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: