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