Do You See What I See?

Change of Site Going Forward

2010-09-25T11:29:00.002-04:00

All - I have moved my postings to Worden going forward starting today. Below is a link to the new site. It is a slick new format and I hope you like it. See you on the web.

Dragonfly Capital Management

Rising Three Methods - In Real Life

2010-09-24T14:01:00.006-04:00

There are lots of great names for Japanese Candlestick patterns, 3 White Advancing Soldiers, Marubozu, Hanging Man, Hammer and my favorite Dragonfly Doji. We have seen a lot of them lately but this week presented a very bullish pattern that we have not seen in a while in the indexes, Rising Three Methods. This is a 5 candle bullish continuation pattern. The first candle is a long white (or green) candle. The next 3 are descending red candles that are contained within the first white candle. The final candle is another long white candle that closes above the first candle.

The Rising Three Methods is about to be confirmed today in the December e-Mini Futures. This chart is as of about 2:00pm Friday. Technically the shadows on the down days should not go outside of the range of the first white candle, but it is most important that the lower shadows do not breach. That is the case here.

If the Futures close above 1136.50 today the pattern will complete and will be a very bullish signal. Right now it looks likely. Watch 1136.50.

From the Charts: Macro Week in Review/Preview September 24, 2010

2010-09-24T11:19:00.037-04:00

This week began looking to bring more new highs for Gold with US Treasury Bonds and the US Dollar Index set up to move lower. Oil looked like it may join them going lower as well. The relatively low volatility index looked like it would not impede stocks from moving higher but only the QQQQ's seemed ready to move with the SPY and IWM still scratching their heads about the next move. I detailed this in the broad market trend reviewed Friday September 17th. As the trading began Gold and the Dollar Index behaved as telegraphed from the charts with Oil stagnating but US Treasuries finding support and reversing higher. The QQQQ's jumped and dragged the SPY and IWM with them. Stocks then took a breather for 3 days and jumped again on Friday, very similar to a bullish rising three methods pattern, that we saw in the e-mini futures. What is in store for the markets next week? Let's look at the charts.

Gold Daily

Gold Weekly
Gold has been on a tear. Today it tagged 1300 and then pulled back slightly. It could rest here as the Relative Strength Index (RSI) is getting overbought. It still looks good for more upside from the clear uptrend channel on the weekly chart. 1345 looks to be the next resistance from a projection off of that weekly chart. Support can be found at 1270 and then 1255.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly
West Texas Intermediate Crude has been caught in the tangle of the Simple Moving Averages (SMAs) which are acting as both resistance and support on the daily charts. The flat-lined Moving Average Convergence Divergence (MACD) and RSI right at 50 on both the daily and weekly charts indicate no clear trend, but the weekly chart shows a very slight up trend. When Oil gets clear of the SMA's it should make a nice move, the question now is when and which way.

US Dollar Index Daily

US Dollar Index Weekly
The US Dollar Index is having a horrible run as a result of the Treasury printing presses. This week the wounds reopened and the bleeding picked up. It is now through all major SMA's and looking for support at 79 with the next support lower at 78. Resistance (we can dream can't we?) can be found now at 79.50 and then 80. The weekly chart shows a very disturbing pick up in the negative MACD indicator this week making matters worse.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly
US Treasuries, as proxied by TLT, seem to be drifting around. I redraw these lines more frequently than any other chart. It looks to be on support of the uptrend from April at 103.50 from the daily chart. Support below that would come at 102.50 and then lower at 102. Resistance can be found at 104.06 followed by 104.80. The RSI is right at 50 and the MACD can't make up it's mind either as it looks the slower and faster signals look like they are repelling each other as they come close to a cross. The weekly chart looks like it is losing the uptrend, barely, or perhaps filling the gap from 6 weeks ago before a run higher. Blowing in the wind.

VIX Daily

VIX Weekly
The Volatility Index has been in a range between 21.25 and 28.40 for nearly three months and looks to continue that way next week. All of the SMA's are within the range on the daily and most are looking like flat lines now, acting as resistance on the way to the top of the range.

SPY 60 minute

SPY Daily

SPY Weekly
The 60 minute chart on the SPY shows that it is now clear of a lot of the resistance and support areas from the past four months and can look to new higher levels if it can hold up. The daily chart shows a strong up move today that stopped right at the 114.84 area that was some support just after the May 6 flash crash. Above that are there is resistance at 116.50 and below is support at 112.61 and then 109.87. The RSI is pointing higher and the MACD is now increasing again. It looks higher. Switching to the weekly chart, the SPY cleared the 200 week SMA today at 114.69. here is a good uptrend developing and RSI and MACD are supporting further advancement. Resistance shows up at 118.50 and then 120.89 on the weekly.

IWM Daily

IWM Weekly
The daily chart of the IWM shows a strong move up to resistance at 67 today with further resistance at 67.50 and then 70 higher. Support can be found at 66 and lower at 65.50. This also looks to be headed higher with the MACD and RSI supporting the bull case. On the weekly chart IWM broke above the downtrend line now sees similar resistance levels as the daily at 67.60 and then 70. Support can be found on the weekly at 64.66 and then lower at 64.19. IWM is now above all of its major SMA's on both the daily and the weekly charts.

QQQQ Daily

QQQQ Weekly
The QQQQ's have been the beast of the equity indexes lately leading the bull charge, and the Three Advancing White Soldiers (actually four) on the weekly chart bode for more to come. Resistance on the daily chart shows up at 50 and then 50.4 higher. there is support at 49.10 and then 48.3 below. RSI is getting into the overbought range on the daily so it may rest and let the SPY and IWM catch up. But it appears the April highs are in sight very soon. This too is above all of its SMA's on both charts.

So next week looks to bring stronger prices for Gold again and more flogging of the US Dollar Index. US Treasury Bonds seem to change direction with changes in sentiment and Oil looks to be stagnating. The relatively low and stable volatility index combined with that weaker dollar create a fertile environment for stocks to continue higher. Good luck next week!

Are We the Only One's on the Planet Blind to the True State of Our Market?

2010-09-23T18:41:00.013-04:00

The last couple of weeks have shown daily uncertainty in the US market as the SPY is toying with a key resistance level. Many believe it works through and then heads higher. Others see the run up that has occurred and are waiting for a pullback (i.e. not sell off). The prevailing sentiment is the market goes higher. Here is the SPY chart.

SPY

Looks like a rising wedge or maybe an ascending triangle, trying to break out higher. Both are pretty positive short term so why shouldn't the sentiment be positive? Most technical analysts will say that knowing that price action is enough. A few will tell you that it is important look at the inter-market relationships for potential catalysts as well. But it is an even smaller group that will take in the broad market news, economic and monetary policies to gain an edge. When looking at the SPY from that perspective there is a markedly different picture.

Look at the SPY from the perspective of a British investor for example.

SPY priced in Sterling

It has been in a downtrend and is now losing the 100 day Simple Moving Average (SMA) as it crosses down through the 200 day SMA,after breaking the downtrend. But that is just one area of the world, with some issues. What would a Japanese investor think. Here is the SPY priced in Yen.

SPY priced in Yen
For a Japanese investor the SPY is breaking the downtrend but lost support of the 100 day SMA and looks headed lower. Hmmm. Not as positive either. What about others?

SPY priced in Euro
SPY priced in Swiss Francs
SPY priced in Australian Dollars

These are even worse, with clear downtrends. Adding in the rest of the world using Gold as a proxy...

SPY priced in Gold

... and it is a clean sweep. Every place else in the world the SPY looks to be in a downtrend. How can we have one view and the other 5 billion people on the planet another? This is a clear sign that the US stock market is being propped up by the weak dollar and loose fiscal policy. I know you need to trade the market you have and that shows a potential to break higher. But be cognizant that the future is not so bright.

Trade'm well and be careful.

Is the Gold Run Done?

2010-09-23T14:38:00.014-04:00

There has been much debate about whether Gold has been rising due to it being a caveat currency or an inflation hedge or a deflation hedge. Allow me to posit that there is some evidence that Gold's rise is at least partially due to current and expected level inflation from reviewing charts of the CRB index, the euro the dollar and gold prices.

Gold - Continuous Contract

Gold Priced in Euro's - Continuous Contract

It is clear from the Gold charts above that Gold has been trending higher in both US dollars and in euro terms for quite some time. But what about inflation?

CRB Index

CRB Index Priced in Euro's
The CRB Index, a measure of inflation, shows a rising trend in both dollar terms and euro terms from about March 2009 through to the end of the year correlating well with Gold in both currencies. After that there was some divergence as the inflation measure in euro's continued the rising trend through to May 2010. During those 5 months the CRB in dollar terms fell slightly then basically moved sideways. All during this time Gold has been rising in both currencies. Since June the CRB in both currencies has been in a slow trend higher narrow ranges in ascending triangles currently testing the top in dollar terms but waning in euro terms as the euro gains strength. Both however are well above their bottom levels from December 2008 and March 2009. As the CRB approaches the apex of these triangles it may be getting ready for a move. Which way? And interesting that the CRB and Gold have been inversely correlated over the last few months. Without those last few months it would seem there is a correlation and therefore Gold buying would be a hedge for inflation. How to get some clarity?

CRB Priced in Gold

Look at the chart of the CRB priced in terms of Gold. This chart shows a clear downward trend since shortly after the long term uptrend in Gold in both currencies began around May 2009. This indicates that purchasing Gold has been a mitigant globally to rising inflation. From this chart it is also clear that in terms of Gold, the inflation measure is almost back to its lows from the early 2009. Will the ratio go below the March 2009 low? It seems we will have an answer very soon as it is within a descending triangle and starting a symmetrical triangle within it that look to resolve in late October at the latest. But with the prospect that the CRB will break out one way or the other, and continued concern over global stability fuel caveat currency buying, I would not be selling Gold bars just yet. It may be getting ready for a much steeper slope.

Top 10 Ideas for the Week of September 20, 2010

2010-09-19T10:13:00.024-04:00

After looking at over 500 charts and posting my thoughts on many of them, I have found some good setups for the week. This week's mix contains 5 long ideas with 5 short setups, and one breakout. These were selected in and should be viewed in the context of the broad market trend, reviewed Friday, which looks bring more new highs for Gold. US Treasury Bonds and the US Dollar Index appear to be heading lower. Oil looks as if it will probably join them going lower as well. The volatility index does not seem like it will impede stocks but only the QQQQ's seem to know that they want higher with the SPY and IWM still scratching their heads about the next move. Sector analysis showed that the strongest sectors were Technology and Consumer Staples and the weakest Utilities, but all were showing signs of sluggishness as was detailed in my review Saturday.

Here are the top ten for the week in no particular order:

1. Blackrock, Ticker: BLK
Blackrock is holding above 162.9, the 50% Fibonacci retracement level of the March 2009 to January 2010 move. If it continues to hold it looks to test resistance at 170, and then 180.98. Support can be found at 156.51 below the Fibonacci level. The Relative Strength Index (RSI) is starting to get Overbought (OB), but the Moving Average Convergence Divergence (MACD) is strong. It looks good higher.

2. Regions Financial, Ticker: RF
After failing at the 7.40 long term resistance/support line Regions has been moving lower. Now that it is through the 200 day Simple Moving Average (SMA) at 6.99, which will act as resistance, it is on the way to 6.35. The MACD is waning and the RSI pointing lower adding to the bear case.

3. SunPower, Ticker: SPWRA
This stock has been in a downward trend for over a year, probably the only solar stock that is. They must put solar panels in the shade or underground. After rejecting the 50 day SMA it is heading to the center of the channel again, and support near 11. Failure there leads to support lower at 10. The 100 day SMA at 12.89 would act as resistance if the 50 day does not hold it down. The RSI is falling and the MACD waning here as well.

4. Callon Petroleum, Ticker: CPE
Callon has been holding support at 3.62 for a month and looks to be poised to rise with the RSI and MACD picking up. It will see resistance at 4.20 and then 4.46 higher.

5. Mellanox Technologies, Ticker: MLNX
Mellanox broke through the recent resistance just above 17 Wednesday and through resistance of the 50 day SMA at 17.57. It retested the 50 SMA and held and is now ready to try higher with resistance at 19 followed by 20.35.

6. Mindspeed Technologies, Ticker: MSPD
Mindspeed rocketed up 14% Friday. So what is it doing on the top ten list, a pullback? No, it still has room to resistance at 9.50, another 9% higher. The strong volume Friday, rising RSI and MACD add to the bull case. Support would be found at 7.90.

7. Lululemon Athletica, Ticker: LULU
Lululemon jumped off of earnings and settled into a bull flag last week. It is slightly OB but this is due to the fast hard move up. If it can get through resistance at 44, it sees some resistance at 45 and 46. Above that the Measured Move (MM), distance from the bottom of the run to the flag added to the top of the flag, would be in the low 50's! Support can be found at 43.

8. Buffalo Wild Wings, Ticker: BWLD
Buffalo Wild Wings ran to the 48.50 long term resistance/support line and rejected. It is headed lower now and should test support at 42.60-.90. The RSI turned violently lower and the MACD crossed adding to the bear case.

9. Biovail, Ticker: BVF
Biovail has had what seems like endless flags and pops higher, but the chart looks tired now. Support can be found at 26.50 and if it breaks that the next support is at 24. Resistance is higher at 27.50. This has been hughely OB and now the RSI is falling and the MACDis decreasing and indicators about to cross. I like it lower.

10. Hi-Tech Pharmacal, Ticker: HITK
It looks like the 3 week run is over for Hi-Tech Pharmacal. It printed a bearish Hanging Man candle Friday near resistance of the 100 day SMA at 21.13. The MACD has been decreasing and the RSI is now leveled out. Support can be found lower at 20 and then 18.89 below.

Bonus Idea: BP Amoco, Ticker: BP
The 50 day and 100 day SMA's are squeezing BP from both sides into a series of thin candles. This could pop either way out of the impending cross. If it breaks higher then resistance can be found at 39.75 followed by 42. If it breaks lower then support comes first at 34 then 33. Perhaps a straddle? I Love it when you get two ways to win!

Have a great week and trade'm well!

SPDR Sector Review/Preview September 18, 2010

2010-09-18T10:43:00.021-04:00

In my review of the SPDR sectors this morning I noticed again that then could be separated into 3 groups based upon their recent price performance. Each chart has some interesting technicals associated with it that I have detailed previously on chart.ly and in my twitter stream so I will not go into those details here. I will focus here on the relative strength of each sector from the recent price history. The first and strongest group contains Technology, XLK and Consumer Staples, XLP. These charts show strong uptrends since bottoming in the beginning of September.

Technology Select Sector SPDR, XLK
Consumer Staples Select Sector SPDR, XLP
The XLK has just completed an bullish Inverse Head and Shoulders pattern but sits near 22.62 resistance from June with resistance at 24 higher and a target from the pattern at 24.75. It also printed a bearish Hanging Man Friday though. The question for XLK in the future is whether the Hanging Man or the Inverse Head and Shoulders is confirmed. The XLP tagged the March-April resistance at 27.80 but stalled there. It has clear air above it if it can get through. Both charts show support areas at the highs in August and below that at their respective Simple Moving Averages (SMA's). Both show that the shorter SMA's the 20 and 50 day are rising, to or through a falling 100 day SMA and a flattening 200 day SMA. This is positive for prices. But both also show and waning Moving Average Convergence Divergence (MACD) and flattening Relative Strength Index (RSI) suggesting the upward moves may be running out of steam. Remember these are the strongest sectors, but have shown their first sign of weakness.

The second group shows a few more signs of sluggishness and contains Health Care, XLV, Consumer Discretionary, XLY, Materials, XLB and Industrials, XLI.

Health Care Select Sector SPDR, XLV
Consumer Discretionary Select Sector SPDR, XLY
Materials Select Sector SPDR, XLB

Industrials Select Sector SPDR, XLI
These sectors are all at or near resistance. But more significantly they are all showing various degrees of flagging at that resistance. XLV is just beginning at the one extreme and XLB and XLI have been flagging for a week or more, at the other end. Three of them nearly printed bearish Hanging Man candles Friday, with long shadows showing signs of selling pressure emerging, with the fourth having a flat out bearish day Friday. They all exhibit a flattening or falling RSI and a MACD that has been declining for several days. The SMA's on the short end are upward sloping, so they may snap out of this flattening. But they are showing signs of waning strength at least.

The third group is the weakest and includes Financials, XLF, Energy, XLE and Utilities, XLU. Take special notice to the fact that the Utilities sector, which has been the strongest as recently as two weeks ago is now one of the weakest.

Financials Select Sector SPDR, XLF
Energy Select Sector SPDR, XLE
Utilities Select Sector SPDR, XLU
All three had there high point on Monday (XLE briefly higher in Tuesday) and fell through the week. It is possible that the price action could be a bull flag for XLF and XLE but, all three printed bearish engulfing candles on Friday, suggesting more downside. Also, all have decidedly downward trending RSI and MACD indicators. The first two, XLF and XLE, had shown good runs higher previously, ending near the 200 day SMA and are now tracking the falling 100 day SMA lower. These two have been bouncing in a range for 4 months and the recent top was near the top of that range. XLU has the worst looking momentum indicators with MACD that crossed lower this week and RSI that has been falling for over a week. Putting a little confusion into the mix, all three sectors have rising short term SMA's, which could give them a lift.

As you look through theses charts note that their positioning is deliberate and intentional. They exhibit a progression from a strong uptrend to a flattening and then a potential downward reversal. Some of the sectors that have been leaders are stalling and pulling back. This is not a prediction that the rally that has taken the market to test its recent highs is over. One week's action does not create a trend or a change. I do however think that there is a message in the rotation. Having Technology and not Utilities lead the way is a good omen for future market strength if it holds up. But it also shows that there are sectors like Financials that need to participate for a full blown rally, which are not currently, and Consumer Staples that you would not expect to lead a broad based rally, but are. Until this shift occurs we may be in for more of the same stumbling along for a while.

Trade'm well.

From the Charts: Macro Week in Review/Preview September 17, 2010

2010-09-17T11:21:00.033-04:00

The week began looking like Gold and the US Dollar Index might take a breather. US Treasury Bonds were on support but looked weak and headed lower. Although Oil was strong it was nearing layers of resistance which could take some time to work through. Volatility seemed to have found a bottom, although still weak, which would allow stocks to continue their move higher, towards a test of the top of the four month (or maybe one year) channel. I detailed this in the broad market trend reviewed Friday September 10th. The week started with a bang as the equity index ETF's went right to resistance on Monday and stayed there all week, except for the QQQQ which did not stop and is trying to drag the others higher. Gold and the US Dollar Index did rest for a couple of days before Gold started higher but the dollar broke lower and Treasuries started to lose their range lower. Oil did test the top of resistance and was smacked back hard. How does this set up for next week? Let's look at the details in the charts.

Gold Daily

Gold Weekly
Gold took Monday off then rocketed up to new highs on Tuesday, rested again Wednesday and created higher highs ending the week. With this move it now has support at 1270 and then 1255 and 1247.79 below. The weekly chart shows a continued move within the long upward trending channel through the 1255 area and onward now to the target of 1328. The Relative Strength Index (RSI) is indicating that it is getting a little overbought so it might rest again, but the trend and momentum is still higher. It wants more. This is re-enforced by the rising Simple Moving Averages (SMA's) and the positive Moving Average Convergence Divergence (MACD) on both the daily and weekly charts, with special notice to the MACD cross on the weekly chart.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly
West Texas Intermediate Crude does not seem to want to join the party. Despite entering the week with positive technicals it tested the 200 day SMA and then rejected lower, as noted above, through the 50 ad 100 SMA's. With a bearish engulfing candle Friday it is hanging on support of 74.70, the 20 day SMA , by a thread with support lower at 72, and it looks weak. Should it bounce there is resistance at 75 and then the 76.22-.72 area followed by 77.76. A lot to work through to get back where it was on Monday. The MACD and RSI have also turned lower suggesting its upward run may be ending. Switching to the weekly chart, the consolidation continues below the SMA's with the 20 week SMA adding a negative bias as it crosses lower. Below the flag there is support at 71.19 and then 70. Should it break the SMA's higher there is resistance at 81.50.

US Dollar Index Daily

US Dollar Index Weekly
Speaking of weak, the US Dollar Index is the poster child. It fell right out of the blocks Monday and took another beating Tuesday. Since then is has created a bear flag with support at 81 and then 80.70 followed by 80. The weekly chart shows that it lost support at 82.08 and 81.63, the 100 week SMA. Both will now act as resistance. The MACD and RSI on the weekly chart appear very bearish. Should it miraculously rise from the dead, there is resistance at 81.72-82 and then 82.28-.44.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly
My proxy for US Treasuries, the TLT, lost support of the 50 day SMA at 101.98 on Thursday and could not reclaim it. The bearish action within the positive candle Friday is also a sign of weakness. There is resistance higher near 103 from the upward trendline and 104.80 higher. the increasingly negative MACD and falling RSI suggest it is heading lower. Continued weakness sees support at 100 followed by 98.92. The weekly chart paints a similar picture with no new knowledge of support or resistance but a couple of key indicators to watch for. Fist this week's candle was a star signifying indecision so be nimble enough to react to a possible reversal. The MACD however is crossing lower and a falling RSI bode for more downside.

VIX Daily

VIX Weekly
There is not much to say about the Volatility Index. It has been in a range on both the daily and weekly charts for several weeks now between 21.25 - 28.4. the SMA's on both charts provide some resistance if the VIX were to move higher. Under the range the daily chart shows support at 18 and the weekly at 16.93.

SPY 60 minute

SPY Daily

SPY Weekly
The 60 minute chart shows clearly that the SPY is testing the 113.20 area for the third time in four months. RSI is falling but still near 50 and the MACD looks stable on this chart. It could go either way. There is support lower at 112.13-22 and then 111.68, and resistance above at 114.67 from May. Switching to the daily chart this week was a 5 day island gap up and is sitting against resistance at 113.25. Should it break through the next resistance is at 114.55. The MACD indicator is decreasing and the RSI is rolling over indicating that there may be a move lower. If so, support can be found at 112 followed by 111.28 and 110. The weekly chart printed a Doji star, signaling indecision, at the 113.26 resistance area. There is further resistance above at 114.67 and 115.38, and further support below at 110.26 then 109.20. There does not appear to be real power in either direction.

IWM Daily

IWM Weekly
The daily chart for the IWM shows a 5 day consolidation range between 64.50 and 65.50. It is slightly bearish as the real bodies became smaller Thursday and Friday and the shadows longer. But it did hold above the bearish 100 day 200 day SMA cross.The MACD is positive but starting to decrease and the RSI is flat lined. If it gets through 65.50 then resistance can be found at 66.50 and 67.25 higher. Support comes first at 64.52 and then 63.29. On the weekly chart IWM is up against resistance from the downtrend line 65.21. Resistance on a breakthrough comes at 70 higher. The tight SMA's act as support below as well as 58.68. The weekly shows the MACD crossing higher and the RSI rising giving it a slight bullish bias. Taking both the daily and weekly charts into account there is not a clear bias in either direction here either.

QQQQ Daily

QQQQ Weekly
The QQQQ is the anomaly in the Index ETF space. It had a strong gap up move Monday and kept going. Have broken and held the long term support/resistance level near 47.80 it is now ready to test the 48.50 May highs with resistance above that at 50.10. The RSI is only approaching being overbought near 70 and the MACD is positive but may be waning. The one bearish glimpse is the solid black candle indicating a bearish day Friday with in the up move, starting at the high and closing lower, also creating a bearish Hanging Man. If it falls then support can be found at 47 and 45.75-.90 lower. The weekly chart shows it at resistance of 48 from September 2008 with 50.55 as resistance beyond that. The converging 20 and 50 week SMA's provide support lower and then 43.80 before the 200 week SMA at 42.51. If you had to pick one broad equity index ETF that is heading higher this would be the one. The weekly also shows an increasing MACD and rising RSI. At least one index knows where it wants to go.

So next week looks to bring more new highs for Gold. US Treasury Bonds and the US Dollar Index appear to be heading lower. Oil looks will probably join them going lower as well. The volatility index does not seem like it will impede stocks but only the QQQQ's seem to know that they want higher with the SPY and IWM still scratching their heads about the next move. Good luck next week and trade well!

Some Precious Metals are More Precious than Others

2010-09-15T21:18:00.011-04:00

Everybody is following the record prices in Gold these days. In fact they have been following Gold for several months now. This includes the new barber I went to today, cab drivers in New York City, my mom, the guy in the kiosk at the mall and everybody else you know. Here is why:

Gold Futures Continuous Contract 10 Year Chart

This is a 10 year chart and there is no doubt about what direction this metal has been heading and where it is heading. Even my three year old daughter can tell me the trend, even though it has been going on for more than 3 of her lifetimes. What about other precious metals though? They do not exhibit the same trending for this long period.

Gold Futures Continuous Contract 3 Year Chart
Let's zoom in on Gold to a 3 year chart you see a peak in March 2008 at 1034 and a trough in October and November of 2008 at 681. Since then Gold has moved up to highs in May and then today's new high close at 1268 or a 166% retracement of that move.

I chose this period because there is a similar peak and trough in the charts for Silver, Palladium and Platinum at these same places. Gold has always been a little bit different, despite being a precious metal. It tends more towards the non-tangible (inflation hedge, caveat currency...) and the cosmetic. Silver has similar desirability for cosmetic purposes but also has industrial use, and Palladium and Platinum are nearly totally used for industrial purposes. What do the charts for Silver, Palladium and Platinum look like over this period?

Silver Futures Continuous Contract 3 Year Chart
Silver peaked at 21.44 in March 2008 and hit a low 7 months later at 8.65. Since that time it has risen to close today at 20.58, retracing 93% of the down move. It had an interim peak just shy of 20 in May as well.

Palladium Futures Continuous Contract 3 Year Chart
Palladium peaked at 600 dollars in March 2008 and fell to 160 its low 8 months later. Since then it has risen to 567.50 in May 2010 and is now approaching that again closing today at 553.80. Today's price is a retracement of 90% of the 2008 down move.

Platinum Futures Continuous Contract 3 Year Chart
Platinum peaked at 2299 in March 2008 and bottomed at 752 that November. Since then it also had an interim peak in May 2010 near 1750 and closed today at 1607 a mere 56% retracement of the 2008 move lower.

What to make of these three charts in comparison to the Gold chart? First, they all have a long way to run if they were to mark their respective improvements from the November 2008 lows on the same scale as Gold. A 166% retracement would put Silver at 29.88, Palladium at 890 and Platinum at 3320, double where it is today. I am not forecasting these numbers as targets only pointing out how little these metals have moved in relation to the Gold move. The second point is that the peaks in May for Silver, Palladium and Platinum clearly illustrate how each metal is correlated to the stock market as this is just a one month lag to the top in the S&P 500 in late April. In fact Gold also peaked at this time but never really fell. Silver had the shallowest plunge and Palladium and Platinum, the two industrial metals, had the deepest plunges and are having the longest lag to recovering their highs, like the S&P 500. These two are clearly the most tightly correlated to the stock market. With the moves in Palladium and Platinum today, however, all are now breaking higher toward Gold. Will they all retrace 166%. Probably not but if the stock market does start to rise again look for the stars to be Palladium and Platinum from that point.

Trade'm well.

Fun with Charts: How Do You Tell the Difference Between a Miner and an Owner?

2010-09-14T19:54:00.012-04:00

So much serious debate about whether the market is about to break through resistance and head higher or reject back down, I thought it was time for a little levity.

Why Did the Chicken Cross the Road?

A chartist's take on a joke can be quite funny. Take it from me. Days like today, with a large trend move in metals, make it easy to see through the marketing spin about whether a company predominantly owns metal reserves or is predominantly getting those metals out of the ground, despite what their website or Yahoo Finance says. So here goes..

Q: How Do You Tell the Difference Between a Miner and an Owner?

Here is the chart for iShares Silver Trust, SLV

iShares Silver Trust, SLV
Notice today's candle. It has a very small shadow, mimicking the candle in both the Gold and Silver commodity charts.

I have put the silver chart here for comparison.

Silver Futures - Continuous Contract

This is the one end of the spectrum. Other stocks like this include GLD, BAA, CEF, and GOLD.

Now look at Market Vectors Gold Miners ETF, GDX.

Market Vectors Gold Miners ETF, GDX
Notice that this chart shows a much longer shadow, indicating that the price action rose in tandem with the commodity price but then retreated a bit because it is not a pure play. You could probably line up all the candles from the miners and get a good estimate of just how 'pure' their business is. Others in this category include ABX, EGO, GG, HL, IVN, NEM, RBY, SLW and SWC.

A: Look at the Candles of the Stocks During Large Commodity Moves

Ha, ha, ha, ha. Gets me every time. So the next time you are at a bar or cocktail party with people who do things other than trade the markets, bring out this little joke to break the ice. You are sure to be able to enjoy your drink alone or get home early. Trade well tomorrow!

Top 10 Ideas for the Week of September 13, 2010

2010-09-12T09:02:00.031-04:00

After looking at over 500 charts and posting my thoughts on many of them, I have found some good setups for the week. This week's mix contains 4 long ideas with 4 short setups, and three breakouts. These were selected in and should be viewed in the context of the broad market trend, reviewed Friday, which looks like there may be a pullback or at least a rest for Gold and a rest or maybe a rise for the US Dollar Index. US Treasury Bonds are on support but look weak and headed lower. Although Oil looks strong, it is at resistance and may need some time to work through it. Volatility seems to have found a bottom, although still weak, which should allow stocks to continue their move higher, towards a test of the top of the four month (or maybe one year?) channel.

Here are the top ten for the week in no particular order:

1. Canadian Solar, Ticker: CSIQ

Canadian Solar has just come out of a symmetrical triangle and had trouble moving higher with the 100 day Simple Moving Average (SMA) as resistance at 12.63. If it can get through it then the next resistance is at 13.50 followed by 14 and 16. The rising 50 day SMA is support at 12.17, and looks to help it get higher.

2. Patriot Coal, Ticker: PCX

Patriot Coal broke through the rising 50 day SMA Friday and is at a resistance area near 12 now. If it can get through 12 then the next resistance level is at 13 followed by 14. The rising Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) also point to it going higher. The 50 day SMA at 11.80 will act as support now, with additional support lower at 11.50.

3. Cirrus Logic, Ticker: CRUS

Cirrus Logic had a rough week and it looks to get worse still. It lost the support of the 100 day SMA Friday and is at support near 15 from the beginning of July and late August. The 100 day SMA will now be resistance. If it falls under 15 the next support area is near 13 and then 11.63. The rolling SMA's, declining MACD and RSI all signal lower.

4. Novell, Ticker: NOVL

The down move on Novell stalled Friday at 5.50 which has been support previously in August. It looks to break this resistance level and test 5.40 and then 5.08, with a falling RSI and the MACD cross Friday. The 50 day SMA is also coming close to crossing down through the 100 day SMA which will add to the bear case.

5. Power-One, Ticker: PWER

Power-One has been bouncing off of resistance at 11.21 for several days now after a previous attempt in mid August. The rising trend line, shadowing the 50 day SMA now is creating an ascending triangle which is about to resolve. A rising RSI and MACD suggest it will resolve to the upside. If it gets through 11.21 the next resistance is at 13. If it rejects at 11.21 and back through the trend line near 10.20 then next support level is 9.50. A two for one potential play.

6. Shanda Interactive Games, Ticker: SNDA

Shanda double tapped support at 38.00 Thursday and Friday, a previous support level. If it bounces there then resistance is first at 40.67, the 50 day SMA, and then 41.47, the 100 day SMA. If it does not hold then support can be found lower at 36.33 and then 33.90. The prognosis is mixed as the 50 day SMA is starting to rise and the RSI is showing oversold, but the MACD still points negative and the 100day and 200 day SMA are also negatively sloped. Watch and play what it gives you.

7. Skechers, Ticker: SKX

Skechers was another stock that had a rough week. It exploded down through the 50% Fibonacci retracement level of 25 on huge volume Thursday. This level will act as resistance now. Despite the small price movement Friday on still large volume it looks like the selling is not over yet and it is prepping to fall further. If it gets through 22.50, a support level from late 2009, the next support is at 20.37, the 61.8% Fibonacci retracement level, and then 18.50. The MACD just recrossed lower indicating increased probability of this happening, although the RSI is slightly oversold.

8. Aeropostale, Ticker: ARO

Aeropostale has been in a range between 21.67 and 23 for a couple of weeks and is now testing the top of the range. The rising MACD and RSI suggest it might be able to work higher. Above this range it would see resistance at 24 and then 25.93 where the 50 day SMA is crossing down through the 200 day SMA.

9. Huntington Bancshares, Ticker: HBAN

Huntington Bancshares has been trying to break through resistance at 6 the last couple of day. This is also the 100 day SMA. If it can get through, then there is resistance at 6.35 followed by 6.75. The Increasing MACD suggests this is the path of least resistance. If, however, it rejects downward again and through the 50 day SMA at 5.77 then support can be found at 5.50 and then 5.32 lower.

10. Regions Financial, Ticker: RF

Regions Financial stock price has been caught on the 50/200 day SMA cross. It can break either way from here but the increasing MACD and relatively low RSI suggest that it might break higher. If it does then there is resistance at 7.34. If the break is lower then support comes at 6.35.

Bonus Idea: Chimera Investment, Ticker: CIM

This pick may take a while to play out. Chimera Investment, a Real Estate Investment Trust (REIT) has been trading in a narrow and tightening range for over a year after its fall in late 2008. It has met resistance at 4 several times along the way and appears to be breaking out above it now. The RSI has risen lately and the MACD which has been pegged near zero is also starting to rise. If it can detach from the 4 area then it can rise to resistance at 5 but it might take some time. With a near 20% dividend rate you can afford to wait for it to rise.

Have a great week and trade'm well!

The Bond Market as Seen through Stocks

2010-09-11T12:20:00.013-04:00

There has been a lot of debate about whether US Treasury Bond yields have bottomed and are ready to rise. I do not claim to be an expert in this field so I cannot talk about the dynamics of increased issuance weighed against the increased demand due to heightened world wide sovereign risks. I will not discuss how front loading the debt issuance will create a much bigger problem down the road when rates start to rise, and should be putting upward pressure on yields. There are others like @Prof_pinch and @bondscoop much better equipped to deal in that space. But I do see something interesting when I look at the trio of Bond ETF's, TLT, iShares Barclays 20+Year Treasury Bond Fund (Treasuries) , LQD, iShares iBOXX Investment grade Corporate Bond Fund (Corporates), and JNK, SPDR Lehman High Yield Bond (Junk). The three charts are below:

TLT, iShares Barclays 20+Year Treasury Bond Fund

LQD, iShares iBOXX Investment Grade Corporate Bond Fund

JNK, SPDR Lehman High Yield Bond Fund

It is clear from these 3 charts that the TLT (Treasuries) led all bond ETF's higher and was the first to crack and start to fall. What is interesting is that it quickly pulled down the LQD (Corporates) but that JNK (Junk) has continued to stay at highs. Now TLT and LQD are sitting at support areas and the debate continues as to whether a bounce will happen or they will lose support and continue lower. The large issuance of corporate debt this week would suggest that the market expectation is for a fall. I suggest that one look to the JNK ETF for the answer. As long as JNK is continuing to hold up, it signals that traders and investors are comfortable with the risk in the US market place and they are continuing to reach for yield. If the JNK starts to fall, it could signal that traders and investors are bailing on the recovery and that sentiment might be changing to where the US is not seen as being safer than other parts of the world economically. At that point all three may continue to fall.

By the way, from the technicals, the TLT and LQD are exhibiting some pretty weak momentum indicators in the MACD and RSI right now although they are at price support. Also the dragonfly doji on the JNK Friday is a very bearish candlestick, despite being at new highs.

Watch the price action and trade'm well!

From the Charts: Macro Week in Review/Preview September 10, 2010

2010-09-10T12:27:00.029-04:00

We came into this holiday shortened week expecting stronger prices for Gold again. The US Dollar Index and US Treasury Bonds were poised to continue their moves lower. Oil was set up for a move higher but without much room before it runs into a wall of resistance. A relatively low volatility index was creating the environment for stocks to push higher, also without a lot of room before resistance. I detailed this in the broad market trend reviewed Friday September 3rd. The week started as expected...for Gold anyway and nothing else. The US Dollar Index and US Treasuries bounced, and Oil and stocks sold off Tuesday. After a little ping pong the week now ended as expected for all indicators except Gold which ended flat and the US Dollar Index which rose slightly. There are some changes in expectation for next week. Let's look at the charts.

Gold Daily

Gold Weekly
Gold raced up to test the 1255 resistance level and then pulled back to 1245 support on Thursday. The support level held on Friday but the Moving Average Convergence Divergence (MACD) is now crossing on the daily chart, indicating an open environment to pullback further. There is support at 1237, 1233 and 1220. the weekly chart looks like a glass ceiling at 1255 which it cannot crack. If it can there is resistance at 1328 higher. I still expect it to reach new highs, but it may pullback first.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly
West Texas Intermediate Crude seems to be breaking out of the 3 week flag to the upside. I have noted in the past that if it did there is a lot of resistance from both the daily and weekly charts at the Simple Moving Average (SMA) levels above. Friday oil blew through he flag resistance at 75.80, now support, and stopped right at the 50/100 day SMA cross near 76.50. The weekly set of SMA's are also very near by now as resistance at 77.30-.82. There is resistance higher at 77.78 on the daily chart and support lower at 74.80-75. Above the bands of SMA's the weekly chart shows resistance at 81.50 and also adds support lower at 72 and then 71.19. I expect it might take some time to get through this resistance but expect a big pop if it happens quickly.

US Dollar Index Daily

US Dollar Index Weekly
The US Dollar Index popped to the 20/50 day SMA cross and held there all week. There is resistance higher at 83.50 and then 84 and support lower at 82 all from the daily chart. The flat MACD and RSI give no clue to a future move. The weekly chart shows the beginning of a flag forming above the 82.08 support level. It also shows resistance at 83 and then 84.01 higher and support at 81.64and then 80.58. There might be a slight bias to the upside from the weekly chart with the rising SMA's and hold of support.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly
My proxy for US Treasury Bonds, the TLT, jumped up Tuesday and proceeded top fall the rest of the week. It ended the week holding support of the 101.77-102.10 area. There is support lower at 100 and then 98. If it catches a bounce resistance can be found at 104 followed by 104.8 and 106. The weekly chart filled the gap from early August and and looks to be headed lower. It adds 102 as a support level and resistance higher at 108. The trend is clearly lower now.

VIX Daily

VIX Weekly
The Volatility Index held support of the bottom of its channel at 21.80, barely. There is support lower at 18 from the daily chart and 16.93 from the weekly. If it continues to hold there is resistance at the 200, 50 and then 100 day SMA's on the way to 28.40 on the daily chart. On the weekly chart adds resistance at 23.88 then 26.09 and 28. It looks to test the bottom of both channels again.

SPY 60 minute

SPY Daily

SPY Weekly
Although the SPY looks to be heading to a test of the 113.20 channel top, the 60 minute chart exhibited a bearish divergence between the price action and the MACD this week. It does look like it may resolve shortly and did not show up in the RSI so it is just a point of note right now. The daily chart printed an Inside Day today, a sign of indecision, with 111.19 as support and then 110.27 and 109.40 lower. It shows resistance at 112 and then 113.20. the weekly chart adds to the picture with a bullish move above the 20/50 week SMA cross above 110. It adds a resistance point higher at 114.67 and support lower at 106 and then 104.35. There is more room still to the upside.

IWM Daily

IWM Weekly
IWM also had an indecisive Inside Day, finishing below resistance at 64.33 with 64.91 as resistance higher. There is support below at 62.83-63 and then 61.84 from the rising 50 day and 20 day SMA's, respectively. It looks good to go higher still. The weekly chart shows the range between the SMA's and 58.68 holding up with this week's candle squeezed by the 20, 50 and 200 week SMA's. There is resistance higher on the weekly chart at 67.50, and support lower at 61 before testing 58.68. The MACD on the weekly looks to be turning and crossing adding to the bull case.

QQQQ Daily

QQQQ Weekly
The Q's also had an Inside Day but well above the 100/200 day SMA cross. There is support at the 45.18-.25 area and then 44.50 below that. Resistance comes first at 46.75 and then 47.10 followed by 47.60. The Q's crossed the 20 week SMA on the weekly chart which will now act as support. There is further support lower at 45.19 and 43.80. Resistance occurs at 46.60 and then 47.20 and 47.60 on the weekly chart. It must get through all those points to have a chance at changing the trend from flat to up. It is a bit troubling that the 20 Week SMA is about to cross down trough the 50 week SMA with the other SMA's flat. There is some room higher but keep an eye on that cross.

So next week looks like there may be a pullback or at least a rest for Gold and a rest or maybe a rise for the US Dollar Index. US Treasury Bonds are on support but look weak and headed lower. Although Oil looks strong it is at resistance and may need some time to work through it. Volatility seems to have found a bottom, although still weak, which should allow stocks to continue their move higher, towards a test of the top of the four month (or maybe one year) channel. Good luck next week!

SPY - What is Your Favorite Color?

2010-09-08T12:36:00.010-04:00

The SPY has been bouncing around between 101 and 114 since shortly after the May 6 flash crash, often times bouncing off of Simple Moving Average (SMA) lines. From this view I have been unconvinced that any nascent trend will hold and have been mainly in cash. But that is my opinion and is formed because I tend to trade single names for a short period of time, usually less than a week. I use the trend to understand which way the wind is blowing and to put it at my back for these short term picks. But how else could you see the SPY activity? Look at this chart:

SPY Daily Chart

Where are your eye's drawn? Do you look at the longer term green Fibonacci lines from the March 2009 lows to the April 2010 highs? If so then you are probably an investor, with a longer horizon, and you might read this chart as a pullback off of the highs that has not yet retraced to the 38.2% level just south of 100, leaving you uncertain as to whether the uptrend is over yet or whether the trend is down now. If this is you then you might be cautiously buying and/or protecting your downside by buying puts.

Or perhaps you are drawn to the magenta box, and see a long term range between 101.13 and 114.74 for a year, except for a brief period March through April 2010 that rose slightly above it. If this is you maybe you area position trader, waiting for the break out of the box to put your money back to work in the SPY.

On the other hand maybe your eyes are following the rolling blue, red and green moving average lines which have been in a tight 12 point range since August last year and narrowing to where they are in a less than 3 point range today. If this is you then you probably also see the flat lines creating uncertainty and are looking for them move and point out the next direction before you jump all in.

Perhaps you look more to the right side of the chart at the downward red dotted trend line. The current price action is pressing against that line right now. If this is you then you are probably closer to being a swing trader and have taken the approach to the trend as an opportunity to take profits from the run off the bottom until you can discern if the trend will be broken or held.

Finally, you might be a day trader (or an algorithm) and only glance at this chart once everyday or so. For you it is important to know how the market is trending and when it might change to determine daily limits but this chart does not drive you decision to deploy money. You are the only one who should be trading right now.

You need to have a plan to trade in this market. If your plan is colored green, magenta, red or blue you might be best served by waiting for your moment.

Top 10 Ideas for the Week of September 6, 2010

2010-09-05T11:49:00.031-04:00

After looking at over 500 charts and posting my thoughts on many of them, I have found some good setups for the week. This week's mix contains 9 long ideas with only 1 short setup, one breakout. These were selected in and should be viewed in the context of the broad market trend reviewed Friday and Sector analysis from Saturday which looks to bring stronger prices for Gold again. The US Dollar Index and US Treasury Bonds look to continue their moves lower. Oil is set up for a move higher but does not have much room before it runs into a wall of resistance. The falling volatility index will create the environment for stocks to push higher, but they are getting close to key resistance levels. Financials, Technology, Health Care and Materials look strongest so picks are focused there. Here are the top ten tonight in no particular order:

1. American Capital LTD, Ticker: ACAS
If this stock can get through 5.75 it sees resistance first at 6.00 and then 6.25. There is support lower at 5.31. Rising Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) . I like it's chances.

2. Keycorp, Ticker: KEY
Has had a strong run and if can get through the 100 day Simple Moving Average (SMA) at 8.10 it can run to resistance higher at 8.55 and possibly 8.75 above that. The MACD had a positive cross Thursday and the RSI is rising. Support can be found lower at 7.94 and then 7.50.

3. Mastercard, Ticker: MA
Mastercard seems headed to the top of its recent channel, if it can get through the 50 day SMA at 207.43. Resistance would be seen first at 210 then 215.96. Support can be found at 198 then 195 lower. The MACD is about to cross and RSI just pierced 50.

4. Micron Technology, Ticker: MU
Micron is breaking higher out of a descending wedge. There is resistance higher at 7.50 and then 7.85. The RSI and MACD both re-enforce a move higher. There is support at the wedge.

5. Mellonax Technologies, Ticker: MLNX
Above the 17.15 resistance this stock has clear air to 18.45 and then resistance at 19.80 higher. There is support at 16 to the downside. MACD gives it a chance, RSI not so sure.

6. Mindspeed Technologies, Ticker: MSPD
Mindspeed is testing the top of a downward trending channel just above the 200 SMA. If it can pierce and hold above the channel it can run to 7.90 and then sees resistance at 8.05. A rejection at the channel boundary will push it lower to 7.14 and then 6.50. MACD and RSI say it can go higher.

7. Endo Pharmaceuticals, Ticker: ENDP
Endo broke higher a few weeks ago and then tested and held the rising 20 day SMA. It is ready for new highs! Support can be found at 27.50 to 28.

8. KBR, Ticker: KBR
If KBR can get through 24.55, a key resistance/support level for many years, then the next resistance is at 28 and it looks likely to test it. Support on rejection at 24.55 can be found at 22.42-.50.

9. Select Comfort Corp, Ticker: SCSS
This was a top 10 pick last week and it seems warranted again. It is closing in on resistance at 6.50 and if it can get through then then is resistance higher at 7.30-.38. Support lower can be found at 6.00. MACD and RSI say that it still has room to run.

10. Mosaic Corp, Ticker: MOS
Mosaic is stuck near resistance at 60 with failing RSI and MACD. There is support lower at 56 and then 53.60. On an up move there is resistance at 62.20

Bonus Idea: Genoptix, Ticker: GXDX
I just noticed that I have the last 10 posts on this stock on the chart.ly stream. This stock has been flagging for some time after its big fall. It looks like a potential play both ways. Above 18.10 there is some resistance at 19.50and then 22. To the downside, below 16.90 there is support at 15.50 and then nothing lower. With the MACD and RSI back in the neutral range something could happen soon. Get ready.

Trade'm well!

SPDR Sector Review/Preview September 4, 2010: There's somehting Happening Here

2010-09-04T11:25:00.019-04:00

There's Something Happening Here....

A couple of things struck me as I looked through the SPDR Sector ETF's this morning. the first observation: all sector SPDR's had similar a pattern of candles the last three days of this week, with three white candles, gapping higher each day, with a smaller real body each day. All had a positive Moving Average Convergence Divergence (MACD) cross and a rising positively sloped RSI during this period. This indicates the rally was broad based and has momentum to run further as indicated in my Macro Week In Review/Preview last night. The decreasing size of the candle's real bodies could be a natural slowdown for a large rally or indicate a topping. But let's leave that for now.

What It Is Ain't Exactly Clear...

The second observation is that the sectors could be split into three groups qualitatively looking at the strength of those three candles. The weakest group contains the Utilities, Industrials and Consumer Staples shown here:

Utilities Select Sector SPDR, XLU

Industrials Select Sector SPDR, XLI

Consumer Staples Select Sector SPDR, XLP

Note how the real bodies of the third candle of these charts is very thin. In fact the Industrials made a doji and the Utilities looks more like a flag then a drive higher. Also both the Utilities and Consumer Staples had Hanging Man candles, a possible bearish omen.

The second group had a much more bullish run. Their charts are here:

Materials Select Sector SPDR, XLB

Financials Select Sector SPDR, XLF

Technology Select Sector SPDR, XLK

Health Care Select Sector SPDR, XLV

These sectors, the Materials, Financials, Technology and Health Care, all had good sized real bodies for the third candle and closed near the top of the candle. They also had moderate or small shadows indicating the third candle was a very bullish day. Finally they all have some room to run before resistance.

The last group containing Energy and Consumer Discretionary, had strong runs but a third candle with longer shadows on both ends. Not quite as strong as the second group but not exhibiting the possible bearish nature of the first group either. Here are their charts:

Energy Select Sector SPDR, XLE

Consumer Discretionary Select Sector SPDR, XLY

....Everybody Look What's Going Down....

What to make of this? Smells like a possible rotation out of Industrials, Utilities and Staples, the defensive sectors, into the Financials, Technology, Materials and Health Care, more aggressive sectors where risk taking occurs.

....Paranoia Strikes Deep....

Maybe a rotation is happening, but take a step back. Looking at a longer chart for Financials as a proxy shows a long extended range. Still some work before leadership higher occurs.

Financials Select Sector SPDR, XLF

You've read this far now enjoy the music and trade'm well!

From the Charts: Macro Week in Review/Preview September 3, 2010

2010-09-03T14:25:00.030-04:00

This week began with the expectation of stronger prices for Gold and Oil, a continued pullback in US Treasuries and possible resolution of the uncertainty in the US Dollar Index. Volatility was falling within a range and expected to have little impact on equities, which were ready for a pop. I detailed this in the broad market trend reviewed Saturday August 30.. Through Tuesday, month end, Treasuries and Oil were bucking that analysis, heading higher and lower respectively, while Gold, the US Dollar Index and equities were behaving as expected. The new month brought an explosion to equities dragging down the US Dollar Index, and a reversal back to expectations on Treasuries and Oil. It also gave a broader perspective from the monthly charts. From the monthlies Gold, US Treasuries and the US Dollar Index looked strong with Oil testing the bottom of a range. The Volatility Index was settling within the tightening SMA's and the Equity ETF's are poised to move lower. Equities lower? Not what happened this week. What will next week bring? Lets look at the charts:

Gold Daily

Gold Weekly

Gold had a good run up this week and printed an inside day today near the 1255 resistance level after testing lower and regaining the 1245 support level. It probed the 1255 level 3 times this week without losing ground and looks to head higher and test the 1265 are above it. Support at 1245 has held but there is additional support at 1233 should it pullback. The channel in the weekly chart gives a resistance level above 1265 at 1328 and shows support at 1225 then 1180.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly

West Texas Intermediate Crude futures also had an inside day and finished near resistance of 74.80-75.1. If it does not reach higher that than Monday's open near 75.50 then it will continue with a lower high building a symmetrical triangle. Above 75.50 it can run higher and sees resistance at 76 and then the cluster of Simple Moving Averages (SMA's) higher between 76.56 and 77.82. There is support on the way down at the 72 area and then 70.50. The weekly chart shows a bullish hammer for the second consecutive week, a bullish indicator if confirmed by a higher week next week. Yet all those weekly SMA's between 75.21-77.75 will act as resistance as well. Should oil get through all those SMA's there is room to 80 and higher. The weekly chart also shows additional support points at 71.19 and 67.72.

US Dollar Index Daily

US Dollar Index Weekly

The US Dollar Index took a beating this week falling out of its bullish flag and looks headed lower. It ended on support at 82, with 81.50 and the 80.70-81 area as support below. If 82 holds and it bounces there is resistance at 82.50 and then the 83.25-.50 area above. On the weekly chart the Dollar Index lost support at 82.25 with the next support 81.64followed by 80.46.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly

After an inside day Monday my proxy for US Treasuries, TLT, printed an bearish hanging man on Tuesday and if there was any doubt confirmed it Wednesday, Thursday and Friday. Having lost the 105 area of support, it looks weak and headed to fill the gap lower to 102ish and then maybe the lower support levels of 100 and 98. Despite being lower today there is a chance for a bounce, heightened by the hollow red candle (bullish in a bearish kind of way) today. Resistance would come first at the 105 area, then 106 and 108. The weekly chart adds to the bear case printing a Bear engulfing candle, covering the last two candles.

VIX Daily

VIX Weekly

The Volatility Index ran to the bottom of the channel it has been in for the last 2 months, barely breaching it today. The lower bound of the channel 21.80 is now resistance with 23.47 and 25.52 resistance above that. There is support at 18 then 15.80 lower if it cannot hold the channel with a fingertip. The weekly chart shows support at 21.25 with 16.93 below that. Holding above 21.25 on the weekly it could see resistance at 24 then 26 and 28. Watch 21.25 as below that would add to the bull case for stocks.

SPY 60 minute

SPY Daily

SPY Weekly
The 60 minute chart for the SPY shows it breaking above a lot of the clutter between the 106 and 110.50 range. it looks good for more. Now there are only a few resistance points higher around the 112.13 area before it tests 113.20 and some clear air. On the daily chart it printed a Hanging Man today a possible bearish omen, right on top of the 100 day SMA (support) and just below the 200 day SMA (resistance). There is support lower at 109.40 and then 108.48 before the strong support at 107.10. The weekly chart shows the rally started off of support at the 104.35 area and rose through the cross of the 20wk and 50wk SMA's. It also adds resistance higher at 114.67.

IWM Daily

IWM Weekly
IWM also had a great bull run but ended the week with a Hanging Man on support of the 200 day SMA, a possible bearish indicator. There is support lower at 63.35 and then 62.77 and 61.87 below. It looks to rise however and test resistance at 65.24 and then maybe 66.50. The weekly chart shows a big bullish candle stopping right at the cross of the 20 week and 200week SMA's near 64.50. This all happens within a flag so the certainty of a further rise is suspect. There is resistance higher at 65 and then 67.50. It also shows additional support at 60.5 and then 58.68.

QQQQ Daily

QQQQ Weekly

The bull move in the QQQQ is the strongest of the equity index ETF's. There is no Hanging Man creating uncertainty, but rather a Three Advancing White Soldiers pattern that is very bullish. It stopped it s run today near resistance of the 100 day SMA. There is resistance higher at 46.25 followed by the 47 area. Support on a pullback comes first at the 200 day SMA and then the 45.00 to 45.25 area. The weekly chart adds to the bull case printing a Bullish engulfing candle that drove through both the 20 week and the 50 week SMA's which will now act as support. the weekly adds resistance higher at 48, and support points lower at 44 followed by 42.46.

So next week looks to bring stronger prices for Gold again. The US Dollar Index and US Treasury Bonds look to continue their moves lower. Oil is set up for a move higher but does not have much room before it runs into a wall of resistance. And falling volatility index combined will create the environment for stocks to push higher. Enjoy your Labor Day Weekend and Good luck next week!

From the Charts: Macro Month in Review/Preview

2010-08-31T16:58:00.018-04:00

Saturday night I reviewed the macro market indicators for the week. It looked then that we would see stronger prices for Gold and Oil and a continued pullback in US Treasuries. I suggested that US Dollar Index was in a range and although volatility was falling, that it would not be a catalyst for equities to break their range. So far this week Treasuries and Oil are bucking that analysis, heading higher and lower respectively, while Gold, the US Dollar Index and equities are behaving as expected.

Tonight being the end of August we get to add another data point and broader perspective from adding the insights of the monthly charts. Let's take a look.

Gold Monthly
Gold printed a bullish engulfing candle this month, pointing to higher prices to come. It remains in a broad rising channel. All of the Simple Moving Averages (SMA) are strongly rising. There is resistance at 1265, and support below at 1226 then 1122 lower. This has more upside room.

West Texas Intermediate Crude Monthly
Oil on a monthly basis remains in a range between 67.70 and 80.00, but looks to test the low end. It printed a bearish candle this month but is above support of the rising 20 month SMA. The Moving Average Convergence Divergence (MACD) is falling and about to cross, boding lowing prices, and the Relative Strength Index (RSI) is also negatively sloped. There is support lower at 60.55 and resistance at 77.25, the 50 month SMA, and then above the range at 88.50.

US Dollar Index Monthly

The US Dollar Index printed a hammer candle, bullish, on support of the 20 month SMA at 81.30. It is within a symmetrical triangle that could take some time to resolve. There is more support lower at 80.43 as well then the bottom of the triangle at 75.50. Resistance shows up first at 85 and then 86.50.

iShares Barclays 20+ Yr Treasury Bond Fund Monthly
TLT, my proxy for US Treasuries, is in the midst of a bullish continuation since the Three Advancing White Soldiers pattern put in from April through June. Resistance above is at the 113.70 top from December 2008 and January 2009. Volume has been trending higher and the MACD shows a positive future. Support on a pullback can be found at 101 and then 100.

VIX Monthly
The Volatility Index became less volatile as all the SMA are converging. There is support at both the 100 and 200 month SMA's between 21.19-21.60 and near 17.50 below that. Resistance comes first at the falling 20 month SMA, 29.07 then 35. It looks to be settling in to a smaller range as long as the SMA's keep converging.

SPY Monthly
The SPY printed a bearish Dark Cloud Cover pattern this month, where the monthly candle started higher and ended lower retracing more than 50% of the up move from the previous candle. The MACD is rolling over and the RSI also pointing lower. There is support lower at 103 then 98.62, and resistance at 107.12, the 100 month SMA and then 108.09 the 50% Fibonacci retracement level followed by 111.75.

IWM Monthly
IWM is more bearish than SPY, printing a bearish engulfing candle this month, after testing the 66 resistance line and failing. There is support at 60 and then at 58.21. Resistance comes first at 62.50 before the 66 level.

QQQQ Monthly
The QQQQ shows a flag after falling from the double top at 50 - 50.65 illustrated above. It also printed a bearish Dark Cloud Cover candle, just above support of the 50 month SMA at 42.16. There is further support at 40.22 below. The 46.50 - 47 range will be the first resistance on an up move. The MACD and RSI point lower for this as well.

In summary, Gold, US Treasuries and the US Dollar Index look strong on the monthly charts. Oil looks to test the bottom of a range. The Volatility Index seems to be settling with the tightening SMA's and the Equity ETF's are poised to move lower. This monthly view supports a continuation of the action seen so far this week.

Trade'm well!

Top 10 Ideas for the Week of August 30, 2010

2010-08-29T15:09:00.020-04:00

After looking at over 500 charts and posting my thoughts on over 200 of them, I have found some good setups for the week. This week's mix contains 6 short setups, and 4 long ideas, with one breakout. These were selected in and should be viewed in the context of the broad market trend reviewed Saturday which looks to bring stronger prices for Gold and Oil and a continued pullback in US Treasuries. Watch the range for the US Dollar Index to signal its next move. Although volatility is falling, it remains with in a range and will have little impact on equities, which appear to have at least a slightly bigger pop in store for the week before hitting resistance, after a rough week this past week. Here are the top ten tonight in no particular order:

1. Bank of America, Ticker: BAC

This stock looks ready to explode down out of this tighten wedge. Under 11.90, the first support is 10.50 followed by 9.25. The weekly chart confirms the move lower will continue to near 10.

2. Hi-Tech Pharmacal, Ticker: HITK

The month long bear flag seems ready to break down below support of 16.80, from a glance at the weekly chart. If it does then the target is 14.

3. Impax Laboratories, Ticker: IPXL

Needs to hold 16.28 the 200 day SMA or 14 is coming. If it holds then resistance is at 17.59.

4. Salix Pharmaceuticals, Ticker: SLXP

It had a good move Friday above the 100 day Simple Moving Average (SMA) but if it loses that there will be a slow march down to the 200 day SMA at 33.44. Note that the SMA's are starting to rollover as well.

5. American Dairy, Ticker: ADY

this stock looks to have finally found a bottom near 7.20. Rising now if it can clear 8 it can can run to 9.75 or more. The weekly chart printed a very bullish Dragonfly Doji.

6. Sotheby's, Ticker: BID

This stock is finishing a symmetrical triangle near the cross of the 50 day and 200 day SMA's. The Moving Average Convergence Divergence (MACD) indicator points to the chances of a break out being lower. The target on a break lower would be 22.30 initially.

7. Select Comfort Co, Ticker: SCSS

The 4.75-5.00 area has been big support in the past and is proving so now as well. Also the bullish candle Friday with an expanding range adds weight to the argument for a reversal. From here it looks to go higher with 6.00 as the first resistance and then 6.50.

8. Whirlpool, Ticker: WHR

The falling wedge is tightening and bodes for a big move to come. The weekly chart points lower, with support at 70 and then 65 on a break of the wedge. If it breaks higher above 77 there is resistance at 82 and then 86. Watch for the break and play accordingly.

9. First Solar, Ticker: FSLR

If it can get above the 130 resistance area it can run to the next area at 140-141.33.

10. Priceline.com, Ticker: PCLN

The range on this stock has been widening over the last few days and if it keeps widening it could spell trouble, as the SMA's are all a long way down. the first clue to a fall would be a crack of the 280 support and test of 272 below. A break of 305 and hold there and you can forget about this going lower. One might play this with put spreads due to the high stock price. Also I can already see Adam Warner (@agwarner) calling me un-American for betting against William Shatner, so make sure it is happening before you play.

Bonus Idea: Network Engines, Ticker: NENG

Not for you big boys whipping around 100,000 shares, but a decent setup for a portion of a portfolio. This stock is finding supp at 1.35. The MACD is turning more positive and there is resistance at 1.70 then 1.80.

Trade'm well!

From the Charts: Macro Week in Review/Preview August 27, 2010

2010-08-27T08:46:00.031-04:00

Coming into this week the market looked to bring stronger prices for Gold and the US Dollar Index with US Treasury Bonds trying to join the party. Oil still looked broken and on a path lower. And a rising volatility index combined with that stronger dollar looked to continue to press stocks lower. This played out as expected early in the week with with Gold and the Dollar Index rising and US Treasuries hitting new low yields, thus higher prices. Stock indexes and Oil did run lower. Mid week Oil found a bottom and Bonds and the Dollar Index a top but Gold just kept strong. Equities were bounced around Thursday and Friday by data and speeches but remain lower for the week. What does next week hold? Let's go to the charts.

Gold Daily

Gold Weekly

Gold had a good run this week and looks ready to go higher still. After a quick hard test of the 100 day SMA on Tuesday, it rallied Wednesday and held there with a couple of doji days the rest of the week, within the consolidation channel between 1233 and 1245 from the May - June time-frame. 1255 is the next resistance area from the highs in late June. The weekly chart shows that the trend remains higher after the test of the channel and 20 week SMA a little over a month ago. Support comes at 1210-1215 area from the daily chart and 1206 lower from the weekly.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly
Oil put in a reversal this week that looks to continue into next week. This is seen in both the daily and weekly charts. The daily chart shows the rally Friday broke through and held the 74.80-75 resistance area. The candle with virtually no upper shadow shows that after testing the 72 support area the bulls were in charge the rest of the day right into the close. There is some resistance at 76 then the confluence of SMA's between 76.90 and 77.94. The weekly chart printed a bullish hammer candle after testing near the strong support around 71 from December, February and May through June. Resistance can be seen at the meeting of the 20, 50 and 200 week SMA's between 77.00 and 77.67.

US Dollar Index Daily

US Dollar Index Weekly
The US Dollar Index may be resting or have found a short term top. The daily and weekly charts conflict slightly on this one. The daily chart shows the index being pushed down by the 50 day SMA, but in a fairly narrow range flag with 82.50 there to help as support and the 20 day SMA at 82.04 lower. A break below 82.04 would signal a top was put in. The weekly chart shows the bullish flag above the 82.25 support area with 83.88 as resistance higher. A break through the 50 day SMA would signal a move higher.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly
Treasury Bonds, using TLT as a proxy, may not be dead but are badly wounded and the beating looks to continue going into next week. The daily chart shows a fall out of an expanding rising wedge that accelerated after it broke the wedge support and strong volume. There is some support at 105 and then 104 below before the gap fill support at 102.67. The weekly chart shows a shooting star or an evening star or inverted hammer candlestick depending upon who you study. Whichever one you choose it is very bearish with the shadow being more than 10 times longer than the real body! Support on the weekly chart comes at 104 and then 102. Should the world look like it was going to end and everybody wanted Treasuries, 109.50 would be resistance, but I think pigs fly first.

VIX Daily

VIX Weekly
The Volatility Index, VIX, remains elevated by historical standards but in a range between 22 and 30 which looks likely to hold next week. The daily chart has recently defined that range between 22 and 28.41 and this week has been heading towards the bottom of the range. The weekly chart shows the 20, 50 and 200 week SMA's creating a boundary between 24.45 and 27.22. If it breaks out higher 32.58 would be resistance.

SPY 60 minute

SPY Daily

SPY Weekly
Moving to the equity index ETF's, SPY continued to trade a fairly narrow range this week. The 60 minute chart illustrates all the points of resistance and support in the range between 104.18 and 110.50. It is also interesting to see that the downward sloping trend line, which extends back to the mid-May highs near 117 is still occasionally playing a role. Most interesting is the support that appeared at 105 this week despite a couple brief dips to the 104.30 area. The daily chart shows a bullish hammer candle Friday but also resistance at 107.10 and then all the SMA levels higher as well as that 104.30-105 support area lower. The weekly chart also printed a bullish hammer within the range of the flag that has been waving since late May. Resistance on the weekly comes from the 20/50 week SMA area, between 109.74 and 110.37, near the top of the range illustrated in the 60 minute chart. Although the SPY looks bullish expect it to run into resistance quickly. It still in a range.

IWM Daily

IWM Weekly
The Russell 2000 ETF, IWM, also closed the week on a bullish note printing a hammer candle on the daily chart back above the 60.25 area that has been resistance/support. There is also plenty of resistance on this chart higher at 62.78-63.05 from the bearish 20/50 day SMA cross and then 64.15 above it. The weekly chart nearly printed a dragonfly doji (the inspiration for the company name), a very bullish formation. The 58.47 -59 support area stands out on this chart as it has been tested and held 3 times since February. The weekly chart also exhibits a lot of resistance points in a tight range above, from the 20, 50 and 200 week SMA's converging between 63.09 and 65.19. Although a bullish set of charts expect this to remain with in theses bounds this week.

QQQQ Daily

QQQQ Weekly
The Q's also ended the week stronger with a bullish hammer candle on the daily chart, which stopped just below the 44.25 resistance area. This too has many resistance points higher starting with the gap to 44.50 the 20, 50 and 200 day SMA's between 45.17 and 45.71 and the 45.75 top area from July and early August. Support lower continues to be at 43.50 and 42.50. The weekly chart also printed a bullish hammer, but at the same time lost the 50 week SMA. The 200 week SMA flat-lined at 42.44 is support and resistance at 45.89 and then 46.60 higher. This also appears to be in a range with the expectation for that range to continue this week.

So next week looks to bring stronger prices for Gold and Oil and a continued pullback in US Treasuries. Watch the range for the US Dollar Index to signal its next move. Although volatility is falling it remains with in a range and will have little impact on equities, which appear to have at least a slightly bigger pop in store for the week before hitting resistance, after a rough week this week. Good luck next week!

Q: Is the Bond/Dollar Run Over? A: Maybe

2010-08-24T15:33:00.011-04:00

Earlier today there were chilling technical indicators pointing to the end of the US Treasury Bond and US Dollar Index rally. Here is the post as written about 12 noon.

Original Post

It is interesting that more equity traders a now paying attention to the price action in bonds and the dollar. Sentiment traders would think this might suggest a top is near. But part of the attention is due to the rise of ETF's available to trade these markets. In fact these ETF's do a pretty good job of communicating information on the macro markets to equity traders without leaving their space. This is valuable information as to the potential future direction for equities.

I posted these two charts about 10:30 today

iShares Barclays 20+ Year Treasury Bond, TLT

Powershares DB US Dollar Index Bullish, UUP

When I first posted them I noted that it was early in the day but that something interesting was happening. The US Dollar Index and Treasuries have been trading in tandem lately. The TLT is creating a shooting star formation. This is where the price opens on a gap and jumps higher only to fall back. If it closes this way it is very bearish. It's companion lately, UUP, is in the process of printing a bearish engulfing candle. This is also bad news for the pair and confirmation of a potential topping process in Treasuries.

Be watchful as to how these close. Strong Bonds and Dollar have been driving equities lower. Use these new tools. A reversal could change things.

Trade well.

What has happened since then?

The TLT found support and rallied back to near the days high and the UUP also rallied above yesterday's open.

iShares Barclays 20+ Year Treasury Bond, TLT

Powershares DB US Dollar Index Bullish, UUP

So no shooting star. No bearish engulfing candle. Just a gap up on a strong candle for TLT and a continuation of the resting/flagging since Friday for UUP. Does that mean that we have not topped and are ready for more upside? Not necessarily, as both TLT and UUP are testing resistance (108 for TLT and as marked on the chart for UUP), but it does tell us that the long foretold bubble top in bonds and the dollar did not happen today. In fact what we learned today was that the bond and dollar bulls, after an early lunch, came back to their screens and saw the pullback as value and started buying again.

So maybe we do go higher still or maybe we don't, but we learned, that for today, that the bulls are still in charge.

Trade well.

Is the Bond/Dollar Run Over?

2010-08-24T11:58:00.006-04:00

It is interesting that more equity traders a now paying attention to the price action in bonds and the dollar. Sentiment traders would think this might suggest a top is near. But part of the attention is due to the rise of ETF's available to trade these markets. In fact these ETF's do a pretty good job of communicating information on the macro markets to equity traders without leaving their space. This is valuable information as to the potential future direction for equities.

I posted these two charts about 10:30 today

iShares Barclays 20+ Year Treasury Bond, TLT

Powershares DB US Dollar Index Bullish, UUP

When I first posted them I noted that it was early in the day but that something interesting was happening. The US Dollar Index and Treasuries have been trading in tandem lately. The TLT is creating a shooting star formation. This is where the price opens on a gap and jumps higher only to fall back. If it closes this way it is very bearish. It's companion lately, UUP, is in the process of printing a bearish engulfing candle. This is also bad news for the pair and confirmation of a potential topping process in Treasuries.

Be watchful as to how these close. Strong Bonds and Dollar have been driving equities lower. Use these new tools. A reversal could change things.

Trade well.

Top 10 Ideas for the Week of August 23, 2010

2010-08-22T16:25:00.023-04:00

After looking at over 500 charts I have found some good setups for the week. This week's mix contains a balanced 5 short setups, and 5 long ideas. These were selected in and should be viewed in the context of the broad market trend reviewed Saturday which looks good for more upside on both the daily and weekly charts for Gold the US Dollar Index and Treasury Bonds. The Equity market could see a positive move in the very short term but the weekly charts point lower. Here are the top ten, short set ups first, tonight in no particular order:

1. MIPS Technologies, Ticker: MIPS

Breaking above the rising channel. If it gets above 6.50 then it sees resistance at 7.21 followed by 8.32. Support is at the channel near 6.25.

2. Akamai Technologies, Ticker: AKAM

It is breaking resistance at the 46.76 area which has stalled it twice before. Now there is resistance at 51 and then 56 from 2007. A rough measured move looking back from the run from 26 to 36 then consolidation between 36 and 46 also puts 56 as the target.

3. Staples, Ticker: SPLS

Watch this for confirmation of the bullish hammer candle from Friday. If it confirms then there is nothing to do here. If it fails then when the stock cracks 18.50 to the downside the next support level is 15.50.

4. Sears Holdings, Ticker: SHLD

This stock failed to rise from a long run down and now is testing 60 again. If it breaks below 60 then 55.50 is the next support. The flag after the latest run down suggests it will try very soon.

5. 51job Inc, Ticker: JOBS

A Top 10 Pick last week, broke out and is flagging now. If it gets above 30 it can run to 32. Support is at 29.20.

6. EnergySolutions, Ticker: ES

the bullish hammer candle printed Friday held the 4.40-4.50 support area. If confirmed it is ready to go higher and sees resistance at 5.17 followed by 5.70.

7. Callon Petroleum, Ticker: CPE

Although this broke down on Friday the strong bearish candle points lower still. Support is first at 4.25 and then stronger at 4.00.

8. Intuitive Surgical, Ticker: ISRG

Another strong move down on Friday on big volume. Looks like more downside. Underneath 290 it sees support at the 275-283 area and then stronger support at the 248-261 range.

9. Delcath Systems, Ticker: DCTH

This printed a bullish hammer candle on Thursday and has held above support at 6 on Friday. If it continues to hold resistance above is at 6.81 on the way to 7.70.

10. Visa, Ticker: V

Visa has been a short idea on the Top 10 list previously and now looks to print some money. Friday's big down move on better volume cracked 70 but came back to hold above it. It still looks weak and a hold below 70 could lead to the 57 area as a target.

Bonus Idea: GMX Resources, Ticker: GMXR

What did this company do wrong? The stock has been hammered lately and looks like it has more room to the downside. If you are not already short this one support lies at 3.43 nearly 25% below current levels.

I wish to apologize to those that watch this process unveil throughout the weekend for the lack of transparency this week. A recent move and technology issues forced me to cut a process that usually takes about 10 hours into about 3hours. The most time consuming part of this process is posting all the charts that do not make the list. It is necessary to review them all, and I did this weekend as always, but had to cut back on the postings in order to get this out. Back to normal next week. Trade well!

Review Your Trades and Learn

2010-08-17T20:36:00.004-04:00

Sunday I put out a Top 10 trade Ideas for the Week which included a long set up for 51Job Inc, Ticker: JOBS. My premise was that it was waving a nice flag after the recent run higher. If it got above 27.15 it could run maybe as high as 33 on a measured move, but at least to 30. Here is the daily chart up to today.

51Job Inc Ticker: JOBS

You can see from the last two days that the trigger went the stock did go higher. Now lets look at the last 3 days in detail.

51Job Inc Ticker: JOBS 5min Trading Chart

From this chart you can see that the trigger did not happen until 3:40pm on Monday. I do not usually initiate a trade in the last half hour or first half hour so I let it go. Tuesday morning the stock opened with a bang and settled very quickly between 28.40 and 28.60. This was a classic bull flag on declining volume so I bought it at 28.45. The stock popped and ran to a range between 29.31 and 29.51. I sold 1/3 on the way at 29.20 and the rest at 29.40. I re-entered at 29.41 an hour late on what appeared to be another bull flag and ran it up only to be stopped out break even just before the close.

Why do I write this? To brag about a good trade? No to learn a lesson and make a point. I did miss a good part of the run due to my trading rules. But without trading rules you do not have discipline and therefore do not have a plan. you can make exceptions to your rules if your plan deems it important. Second, I want to learn from my mistakes. When the price started to rollover at 3:35 it should have been a clue to me to protect gains and get out. I did not. I will remember that now. Lesson learned for me. For you: Review your trades and learn what else you can do.

Trade well.

Is The Market Still Bullish on Bonds?

2010-08-16T17:44:00.010-04:00

Is the market still bullish on US Treasury Bonds? There was a lot of discussion today about blow off tops in bond prices or that yields could not go any lower. Others were stating that the strong bond market is signaling the equity market that it should get ready to move lower still. So which is it. Here is one view from looking at the activity in the iShares Barclays 20+ Year Treasury Bond ETF ticker: TLT and its bearish half-cousin ProShares Ultrashort Lehman 20+ Year Treasury ETF ticker: TBT. Understand that these are not mirror images of each other but are liquid trading vehicles used by professionals and a decent proxy for the view on Bonds. Look at the charts over the last 4 months:

iShares Barclays 20+ Year Treasury Bond ETF, TLT

ProShares Ultrashort Lehman 20+ Year Treasury ETF. TBT

TLT has been been in a channel between 98 and 102 over much of this period but in a rising trend the month of August. Volume has been fairly steady throughout this time frame. During the recent rise the RSI and MACD have been trending up along with the price. Today there was a big gap up and strong candle today but volume did not change today. This would lead you to believe that today's move was not a blow off top.

TBT has been trending downward but found a range over mid June to the end of July. Volume was steady over that time period. For the month of August the trend has been down and volume has not changed much. During the recent downtrend the RSI and MACD have been trending along with the price. Today there was a big gap down and strong candle with increasing by more than 75% over the recent trend. This might make you consider that a blow off bottom was occurring.

So which one is it? Is the run in Bonds done or is the move higher poised to continue? How about a different explanation. If you are confused as to which answer is right isn't it possible that the market is confused also?

Let me suggest a different explanation as to what is happening. Holders of TLT believe that bond prices can still go higher, meaning that yields move lower. They are unwilling to sell their holdings due to their conviction. Holders of TBT may be in one of two camps. The first one is betting that prices have topped and yields are going higher. In the second camp are those that are holding TLT that are hedging their bets by going long TBT. This is the new money added or increase in volume today.

So perhaps the balance between the long view and short view on bonds is shifting, but only slowly with the longs just hedging their bets. The tell will be what happens on the next move.

Top 10 Ideas for the Week of August 16, 2010

2010-08-15T10:53:00.023-04:00

After looking at over 500 charts and posting my thoughts on over 200 of them I have found some good setups for the week. This week's mix contains 9 short setups, and two long ideas. These were selected in and should be viewed in the context of the broad market trend reviewed Friday which looks to bring stronger prices for Gold and the US Dollar Index with US Treasury Bonds trying to join the party. Oil looks broken and on a path lower. And a rising volatility index combined with that stronger dollar should continue to press stocks lower. Here are the top ten, short set ups first, tonight in no particular order:

1. Genoptix, Ticker: GXDX

Waving a long flag after a big drop and now looks ready to move lower with the MACD crossing & rolling over. Under 15.50, there is no support. There is resistance above at 18.16.

2. Impax Laboratories, Ticker: IPXL

Trying to hang onto the 200 day SMA at 15.92 as support. If it loses that level then 13 is support. 17.10 is resistance above.

3. Goldman Sachs, Ticker: GS

Holding the magic 148 level for now with the 100SMA pushing it lower. If it goes through it then support is at 142.29. Resistance above is at 152.5/157

4. Visa, Ticker: V

Lower highs as it continually tests the 70-70.38 area. When it breaks through the target is 57. Resistance above at 74.44.

5. Jabil Circuit, Ticker: JBL

If it gets under 11.50 then support is at 10.65 then 9.50, with resist higher at 12.45.

6. SIGA Technologies, Ticker: SIGA

This stock fell out of a rising wedge to the down side and is now looking for support at 7.61. Under that support is at 7.28 and then 7.01. the target is under 7. Resistance is at 8.25.

7. Yahoo! Inc, Ticker: YHOO

It is looking like it will go through support at 13.70 with 12.75 as support lower. Resistance is at 14.

8. Helix Energy Solutions, Ticker: HLX

Has lost support of the channel and now falling further. If gets under 9 then can run to 8 then 6 as support. Resistance is at 10 then 10.51.

Now for the Long Set Ups

9. 51job Inc, Ticker: JOBS

Waving a nice flag after the recent run higher. Above 27.15 it can run to 33. Support is at 25.50.

10. True Religion Apparel, Ticker: TRLG

Found supp at 20 and now needs to take out 21 for a run to 22 then 24.09. Looking good for a run.

Bonus Idea: GMX Resources, Ticker: GMXR

One might short as much as they can borrow of this and then put the rest in puts. 3.43 is next support from early 2004. Resistance is at 6.10.

Trade'm well!

SPDR Sector Review/Preview August 14, 2010

2010-08-14T07:13:00.028-04:00

From last night's Macro Week in Review/Preview we see that a rising volatility index combined with that stronger dollar should continue to press stocks lower next week. How does that play out when looking at the individual market sectors? Lets take a look.

Materials Select Sector SPDR, XLB

It fell out of the 32.20 to 33 range this week and below the 100 and 200 day SMA. Now it is seeking support at 30.61 the 50SMA with 29.50 below that. Resistance is at SMA's then the channel bottom at 32.20.

Energy Select Sector SPDR, XLE

It is seeking support at what has been a key area between 52.90 and 53.40 with the 50 day SMA there to help. If it holds then the 54.50 gap area and the 100 and 200 day SMA's above are resistance. Support can be found lower at 51ish then 50.25.

Financials Select Sector SPDR, XLF

It is looking to test the bottom of the recent range at 13.85 for support. If that fails then the long term R/S line at 13.55 is the next support. On a bounce resistance can be found at 14.44, the day 50 SMA and 200 day SMA then the top of recent range at 15.05.

Industrials Select Sector SPDR, XLI

It lost the 100 day SMA this week and is now on support of both the 50 day and 200 day SMA's. Failure here sees the next support at the 27.75 area before 26.80. Resistance on a bounce can be found above 29.50 at 30.19.

Technology Select Sector SPDR, XLK

Holding near support at the 21.19-21.30 area with support lower on a breakdown at 20.75 then 20.25. Resistance on a bounce can be found at 21.68 then the SMA convergence area 22.08-.25 and 22.50.

Consumer Staples Select Sector SPDR, XLP

Lost the recent uptrend line near the 100 day SMA and the support of the 200 day SMA this week. It regained the 200 day SMA after tagging the 50 day SMA later in the week and is now looking to hang on. Failure here sees support at 26.56 then 25.90 before the 25.25 area. Resistance on a bounce is found at 26.94 then 27.30.

Utilities Select Sector SPDR, XLU

The Utilities SPDR was knocked off the top but is finding support at the 30.35-30.72 range, with the RSI turning higher again. Resistance above is at 31 then the recent highs at 31.45. Support below comes at the SMA's 29.47-29.75. This sector is still the strongest.

Health Care Select Sector SPDR, XLV

The 100day SMA drove this lower to support of the 50 day SMA this week, near the 29.28-.38 area. It looks to be flagging before another move. A push through the 50 day SMA leads to support at 28. A bounce sees resistance at the 100 day SMA then 30 before then the 200 day SMA above.

Consumer Discretionary Select Sector SPDR, XLY

This looks broken. It lost the 50 and 200 day SMA's this week and could not recover. 30.50-30.75 is a big support area and failure here sees support lower at 30 then 29. Resistance above the 200 day SMA is at 31.17 then 32.32 the 100 day SMA.

In summary nothing here looks strong. Just varying degrees of weakness. Some are sitting on key support levels but the other indicators are showing weakness as opposed to strength. If I had to pick the strongest sector I would still go with the Utilities. Consumer Discretionary, 2/3 of GDP, looks the weakest. That does not bode well for the market in general. Utilities will not lead the market to new highs. Get ready for at least a little more downside. Trade'm well.

From the Charts: Macro Week in Review/Preview August 21, 2010

2010-08-13T18:12:00.031-04:00

Coming into this week I expected continued stronger prices for Gold and the US Dollar Index, with US Treasury Bonds trying to join the party. Oil looked broken and headed on a path lower. And a slowly rising volatility index combined with that stronger dollar looked to continue to press stocks lower. The week started mainly as expected and finished as expected but was a bit uncertain in between. Let's look at the charts:

Gold Daily
Gold Weekly
Gold looked strong all week and finished Friday with a healthy pause. It tested the 1233 resistance, and is now resting for run at 1245, with support on the daily chart at 1220. The uptrend looks to continue. The weekly chart clearly shows the trend is higher and that 1260 is the next resistance level.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly
Oil continued the bear flag after falling and started a new downward move on Friday. Although it nearly printed a hammer, it still looks weak, and ready to test 72 as support. There is resistance above at 75 and then 77.25. Turning to the weekly chart the picture gets uglier. Last week oil lost the 20, 50, and 200 week SMA's and it barely tested them before a continuation of the chart lower. Under 72 there is support at 71.19 then 67.78.

US Dollar Index Daily

US Dollar Index Weekly
The US Dollar Index finally cracked 83 on Friday and tested 50SMA, at 83.42. It looks good to take it out and head higher from there. Resistance stands at 83.72 and then 84.25, with support at 82. The weekly chart shows the start of a bull flag holding over support at 82.25.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly
Bonds as measured by the TLT broke higher out of a tight range this week, clearly seen in the weekly chart. The daily chart shows the gap up and flag before a further run late in the week. Friday looked to be a rest day after the strong move this week. It looks good for more. 108 is the next resistance followed by 110. There is now support at 105 and 104 before the gap level of 102. The weekly adds that it is getting overbought but this is on a strong quick move up so it can stay that way for a while. It also shows resistance higher at 110.

VIX Daily

VIX Weekly
The Volatility Index has broadly been in a range between 22-28 for the last 6 weeks. It started the week falling to test the 200 day SMA and held to move higher and is now testing support of 50/100 day SMA cross. But in a range. If it holds then 28 is resistance higher and below 23.36 is support. The weekly chart is a bit more bullish with a test of the 28 resistance with 30.25 then 32.68 as resistance higher.

SPY 60 minute

SPY Daily

SPY Weekly
The SPY is trending lower and looks to continue. Despite the bullish doji above support at 107.10 on the daily chart the weekly printed a more bearish looking long legged doji, which takes precedence. This uncertainty is easier to understand when looking at the hourly chart and seeing all the support and resistance points between 106 and 110. Both scenarios could happen if there is a small up move to the tightening wedge on the daily before a further fall. Not a prediction, just saying. If the SPY does get through and hold below 107.10, then support is at 106 followed by 104.75. Resistance is at 109.05, then 109.66.

IWM Daily

IWM Weekly
IWM printed a bullish hammer candle Friday which may stall the fall. Like the SPY though, the weekly chart for IWM shows a long shadow meaning that it ended the week on weakness. Recall the weekly weakness takes precedence over the daily chart. 61 is support with 60.03-60.25 below that and resistance is at 61.60 then 63.00-.60.

QQQQ Daily

QQQQ Weekly
The Q's look similar to the SPY and IWM. A near hammer on Friday bodes bullish in the very short term with resistance at 45 and then 45.40. But the long shadow on the weekly chart again illustrates that the week ended on a downward move, in this case right at the 50 week SMA. Support comes at 44.50 then 44 from the daily chart and then lower at 42.43-.78 from the weekly chart.

So next week looks good for more upside on both the daily and weekly scale for Gold, the US Dollar Index and Treasury Bonds. The Equity Index ETF's could see a positive move in the very short term but the weekly charts point lower. Uncertain how to react to that, the VIX is still rangebound. Trade well this week!

From the Charts: Macro Week in Review/Preview August 13, 2010

2010-08-13T17:59:00.026-04:00

Coming into this week Gold looked to be going higher, and Oil despite ending the week weaker was holding support. The US Dollar Index needed life support and was looking to get it in the 79.50 to 80 range, with bonds in a range. The major equity index ETF's SPY, IWM and QQQQ were all showing indecision shorter term but pointing higher on the weekly charts, and near the 100 day SMA as resistance. The volatility index looked to be headed lower, perhaps aiding index ETF's higher. By Wednesday the US Dollar Index and Oil moves changed all that. Let's look at the charts.

Gold Daily

Gold Weekly

Gold finally showed its hand on Thursday with a strong move above the 50 day SMA and held the breakout on Friday. On the weekly chart it has support of the rising 20 week SMA. The 50 day SMA is now support and gold is ready to run for 1220 and then 1233-45. The weekly chart shows additional resistance at 1225 on the way and finally at 1264. Support below the 50 day SMA is at 1200 and then 1189 with the weekly chart adding 1175.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly

Oil broke lower through the 20, 100 and 200 day SMA's on Wednesday continuing lower Thursday below the 50 day SMA and challenging the bottom of recent 76 - 82 channel near 75.75ish. It is still probing lower and looks to test support at 74.80 soon. The bearish engulfing candle on the weekly chart reinforces this having blown through all the weekly SMA's, and shows support lower at 72 and then 68.07. Resistance comes at all those SMA's on the weekly chart and at 77 followed by 78.19-79.08 from the daily chart.

US Dollar Index Daily

US Dollar Index Weekly

The US Dollar Index retook the 200 day SMA on Tuesday and then never looked back. It looks to continue it's strong move up with resistance at 83.66-.96 on the daily chart, near where the 50 day and 100 day SMA's are converging. The weekly chart shows the strong bounce off of the 50/200 week SMA cross at 80.13, which is now support, and forecasts resistance at 83.67 followed by 86. Support can be found at 82.50 then 81.82-82.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly

The long Term Treasury ETF finally cracked the top of 98.25 - 102 channel on Friday. If it can hold that level it can run to 104, and then perhaps 108 as pointed out on the weekly chart. Failure to hold the 102 level will see support in the 99.83-100.20 area and then 98.25 below. RSI and MACD are positive reinforcements to the case higher.

VIX Daily

VIX Weekly

The daily VIX chart popped on Wednesday above the 100 day SMA and held. It has started a flag since, resting for the next move. Looking at the weekly chart the downtrend line from early June was breached to the upside and stopped just above the 200 week SMA. It looks poised to go higher, especially if it can break 26.65, the 50 day SMA, from the daily chart, and then would see resistance at 28 and then 30 above, with the weekly chart adding 32.75 as further resistance. if the breakout fails, support can be found at 25.38 then 24 and 23.44-23.50.

SPY 60 minute

SPY Daily

SPY Weekly

The SPY 60 minute chart shows a couple of unfilled gap downs this week and tight trading range on Friday. There are many potential support and resistance points but it clears out a bit once the SPY gets below 106. Switching to the daily chart shows the strong move down Wednesday followed by lower moves at the end of the week and a doji today. The weekly chart tells a strong story with a long red candle with very short shadows. This is heading lower. Support can be found at 107.10 then 106 and 104.38-.75. Resistance is clearly at the 50 day SMA which it could not retake, at 108.82, and then 110 above that. The weekly chart adds resistance as well at the 50 week SMA at 109.51.

IWM Daily

IWM Weekly

The daily chart shows IWM losing the 20, 50, and 200 day SMA's all on Wednesday, and then following lower the rest of the week. Today's inside day bodes for a continuation lower and this is reinforced when looking at the weekly chart. Support may be found at 61 or lower at 60.25 from the daily chart and the weekly adds support lower at 58.47 then 56. Resistance comes first at 61.75ish followed by 63 and then all the daliy and weekly SMA's.

QQQQ Daily

QQQQ Weekly

The Q's flew through the 20, 50, 100 and 200 day SMA's on Wednesday and then dropped lower to end the week. Friday's inside day bodes for a continuation lower, with support at 44.50 then 44 and 43.50. This is reinforced by the weekly chart which also lost the 50 week SMA and now sees support at 42.78 below the previously mentioned levels. Resistance could come at the tightly grouped 20, 50 and 200 day SMA's as well as 45.75 and 45.90. Lots of resistance in a tight range.

So next week looks to bring stronger prices for Gold and the US Dollar Index with US Treasury Bonds trying to join the party. Oil looks broken and on a path lower. And a rising volatility index combined with that stronger dollar should continue to press stocks lower. Good luck next week!

Marubozu for Everybody!!

2010-08-11T17:40:00.015-04:00

Well Not Quite Everyone

Today was an unusual day. There were strong moves in all of the broad market indicators used, except for Gold, which was keeping its cards close to the vest.

Gold Daily

Gold continued it's flagging near the 1200 resistance level with 1189 support below and 1210 as resistance above.

Let's look at the other macro indicators before shifting to the equity index ETF's.

West Texas Intermediate Crude Daily

US Dollar Index Daily

iShares Barclays 20+ Year Treasury Bond Fund Daily

Oil, the US Dollar Index and the Bond ETF all posted strong moves printing candles called Marubozu. Technically a Marubozu would be a candle with the shadows (the thin lines on the ends of a candle marking the high and low) shaved off, so opening on the low and closing on the high or vice versa, but I am taking a little artistic license as all technical analysis is subjective. A my twitter friend @Bimmertrader points out I don't shave with the Gillette fusion razor and am considering the day's low/high as a little stubble. These candles signify a very strong move and an expectation for continuation in the same direction. For Oil the direction was lower and now sees support at 76.99 and the bottom of the channel at 76. For the US Dollar Index and Bonds it was higher. Resistance for the Dollar index comes at 82.50 and then 83.65, and for the Bond ETF at 102. Note also that the MACD crossed over today for all 3 and that the RSI moved across 50 for Oil and the Dollar Index and was already there for the Bond ETF. These indicators reinforce the information from the Marubozu.

Now let's get to the Equity Index ETF's

SPY Daily

IWM Daily

QQQQ Daily

More Marubozu here, all to the downside, with some additional artistic license taken on the Q's. The IWM took the lead today, as it had in the previous move to the upside. It gapped down below the 20, 50 and 200 day SMA's and now sees support at 61.50 and then 60.25. The QQQQ also lost the 50 SMA but regained it by the close and it is now support with 45 and then 44 as support lower. The SPY did not reach the 50 day SMA so it remains supp at 108.88 with 108 and then 107 below. The IWM also was the first to move the RSI under 50 but they are all under 50 now, and where the MACD crossed on the IWM yesterday it made the cross today on the SPY and the QQQQ. This set of pictures points lower for all the equity indexes.

The total picture out of today's trading was a large move stronger for the Dollar Index and Bonds and lower for the equity index ETF's and Oil. Many will talk about a rebound for tomorrow but the Marubozu say they are wrong and the moves will continue.

Trade'm well tomorrow!

Don't Get Caught in the Moment It Can Cripple You: Don't be a Pig

2010-08-11T09:58:00.006-04:00

Yesterday late afternoon I started stalking Apple, ticker AAPL, for a short options combination trade. The chart above shows a string of tighter range days unable to break above 265 over the last 2 weeks, and today's move down. I was looking at 1x2 Put spread. Here I was looking to buy August 240 puts and sell both a August 230 and a 220 put for each one bought. The trade would put me net long AAPL at 210 if the stock were to close August 20 below 220. I am willing to own Apple at 210, but was betting that the combination would rise multiples if the stock started to fall and I would most likely sell it before expiry. The market for this combination was 4c bid and 6c offered just minutes before the close. I stuck to my bid and did not trade.

As I write this the stock is down $5.80 at 253.40 and the spread I was unwilling to pay 6c for yesterday is now showing a 41c/46c market. It could have been a 680% return in less than one hour of market exposure......if I was not a PIG.

Moral of the story, get caught up in the moment, fight for every penny, but remember the broad context of your trading premise. Like the lottery you've got to be in it to win it!

AONE Options Earnings/Breakdown Play

2010-08-10T18:00:00.008-04:00

I have been watching A123 Systems, Ticker: AONE, since its IPO in September last year. It has been a dog most of its life so perhaps I have a bias. Here is the weekly chart.

AONE Weekly

From the weekly chart you can see there was a clear down channel for the first half of the year until it started basing in June.

AONE Daily

The daily chart shows the basing channel between 8.40 and 9.50 that took place until the end of July, when it broke higher. Note that after the break out it never took out the May high at 11.50 or solidly breached the 100 day SMA, reinforcing the weakness of the move up. Also note the ascending triangle forming recently with the 100 day SMA pushing through lower, creating a symmetrical triangle within the ascending triangle. This last formation focused me on trading the stock. The resolution of symmetrical triangle pattern seemed imminent and the earnings announcement after the bell today led me to believe the catalyst for a move existed. Upside resistance was at 11 and then 11.50. Downside potential was 9.75 and then 9.50. The Moving Average Convergence Divergence (MACD) was rolling lower and the RSI was falling, biasing me to the downside.

AONE 5 min

I bought August 10 strike puts at 3:12 Monday when the stock was trading at 10.89 for 25c. the puts . The stock had tested the 10.50 support area a couple of times over the last few days and had double topped at 11.50. It also failed to make a higher high after rebounding from the second fall from 11.50. Note that the 5 minute chart above shows the ascending triangle but not the 100day SMA. Today's action quickly broke the trendline and hovered near 10.50 all day.

Earnings did prove to be a negative cataylst and the dotted line shows where the stock last traded in after hours as of 6:45pm. Based on this price and reduced volatility I should be able to sell the puts tomorrow at for at least a double. Not bad for a slightly more than 1 day holding period.

The keys to this trade were a view that the price was going to break out of the formation lower and knowledge of a catalyst to force the action today. Wish me well for the open!

Why Risk Limits are Important: The Real World

2010-08-09T15:57:00.012-04:00

Just back from vacation and starting off with a bang. To the downside! Well at least it could have been a bang or explosion if I did not have parameters on the amount of risk I am willing to take. Take a look at this 2 year chart of Endo Pharmaceuticals Holdings, Ticker: ENDP.

Seems to be breaking out of a long term symmetrical triangle to the upside. In fact it was a top ten pick last week for just that potential. On a retest of the downtrend line today I bought a small position at 24.87 and placed a stop just under the trend line, at 24.74. All seems well right? Now look at the 5 minute chart for today.

After trading in a tight 20 cent band all day, at 3:30 the stock plunges down to 24.58 and then rips up to 25.67 before falling back to close the 5 minute candle at 25.12. $1.09 range or 4.3% move all within 5 minutes! Volume that had been on pace for about two thirds of the normal 1.430 million shares printed over 1 million shares in that 5 minute candle alone! Obviously my stop was hit. Luckily it was within a penny of my order for a 14 cent/share loss. What happened? At 3:30 this headline hit the PR Newswire: "Endo Pharmaceuticals Agrees to Acquire Penwest Pharmaceuticals and Submits NDA For New Formulation of Long-Acting Oxymorphone Designed to be Crush-Resistant."

How could you have know that was coming right? Exactly. And that is why your trading system needs to have controls in place for the amount of risk taken. My risk controls take two forms. The first I touched on above, setting a stop loss. This should be placed at a meaningful level. You need to determine what is meaningful to you. It may be just below a key support level or some fixed percentage or dollar/share value away from the execution price. You recall my stop was just below the trendline. This determination also depends on the size of the position you have on. Since I had a small position on, the trendline at 13c/share away was an acceptable risk for me, and probably would have been even if I had on a larger position as well. The point though is that the amount of money you are willing to risk is determined by both position size and how far away your stop is from the execution price.

I lost some money today on this trade, and I do not like that, but it could have been a lot worse had I not determined how much money I was willing to risk before I bought the stock. Who knew that the price would explode or that it would stop falling? Be prepared. Determine your risk tolerance before you trade.

From the Charts: Macro Week in Review/Preview 8/7/2010

2010-08-05T07:33:00.057-04:00

The week began looking to bring stronger prices for Gold and Oil. The US Dollar Index looked to be headed to the woodshed for a further beating and US Treasury Bonds might drift to the top of their range. Less volatility in the volatility index and a weaker dollar looked to make it easier for stocks to rise and test their 100 day SMA's (last week's summary/preview). Equities did test the 100 day SMA but could not meaningfully pierce it despite the VIX heading lower. Gold did rise and the dollar did continue to get beat up. Oil and bonds were a little more quirky but behaved broadly as anticipated. Let's look at the details:

Gold Daily

Gold Weekly

Gold pierced the 100SMA on Tuesday then never looked back pushing through the 20 SMA and touching the 50SMA Friday at 1211 before a slight pullback. 1211 will continue to be resistance, with 1241 a big resistance area above that. 1200 will act as support with the 20/100SMA area at 1189 further support below that. The weekly chart confirms the direction is higher now, adding a resistance point at 1225, and showing some support at 1192 then 1175.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly

Oil broke out of the box Monday with a strong move up and initial test of 82, the top of the 76-82 range it has been in. After pushing through on Tuesday it could not hold 82 as support through Friday and fell back into the range. 82 will continue to act as resistance, with 79.50 and then all SMA as support lower, until the bottom of the 76-82 channel. The weekly chart shows the short term direction is higher, as it held above the weekly SMA's and rose this week. Support in the weekly chart comes at 79.50 then 20/200/50 week SMA's between 76.76 and 78.25. Resistance shows up at 85 then 87.50. Expect another test of the 82 channel top.

US Dollar Index Daily

US Dollar Index Weekly

The chart for the US Dollar Index looked ugly Monday and just kept getting worse. Friday saw it lose the 200 day SMA and hoping for support at 80 from April or the stronger 79.50 area. This 79.50-80 area is the key to future direction, but it looks lower still. If this area holds, resistance comes first at 80.68 then 81 and 81.50. The weekly chart shows it is holding onto support at the 50/200 week SMA cross near 80. The 79.50 support area from February through April would give way to 78 as support lower and then 77.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly

The long bond ETF tested 100 immediately on Monday, consolidated throughout the week then retested the 100 area on Friday. This week confirmed the importance of the 50 day SMA as support, currently at 98.46. Moving to the weekly chart more clearly confirms that TLT is in a range between 98.50 and 102. Expect this continue near term.

VIX Daily

VIX Weekly

The Volatility Index, VIX, printed a series of bearish engulfing candles, where the body of today's candle completely covers body of he previous day's candle, this week which bodes for lower levels to come. It is still elevated by historical standards. The weekly chart shows the trend down more prominently. Support comes at 20 and then 18 below that, with resistance first at 22, and 23.40 and 25.

SPY Hourly

SPY Daily

SPY Weekly

The hourly chart for SPY shows the tone of the market for the past week: wait and see what happens with the Friday employment report. The energy created by the tight trading range Monday through Thursday between 111.75 and 113 was then released on Friday with a downside test of the 200 day SMA at 110.93 before rising back to close in the range on strong volume. The importance of the 200 day SMA as support was confirmed otherwise a whole lot of action yielding nothing, unless you area a day trader. This is reflected in the daily chart and summed up in one word, indecision. On the daily chart the 200 day SMA is support at 110.93 with 110.20 below that. Resistance is first at 113.20, the mid-June high. The weekly chart points to a positive future. On the weekly it broke and held the 20wk SMA at 111.85, and sees resistance at 113.20 and then 114.67, with support lower at 109.38.

IWM Daily

IWM Weekly

IWM showed the same pattern of a tight trading range Monday through Thursday but did not respond as well to the downside energy release Friday, failing to re-enter the range. It did confirm the 200 day SMA as strong support as it held 63.85 then rose and held 65. Still, 66.63 the 100 day SMA is resistance, so a range between the 100 day SMA and 200 day SMA exists causing some indecision on the next direction. Again the weekly chart looks more positive. IWM probed above the 20wk SMA at 66.29 but could not hold it. Another push will see resistance higher at 67.50 and 64.68 acting as support lower with 62.86 below.

QQQQ Daily

QQQQ Weekly

The Q's were the strongest of the index ETF's this week. After the same tight trading range Monday through Thursday it retook, and held above the 100 day SMA at 46.68. Resistance higher is at 47 then 47.80 with support below the 100 day SMA at 45.75. Still a pretty tight range with some indecision about the next direction. On the weekly chart QQQQ rose above the 20 week SMA at 46.46 and held. It also looks more positive on the weekly timeframe. Resistance comes at 47.80 and support at 45.90 then 44.71 from the weekly charts.

So going into next week Gold looks to be going higher, and Oil despite ending the week weaker is showing strength as well. The US Dollar Index needs life support and hopes to get it in the 79.50 to 80 range, and bonds remain in a range. The major equity index ETF's SPY, IWM and QQQQ all are showing indecision shorter term but are pointing higher on the weekly charts, near the 100 day SMA as resistance. With the volatility index looking lower, perhaps they can punch through.

There will be no Top 10 Trade Ideas put out this weekend due to my vacation, but it will return next week. I will be reviewing the sector SPDRs Sunday night and getting back into the individual names starting Monday. Have a great week trading!

Top 10 Ideas for the Week of August 2, 2010

2010-07-31T19:01:00.026-04:00

After looking at over 500 charts and posting my thoughts on over 200 of them I have found some good setups for the week. This week's mix is identical to last week's with 8 long setups, two short ideas and one potential break out. These were selected in and should be viewed in the context of the broad market trend reviewed Friday which looks stronger for gold and oil. The US Dollar Index seems to be headed to the woodshed for a further beating and US Treasury Bonds may drift to the top of their range. Less volatility in the volatility index and a weaker dollar should make it easier for stocks to rise from what looks like a minor bias to the upside for IWM to a bullish indication for SPY. Here are the top ten, tonight in no particular order:

1. Endo Pharmaceuticals Holdings, Ticker: ENDP

If it gets above the triangle at 24.85 then there is some resistance at 26 but a target of 32. Support lower on a rejection of the triangle bound is massive, as all 4 SMA 20/50/100/200 and the triangle triangle bottom.

2. RINO International Corp, Ticker: RINO

Could not get above the 15.50 top from June and now it is looking for support at the 50SMA 13.13. This is the potential entry point. If it holds it should re-challenge the 15.50 top, with 12 below as support.

3. Caribou Coffee Co., Ticker: CBOU

Flagging above the recent 10.52 resistance. Now it is ready to pop to 11.50 resistance then 12.90 both from near the issuance 5years ago. Support is at 9.73 below and then the 10.52 area.

4. Crocs, Ticker: CROX

Broke the 12.28 resistance level so ready for higher. The RSI says it is getting overbought as it is above 70 but it can stay overbought for sometime and there is no resistance until 15.49. Support below is at 12.28 then 11.30.

5. Anadarko Petroleum Corp, Ticker: APC

It reclaimed and is holding a range between 49.08, the Resistance/Support line, and the 50.52 area. Could break either way. Above 50.52 the first resistance is at 55 and then 56.68. A break below 49.08 sees support at 44.95. Nearly 10% either way. August 49/50 split straddles went out at 4.26, anticipating this move will happen. Better return in the stock.

6. American International Group, Ticker: AIG

It is holding the break above the descending triangle well. There is resistance 40 then 42.5 above. Then the real money kicks in. Support lower is at 36.06.

7. Jefferies Group, Ticker: JEF

There is a flag forming after the recent move higher, ranging between the 100 and 200SMA, 24.16 and 24.81. Looks like it will break higher. The target on a break is 27.50. There is support below at 24 then 22.79.

8. Emulex Corp, Ticker: ELX

8.70 has been a big area of support in the past and it is testing it now. On a break lower the first support is at 7.75 followed by 7.26. Resistance is at 9.90 if it bounces.

9. NCR Corp, Ticker: NCR

It rejected 14.35 last week and is now looking for support at 13.42. If it finds it there and holds resistance is at 14.35 for a 7% win.

10. Research in Motion, Ticker: RIMM

It broke above the 50SMA Friday and finished at resistance near 57.5 and filled the gap down from late June. it is ready for a move higher now to the 63.20-63.86 resistance area. Support below is at the 50SMA at 55.25.

Bonus Idea: National Bank of Greece, Ticker: NBG

Come on, all of the European banks are okay and the National Bank of Greece is rising. You have to be kidding me. This at the top of a Dead Cat Bounce at the 100SMA. RSI is falling and the MACD is rolling over. Target is 2.50 or the 50 SMA whichever is lower.

No Top 10 List next week as I will be taking a short vacation. Back the following week. Trade'm well!

From the Charts: Macro Week in Review/Preview 7/30/2010

2010-07-30T19:05:00.031-04:00

We entered the week with Gold looking weaker and oil looking stronger. The dollar index seemed to be in limbo and equity Index ETF's seem to be poised to move higher with support of a VIX looking to move lower. Gold and Equity index ETF's moved as expected Monday and early Tuesday but then reversed course. Oil declared itself to be range bound and the dollar broke lower later in the week, taking bond yields lower. I am adding a new indicator this week, the iShares Barclays 20+ Yr Treasury Bond Fund, Ticker: TLT, as a proxy for the bond market. Let's look at the details:

Gold Daily

Gold Weekly

Gold had fallen out of the upward channel on the weekly chart last week and lost the supp of the 20wk SMA at 1190 on Monday. This allowed it to fall to the 1162-1164 support area from April. After a bounce it is attempting to retake the 100SMA and the 20WK SMA with a hammer on the weekly. The monthly chart however is adding to the resist at 1180. Above that another run at 1213 and higher can take place.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly

Oil has been in a range between 76 and 82 for several weeks now, the game has been to figure out if it will be above or below the 100SMA in that range. It took a short trip above and has been hovering around the 100/200 SMA area. The weekly chart shows just how tightly bound that range is in the broader context. I am not expecting any change from this in the coming week.

US Dollar Index Daily

US Dollar Index Weekly

US Dollar Index Monthly

The US Dollar Index has been in a down trend since the beginning of June. Despite what looked like a pause in the daily chart this week the weekly shows continued downside which appeared in the daily later in the week. 80 - 80.70 looks to be a support area. I have added the monthly chart here to show just how ugly it could get below80 with support at 77.50 then 75, both corroborated on the weekly and daily charts.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly

Treasury Bond yields have been a recent lows lately with prices near all time high levels and have been ranging lately. This is easily seen in the weekly chart with the range being 98-102 on the TLT. I expect this range to continue next week.

VIX Daily

VIX Weekly

The daily chart of VIX shows a continued elevated level and reduced range with 23.50 acting as support. The weekly shows more clearly that there is a descending triangle formed and it is near its conclusion. There is support below around 22 on a breakdown and 26 appears to be resistance above. Expect it to remain elevated in the coming week.

SPY Monthly

SPY Weekly

SPY Daily

Today was a big day as there were many reasons (price levels) to be fearful coming in. Going backward on the SPY the monthly chart shows a clear reversal of the downtrend with a bullish engulfing candle and above the 108.09 Fibonacci level. The weekly shows a doji but very close to last weeks high and above the 50 week SMA and finally the daily tested and held the 109.15 support area from the monthly chart today. It avoided virtually every potential pitfall today and looks to go higher now. 112 to 112.5 is resistance.

IWM Daily

IWM Weekly

IWM Monthly

The Russell 2000 ETF daily chart shows a bottom was found at the 50/200 day SMA cross near 63.79. From a touch there Friday it rallied to resistance at 65. The weekly looks a bit less bullish with a doji just above the 200week SMA at 65, but could be just resting. Moving to the monthly chart, IWM shows an inside candle and a range of 58.07 to 65. If it can hold above 65 then it will act as support for a run to 66.70 then 67.50 and 70. Failure sees support at 63.79 then 63 before 60. Based on SPY I expect it will hold and move higher.

QQQQ Daily

QQQQ Weekly

QQQQ Monthly

Finally the Q's look very similar to the IWM. The daily shows it bounced off support of the 200 SMA and stalled at the 45.75 resistance area. The weekly shows a doji right at a resistance/support line, but the monthly is slightly more bullish as it closed above the previous month's real body. Less indecision here, a short term positive next week with 46.70 as resistance.

So next week looks to bring stronger prices for Gold and Oil. The US Dollar Index seems to be headed to the woodshed for a further beating and US Treasury Bonds may drift to the top of their range. Less volatility in the volatility index and a weaker dollar should make it easier for stocks to rise from what looks like a minor bias to the upside for IWM to a bullish indication for SPY. Good luck next week!

Levels to be Fearful: The Prequel SPY

2010-07-29T20:21:00.012-04:00

110.41, 109.15, 108.09, 107.84 and 107.01

Tomorrow is month end for the market and so there are many different views of the market that will be coming together, each painting a picture of the past and trying to glean an insight into the future. Using the S&P 500 SPDR's, ticker: SPY as a proxy for the market and a tool to guide us through the process, let's take a closer look at what could scare and how likely it is to happen.

SPY Monthly Chart

The monthly chart shows 3 levels that if the SPY closes below them could cause some downside panic. The first is 108.09. This is a 50% retracement of the movement from the October 2003 lows to the October 2008 highs. The second is 107.84. Below this level SPY would no longer print a bullish engulfing candle as it looks today, (where the body of this candle totally engulfs the preceding candle and closes higher - this is a bullish signal). Last, the 107.01 level where it would give up the 100 month SMA.

SPY Weekly Chart

On the weekly chart there are two additional levels that could be party poopers. The first is 110.41. This would create both a lower close than the high of the previous week and a shooting star pattern that is bearish. The second is 109.15, the 50 week SMA.

Are these levels 110.41, 109.15, 108.09, 107.84 and 107.01 even possible? Lets look at the daily and hourly charts for clues.

SPY Daily Chart

The daily chart printed a bearish engulfing candle today signaling a bearish trend to come already. Also below the 110 area that it is near and tested today the next level of support is the area where the 20 and 50 SMA's are converging at 107.98-108.21. This makes the first 3 of the 5 levels possible.

SPY Hourly Chart

The hourly chart shows a convergence of the 50 hour SMA and the down trend line at 109.19. Below that the 200 hour SMA at 107.95 provides further support. You can also see several other support and resistance areas along the way and lower. This chart also confirms the possibility of the first 3 levels and show what it would take for the last 2 to occur.

First, let me state that I am not predicting doom and gloom, only showing that there are downside scenarios to protect against, as illustrated from the technical analysis of the charts. These are real possibilities, though and you should be prepared for what you will do if they occur.

Good luck tomorrow!

Top 10 Ideas for the Week of July 26, 2010

2010-07-25T17:13:00.024-04:00

After looking at over 500 charts and posting my thoughts on over 200 of them I have found some good setups for the week. Another week another change in view. Last week there were 8 short set ups two potential break outs and one long idea. This week nearly opposite with 8 long setup two short ideas and one potential break out. These were selected and should be viewed in the context of the macro view which looks weak for gold and positive for oil. the dollar is in limbo. Equity markets seem poised to push higher and a falling VIX is supporting this. Here are the top ten, tonight in no particular order:

1. Netflix, Ticker: NFLX

This stock is heading down to 98.32, the 100SMA. Inside continuation day Friday. Resistance is at 110 then 113.24.

2. Pactiv Corp, Ticker: PTV

Shooting star or spinning top after a consolidation. Might be the start of a break higher but I am looking for a quick retest of the channel and the 50SMA. Will use 31 as a stop.

3. Under Armour, Ticker: UA

Confirmed the break out of the symmetrical triangle. The target on the move is 42. Support below stands at 36.50.

4. Whirlpool, Ticker: WHR

Printed a Morning Star reversal candle Friday right on the 200SMA. Should rise from here with a target of 90 target then 95.28. There is support below the current 85.97 level at 84.

5. ReneSola Ltd, Ticker: SOL

Piercing the 7.90 resistance level again. If it gets above 8.25 get in for a ride up. The potential is 11.5-12, and there is support at 7.25 and then 6.37.

6. Origin Agritech Ltd, Ticker: SEED

Same juicy story here as last week. If it can get above the 50SMA (acting as a descending triangle) it can run to 9 then 10.5. Support below is at 6.81 before a gap down to 5.80.

7. BP Amoco PLC, Ticker: BP

I am sure this will be a controversial pick, but it broke, tested and held the 50SMA. It is heading to 39.75, the next resistance with 42, and 45.74 above that. Support below at 34 if the market decides it was not Hayward's problem.

8. Jazz Pharmaceuticals, Inc, Ticker: JAZZ

Printed a long string of tight candles the past two weeks. It has bee consolidating between 8.25-8.98. My bet is it breaks higher, above 8.98, and then resistance is at 9.61.

9. Visa, Ticker: V

Defied the recent Head & Shoulders top and marched higher to the 75.75 Fibonacci level. It looks to get above it and then it will see resistance at 82.26-82.68, the 100/200 cross area. If it fails support is at 70.11 for a two headed monster.

10. Ctrip.com Inc, Ticker: CTRP

Strong move back to the 40.75 level on Friday. If it gets through then next resistance is at 44 then 46 above. Support on a pullback is at 38.71.

Bonus Idea: InfoLogix Inc,Ticker: IFLG

This stock is gathering lots of energy. Now which way will it pop? If higher look for 8, then 10 then 13 as resist. If lower 3.50 is support below. I am betting higher, but watching. My friend @tlento on twitter reminds us that there is a big dilution coming up in August.

Trade'm well!

From the Charts: Macro Week in Review/Preview 7-24-2010

2010-07-23T18:52:00.030-04:00

Coming into this week there looked to be further weakness in equities and gold ahead. Oil appeared to be heading higher. The dollar index was showing signs of a bounce but had room to move lower if support did not hold. Monday held true to the research but the equity markets quickly reversed Tuesday morning and started moving higher. Oil did continue to press higher and Gold lower with the dollar index continuing to waffle. Finally the VIX remained in a tight range. Let look at the details:

Gold Daily

Gold Weekly
Gold set out creating a lower bear flag on Monday and just sat there, flipping from 1195 support to being resistance. The weekly chart shows that this is bearish going forward as it fell out of the upward channel, but is still holding support of the 20wk SMA, barely. Look for a test of 1179 from the daily range. If that fails 1143 is the next support and then 1116 from the weekly chart. If 1179-1183 holds then a retest of resistance at 1207 could happen.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly
After holding the new higher range 76-82 oil kept plugging away at the 100 day SMA breaking through it and the 200 SMA on Thursday. Friday confirmed the break above the 200 SMA and a move into the top of the range. It now has a chance to run higher to 82. The tightly bound SMA's on the weekly chart will act as support, with resistance above 82 at 87.

US Dollar Index Daily

US Dollar Index Weekly
The dollar index held the 82 support level on Monday but probed it 3 days this week. Wednesday's strong push higher was beaten back and more on Thursday. The weekly chart shows a long run down to support at 82.25. The weekly suggests that it will go lower as the MACD is just getting started and the RSI indicates it is not oversold. Watch for support at 81.42 if it fails here. The 83.52 area is resistance if it bounces.

VIX Daily

VIX Weekly
The Volatility Index appears to be bouncing like a superball (each bounce has a lower high) off of the 23.50 area creating a descending triangle pattern. Note that the 23.50 level represents that volatility has been elevated since the beginning of May. From a technical analysis perspective the VIX appears to be headed lower. If that happens it would create an atmosphere where price gains in stocks would be easier to achieve. Keep that in mind.

SPY 60 minute

SPY Daily

SPY Weekly
SPY is trying to change the trend from down to up. The 60 minute SPY chart shows that there is a lot of congestion between the 110.41 close and 112 with several instances of resistance and support in between. The daily chart confirms a break of the downtrend lines and a near touch of the 200 day SMA at 110.68 which could give resistance. The weekly chart shows a move higher with resistance at 112.21 the 20wk SMA. SPY is in a transition phase. If it continues up to 112 the trend will have changed top rising and look to 113.2, the June highs, as resistance. If it gets knocked back 108.40 looks to be support.

IWM Daily

IWM Weekly
Strongest of the Index ETF's. The IWM saw a strong move higher to resistance at 65 over the last 4 days, through the 200day and 50 day SMA's. It now sits just above the 200wk SMA at 64.73 and looks to be heading for 66.50-.71 as resistance from both the daily and weekly charts and support below at 62.23-.52. Small caps leading higher.

QQQQ Daily

QQQQ Weekly
The Q's are the weakest of the Index ETF's. The daily chart shows that the rally ended just at the downtrend line from early May. The weekly shows that it broke the 45.90 resistance level but is in a resistance range now topped at 46.60. This resistance is confirmed on the daily chart near 46.70. If it rejects this resistance are the support area below is 45.13-.30 first and then 44.45. Given the outlook on the VIX and the other Indexes the bias would be for a break higher.

SO we enter next week with Gold looking weaker and oil looking stronger. The dollar index seems to be in limbo and equity Index ETF's seem to be poised to move higher with support of a VIX looking to move lower. Individual names will come over the course of the weekend and Top 10 Ideas Sunday. Have a great weekend!

Preparation, Process and Discipline

2010-07-20T06:26:00.015-04:00

This one is for the newbies. The ones who got A's in school because their teachers were afraid of their parents. The ones who got a trophy at the end of the end of the season just for showing up. The ones who have been conditioned to believe that they can do anything well from all these rewards for mediocrity.

Welcome to the Real World

No not the MTV version but the one where every day, all day long, everybody else is trying to take your money. Your confidence and bravado might get you noticed. Quoting lines from Sun Tzu's "The Art of War", or movies like "Wall Street", or "The 300" may pump you up and impress your friends. There is a place for that in trading. It is a competitive game. As I said every day, all day long, EVERYBODY ELSE is trying to take your money. ALL OF IT!

Are you scared now because you should be. So what are you going to do about it?

Preparation, Process and Discipline

Get prepared. Preparation sets the stage for success. For me preparation for the next week starts Friday at 4:30pm. I trade mainly off of technical analysis so I start the process by reviewing the daily and weekly macro charts, to reaffirm and reacquaint myself with the current trend. This is not just the S&P 500, Nasdaq 100 and Russell 2000, but also inter-market indicators that influence the stock market like Gold, Oil, and the Dollar as well as indicators of market breadth and momentum. With a reaffirmed understanding of the trend I then look for relative strength or weakness, and divergences from that trend by reviewing the Sector SPDR's.

Over the course of the weekend I then proceed to go through all of the individual stocks I follow looking for those where there is an interesting story. For me this encompasses about 600 names and is constantly growing. I seek out new names to review as the more practice I get the better I become even though I have been in the markets for over 20 years. when I see something interesting I write it down either on the chart or in my notes or both. This has recently yielded a smaller list of 150-200 names which I then review for price movement potential. At the end of that process I might have 30 - 50 names that I think hold potential to play on Monday morning. Finally I take that list and determine the best of the best ideas to put on the first page of my watch list (and here on this blog).

During this whole process I also look at the work of other technicians to see if I can see what they see or if I have missed something. I seek out the work of technicians that have different styles of TA than I do as well as those who have a similar style to keep my thinking fresh.

I do most of this process transparently on twitter over the course of the weekend. As such I see people come and go and ask their opinion of a single name or a few names here and there and sometimes express their view as well. It makes me wonder if they are doing the same thing as me, just not as transparently, or if they are looking for a short cut.

Execute the Plan

Now prepared for Monday morning I check the Sunday night futures market and go to bed. Rested and ready Monday morning I am prepared, not for the week, but for the day or maybe two days. Despite the best preparation and process the market can do whatever it wants. So often times all this becomes old within a couple of days or hours. Sunday night I put the idea to short Dendreon, Ticker: DNDN, based on the rejection of the top of the down channel with a target of 27.

I did short it and got stopped out 3 1/2 hours later up 83 cents, but look what happened after that. It closed basically unchanged.

This is where discipline comes in. If after all your analysis none of your ideas trigger, or the market changes direction, then don't trade or get out. Take the time to reassess the changing conditions. More on that in another blog.

I trust that you see there is a lot of work and time that goes into being ready to trade (or sit on your hands). Do that work. Put in that time. Everyone else who is trying to take all of your money is. I am. I am not trying to crap on a whole generation. I know of many young traders that do put in the time and do their homework, day after day, week after week, month after month. Be one of them.

Top 10 Ideas for the Week of July 19, 2010

2010-07-18T14:29:00.029-04:00

After looking at over 500 charts and posting my thoughts on over 200 of them I have found some good setups for the week. Again a week makes a big difference in view. Too much churning. Last week there were 6 long set ups, one short and 3 potential break outs, where they could go either way. This week there are 8 short set ups two potential break outs and one long idea. These should be viewed in the context of the macro view which looks lower next week for equities and gold. Oil seems to be doing better. Watch the dollar index for signs of a bounce otherwise room below. Here are the top ten, tonight in no particular order:

1. Helix Energy Solutions, Ticker: HLX

Falling out of a long channel between 10 and 17. If it gets below 9 it can test 7.25 then 6.

2. Callon Petroleum, Ticker: CPE

Fell out of an ascending triangle and now broke through the 100SMA. Next support is at 5 then 4.50.

3. Visa, Ticker: V

Head & Shoulders top forming, with the peak at 83.79 and neckline at 70.11. A break of the neckline makes for a target on completion of 56.43.

4. Nanometrics, Ticker: NANO

Testing the bottom of a symmetrical triangle near 8.6. A confirmed break out lower, I will be using 8, sees 7 as next support followed by 6. If it bounces the resistance is at the SMA's near 10.

5. Hi-Tech Pharmacal, Ticker: HITK

Broke lower out of a symmetrical triangle. it will see some support at 19 and 18 on the way to the target of 14.

6. Dendreon, Ticker: DNDN

In a broadening descend wedge. It just rejected the top of wedge and the 200SMA. Now it looks clear to run down to support at 27.20.

7. Madison Square Garden, Ticker: MSG

Fell out of a symmetrical triangle shortly after the LeBron news died. The target is 17.

8. National Presto Industries, Ticker: NPK

Heading to test support at 90. If it fails there the next support is at 83.30. If it bounces at 90 then resistance is at 95.

9. Shanda Interactive Games, Ticker: SNDA

In a descending triangle with support at 38.20. Breaking support leads to next support below at the 33.70-34 area then 30.83. If it breaks higher then resistance above is at the 50/100 SMA area. If it gets there then can try the 200SMA above that.

10. Whirlpool, Ticker: WHR

Touching the 90 support area. If it fails there then 85.52, the 200SMA, below is support after that. If it bounces off of 90 then can play to resistance at 95.11.

Bonus Idea: Teekay LNG Partners, Ticker: TGP

A beast in the current market. Hitting new ATHs. Just keeps going up. Use 31 as a stop or support.

Trade'm well!

From the Charts: Macro Week in Review/Preview 7-16-2010

2010-07-16T18:11:00.022-04:00

Going into this week I was looking for a range bound week for equities with a bias to the top of the range. Gold and Oil also appeared to be in a range, but the dollar index looked weaker and to be heading lower. Volatility measured by the VIX was in a tight range last week and looked to continue that way. The equity ETFs used here as a proxy did end up testing the top of their ranges and gave it all back with a vengeance today. Gold is still consolidating and the Oil has now flipped to a range on the upside of the 20SMA line that was the top of the range last week. The dollar index moved as expected, lower still. Finally the VIX held in a tight range. Lets look at the details:

Gold Daily

Gold Weekly

Looks Lower in the near term 1175. Despite big move today, Gold is still in a flag with the weekly channel bottom as support, at 1192 right now. On the daily charts the 20day SMA is about to cross the 50 SMA moving down which will increase the downward bias, adding some spice to the mix. This cross is also resistance at about 1220. Below the 1192 channel bottom next support is at 1175 then 1160.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly

WTIC behaved well this week. Mid week jumped the 20SMA on the daily and has held, establishing a new range 76 - 82 range, with 78.89 also resistance in the middle. The weekly chart shows that the three weekly SMA 20/50/200 are all tightly intertwined and acting as resistance above between 76.27 and 78.51. This suggests that if it does get through 78.51 it will stay in the upper half of the range. Support on a failure is 74.50 from the daily chart and then 71.19 from the weekly.

US Dollar Index Daily

US Dollar Index Weekly

The US dollar Index has been having a rough ride lately and continued this week. The daily chart found support for a nanosecond at the 100SMA and then fell out of bed Thursday. Today's candle a hammer though suggest the fall may be over and ready to reverse. It needs confirmation though and teh potential exists in the weekly, although it is a harder case to make. The weekly looks ugly, but is at the same support level, around 82.25 as the daily. Both charts show support below at 81.36-81.70. Should it reverse look for 83.41 as first resistance.

VIX Daily

VIX Weekly

The VIX is creeping higher off of strong support in both the daily and weekly charts in the 23.4-24.25 and 24 - 25.60 areas respectively. The weekly shows a declining trendline since the beginning of June that may halt an up move. otherwise the next resistance area is 28 where there has been some battles recently on the daily and weekly charts.

SPY 60 Min

SPY Daily

SPY Weekly

The SPY has room to move lower. The short term 60 minute chart, when reviewed in the context of where the SPY is currently reveals some interesting things. Sitting near the 100 minute SMA at 106.23 there has been support at several instances near 106-106.09 and resistance near 106.84 -107.5. this is interesting because it seems to confirm that the SPY has fallen out of the 107.25-110.53 range from the daily chart. The daily chart adds further downside bias as it has broken through the 20 day SMA but shows lower support at 105 then 104.38 area and resistance on the 50SMA and down trend line both near 109. Both support and resistance levels are confirmed in the weekly chart.

IWM Daily

IWM Weekly

The daily chart shows IWM has fallen of the box I have been using to show a consolidation area from 2008. The next support below is 58.5-59. I will need to zoom out again next week. The weekly is a stronger indicator that IWM will continue down. It has failed to take the 50wk SMA and showing consecutive inside weeks with additional support below at 56.09. Resistance is at 62.80, and then 63.50 from the daily and then 64.74 from the weekly.

QQQQ Daily

QQQQ Weekly

The Q's had a very strong down candle today through the 20/50/200 SMAs, Oh my! The weekly long legged almost evening star-like candle halted right at the 50wk SMA. The daily shows support below at 43.50 and the weekly at 42.78 with both adding support at 42.50 area. 45.50 - 45.70 seems to be resistance above.

That is it for the broad market. Looks lower next week for equities and gold. Oil seems to be doing better. Watch the dollar index for signs of a bounce otherwise room below. I will post some individual names this weekend and Top 10 Ideas Sunday. Have a great weekend!

Top 10 Ideas for the Week of July 12, 2010

2010-07-11T18:40:00.025-04:00

After looking at over 500 charts and posting my thoughts on over 175 of them I have found some good setups for the week. What a difference a (shortened) week makes. 10 short ideas last week, only one here. There are also 6 long set ups and 3 potential break outs where they could go either way. These should be viewed in the context of the macro view which looks most likely to be a range bound week for equities with a bias to the top of the range. Gold also still weak but at a support area, Oil now in a new higher range and the Dollar still looking for support. Here are the top ten, tonight in alphabetical order by ticker:

1. American Eagle Outfitters, Ticker: AEO

In a down trend and getting support at the 11.40-12.30 range. If it fails support the next level down is 9.60. If it goes through the trend line then resistance is at 13 followed by 14.07. Falling SMA's suggest it is more likely to fail the support level.

2. Astrazeneca PLC, Ticker: AZN

Broke out and retested before rising again. Looks strong. Target is 53 on a measured move, looking at the run from 35 break out level previously to the channel bottom at 42. Support below is at 47 before the top of the channel at 46.

3. Buffalo Wild Wings, Ticker: BWLD

Touching the falling 50 day SMA at 37.93, looks to reject lower from recent 3 wk downtrend. 35.25 -.40 has been good support and expect another test there. Failure brings support at 30.90. If it breaks the 50 SMA, 41.50 is resistance above.

4. Blackstone Group, Ticker: BX

Holding strong above the 9.83 Fibonacci level. Will run to 11.04/11.39, and then maybe 12.65. Support below is 9.7 and a break of that sees 9.00 as support.

5. Chipotle Mexican Grill, Ticker: CMG

It held support at 135 last week and is now testing 141.43, the 50SMA. Above 141.43 it will run to the previous high at 156. There is still support at 135.

6. Hi-Tech Pharmacal Co, Ticker: HITK

At the top of a symmetrical triangle with all SMA's acting as resistance. Could break higher but not likely. If it did the target would be 35. More likely test bottom at 21. Below that and it can run to 13 with a stop at 19 and 17 on the way.

7. Universal Display Corp, Ticker: PANL

Looking strong. Above 19.50 this can run to Dec 08 highs near 23. Support below is at 17.50.

8. Transocean, Ticker: RIG

Has created a pennant after the recent fall, centered at 50. This was a previous R/S level. Fallout lower will test the lows of Dec 08 and I expect blow through that level. If the break out is higher 56.25 is the first stopping point before running to 65. My bias is to the downside.

9. RINO International Corp, Ticker: RINO

If this stock can hold above the 50SMA at 13.58 (it is above right now) it can run to 15.50 then 17.49. Really strong. Support below on failure of the 50SMA is at 12.

10. Solarfun Power Holdings, Ticker: SOLF

Aptly named solar stock, this one is the most positive solar charts. As it breaks above the symmetrical triangle higher 10.50 is the first target. I am looking for 12 or higher. Support is at the triangle at 8.50.

Bonus Idea: Visa, Ticker: V

Broke above the 50 day SMA and the 75.75 Fibonacci level on Friday. The RSI and MACD all look good. I like it to 82 (the 200SMA) or higher.

Trade'm well this week!

From the Charts: Macro Week in Review/Preview 7-10-2010

2010-07-10T08:47:00.027-04:00

Going into this past week all the equity index ETF's had come off of a weak performance and still looked weak both on the daily and weekly charts. Perhaps a bit stronger on the dailies as many were right on top of some support. Gold looked to have settled after a plunge, but also weak. Oil and the dollar index also had weak performance and looked like they were still searching for a bottom. So the set up was for another week of weakness, with a slight chance of a bounce in equities. That did not last much beyond the futures open Monday night.

By Tuesday morning the sentiment for the equity ETF's had changed from weakness to at least basing and by Wednesday it was up, finishing the week strongly. Gold, oil and the dollar however, behaved as expected. Lets look at the details:

Gold Daily

Gold Weekly

Gold established a flagging pattern this week. As suggested the 1185 weekly support was tested and held, but it could not retake and hold above the 1211 resistance or the 50SMA on the daily at 1216. A flag after the large drop would suggest a continuation lower to test the 100SMA at 1171 or the 1164 tops from early this year, but the hammer on the weekly suggests a reversal, if confirmed. If the 1185 level is breached on a close then it will go lower, otherwise expect a range with 1216 remaining resistance, with a break above confirming the reversal.

Oil Daily

Oil Weekly

Oil broke above a tight range this week when it pierced through the 50SMA Friday. The daily picture now confirms a new range between 76 and 82, but with the 100 and 200SMAs in between to dampen moves. the weekly picture printed a piercing candle, also giving credence to a higher range. Resistance on the weekly is clustered at the tight $2.50 range between the 20/50/200 week SMAs at 76.-78.68. This tells me if it gets to the top of the range it may get strong support at 79.

US Dollar Index Daily

US Dollar Index Weekly

The US Dollar Index resumed its fall and looks to continue next week as it is establishing another bear flag on the daily. The weekly chart shows a continued move lower. Both time frames point to support at the 83.30 area, the 100day SMA and the 20wk SMA. If it breaks below there is support at 82.25 on both charts. Resistance above is now at the 84.50-85 area.

VIX Daily

VIX Weekly

The VIX is setting up for a stall or reversal at the 200SMA where it has a history of support/resistance lately as seen by the 4 recent bounces there. The weekly view supports this thesis. If support is not held then the weekly chart shows the downtrend line around 18 as next support and is confirmed in the daily. The 28 area has been a node of resistance/support and will act that way on a bounce off of the 200SMA higher.

SPY 60 Min

SPY Daily

SPY Weekly

I put the 60 minute chart up to show just how congested the history has been between 106.84 and 110.76. There will be a lot of chop in this range. Moving to the daily chart, the long term down trend line from September 2007 highs comes into play at 108.80. Add to that the weekly printed an inside candle and resistance above at 108.51. I take from this that a move above 108.80 will chop until can get through 110.40, but if rejects at 108.80 the support should be at the 104.38-.75 area.

IWM Daily

IWM Weekly

The daily chart shows resistance at the 200SMA very near and above that 65.57 form the 50SMA. Support comes from the 61.50 box bottom and then 58.40 below. Moving to the weekly, the inside candle straddling the 50wk SMA also shows support around the 58.80 area and resistance at 64.78 200wk SMA. looks like a range this week to me with a bias to setting a lower high from the falling 50day SMA.

QQQQ Daily

QQQQ Weekly

The daily chart shows a new rising trend forming but overhead resistance near where the 50 and 200 SMA are due to cross soon near 45.40. The weekly shows 45.70 as resistance. Volume on this run up has been divergent as it is falling. The daily chart sees support at 43.50 from May-June and then 42 - 42.50, with the weekly seconding that with support at 42.78 from February and 42.28, the 200wk SMA. Note that the weekly printed an inside candle on this chart as well, leading me to look for a range week up coming.

That is it for the broad market. Looks most likely a range bound week for equities with a bias to the top of the range. I will post some individual names this weekend and Top 10 Ideas Sunday. Have a great weekend!

The Day of Spinning Tops

2010-07-08T18:59:00.017-04:00

Do you remember when you were a kid and would get toys like these from Birthday party goodie bags, in your stocking for Christmas or as a dreidel for Hanukkah (guessing here as I am technically Catholic)? The hours of fun? Probably not as most of you are young enough to be my kids and only play video games, but trust me there was a time when this was cool.

Well there is more than one kind of spinning top and we saw many of them today of the Japanese Candlestick Pattern variety. The Japanese Candlestick guru Steve Nison defines a spinning top as a near doji with two long legs, but has also categorized short legged doji as spinning tops. So you can debate me as to whether today's action was a bunch of spinning tops or long legged doji, but the read is the same. The recent very short term up move has lost momentum and short term outlook is now at least neutral if not reversed.

For braoder appeal I will illustrate with the broad index ETFs although there are also many individual names that show the same pattern. I have cropped my SPY, IWM and QQQQ charts below to show the recent activity more prominently (typical 1yr+ charts at the end).

SPY Daily 3 Month Chart

IWM Daily 3 Month Chart

QQQQ Daily 3 Month Chart

In these charts you can see big up moves yesterday followed by these spinning tops or doji today. The SPY move stalled just below 107.73 20SMA and the support area from the last days of June. Volume fell off today and RSI is near touching 50. IWM moved into the box but stalled at the early June support level also with lower volume. QQQQ stalled at the late June gap down level on relatively moderate volume. You could make a case for all of these that they hit some kind of resistance. That is what is also pointed out in the Spinning Top patterns.

So now you have seen the down move over the last 2 months, were waiting for a bottom to get long again, and appeared to get the start of that move yesterday. Today's Spinning Tops or Doji's adding a possible change to neutral or down are a good illustration of why you seek confirmation of a trend change. Unless you are a nimble day trader who can react instantaneously when markets reverse you have to take today's action as a reason to watch a little longer before jumping in long.

Here are the longer time period charts to give you more perspective. i will post longer period charts on Chart.ly with support and resistance as well. Trade'm well.

SPY Daily 1 Year Chart

IWM Daily 2.75 Year Chart

QQQQ Daily 1 Year Chart