Tuesday, March 30, 2010
Wednesday, March 24, 2010
TLT Update
Exited my long treasury bond position today with a decent but much smaller than I'd hoped for profit. Then reversed and went short. Today's large volume move is really significant, and I think is the precursor to a major breakdown. Catalyst today was a poor showing at the 5 year treasury auction. Health care bill was passed over the weekend, so a few days late but still relevant.
Tuesday, March 16, 2010
Sunday, March 14, 2010
30 Year Yield 1977 - 2010
This chart is why I am long Treasuries. This is a 23 year price channel for chrissake! Rates have also rallied into roughly their average level from 02-07. Also at the 50 month moving average - they haven't held a rally above there in nearly 30 years. This is a huge divergence between popular sentiment on rates (everyone and their mother says they're going higher) and the long term pattern (which says to get short rates/long bonds at these levels). I recently read something that said treasuries are the most hated asset classes among money managers and the general public. If this channel ever breaks then I might think about getting short bonds. That would be an indication of a massive sea change.
Fundamental reasons? We've lost far too many jobs for unemployment to make a rapid comeback. Sure the fed is printing money, which can easily lead to inflation eventually, but right now the fight is against deflation and money it is injecting into the system is not multiplying through bank lending like it's supposed to. I believe in John Mauldin's "muddle through" scenario, with a recovery that is so slow it still feels like drawn out recession. This scenario would imply that rates can stay lower than most people think.
Watch support level at 41.70 - take 2/3 of my profits by then. That level held in 03, 05, 07, and again in 09. Hold the rest as a tail.
Fundamental reasons? We've lost far too many jobs for unemployment to make a rapid comeback. Sure the fed is printing money, which can easily lead to inflation eventually, but right now the fight is against deflation and money it is injecting into the system is not multiplying through bank lending like it's supposed to. I believe in John Mauldin's "muddle through" scenario, with a recovery that is so slow it still feels like drawn out recession. This scenario would imply that rates can stay lower than most people think.
Watch support level at 41.70 - take 2/3 of my profits by then. That level held in 03, 05, 07, and again in 09. Hold the rest as a tail.
Friday, March 12, 2010
GDX
Pulling to pitchfork channel. The trade is really off of the red dog reversal candle, for an ultimate break of the downtrend on the daily. But playing with Andrew's pitchfork to see how it serves as a guide. Needs to make a higher low here otherwise trade is in trouble.
Here's how it looked when I first entered. Haven't seen a real change of trend yet.
Here's how it looked when I first entered. Haven't seen a real change of trend yet.
Thursday, March 11, 2010
GDX Update
Red dog reversal in the works (courtesy T3 - after at least three down days price makes new low then trades back up through yesterdays low). Using this intraday pattern to springboard into macro trade with better positioning. If red dog reversal plays out we'll have a strong close on the daily, which will be a good reversal candle. If that daily reversal candle has follow through in next few days GDX will break its downtrend line on the daily, which means I have much better position and risk-reward than if I'd simply waited for a break of the trendline.
Daily also has pattern I like - strong rally pokes its head over trendline but no solid break, then pulls back (people selling at the trendline, hopefully some people getting short). Basically creates a flag hugging right against the trendline. Usually follows through with a solid break after 5 days or so hugging the trendline. That's what I'm betting on.
I also like that the reversal candle is on a pull back into moving averages after the second break higher above them in past 6 months.
Daily:
Intra day 15m:
I'm playing around with the pitchforks here too - it broke the downtrend pitchfork on the daily already, and also pushing through this intraday pitchfork (a little more push will be a clean break). Bought that pullback 45.07, stop underneath lows. Will also stop out of we don't get a strong close today, so intraday risk is even less (assuming it doesn't collapse).
Will take some off the table around $48 - $50 and $54 levels, but ultimately trying to position myself for a break to all time highs because I'm bullish on gold and the miners basically offer away to leverage that.
Daily also has pattern I like - strong rally pokes its head over trendline but no solid break, then pulls back (people selling at the trendline, hopefully some people getting short). Basically creates a flag hugging right against the trendline. Usually follows through with a solid break after 5 days or so hugging the trendline. That's what I'm betting on.
I also like that the reversal candle is on a pull back into moving averages after the second break higher above them in past 6 months.
Daily:
Intra day 15m:
I'm playing around with the pitchforks here too - it broke the downtrend pitchfork on the daily already, and also pushing through this intraday pitchfork (a little more push will be a clean break). Bought that pullback 45.07, stop underneath lows. Will also stop out of we don't get a strong close today, so intraday risk is even less (assuming it doesn't collapse).Will take some off the table around $48 - $50 and $54 levels, but ultimately trying to position myself for a break to all time highs because I'm bullish on gold and the miners basically offer away to leverage that.
TM Update
Pitchfork seems to give good signals on TM. Already short small (stop over monthly highs). Will try the pitchfork break as a signal to add. Not getting too aggressive though.
Japanese Yen Index
In rising channel and forming head and shoulders and significant divergence on MACD and RSI. Channel break would be very bearish for the Yen. If it keeps consolidating then looks more like cup and handle. See what happens.
Monthly:
Wednesday, March 10, 2010
SPY Looks like High of 2007
Look at these two charts:
See the resemblance? Grind higher on the left side, choppy consolidation then a last gasp rally before a fast, high volume plunge. High volume on the low with a strong capitulation reversal candle and choppy, vaguely head and shoulders pattern before the push higher. Then a march to the highs again in a linear channel, on declining volume. You should recognize the first as the high of 2007. This is the current market.
Here's how it resolved in 2007. You should know what came after:
The obvious major difference is that in 2007 we had gon through several years of an extended bull market. Rigth now we've had the first extended push off the lows of a crushing bear market. You could say right now resembles more 2002 - 2003 than 2007. But the resemblance of these charts is pretty striking I'd say. Here's another difference:
The VIX then:
And the VIX now:
And the VIX in 02 - 03
The most notable thing is in 2007 the VIX looked extremely bullish (market bearish) and there was a MASSIVE divergence between the VIX and the market. VIX hit new highs then pulled back to support, well off the prior low, and right to an ascending trendline, as the market hit new highs. This was a big bright red flag that the rally of 07 was suspect.
Right now the VIX doesn't look anything like 07. Maybe some resemblance to 02-03...it choppy and kind of grinding lower. Market is right at old highs, and the VIX is right at old lows - no divergence there. VIX right now does look like it could pop - descending wedge into old lows on a 3 month chart. I still have some short exposure via credit call spreads (which, needless to say, are not making me money), but I priced my risk to hold to expiration so that's what I'm gonna do.
March has more turning points than any other month of the year. If the market tops out in the intermediate term, which I still think it will by April, I have no opinion as to whether it's the start of another crash, or just a correction. Either way the first move will be fast and furious.
See the resemblance? Grind higher on the left side, choppy consolidation then a last gasp rally before a fast, high volume plunge. High volume on the low with a strong capitulation reversal candle and choppy, vaguely head and shoulders pattern before the push higher. Then a march to the highs again in a linear channel, on declining volume. You should recognize the first as the high of 2007. This is the current market.
Here's how it resolved in 2007. You should know what came after:
The obvious major difference is that in 2007 we had gon through several years of an extended bull market. Rigth now we've had the first extended push off the lows of a crushing bear market. You could say right now resembles more 2002 - 2003 than 2007. But the resemblance of these charts is pretty striking I'd say. Here's another difference:
The VIX then:
And the VIX now:
And the VIX in 02 - 03
The most notable thing is in 2007 the VIX looked extremely bullish (market bearish) and there was a MASSIVE divergence between the VIX and the market. VIX hit new highs then pulled back to support, well off the prior low, and right to an ascending trendline, as the market hit new highs. This was a big bright red flag that the rally of 07 was suspect.Right now the VIX doesn't look anything like 07. Maybe some resemblance to 02-03...it choppy and kind of grinding lower. Market is right at old highs, and the VIX is right at old lows - no divergence there. VIX right now does look like it could pop - descending wedge into old lows on a 3 month chart. I still have some short exposure via credit call spreads (which, needless to say, are not making me money), but I priced my risk to hold to expiration so that's what I'm gonna do.
March has more turning points than any other month of the year. If the market tops out in the intermediate term, which I still think it will by April, I have no opinion as to whether it's the start of another crash, or just a correction. Either way the first move will be fast and furious.
Andrew's Pitchfork
Was playing around with this indicator to see how useful it would be.
Pros
- Seems like it can give clues to change of trend before a trendline break.
- Can give an early indication of the trajectory you should expect
- Everybody is looking at channels and trendlines, this gives you something that less people are taking signals off of.
Cons
- Very subjective (but aren't trendlines too? I use them all the time)
- Can't make it fit on a lot of charts (but again, same could be said for trendlines)
- Price can really push against the edges and still not really break the channel, so by the time you get a clear signal prices have already made a significant move (either against your, or away from a decent entry point)...again, same could be said for a lot of indicators.
Use
- Seems particularly useful for strong, linear trends, but the lines also seem to show something the eye can see on its own.
- Gotta play around to see what's best fit. If midline tracks price that's a pretty good indication of a valid pitchfork (only the starting point is based on an actual high or low, and the second point is really just a midpoint of two actual price points, so it's kind of a made-up line...so if the stock moves in line with that it means there's significance.
- Not going to work for a lot of stocks. Stick to using with those where it seemed to be useful in the past.
- Best to use for tend following in same direction of pitchfork, or for identifying trend changes? Not sure yet.
- Might have to ignore certain extreme price points, like with trendlines.
- Points #1 and and #3 should be where the primary trends start...so not necessarily an exact high or low. For example, in an uptrend, point #1 could be where the break out starts instead of the low of the consolidation, #2 should be the intermediate high, but #3 should be where the next rally begins, which may or may not be the low of the correction/consolidation phase.
Some charts I used to play around with this. Some seem pretty valid and useful. Others are pretty questionable.
Here's Crude Oil Monthly. Couldn't get many to fit well, and even with those that did below how sure how useful it'd be for actual trading. Interesting how prices followed the trajectory of the green pitchfork for a while, but on the underside of it. Would have been tough to use for trading, but after the fact seems significant.
Here's the dollar index. Would have been useful for that top, and also the change of trend. But it was grinding against the upper range in the down move, so easier to read after the fact than in the moment.
Dollar Index Daily - Has moved pretty far out of its upwards channel. Is this an indication the rally is over for now? Some other things tell me so, so interesting that this confirms. Again, looks like the kind of linear move that the Pitchfork is most useful for.
Gold Monthly -The two recent touches of the underside of the midline help validate this in my view.
Another way to draw the monthly. Also confirms the uptrend, but shows these can be drawn multiple ways. Here it happens that confirm the prior. Not always the case though. The confirmation I'd say helps validate the indicator for GLD.
Weekly - Very useful for the 07 rally. Would have had you riding up and it broke at the top (giving some back of course). These linear moves are where this works best I think...but this is also looking after the fact. Can we use this as an expectation to project the future trajectory?
Also notice it works when used on the MACD. RSI not so much though. Makes sense since these indicators are just filters of price data.
Daily - Pitchfork would have done great job letting you ride the recent rally. Notice the overthrow then climax top. Like any kind of channel waiting for a break meant you would have given a lot back, but on the other hand, it would have definitely told you to stay away from trying to buy pullbacks once it broke. Good signal that rally wasn't coming back for time being. Consolidating nicely so far. The downtrend pitchfork gave a fake out, but ultimately a good indication that downside had stopped.
GDX Weekly - Price seenm to conform to the uptrend pitchfork really nicely, and the downside break was great signal to get out of longs for time being. Also could have told you to cover shorts/get long after drop of 08. The current pullback has broken higher - interesting because the downtrendline hasn't seen a strong break yet. I'm still checking it out but this is where I think this indicator will really come in handy - tipping you off to a change in trend before the downtrendline breaks (which everybody and their mother is watching), to get you a better entry or exit.
Will this be the new upside trajectory? Price probably needs to make a higher high to confirm an uptrend before we could say so. Again, this would be the real utility of this - a way to project the trajectory of a move, and set trailing stops or change of trend entry points. Trendlines and moving averages are useful, but very commonly watched.
30 year treasuries yields Daily - Pitchfork worked really well to catch trend changes. Might have had one whipsaw in that downtrend, but the ultimate break looks like one of the more tradeable one's I've seen. Giant head and shoulders too. If it breaks higher could see a huge rally in yields. I'm short yield (long Treasuries), based on longer term factors.
30 Year Treasury Yield Monthly - Not sure how valid it is how this is drawn, and I show other charts with different ways to draw this. If valid supports a bearish case for now.
30 Year Treasury Yield Monthly again - just dicking around with some other ones. Seemed to be useful for big picture view, but not great for entries or exits.
Another 30 Year Yield Monthly - Supports bearish case but really on the cusp...trying to poke its head through.
But draw the pitchfork like this and it looks bullish. Bottom line for this Monthly chart - you can draw this a bunch of ways, all of which seem plausible, but they tell very different stories. Not going to put too much weight on pitchfork on the monthly. Look at that bearish engulfing candle though!
Our beloved Dow. Short if it breaks under that pitchfork? Again, these shorter term, linear moves seem to be where this indicator works best.
And the SPY. Looks a hell of a lot better than the Dow...if I wanna short I'd short the Dow, since it's been underperforming to the upside. Could have bought after that first pullback and used this as a channel to trail a stop...so far that strategy would have worked well. If it breaks soon though, figure that, depending on your entry, if you only sold with the trailing stop, you gave a lot back and might not have made all that much. But if it keeps chugging.
Goldman Daily - I've been watching this for the trendline break, which it's poking its head through right now. Using the pitchfork would have given a much earlier signal though.
That's it for now. Going to start incorporating this into my analysis, just as a secondary tool (if even that much). Need to get accustomed to it, but could be good addition to the toolkit. Right now all I really use are support/resistane, chart patterns, candlesticks. Also use, very loosely, moving averages, MACD and RSI (not for signals, just for perspective).
Pros
- Seems like it can give clues to change of trend before a trendline break.
- Can give an early indication of the trajectory you should expect
- Everybody is looking at channels and trendlines, this gives you something that less people are taking signals off of.
Cons
- Very subjective (but aren't trendlines too? I use them all the time)
- Can't make it fit on a lot of charts (but again, same could be said for trendlines)
- Price can really push against the edges and still not really break the channel, so by the time you get a clear signal prices have already made a significant move (either against your, or away from a decent entry point)...again, same could be said for a lot of indicators.
Use
- Seems particularly useful for strong, linear trends, but the lines also seem to show something the eye can see on its own.
- Gotta play around to see what's best fit. If midline tracks price that's a pretty good indication of a valid pitchfork (only the starting point is based on an actual high or low, and the second point is really just a midpoint of two actual price points, so it's kind of a made-up line...so if the stock moves in line with that it means there's significance.
- Not going to work for a lot of stocks. Stick to using with those where it seemed to be useful in the past.
- Best to use for tend following in same direction of pitchfork, or for identifying trend changes? Not sure yet.
- Might have to ignore certain extreme price points, like with trendlines.
- Points #1 and and #3 should be where the primary trends start...so not necessarily an exact high or low. For example, in an uptrend, point #1 could be where the break out starts instead of the low of the consolidation, #2 should be the intermediate high, but #3 should be where the next rally begins, which may or may not be the low of the correction/consolidation phase.
Some charts I used to play around with this. Some seem pretty valid and useful. Others are pretty questionable.
Here's Crude Oil Monthly. Couldn't get many to fit well, and even with those that did below how sure how useful it'd be for actual trading. Interesting how prices followed the trajectory of the green pitchfork for a while, but on the underside of it. Would have been tough to use for trading, but after the fact seems significant.
Here's the dollar index. Would have been useful for that top, and also the change of trend. But it was grinding against the upper range in the down move, so easier to read after the fact than in the moment.
Dollar Index Daily - Has moved pretty far out of its upwards channel. Is this an indication the rally is over for now? Some other things tell me so, so interesting that this confirms. Again, looks like the kind of linear move that the Pitchfork is most useful for.
Gold Monthly -The two recent touches of the underside of the midline help validate this in my view.
Another way to draw the monthly. Also confirms the uptrend, but shows these can be drawn multiple ways. Here it happens that confirm the prior. Not always the case though. The confirmation I'd say helps validate the indicator for GLD.
Weekly - Very useful for the 07 rally. Would have had you riding up and it broke at the top (giving some back of course). These linear moves are where this works best I think...but this is also looking after the fact. Can we use this as an expectation to project the future trajectory?
Also notice it works when used on the MACD. RSI not so much though. Makes sense since these indicators are just filters of price data.
Daily - Pitchfork would have done great job letting you ride the recent rally. Notice the overthrow then climax top. Like any kind of channel waiting for a break meant you would have given a lot back, but on the other hand, it would have definitely told you to stay away from trying to buy pullbacks once it broke. Good signal that rally wasn't coming back for time being. Consolidating nicely so far. The downtrend pitchfork gave a fake out, but ultimately a good indication that downside had stopped.
GDX Weekly - Price seenm to conform to the uptrend pitchfork really nicely, and the downside break was great signal to get out of longs for time being. Also could have told you to cover shorts/get long after drop of 08. The current pullback has broken higher - interesting because the downtrendline hasn't seen a strong break yet. I'm still checking it out but this is where I think this indicator will really come in handy - tipping you off to a change in trend before the downtrendline breaks (which everybody and their mother is watching), to get you a better entry or exit.
Will this be the new upside trajectory? Price probably needs to make a higher high to confirm an uptrend before we could say so. Again, this would be the real utility of this - a way to project the trajectory of a move, and set trailing stops or change of trend entry points. Trendlines and moving averages are useful, but very commonly watched.
30 year treasuries yields Daily - Pitchfork worked really well to catch trend changes. Might have had one whipsaw in that downtrend, but the ultimate break looks like one of the more tradeable one's I've seen. Giant head and shoulders too. If it breaks higher could see a huge rally in yields. I'm short yield (long Treasuries), based on longer term factors.
30 Year Treasury Yield Monthly - Not sure how valid it is how this is drawn, and I show other charts with different ways to draw this. If valid supports a bearish case for now.
30 Year Treasury Yield Monthly again - just dicking around with some other ones. Seemed to be useful for big picture view, but not great for entries or exits.
Another 30 Year Yield Monthly - Supports bearish case but really on the cusp...trying to poke its head through.
But draw the pitchfork like this and it looks bullish. Bottom line for this Monthly chart - you can draw this a bunch of ways, all of which seem plausible, but they tell very different stories. Not going to put too much weight on pitchfork on the monthly. Look at that bearish engulfing candle though!
Our beloved Dow. Short if it breaks under that pitchfork? Again, these shorter term, linear moves seem to be where this indicator works best.
And the SPY. Looks a hell of a lot better than the Dow...if I wanna short I'd short the Dow, since it's been underperforming to the upside. Could have bought after that first pullback and used this as a channel to trail a stop...so far that strategy would have worked well. If it breaks soon though, figure that, depending on your entry, if you only sold with the trailing stop, you gave a lot back and might not have made all that much. But if it keeps chugging.
Goldman Daily - I've been watching this for the trendline break, which it's poking its head through right now. Using the pitchfork would have given a much earlier signal though.
That's it for now. Going to start incorporating this into my analysis, just as a secondary tool (if even that much). Need to get accustomed to it, but could be good addition to the toolkit. Right now all I really use are support/resistane, chart patterns, candlesticks. Also use, very loosely, moving averages, MACD and RSI (not for signals, just for perspective).
Tuesday, March 9, 2010
GS Update
I think market is due to correct, and depending on how the market is looking, going to look for entry in Goldman close to $160, stop $153.45 (under low of weekly wide range bar).
GDX & Gold
GDX trying to push through the intermediate trendline. RSI broke trendline, and some good volume off the lows.
Weekly MACD found support at zero line and looks like turning higher. RSI has held support around 40 - 50 area. The biggest problem is the longer term uptrend break - if it breaks downtrend I'd expect it to find resistance at the broken uptrend. Probably still needs to do some digesting before a real move higher. Holding up well though. Could buy a pullback, but would expect to sit through some chop for a while. If gold stays firm this should hit all time highs in the next year or so.
Dow Ascending Wedge
A great bearish pattern. A little overthrow today too. Dow has underperformed other indices on this bounce higher relative to the prior highs. Saw the same wedge on SPY and IWM but so far they've failed to result in any downside. If today closes with a big tail I'll get short DIA (via puts).
Toyota
Interesting how the chart is playing out with the crisis for them. Some might say buy the bad news. For long run maybe, but for the short run there is nothing on the chart saying to get long, except for the volume at the lows, but that along isn't a good case in my view. Public perception of the company has been permanently damaged for a long time...I can't see any scenario where their earnings aren't impaired for anything less than a year, probably longer.
On Weekly it's playing with that intermediate uptrend...not a clear break yet. Red line is monthly and weekly high...a move above that should make any shorts really question their position. RSI and MACD negative, but also not extremely so. 20 EMA starting to cross under the 50 SMA. Would want a clear break to really think about a short, but then risk-reward probably won't be as good. If aggressive could short against the weekly/monthly high to get good positioning for a break.
Daily:
On daily uptrend looks a lot more more like it was solidly broken, and now on a retrace. RSI went negative now bounced back to 50. 50 SMA right at the 200 SMA, looks like it'll cross under. MACD heading up towards zero line, but not there yet. 20 SMA turned up.
I'm a strong believer in muddle through and a multi-year deleveraging cycle, which will put pressure on all the car makers.
Short squeeze - only 0.5 days to cover shorts, so not much short interest...pretty surprising
Verdict: Some conflicting signals but stronger sell than buy. Could scale in small amount here but want either higher price or downside confirmation to be aggressively short.
Earnings on May 6.
On Weekly it's playing with that intermediate uptrend...not a clear break yet. Red line is monthly and weekly high...a move above that should make any shorts really question their position. RSI and MACD negative, but also not extremely so. 20 EMA starting to cross under the 50 SMA. Would want a clear break to really think about a short, but then risk-reward probably won't be as good. If aggressive could short against the weekly/monthly high to get good positioning for a break.Daily:
On daily uptrend looks a lot more more like it was solidly broken, and now on a retrace. RSI went negative now bounced back to 50. 50 SMA right at the 200 SMA, looks like it'll cross under. MACD heading up towards zero line, but not there yet. 20 SMA turned up.I'm a strong believer in muddle through and a multi-year deleveraging cycle, which will put pressure on all the car makers.
Short squeeze - only 0.5 days to cover shorts, so not much short interest...pretty surprising
Verdict: Some conflicting signals but stronger sell than buy. Could scale in small amount here but want either higher price or downside confirmation to be aggressively short.
Earnings on May 6.
FSLR & Solars
Very bearish chart. Break of $100 = FSLR takes a fat dump. Underperforming other solar stocks and definitely underperforming the market.
TAN - solar ETF. Looks like bear trap in the making could squeeze some shorts. Needs a good break below $8 to get excited about a short entry.
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