December 27th 2013: So, what's in store for the market next year??

Answer:  How the heck would I know; I don't have a crystal ball.

Here's something that I wish someone had told me when I was younger:  most predictions for next year will be wrong.  Here's another one:  humans suffer horribly from bias.  They're biased by where they get their paycheck, they're biased by the need to predict the future, they're biased by recent history, etc., etc.  As an example, if Year 1 was up 25%, your friend the stock broker from big bank brokerage A will jump on TV and predict Year 2 will be up 10-15% based on X,Y, Z logical and usually fundamental arguments.  Similarly, the guy from the bear shop will say stocks are going to crash.  Every year, he'll say the same foolish thing and he'll be right 1 or 2 years out of 10.  The guy from the bond shop will say to buy bonds for the long-term to reduce volatility in your portfolio.  You can watch them on mute and fill in the words yourself because on average they'll all say the same thing depending on their individual biases, employers, and current portfolio position.

Anyway, my main point was not to rip on talking heads on TV....

I think it's much more valuable to talk about possibilities for 2014.  There's an important distinction between possibilities and predictions.  Possibilities offer a potential road map.  Predictions are an imperfect attempt at defining the future.  The key distinction for me is that the charts will tell me if I'm on the wrong potential path and I can get the heck out of the way.

Here's some possibilities for 2014 (and a brief rationale):
- $SPX:$USB ratio tags its 1999-2000 high of ~16.  (Trend is in place and can hit top of prior range - especially if money flows out of bonds and into stocks).
- $COPPER gets a bid after 3 years of neglect and runs up to the top of its range @ $4.50 per pound.  (Some nice bullish divergences showing on the monthly RSI(2) chart.)
- $XJY (japanese yen) continues to slide against major currencies until it finds support in the low 80's.  (Breaking down below $96 and trend is in place).
- $GOLD (& $SILVER) experience a vicious short-covering rally.  ($SILVER is finally outperforming $GOLD and historically, that's been a clue that prices can rip higher.)
- $TYX (30-year bond yield) hits 4.5%.  (Trend is in place and can hit top of prior range).
- $WTIC continues sideways between $115 and $75.  (Competing RSI(2) monthly chart divergences suggest range bound trade for now).
- $NATGAS surprises to the upside despite reports of large supply.  (Cup and handle target is close to old resistance at $6.11).
- Industrials, XLI, (led by shippers: SEA) outperform the $SPX in 2014.  (Trend is already in place for XLI, shippers could add more fuel.)
- Metals (XME, SLX) are surprise leaders for 2014 and play catch up to the rest of the materials sector.  (Monthly charts look bullish for the first time in 3 years).
- $VIX remains trapped in the 10-20 range.  Brief forays above 20 will be buying opportunities for equities.  (Monthly $VIX chart looks bearish to flat.)

So those are some of things that I'll be watching for in 2014.  IF the right set-up comes along, I'll be jumping on a few of these.  Good luck to all!

December 7th 2013: What's up with energy stocks?

Once again this week, there's too much for me to cover in a single blog post....

In no particular order:
- The relative out-performance of industrials &  health-care vs. almost every other market sector
- The relative out-performance of large caps on Friday (vs. small & mid caps)
- The relative out-performance of low-vol vs. high-beta on Friday (SPLV vs. SPHB)
- The accumulation day on Friday and what that means for the market (short version:  as long as Friday's lows hold, I expect a grind upward into year-end.  Accumulation/Distribution days act as anchor points.)
- Gold & Silver & related miners
- Bonds & Yields
- Trends in Natgas, Crude, and the Gasoline:Crude spread

The most surprising thing to me that happened this week was the action in energy stocks.  Forget IOC blowing up; check out the action in the former energy leaders.  For example, on Friday, the INDU's are up 200 pts and many of the former leaders in energy, including:  OAS, PXD, EOG, not to mention solar names, were getting hammered.  That's the epitome of poor relative strength in the face of rising oil prices and buoyant stock market - a big, giant red flag.  The large caps energy names (XOM, CVX) and refiners were holding up the whole sector so the headline prices of the energy index were well-contained, but the action under the surface was ugly.  It won't take much for the energy sector to completely rollover.  Technical indicators for the broader market suggest to me that the probabilities are for higher prices, but if we do rollover watch for energy to lead on the downside.  They also have the potential as a hedge while playing other sectors (like industrials).

Here's a chart:

Here's what I see:

- Poor RSI

- Nested box formation

- Small box is a tight range consolidation

- The bottom of the large box is the target on a break of the small box

For more charts and to read a disclaimer, please visit my public chart list on stockcharts.com....

http://stockcharts.com/public/1109955

November 24th 2013: The Kirk Report for $100, Alex?

For the not-so-princely sum of $100 per YEAR (not per month), you can have access to the trading brain of Charles Kirk via his namesake, The Kirk Report.

Charles brings with him an extreme work ethic that helped him turn a tiny $2K porfolio into a relatively huge $7M account.  I haven't done the math to figure out the average yearly compounding, but we can say for sure that he's done well at trading.  At this stage, he can afford a more balanced life, but that doesn't seem to diminish from the virtual fire hose of information that he shares daily via email updates (pre and post market updates), weekend updates (flipboard magazine and week-in-review video), as well as a real-time, twitter-like, link-fest called the "Notebook".

In general, some of my favorite posts are the in-depth interviews with other traders who have reached that elite multi-million (or higher) status.  It's Jack Schwager's Stock Market Wizards in real-time.  Where else are going to find this stuff?  One of my all-time favorite posts of his was a 2012 "self interview" titled simply, "How I made 54K last week".

Perhaps his greatest talent is the ability to see and map out price patterns and possibilities in the S&P500 chart on multiple time frames (from weekly to 1 min charts).  He identifies the patterns (mainly cup & handle and variants like head & shoulders) that seemingly everyone (including the HFT algo's) are watching.  Even if you don't trade patterns, it's useful to be aware that he's trading them, other pattern traders are trading them, and the algo's are trading them.  The completion or failure of these bullish or bearish patterns also gives a sense of the strength of the underlying trend.  For example, if the bearish pattern currently in play fails, a bullish one will often form and succeed.

Where else might you spend $100 on trading this year?
- 5 round trip trades?
- A tight stop?

Consider joining the Kirk Report for 2014 and earning a multiple of your $100 back.

In full disclosure, Charles is offering a "End of Year Drawing" with prizes for positive reviews.  My personal win-rate with random events like drawings is close to zero, so don't let the drawing color your interpretation of my review.

November 11th 2013: The importance of staying solvent...

"Markets can remain irrational a lot longer than you and I can remain solvent".
- John Maynard Keynes

ref.:http://en.wikiquote.org/wiki/John_Maynard_Keynes


On Thursday, the Dow busted its highs and then quickly reversed with volume on the downside.  The weak bounce into 12N had little volume, so I went short the Dow (and the S&P500 for good measure) right around 12N.  Nice entry.  Superior risk/reward over some other plays that I considered (including financials) and the market went my way the rest of the day and it was a nice easy ride down.  Don't you love it when a plan comes together?  I mean it was picture perfect distribution day with bearish engulfing candle that swallowed the last week's worth of price action and destroyed some bullish price patterns in the process.  And I was feeling rather pleased with myself.

Then, the payroll numbers hit @ 8:30A on Friday.  Bizarrely strong considering the fiasco in Washington, but I don't pay too much attention to fundamentals.  Bond market tanks immediately.  Dollar is flying, but fades intraday.  Equities dip slightly then recover fast and level out until 3:30P.  Financials absolutely ripped higher.

Perhaps I should have covered immediately.  Perhaps I should have gotten long something...anything really.  Instead, I just watched my gains evaporate and come just shy of my stop (Thursday's highs).  And while I was watching the market (equities, bonds, currencies), my thought was "are we really doing this?  really?"  Are we really going to have an accumulation day up here after we just ripped almost non-stop from the October lows?  Yup.

I stopped myself out today (Monday) and flipped long (small) in regional banks and solar.  My losses were small (because I had a good entry).  And it stings giving back those nice profits - especially since the odds of getting an accumulation day after a distribution up here were extremely low.  But it would be far worse to stubbornly hold onto my position when the market is doing the opposite of my expectations.

Repeat after me:
"The market can remain irrational a lot longer that you and I can remain solvent".

For more charts and to read a disclaimer, please visit my public chart list on stockcharts.com...
http://stockcharts.com/public/1109955

October 27th 2013: Unadjusted vs. adjusted charts

This morning, I woke up and I had this dreadful feeling that I posted the "adjusted" chart of SPLV and not the "unadjusted" chart.  (Does this ever happen to you?)  In case you are not familiar, unlike most charting programs, stockcharts corrects for dividends, splits, etc. in their standard charts.  For stocks that are dividend-heavy, this can make a big difference in their longer-term charts.  There is a vigorous debate over which format is the "most correct".  For most of my work, I don't care either way.

However, in this case, I feel like the "unadjusted" chart is more accurate albeit somewhat less compelling.  The song remains the same:  watch the low-vol ETF to determine if the rotation away from high-beta is happening or not.

October 26th 2013: Low-volatility vs. High-Beta Stocks

There was a very interesting development in the markets this week that you might have missed if you just looked at the broader averages.

The stocks that got us to these lofty levels (china stocks, solar stocks, select tech, etc.) are rolling over here -even the small caps closed down on Friday.  In short, high-beta, high-growth is in trouble.

When this happens, there are 3 possible outcomes:

1.  A pause that refreshes and high-beta takes off again

2.  A rotation into low-beta, low-volatility, high-dividend boring stuff (like this Spring)

3.  A decline where the high-beta roll pulls everything else down with it (like the June and August dips)

We're clearly overbought.  $USHL5 just spiked 5000 - which if you follow Alexander Elder is a big red flag and often a leading indicator.  The percentage of stocks over the 50-day SMA is over 80% (which is high, but not extreme).  It doesn't really matter which metric you chose (RSI, MACD, CCI, stochastics, etc.), they're all extended.

So, where are we going next?  I have no idea, but I do know what to watch:  SPLV.

SPLV is busting out of a huge consolidation and could play catch up to SPHB which has enjoyed a good romp for the past few months.  If we take out this week's low in SPLV, all bets are off.  But right now, it looks like all systems go for SPLV and I'll be buying dips.

If my interpretation of the charts is correct, then scenario #2 above is the correct one.

Here's a chart of SPLV and you can decide for yourself:

For more charts and to read a disclaimer, please see my public chart list on stockcharts.com...

http://stockcharts.com/public/1109955

October 20th 2013: Volatility crush drives markets higher

It's been a while, so I feel like I can point out that ignoring the noise/news and trading the charts worked again!

As much as I try not to let the noise (news + opinions) influence my trading, I am aware of some of the prevailing views by other traders out there.  One of the things I heard alot of this week was the "sell the news" trade.  In other words, markets were going to "tank" once a deal was announced.  It seemed like everyone and their brother were ready to jump on this trade.  I have to say that sticking with the trend and watching the charts & patterns worked better than the opinions of others.

(OK, OK - enough on that topic....)

In $SPX land this week, the real keys in my mind were the ability to hold the $1695.93 low, the bull-flag breakout, and the follow-through the next day.

Another factor that I think many people miss is the importance of volatility crush.  Volatility crush is usually associated with the decrease in options pricing following an earnings report.  In this sense, I'm using volatility crush to describe how volatility responds following some "crisis" in the markets.  Once this "crisis" has passed, volatility squeezes out of the market like air rushing out of a balloon.  In this environment, it's very hard for stocks to go down as put buyers and volatility hedgers get squeezed providing rocket fuel for natural buyers of common stock and calls.

Here's a chart of VXX which illustrates the "volatility crush" this week...
- Last week, we had price stalled at the top of the box
- Last week, we had NegD with FORCE vs. price to set-up the fall
- This week, price broke the bottom of the box with FORCE and volume
- Keep an eye on VXX because it can go a few points lower which would help push the indexes melt up further

For more charts and to read a disclaimer, please visit my public stock charts list on stockcharts.com...
http://stockcharts.com/public/1109955

September 23rd 2013: Ignoring the noise works again!

OK - last post on this topic for a while....

But I'd like to point out that ignoring the news (noise) worked again.  Wherever you turned last week, there were smart, highly- (over?) paid economists and analysts calling for $5B-$15B of tapering.  I think they all went to the same school because the numbers were all very close - at least the ones that I heard by accident.

How did that work out for them?  Did they save their clients money by advising them to be "careful" or "cautious"?  Did they get a bigger bonus?  Did they still collect $250K+ for touting their [very wrong] opinions?  Were they at all remotely helpful in making an investment thesis and executing a plan?  How about those kind fellows that said to buy gold and emerging markets at the top based on continued Fed injections?  Was that helpful?

No, no, no.

If one looked at the $SPX chart, put some ear plugs in, went long on a daily close above 1690 (as I suggested in the last blog post), took profits when available, raised stops to the lows of the previous day, exited remaining shares on stop out, etc. - you would have had a great week.

So what's in store for this week?  As usual, it's helpful to look at the charts.

Last week, we had a long-wicked bearish candle that stuck it's head [briefly] above the box and then retreated to close just above the box (by a few pennies).  Most other indicators are still bullish.

There's 3 scenarios to keep in mind here:

1) We rip higher and close above the box with a strong green bar which would suggest a further box-length move in the direction of the break (up).

2) We rip lower and close below last weeks bearish candle which would suggest we attack the lower edge of the box (August lows).

3) We drift sideways and frustrate both bulls and bears.

My 2 cents is that we drift sideways (#3).  After a strong push with FORCE last Wed, it would be unusual to see us just give up and tank.  More often, we see a pause, retest that bar, and then roll if that's the direction the market ultimately takes.  Additionally, most weekly indicators are still bullish and we usually take a couple weeks of neutral bars before we start to roll (see May and June peaks).

Here's the chart:

For more charts and to read a disclaimer, please visit my public chart list on stockcharts.com...

http://stockcharts.com/public/1109955

September 14th 2013: Ignoring the news (noise)!

From the sounds of the financial media, we're heading for global disaster next week.  We've got lots of things to worry about:  Syria, Debt, Larry Summers, the FED meeting, quadruple witching, etc., etc., etc.  You'd think we'd be down 30 handles on the $SPX in anticipation of such gloom and doom...but that's obviously not what happened last week.

When I look at the chart of the $SPX, I see a market that's in an uptrend making higher highs and higher lows.  Has the market sufficiently discounted all of the bad news in August and now we're bouncing in relief?  Or perhaps some very smart (or more accurately, very well connected individuals) have a better handle on next week and are betting accordingly?  For whatever reason, the market looks like it wants higher prices.  Other than being overbought and the volume being light (typical), the technicals look solid.

Here's a thought exercise: pick a time period in the past when we ripped higher for a few weeks.  Do you remember the news that fed that rally?  Do you remember what fears were overcome to squeeze the bears and prod under-invested bulls to commit more capital?  Most people can't remember.  I sure as heck can't remember and it doesn't really matter either because the charts tell the story.

To sum up:  the market discounts readily available public news, some nefarious people know the outcome before the news is released, and the charts will conveniently consolidate all of this and more into price patterns for us to trade.

Here's my trade:  long on a close above 1690 with a stop below.

Here's the chart...

For more charts and to read a disclaimer, please visit my public chart list on stockcharts.com....

http://stockcharts.com/public/1109955

August 31st 2013: If the US dollar goes higher, where does everything else go?

Hint:  Lower.

Once again, there's not a shortage of things to talk about this week.  In no particular order, we could talk about:

1) Small-caps breaking down  ($SML)
2) Mid-caps breaking down ($MID)
3) Europe rolling over hard after displaying RS
4) The big moves in the $VIX and loosely-related ETF cousins (VXX, XIV)
5) The persistent weakness in the $INDU's and $TRAN
6) The stubborn stickiness of the $NDX (QQQ) and its resistance to rolling over

But I don't have time to write 6 additional blog posts, so I'm just going to pick the most important one:  $USD/UUP

Let's take UUP as a proxy for the $USD since I can easily get volume and it's easier to see the trends.

On the bull side of the ledger, we have:
1) Higher low and higher high on the daily chart of UUP
2) Down-trend appears broken on the weekly chart with a close above previous week's high @ 22.07
3) Elder Impulse Bars turned blue (neutral) and stayed blue after weeks of being red.
4) Price closed above 5-week EMA
5) FORCE(2) is green and trending up
6) FORCE(2) on the downside was light as price was testing previous lows @ 21.82-22
7) Price bounced off clear support at 21.82-22

On the bear side, we have:
1) Weak volume
2) Price is below 10w SMA
3) Bearish 5w EMA x 10w SMA cross still in play
4) Price is below Chandelier Stop line (10,2)

I can sort of wave away the downside arguments as being symptomatic of being early in the trade.  If the UUP starts ripping higher, I would expect the other indicators to catch up.  If we break 21.82, then clearly something went wrong with my thesis.

Overall, the bullish aspects of a UUP long trade have much more appeal and we could easily see the top of the recent range at 22.94.  We've been in a range of 21.50 to 23 for almost 2 years on the UUP, so a move higher within that range is certainly within the realm of possibilities.  In fact, you could argue that it's just normal chop within a box (range).

So, what does a $1.50 pop in UUP mean for the rest of the world?  My take is that it means a great deal for commodities, stocks - and emerging markets specifically, and even the stubbornly sticky QQQ.

If you're only going to look at 1 chart every day, this would be a good one to watch.

Here's the chart:

For more charts and to see a disclaimer, please read my public charts at stockcharts.com:

http://stockcharts.com/public/1109955

August 18th 2013: Is junk the new high-beta?

We could talk about alot of things this week:
1) The continued dramatic weakness in commercial real estate (something I flagged last time)
2) The amazing run that AAPL has had lately pushing prices back to pre-2013 levels and buoying the Q's (see older post for my take on AAPL as it starting to turn)
3) The big push higher in GDX (also something that I flagged earlier)

But that's all old news.

What was most surprising to me this week was the relative outperformance of Europe while the SPY's were breaking down - especially Italy.  Yes, Italy.  The country that the media would have had you to believe was going to take down Europe and by extension kill the nascent recovery in the US, speed China's demise, and send the world into global economic recession.  That Italy!  (I try to avoid reading the news because it's misleading [at best], but sometimes a little bit of news slips in).

Here's what I see from the chart...
1) Price is breaking out of a box.
2)  MA's are trending up.
3) Price is above the Chandelier Exit Line
4) Elder Impuse Bars are green
5) RSI(2) is 99+
6) FORCE(2) is green

Pretty impressive stuff!  The only negatives that I see is the lower peak in FORCE (vs. the April surge) which is due to the below average volume.  This could be a seasonal issue as I understand that EVERYONE in Italy is on vacation in August (which makes me wonder how anything gets done...).

I'd rather not be long Italy because of political risk, but VGK and EZU are two strong Europe-based ETFs that are also outperforming vs. the $SPX.  It's a very interesting divergence to see Europe leading the US when so often it's been pulling the US indexes down.  I would expect Europe to lead again once the SPY's recover.

Another aspect to consider is that junk is leading now simply because of rotation.  Gold miners, Italy, and other chronic underperformers are suddenly getting a bid.  Regardless of the reasons, the important part is that they are moving higher.

Here's the chart...

For more charts (and less commentary), please visit my public chart list on Stockcharts.com.  Also check out the disclaimer there.
http://stockcharts.com/public/1109955

August 4th 2013: Shades of 2007 in Commercial Real Estate?

Starting in 2007, commercial real estate (IYR) started vastly underperforming the ($SPX/SPY's).  Then, there was a big rebound off the March 2009 bottom after China bottomed in late 2008 with real estate leading, both in terms of relative performance and absolute returns.  And now we're seeing IYR leading to the downside again.

I like paying attention to price performance rather than opinions.  I'm sure there's lots of smart people jumping up and down and saying to buy or sell IYR right now based on some well-though-out, cogent arguments.  The trouble is that someone is wrong and I'm not clever enough to know which well-educated person is correct.  On the other hand, stock prices are always correct in the sense that they reflect matched prices for buyers and sellers at a particular moment in time, but I digress...

Here's what I see:  for whatever important reason, IYR is heading down and dramatically underperforming the SPY's as the SPY's are reaching all-time highs.  This week, not only did IYR fail to break out of a potential flag pattern, it broke down below MA support lines and the chandelier exit line.  In doing so, it appears headed for the bottom of the blue box @ $62.72.  If $62.72 should fail, there is a large inverse cup & handle bearish pattern which, if completed, would send prices much, much lower.  The only mild positives are that volume came in just above average and FORCE is still less than the June lows.

Good luck out there and may the FORCE index be with you in your trades.

For more charts and a disclaimer, please see my public chart list on stockcharts.com.

http://stockcharts.com/public/1109955

July 20th 2013: Follow-up to April 13th post on Gold Miners

After a few weeks off, I'm back and I like what I see.  There's so many opportunities out there right now.

Let's start with Gold Miners...

Back on April 13th of this year, I said gold miners were headed down.  They were weak and getting weaker at the time, but very oversold already.  My target on GDX was $17.50 with a test of $15.48 possible.  Now it looks like we won't quite get there.  I think we hit $30.10 before we hit new lows (vs. $22.21).

Here's why:
- BPGDM% is at 13.79%, the highest since Feb 2013.  (See stockcharts.com for more info.)
- For the first time in many months, gold and silver stocks are showing up in my weekly screen of strongly bullish stocks.  (AG first, and now AUQ and NGD).  I expect more to follow.
- We closed above the weekly Chandelier Exit Line for the first time in over 6+ months.
- Everyone HATES gold - especially the experts on TV.  They'd rather own cows than gold.  Cows!  I've got nothing against cows, but gold is easier to maintain.  Yes, I know it doesn't pay a dividend and you can't eat it.  Get over it.  At the very least, it's just another investment class that's gotten pummeled just like tech stocks, financials, real estate, etc.  These things go in cycles.  Everybody is way too bearish at the bottom and everybody way too bullish at the top.

I'm not calling a bull market or a return to the old highs, but I do expect GDX gains to outpace SPX gains from here until year's end.  And if I'm wrong, I'll get stopped.  In terms of specific, the 3 that I mentioned before as well as your favorite gold/silver ETFs are good places to look for entries.

Here's a chart...

For more charts and to read a disclaimer, please see my public chart list on stockcharts.com....

http://stockcharts.com/public/1109955

June 23rd 2013: A change in tone...

I skipped a few weeks there while $SPX was forming a box (ranges/consolidation/wedge/whatever_you_want_to_call_it).  It appears (to me) that we broke the box to the downside this week and thus it deserves some attention.  Perhaps more importantly, the tone of the market is changing.

On the positive side of the $SPX technical ledger:
- Monthly trend is still up
(that's about it)

On the negative side of the $SPX technical ledger:
- First red weekly impulse bar since December 2012
- Price closed below the weekly chandelier stop line for the first time since November 2012
- 5w EMA is below the 10w SMA for the first time since October 2012
- Weekly FORCE(2) is red (below zero)
- Weekly RSI(2) is below 10.
- Bullish price patterns are failing (ex. inverse head & shoulders)

So, that's what I see right now.  Where are we going?

There's basically 3 scenario's for every trade:
- Lower
- Flat
- Higher

Based on this week's technicals, my bias is that we trade lower after a brief oversold bounce.  If this is correct, I'll have a good chance of entering a short trade next week with an expected tag of 1608 (the bottom of the box that we just broke).  If the short works, the market should fall to 1549 at some point in July (a box length).

Flat seems like a low probability since volatility is increasing and we've broken the recent box (range).

Higher is possible given the market's tendency for false breaks and the persistent FED funny money liquidity injections as well as end of quarter mark-up.  If the market closes above 1608, then I'll have to give this possibility higher odds.  A close above 1608 would put the other side of the box back into play (1667.47).

Either way, there's about 60 pts of range to play in.  Good luck!

Here's the chart...

June 9th 2013: Don't play the slippery eel!

Here's a pattern that I'm seeing more and more of lately...

The market will form a defined top or bottom, traders will position their stops accordingly to control risk, programs will run them out, suck in bears and immediately reverse higher to squeeze the bears and force stopped bulls to play catch up.  I've seen this in bonds, emerging markets, US markets - it's everywhere.

My advice is don't play their game.

Now whenever the market pulls back hard, I always assume that the "left shoulder" will fail, i.e., the first hard pullback and I never buy it.  There's almost always a 2nd lower low.  It makes sense psychologically when you think about where traders will have their stops and how they might be positioned at certain key levels and, most importantly, where the programs will be hunting both longs and shorts.

If at all possible, think about where the programs might try to attack - NOT classical, textbook support and resistance stop levels.

May 20th 2013: The case of the disappearing volume...

I like volume.  Volume = tighter spreads which results in better entries and exits.  I also like trailing a stop higher on runners with a stop market order because once my stop hits, I want out.  However, if you try to do this in a thinly traded stock, what often can happen is that your order will fill quite a bit lower than your stop activation price.  Not good, but at least you're out.  Worse, if you try to enter a stop limit order, the market can jump your order.  Meaning, the stop activation will trigger, but the sale can't execute because now the prices are much lower than your limit order.  Worse than that, you might erroneously think that your order got filled because you got a handy alert that said your stop was hit via email or text.  All of this nonsense has happened to me and I'm sure quite a few other people, too.  To sum up, I like volume and avoid thinly traded issues like a plague.

Lately, I've noticed that the volume in some ETFs that I used to trade is woefully inadequate for my needs (e.g., IWC) and even some of the high volume ETFs have much less volume than they used to.  Take the Q's, for example, QQQ busted out over 70 but the volume is about 10% of the 2008 plunges.  It should be easy to tell when a real correction (5+%) is upon us as volume will rip higher (at least double these anemic levels).

Here's the chart:

May 14th 2013: Solar stocks catch FIRE!

After a few months of consolidation, the solar stocks are catching FIRE again.  Maybe because it's summer?    Maybe because oil prices are still relatively high?  Who knows?  I don't pretend to be a fundamental investor.  I don't really care why.  I just care that they're going up.  Let's take the ETF "TAN" as an example.  The 6-month chart goes from the lower left corner to the upper right corner (i.e., the general trend is up).  We just had almost 4 months of consolidation (rest) followed by a breakout.  Very short-term (intraday charts), it looks a bit over-extended (overbought).  The bigger picture (weekly chart, see below) is showing a breakout supported by volume and FORCE.  During up-trends, boxes tend to act as continuation patterns and break in the direction of the trend.  A box-length move in the direction of break would put the target at $25.92.  Ideally, we'd get a light volume pullback to set-up a better risk/reward trade and then start to ramp up with volume.  I'd look to buy the start of the ramp on a 30 min chart.

Here's the chart...

I have no position in TAN or other solar stocks right now - although I might buy a light volume pullback in the future.  I did own some WFR calls which I sold yesterday.  In retrospect, there's not really much point in owning calls on a $5 stock - I should have just bought the common which acts as a deep-in-the-money call which never expires.  I still made money on the trade, but it wasn't ideal - especially when the option volume dried up.  After 10+ years, I'm still learning with every trade.  I guess that's part of the fun.

For more charts and to read a disclaimer, please see my public chart list on stockcharts.com...

http://stockcharts.com/public/1109955

May 5th 2013: Is this time really different for the $NDX???

The last 2 breakouts in the $NDX (see chart) were mediocre at best.  FORCE barely expanded and price went flat for weeks after the "breakouts".  However, this time might be different.  The $NDX busted out with wide price spread and higher FORCE than its had in the last 6 months.  That certainly looks bullish to me.

For most of the last 6 months, the Q's have lagged badly and I dutifully avoided them on the long side.  (Sometimes half the battle is staying away from the dogs).  But this week, the tide seemed to have turned.  For the first time in a long time, I was long QQQ calls this week and sold half on Thursday and half on Friday for some nice gains and currently have no position in the Q's.

Let's see if this breakout can stick.  IF it does, I'd be inclined to buy another dip - just as it starts to curl up again.  The number to watch is the previous box high at 2863.66.  That's my line in the sand.  Long above.

Here's the chart...

For more of my charts and to read the disclaimer, please see my public chart list on stockcharts:
http://stockcharts.com/public/1109955

April 22nd 2013: SPX is range bound and down!

This weekend, I had an epiphany of sorts.  The stock market is just like Smokey and the Bandit.  The Bandit is constantly trying to steal your money and stay a few steps ahead of Smokey.  If I ever get my hands on the Bandit, I'm going to wring his filthy neck...

From the recent $SPX chart, it appears that we're range bound and down!  [sorry, i couldn't resist]

After 2 failed breakouts, the FORCE index has turned blood red as volume blew out last week.  I could point out the bearish divergences on the chart, the chorus of secondary indicators (like accumulation/distribution days, bullish percent indexes, summation indexes, new highs vs. new lows) but I won't.  It all boils down to price.  The box (range) that I'm looking at now is 1540-1600.  Ideally, I'd like to see a weekly close that exceeds one of those numbers and holds.  Nothing else matters.  If I were a betting man (and I am), I'd bet that we close down.  However, I'll keep my opinions out of this one and let price decide where it wants to go.

Here's the chart and box (range) highlighted in blue outline:

For more of my charts and to read a disclaimer, please see my public chart list on stockcharts.com:
http://stockcharts.com/public/1109955

April 13th 2013: News flash! Gold miners are in trouble!

In case anybody missed it, gold miners are in trouble.  Energy costs are still relatively high and gold is getting cheaper.  Their costs for getting the metal out of the ground are going up - not down.  Ever helpful Goldman suggested shorting gold this week (but not 300 pts ago).  To make matters worse, large holders of gold and GLD (ex. John Paulson) haven't sold enough and GLD itself is selling into the market to match its index.  GLD has become the 6th largest holder of gold in the world behind France.  Canada, which has been historically known for gold production, has a paltry 3.4 tons of gold in reserve.  If GLD with 1158.56 tons of gold gets whacked 3%, that's equivalent to forced selling of ~34 tons of gold (or 10X Canada's entire holdings!).  But that's old news....

The big question is where do we go from here?  My short answer:  down (see chart)

Here's why:

• We've broken a huge trading range to the downside that took ~3 years to construct.
• There's an obvious head and shoulders pattern which projects much lower.
• In terms of historical similarity, the peak of 54.69 in Oct 2012 looks similar to the peak of 50.70 in July of 2008.  Using similar price destruction estimates, projects to ~17.5(!)
• We're into the monthly bar of the 15.48 low in Oct 2008 and often that leads to eventual testing of the low.
• The US dollar was down this week.  Imagine how much gold would be down if the dollar was actually up(!).  What if it gets back to the old highs of $88-$89??

Here's what we need for a bottom:

• ~1 month of rapid price destruction where almost every single day the price of GDX is lower.
• Margin calls.
• Large holders of GLD to throw in the towel.
• GLD to get materially smaller.
• Central banks to start buying heavily to counteract the compounding effects of GLD.
• Calls of removing gold from "diversified" portfolios
• Gold miners to announce they are stopping production en masse.

April 7th 2013: Japan declares war on its own currency!

Does everyone hate their currency?  It certainly seems that way - at least in governments around the world.  The citizens that elect the governments might say otherwise, but I digress...

This week, Japan unleashed the world's most aggressive easing policy (so far).  They plan on DOUBLING their money supply from 135T YEN to 270T YEN(!) by December 2014(!).  In GDP terms, this equates to a 1% increase every month this year and increases to 1.1% every month next year(!).  To put this in perspective, the US is currently expanding its already HUGE balance sheet by 0.54% every month.  In short, Japan has just announced a 2-year war on its own currency and it won't quit until it achieves 2% inflation.  This is big news for Japan and currency markets, in general.

So, how could you play it?  Well, you certainly could go short the yen.  Either in the FX market or by an ETF like YCS (just be aware of the tax complications).

Another option is with a currency-hedged Japan ETF like DXJ.  This has been a popular trade already this year - especially with hedge funds.  Last week, we had a shakeout in DXJ which quickly retraced and closed higher after news from Japan about their new anti-Yen policy.  My take is that governments are bigger than hedge funds and this already crowded trade can get even more crowded with the government behind the move.

Let's go to the chart.  I already noted the shakeout which set-up the bottom edge of a nice box.  We reversed sharply on the news and had follow-through the next day to close up and out of the box.  In an uptrending market, upside box breaks act as continuation patterns and target a box length move to come.  That equates to a price target of $47.85 where I would lock in some gains and let the rest run with a stop.

For more of my charts and to see a disclaimer, please check out my public chart list at stockcharts.com:
http://stockcharts.com/public/1109955

Here's the chart:

April 1st 2013: Boring is the new high-beta???

I'm sure that I'm not the only one that's noticed that boring stuff is on a tear in the market.  Staples, Health-Care, Utilities, Low-Vol.......they're all red hot.  These are the sectors that are driving the $SPX higher - not momentum, not growth - boring is the new high beta.

Generally, at the start of rallies, we see things like small caps, the nasdaq, recent IPOs, etc. leading.  The fact that we're seeing boring stuff leading means that we're at the tail end of this leg higher.  To be clear, I'm not calling a top.  I plan on enjoying the ride while it lasts and focusing on the strongest sectors in the market place.

I could put up ratio charts of the SPHB:SPLV or XLP:SPY, but I think this one says it all.  Almost every week, the XLP is higher regardless of the noise out of Europe or political hand-wringing in the US or real estate bubbles in China.

Here's the chart:

To see more of my charts, please visit the public chart list section of stockcharts.com and see my disclaimer there, too.

http://stockcharts.com/public/1109955

March 23rd 2013: Bonds aren't bursting....yet.

I was talking bonds with a friend of mine this week and the TLT chart looked like an interesting one to discuss for the blog...

For all the talk of a) bonds being in a Fed-induced bubble and b) over-heated bond assets MUST flow into equities, the TLT chart looks bullish or perhaps more likely "not bearish".  What I mean by that is TLT looks like it's going to be trapped in a box (range) for some time.  (By the way, if anyone tells you the market MUST do something, just consider the source and the alternative).

When TLT broke the lower edge of the box with volume and FORCE in early March, I went short TLT (via long TBT) in anticipation of a larger sell off.  However, the sell-off got absolutely no traction and I quickly covered for a small loss.  What happened next is reminiscent of some of the best $SPX bottoms where price undercuts a defined support level and closes sharply higher in the same week.  After undercutting the lows, TLT bounced back into the box on better than average volume and improved FORCE....and then the following week jumped sharply in price.  This is bullish price action.

On the bullish side of the ledger, we have the following:
- Undercut of support and close above
- 5EMA and 10SMA are close to crossover (a few ticks away)
- FORCE index is green (positive)
- Volume on black bars is increasing
- Price closed above 5EMA and 10SMA
- Bullish "W" pattern on daily
- Bullish cup and handle pattern on daily
- Bullish triangle continuation pattern on daily

On the bearish side, we have the following:
- Downtrend is still in place with a series of LL's and LH's
- Gap remains open a few points below
- Volume on red bars is still high

Overall, I think odds favor TLT remaining in the current box for the next few weeks - perhaps months, but I will respect a break in either direction.

I have no position in TLT or TBT right now and don't plan on initiating one any time soon.

For more charts with alot less narrative, please see my public chart list (and the disclaimer, too!)
http://stockcharts.com/public/1109955

Here's the chart (courtesy of stockcharts.com):

March 16th 2013: Apple isn't dead yet!

For my first post on Weekly Stock Charts, I thought that I'd go over everyone's favorite stock, Apple [AAPL].

First a few words about my methods of analyzing stock charts.  As the title of this blog suggests, I mainly focus on weekly stock charts to identify areas of support and resistance areas (which I draw as boxes for convenience).  I trade those boxes based on the teachings of trend-following with a pinch of Darvas box theory and Alexander Elder layered on top.  If that last sentence made absolutely no sense, might I suggest reading 3 books as background:  Michael Covel's "Trend Following" and Nicholas Darvas' "How I Made $2M in the Stock Market" and any of the books by Alexander Elder.  Or just follow along with my posts and you'll see how I do things.

Too many people have given up Apple for dead....and it's not quite dead yet!

As the chart below illustrates, there's some bullish divergences between the FORCE index and price (FORCE is making a higher low while price made a lower low).  Elder Impulse bars are blue (neutral) - which is infinitely better than red (if you're bullish).  Resistance is at 478.81 (the top of the blue box).

So, the million dollar question is can it actually make it to that high of 478.81?

Maybe not, but I'm still playing for a bounce.  Here's why:
- Bullish divergence in FORCE index
- FORCE index is green (positive).
- Bouncing off resistance (now support) from Oct 10th 2011 weekly high of 422.
- Sentiment has become too negative after 6 months of going down

On the negative ledger, you have the following to contend with:
- Trend is still down (5EMA is lower than 10EMA), shaded red on the chart.
- No higher highs printed yet
- Price is below 5EMA
- Volume on weak bounces remains correspondingly weak.

Taken together, I think the odds for a small bullish bounce are better than 50% and certainly better than any time since September 2012, but I wouldn't count on tagging the 478.81 high just yet.

I'll revisit AAPL in a few weeks to see how it all plays out.

For more charts and disclaimer, feel free to check out my public stockcharts list:
My StockCharts Public Stock List

*** This blog post is for informational and educational purposes only and should not be misconstrued as investment advice. ***