Beaver Moon Did It Again...

The U.S. stock market bounced on the full moon (Beaver Moon), yet again. Just when I started uneasy holding long positions after seeing high-volume selloffs (that clearly signal distribution - pros are getting out).

This moon cycle pattern was first mentioned back in September by one of the members (a very strange one, too) on the Yahoo SKF message board. I laughed, but I didn't sell out, partly because of his insistent comments. Another bounce occurred on October's full moon. And another on November's full moon, which has now sent Dow to 2009 high. This latest full moon, I learned, was considered the most powerful full moon in 100 years, according to this Indian guru. (The link was given to me by my primary physician.)


This is a daily Dow chart, marked with green arrows for full moons, and red arrows for new moons.

Please don't trade on the moon cycle unless you do your own DD (I don't know how you do DD on moon cycle but...) and are convinced of it. I am definitely not recommending anything here. It's lunatic, literally. And MACD and RSI both show negative divergence, although slow stochastics (60,3) is nicely above 80 again.

Negative divergence on a short-term daily chart usually indicate a correction is imminent, and I thought we would get that correction today. All we got was S&P500 down 0.07 points and Nasdaq down 2.98 points. Instead of selling off, Dow managed to go positive. What do I know? (Can't win against Goldman Sachs, who's doing "the God's work", can we?) Sphere: Related Content

Expanding Wedges on VIX

I've read that an expanding wedge pattern near the top after a prolonged upward movement is bearish, a topping pattern.

What about an expanding wedge near the bottom, after prolonged downward movement? Is it bullish? Bearish? Anyone?

Because that seems to be what I'm seeing in the VIX daily chart. Not just the index movement, but also RSI, MACD, and slow stochastics (12,3).

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Is the Rally from March Finally Over?

For the first time since I went long back in March, I am shopping for short ETFs.

The major indices dumped big time today, after a tepid attempt to reverse the trend yesterday. Since last Friday, Dow has lost 347 points, or 3.4%, S&P 500 lost 54 points or 4.9%, and Nasdaq lost 131 points or 6%.

September had a similar mini-crash that brought the indices to their 50-DMA. June was worse, to be sure, and the indices dipped below 50-DMA and 200-DMA (crossover was happening then, so it didn't take much to go below 200-DMA).

What I don't like about it this time is the behavior at the top, from October 19 to 23. The daily movement was loose and wide. 100 point reversals, big down day followed by big up day. What does that remind me of? The market top in October-November 2007, and September 2008 right before the crash.

This is a 7-month daily chart of Dow. Negative divergence between RSI, price, and money flow are more prominent and consistent. It decidedly broke the trend line from March low today, and can go down to the trend line from August. That trend line forms a rising, expanding wedge, which is bearish and indicating the topping action. Using the slow stochastics with (5,3) for short-term trend, the index is short-term oversold, which is about the only good thing about the chart for market bulls.


Goldman Sachs lowered their estimate on the 3rd quarter GDP today, one day before the announcement. Market reaction to economic/financial news (ever since the new moon, come to think about it) has been negative: good news is perceived as not good enough, and bad news is perceived as worse. If this trend continues, the reaction to GDP number may be negative, no matter what the actual number will be. If that happens, it may finally be the "batten down the hatches" time, and time to make money on the short side.

Still, stochastics is short-term oversold, and the put/call ratio (a contra-indicator) has spiked up to 1.11. A bounce may happen soon. Another contra-indicator is that too many traders and pundits are now very bearish, calling the top for the year (even Jim Cramer).

Well, the proverbial broken clock is right twice a day... Sphere: Related Content

Now It's AMZN's Turn!

Nasdaq beta stocks are back with vengeance. First was Google (GOOG), then Apple (AAPL), and today was Amazon (AMZN). It announced a steller quarter result after hours and the stock jumped to $106. In this deep recession, the company's profit jumped 62%. If the AH price holds at Friday's closing, it will be ALL TIME HIGH for the stock.

This is the monthly chart of AMZN since its IPO. I don't care to do the TA analysis on a wild-looking thing like this. I'm just impressed. Usually when a stock falls from the crest (like Nasdaq dot-com bubble high), it doesn't recover. But this one did, and is about to take out the previous high.

I've been the customer ever since AMZN opened its virtual door. Its CEO, much like AAPL's CEO, has just kept at it, instead of selling out, retiring, or going into philanthropy.



About the only thing I can say about the chart is that the trendline held at the bottom, and it was a buy when it bounced off that line in November last year, at $34. It is quite possible that a few years from now I may be asking myself, "So AMZN was only $100. What was I thinking?"
Maybe I should think the unthinkable and buy the breakout. Sphere: Related Content

Nasdaq (and Dow and S&P) at 2009 High

To the chagrin and frustration for the bears, the stock market keeps going up. Today, all three major indices marked the 2009 high with healthy gains but subdued volume (Op-Ex fatigue, maybe).

Barring disaster overnight (and premarket tomorrow), tomorrow's market looks brighter as Apple (AAPL) announced a blow-out earning after hours (the company sold more Macs and iPhones in any quarter in company's history), and the stock is currently trading over $200.

I haven't looked at Nasdaq chart since June (as I don't have tech stocks like I used to), so maybe this is a good time to do that to figure out whether every bear is saying is true ("the market is topping").

The first thing I notice about Nasdaq is the volume. Unlike other two indices (Dow and S&P500), Nasdaq's volume has remained robust. So far, I don't see negative divergence between RSI, price action, volume, CCI, slow stochastics. This is a very strong chart. About the only thing that makes me nervous is the extremely steep ascent from March low (steepest of the three major indices).

Around March 09 bottom, that was clearly a double bottom formation with handle, and the handle break in late May held. I should have paid more attention to Nasdaq around that time, for obviously easier money was in Nasdaq.

The index is right now between 50% and 61.8% Fib retracements, and 61.8% retracement is a logical target (2251). If 61.8% retracement is taken out (75 points away), it could go back up to 2007 high, I suppose. Some of the index components are already in that territory, about to take out all-time high (AAPL, BIDU, AMZN). Semiconductor sector is not acting well, despite the steller result from Intel (INTC). We'll see.

I don't quite see the topping formation on Nasdaq. The ascent has been steep, yes, but so far none of the indicators show overbought condition or trendline break. I personally prefer it would go sideways for a while, but what I think counts nothing toward making the market.

It's been a scary ride holding long positions (some positions as early as March) but I'm still holding most of them. Scary but lucky ride so far. Sphere: Related Content

USO Jumps

one day after I sold out my call options (at $0.90) at a 10% loss. If I had waited till today, I would have gotten out with 60% to 100% profit.

Lesson: If I intended to be a replacement for DXO, I should have bought longer-dated options, not October (duh). I could have gotten UCO, double-long oil ETF.

As October options expire this week, I was under pressure to get out yesterday when USO perked up. I probably should have done some quick TA to see if there was more upside. But with US dollar tanking like it did yesterday I thought the rebound would come today and the option was expiring fast. US dollar rebound came, albeit weak, but oil keeps going up.

Oh well. It could have been much worse. At one point in October, that particular call option was $0.20.

(Still it irritates me... Missed by the day!!)

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