#MarketTiming – beware the ides of August…

SPY gaped up today, hit yesterday’s suggested 247 resistance on the first five-minute bar, and turned down, down not so much but maybe enough given that that is a lower high since last week’s nuclear Tuesday reversal.

In addition my daily price and breadth indicators also gave sell signals with lower highs. Volatility remains on a buy but it is for the third day in a row which makes any more time tenuous. If it were to turn it would give a higher low in the VIX, a possible hint a change in trend.

Today’s turn down in short-term breadth (see red circle on the chart below) in context with the continued decline in long-term breadth is often a gift the the bears, which is to say the general market should plunge tomorrow.

These are all quiet signals after yesterday blast to the upside which may mean they mean nothing at all and today’s long sideways price action after the open was nothing but a consolidation of yesterday’s gain before proceeding higher.

But these quiet, disquieting, signals could also be like whispers in the night — “beware the ides of August, beware…”

How often has the market topped quietly in August and fallen all the say into October?

SWING TRADING SIGNALS:

PRICE: Sell. Price (Day 1).
SHORT-TERM BREADTH: Sell. (Day 1).
VOLATILITY: Buy, (Day 3).

CONTEXT:

LONG-TERM BREADTH: Sell (Day 10).
CNN MONEY’S FEAR AND GREED INDEX: (36, still at a fear level).
NIFTY-50 STOCK LIST: 42 Buys; 13 Overbought, 2 Oversold, 2 new buys today, 3 new sells.

(click on the chart for a larger view)

SWINGTRADING2017-08-14_1524

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$SPY and $QQQ – not good behavior…

Both SPY and QQQ gapped up today but both meandered all day pretty much below each’s respective open. That is not good behavior despite the gap gains.

And yet, as I said yesterday, the market will go up until it goes down. So QQQ and its leverage ETF TQQQ again registered another up day, the 10th in a row and SPY is overbought.

Any time now these two major ETFs, representing the NDX and and SPX, are going to have a sell-down (may have to say that again and again until I’m bluer in the face). However, I suspect tomorrow is that day.

There are signs. Less pronounced than before, but again…signs.

Short-term breadth gave a sell signal on the close. The buy signals on the individual stocks in my nifty-50 stock list rolled down from 29 to 26 on buys. The Fear and Greed Index is now in “extreme greed”, a contrarian indicator (although it sill has to turn down to give a sell). As I said, less pronounced.

Again, I need to state since long-term breadth is positive, there are no shorts here, just the possibility of a dip to take some profits, and then to look to buy back in hopefully at some lower level.

SWING TRADING SIGNALS:

PRICE: Positive. Long (Trade Day 9).
SHORT-TERM BREADTH: Negative. Flat (Day 2).
VOLATILITY: Positive, Long (Day 2).

CONTEXT:

LONG-TERM BREADTH: Positive (Day 7).
CNN MONEY’S FEAR AND GREED INDEX: (76, reaching extreme greed level).
NIFTY-50 STOCK LIST: 26 Buys, falling; 19 Overbought, 2 Oversold, 4 new buys today, 7 new sells.

The rally results so far (nine full days from the open of 7/10):

TQQQ up 13.8 percent.
XIV up 14.8 percent.
UPRO up 5.8 percent.
TNA up 6.5 percent.

The net gain is now 10.2 percent as marked by the Price buy signal on the open of 7/10).

(click on the chart for a larger view)

fear_and_greed2017-07-17_1525

$RACE – Ferrari racing up the Darvas stairs…

At the risk of oversimplification, the most effective ways to trade stocks is to keep it simple.

One of the best ever at this was Nicholas Darvas.

His method was to put a simple box around a stock’s price consolidation and buy it as the stock came out of the top of the box and either put a stop loss below his trade price (which would be a tight stop if the stock came back into the box) or below the bottom of the box (depending on anyone’s individual risk parameters).

Darvas said he never shorted a stock dropping below the bottom of a box only because he felt he was not psychologically suited to selling short. Still that would be, especially in a bear market, as simple of buying the top of one of his boxes in a bull market.

Darvas’ book “How I Made $2,000,000 In The Stock Market” (this was the 1950s) describes his “Box System”. It is a classic. And timeless – see the chart of RACE below.

I have said before the easiest way to buy or not buy an IPO is to put a box on the high and low of its first day of trading and buy above the top of the box and short below the box. While an IPO’s first day is itself a Darvas box (blue on the chart below) as one can see here there are others also very worthwhile for the trader as well as a longer-term investor.

(Click on chart for a larger view)

RACE2017-07-18_0928

$USD – a vote on the country ever day…

Given that currency trading is a vote by the whole world on your country every day and now that President Blowhard believes the dollar’s recent rise was because of “confidence” in him instead of an overflow from the Obama Administration, the US dollar is likely to decline now.

Trump commented that yesterday that the dollar was too strong because of “confidence in me”, but the currency has been going sideways to down since his inauguration.  Confidence in him?  More likely a rising lack of confidence.

And of course, the US dollar always does decline in Republican Administrations.

That was never more pronounced in historical terms than the day George W. Bush made his “Axis of Evil” speech.  That moment was the precise top for the dollar in his term.  It was as the entire world heard that and thought that guy is crazy and ran for cover.  It declined 40 percent and has not completely recovered.  No analysts ever seem to want to talk about it, preferring to say a weaker dollar makes American multi-national companies more competitive, but think what a drop of 40 percent in net worth means to the biggest economy in the world.

Subsequently, from the day Obama locked up the Democratic Party’s nomination in 2008 the dollar bottomed.  It was as if dollar bulls knew he would be President and were, after the raging uncertainties of the Bush Administration, damn happy he would be.  There were some wild swings in the currency as Obama battled Congressional Republican obstruction (shutting down the government…) but once he was reelected, it was clear sailing to the upside until now.

So what now?

The new era of raging uncertainties is just beginning so, despite professed Fed Reserve tightening, it is probably best to be defensive, if not downright bearish, on the US dollar.

(right click on the chart for a larger view)

USD2017-04-12_1312

#BullMarket – so many buy signals…

…it is almost scary.

But it is what it is.  I guess the Fed came to save the day…with higher interest rates no less.

With a low above a low on the NYMO after five weeks of highs below highs, it appears bears have one more day (tomorrow) to make their presence felt but after that, if the NYSI up, it will be rocket time again. In other words, new highs across the board someday soon (tomorrow, Friday, next week) and probably then some more…

Also, a nice little divergence there on my nifty-50 stock list from 42 sells in February to 38 four days ago (there are 39 on buys now).  Last time had a similar divergence was at the bottom in November.

(right click on chart for a larger view)

MAIN

#MarketTiming – whipsawing down…

TREND TRADE: Down from open, 1/30.

SWING TRADE: Down from open, 1/27.

DAY/SCALP TRADE: Selling the bounces with the trend trade

PRICE TREND: Nasdaq, whipsawing.

SETUP:

As noted in the last post here, the Trend Trade was possibly whipsawing and so it did.  The trend turned up on the open of 1/25 and turned down again today, giving another sell signal for tomorrow open.

Geez…whipsaws…

But in the context of this whipsaw behavior on the major market indexes, there was a possible stop loss issued by the swing trade which, after giving a buy on the open of 1/20, turned down on 1/26.  That was an alert to sell all or half of any long position (see the note on the short-term McClellan breadth below).

On the swing trade, before the turn down, the 3x-leveraged ETFs were up – XIV by 7.5%, UPRO by 3.8%, TQQQ by 6.0%, and TNA by 5.8%.  On the stop, UPRO and TQQQ gave back less than one percent; TNA gave back 2.3%; and XIV actually held 1 percent of its overall gain during the down turn.  The reason to use stop-losses is extremely evident at the moment with XIV down 2.1% on the Trend signal, TQQQ down 1.2%, UPRO down 2.2% and TNA down 6.8%, with the actual exit signal on tomorrow’s open (beware the gaps down).

Geez…whipsawing times.  Tricky to trade and never any fun.

And whipsaws may continue since today’s drop (shall we call it the Trump-Muslim drop?) caused 41 of the stocks on my nifty-50 stock list to go sells. That could be the beginning of a considerable sell off as noted here on the January 23rd post:

“One of the great things about the McClellan is that the two indicators give hints ahead of time as to what is likely to come next in the general market.  If there is another high below a high on the NYMO, especially below the zero line, it will likely be a gift to the bears.”

But more often in the current bull market 40+ sells has been the bottom or at least the beginning of a bottom for an upswing (see chart below for previous 40+ sell markers), even when the down side, like now, has hardly begun.

Geez…Tricky to trade again.

(right click on chart for a larger view)

trendswing_2016-12-12_0818

#MarketTiming – once again the bull runs…

TREND TRADE: Up from open, 1/25, possibly whipsawing.

SWING TRADE: Up from open, 1/20.

DAY/SCALP TRADE: Buying the dips with the trend trade

PRICE TREND: Nasdaq up 1 day, whipsawing.

SETUP:

After giving all the signs of an impending sell down, the market took off again to the upside.  This has happened a lot during the later stage of this bull market.

Each time breadth has turned up (which it did again yesterday), the market has had a run so at this point the past of least resistance is again up.  See how XIV, the leveraged inverse VIX ETF, has performed with the market behind it on the chart below (the green vertical lines marking each new surge like yesterday).

But the signs for a sell down remain, at least for now, so trading here is tricky and a buy and hold strategy downright scary.  Appears the market chop has an upward bias but that is the way it was Tuesday.  Today late may be another matter.

Stocks on my nifty-fifty stock list went from 19 on buy signals to 38 in a day.  Stocks coming off recent sell downs that might produce at least a swing bounce or scalp trade include the banks JPM, C, GS, BAC and a big cap on the list, DIS.

Should be noted I guess that airlines, ALK and HA, on the list remain oversold and could play catch up in the next couple of days if the market continues yesterday’s bounce.

(right click on the chart for a larger view)

trendswing_2016-12-12_0818

#MarketTiming – on the verge of a sell off…

TREND TRADE: Down from open, 1/20.

SWING TRADE: Neutral from open, 1/23.

DAY/SCALP TRADE: Selling the bounces with the trend trade

PRICE TREND: Nasdaq down 1 day, whipsawing.

SETUP:

Market breadth as measured by the McClellan Oscillator (NYMO) and Summation Index (NYSI) has turned negative with a falling NYSI and highs below highs on the NYMO (see first chart below).

One of the great things about the McClellan is that the two indicators give hints ahead of time as to what is likely to come next in the general market.  If there is another high below a high on the NYMO, especially below the zero line, it will likely be a gift to the bears.

The McClellan is not infallible but it almost is.

In addition (see second chart below) this post-election rally has been mirroring the post-Brexit rally almost perfectly.  If that continues, it is also saying a sell-off is right around the corner.

To state the obvious, the sell-off itself indicated above has not,  as yet, happened.

But maybe tomorrow.  An age-old “turn around Tuesday”? If not it likely to be soon.

(click on the charts for a larger view)

masterchart2017-01-23_2245

trendswing_2016-12-12_0818

$USD – the dollar historically speaking…

Historically speaking, the US dollar goes to hell under Republican administrations.  Does anyone actually expect it to be any different this time?

May take a while since Janet Yellen’s term has year or so to go and apparently the Federal Reserve is now determined to hike interest rates. But eventually, the businessmen now running government (who of course are totally unaware that the government is not a business) will want to debase the currency.

There is the belief that a weaker dollar enables American companies to more easily compete against competitors around the world.  Maybe so. But every time I look up while the dollar is down, it is the competitors buying US companies instead of buying their products.

Oh, well, this Bud’s for you.

(right click on the chart for a larger view)

us_dollar_2017-01-16_1053

$TSLA and market timing…(updated)

Not confirmed yet but if the market stays down it appears after 45 days of rally, the market may begin to take a tumble today.  And if today’s downside trigger follows through, there could be a full-blown correction in the making.

A couple of ifs in there but if they hold, it will be time to look around for stocks to sell if one currently holds them, or to short if one is an aggressive trader.

Case in point – TSLA.

TSLA, like to most stocks, tends to run with the market’s general direction, both up and down.

On the up, Tesla has had a great in run during this rally, roughly from 191 to (at the moment) 227, or 18.5% or so.  A profit well worth locking in since the stock can be volatile.

Now for the down.  Looking at the chart below, it appears the market may be turning negative (the green and red dots the middle of the chart) and so is Tesla’s stock.  When the market and the stock are in sync like this one needs to go with the market until the stock says otherwise.

In short, TSLA is a short.  That is if all the ifs above remain true at the end of this day.

UPDATE:

Market breadth did not stay negative on yesterday’s close (note the green dot instead of red on the indicator in the middle of the second chart below) so the short signal anticipated here never triggered and instead TSLA, on news (its charging station pricing) and modestly bullish day in the Nasdaq to back it up, had a nice rise today, 3.3% from today’s open. So it goes sometimes.

(right click on the chart for a larger view)

tsla2017-01-12_0729

(right click on UPDATED chart for a larger view)

tsla2017-01-12_0729