still up, over 60% gains from last year’s Buy signal. One of these charts will reverse trends and that reversal will be a heads-up for new positions.
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 to the Trend Following Trading Model newsletter and trading system, read this introductory article.
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The Wheel
by Chart School - April 11th, 2010 2:34 pm
The Wheel
Courtesy of Allan
Below is my QQQQ chart, including the Daily Trend Model, an EW count, Auto-Trend Channels and the Elliott Oscillator.
Since the mid-February LONG signal, the index is up about 10%. Prices have been contained in a well defined trend channel, all the time safely above the Daily Trend Line (navy). On the bottom oscillator, the recent new highs in price are not being confirmed by new highs in the oscillator. This suggests that the proposed wave count on the screen is correct and that after the completion of the Wave 5 of 5, a significant decline will be likely.
Below is the same QQQQ chart, less all of the bells and whistles save one, the Daily Trend Model:
This chart suggests only one thing: that the market is in an uptrend and traders/investors should be LONG. The late January EXIT was good for about a 10% decline before the index flipped back to the bullish camp. There is no suggestion here about any imminent declines, non-confirmations, wave counts or trend channels. Just that one thing: LONG.
There may be a market environment coming where such simple, observable, understandable analysis will fail. Alternatively, this kind of market analysis will continue to be an effective steering current for navigating market direction. All I can say is that this analysis continues to amaze me with its effectiveness across so many indexes, ETF’s and stocks, as well as across multiple time frames.
I don’t claim to have re-invented the wheel here, only to have found one and am now employing it in all of my market decisions.
*****
Allan’s new newsletter, “Trend Following Trading Model,” incorporates his chart-based, trend-following method. Most trades last for weeks to months. Allan’s offering PSW readers a special 25% discount. Click here. For a detailed introduction to the Trend Following Trading Model, read this introductory article.
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BIDU Weekly
by ilene - April 7th, 2010 12:12 pm
This is perhaps one of the best examples of Allan’s trend trading system. Allan says that BIDU is an excellent trender and his system would have got you in sometime in January, though the last weekly signal was back in 2009. For you bears, his system should catch a trend reversal early. (It’s hard not to look at that chart and anticipate a BID adieU moment, but maybe that’s just me.) Anyway, Allan’s system is easy to trade and you’d only be looking at signals on Monday morning. – Ilene
BIDU Weekly – Update
Courtesy of Allan
I wrote up the Weekly Trade Model of BIDU back in January. It has turned into one of big success stories of the Trend Models:
We knew in January that BIDU trended well and was a good stock to trade in a longer-term model. Although they all don’t trend this well, having one or two that do, make up for any that don’t. Another "Basket" idea in the making?
And the market as a whole?
Says Allan: Back to Trends.
Notwithstanding my personal trend line, the market’s trend has been up since mid February.
The beauty and simplicity of this directional model cannot be overstated. The up-trend continues, as it will until it reverses. Trade accordingly.
Allan just launched a newsletter, “Trend Following Trading Model,” to go with the trading system he’s been working on for years. His trend-following method is chart-based and objective. Most trades last for weeks to months. Allan’s offering PSW readers a special 25% discount. Click here. For a more detailed introduction to the Trend Following Trading Model newsletter and trading system, read this introductory article. – Ilene
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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.