Thursday, August 26, 2010

Silver Breaking Out: SLV

Whatever got into the poor man's gold (that's silver) today (8/25/2010), it pretty much had a TA textbook breakout from a pennant or triangle formation.

Here's a 6 month daily chart of SLV, an ETF that tracks silver (and is supposed to be backed by physical silver, though no one with a working brain believe it). This breakout would put the target price of SLV at $20.84.

In a 3-year weekly chart, SLV seems to have formed a cup and handle, and the handle is shaped as a pennant. The target based on that formation is over $30.

I bought SLV when it was slightly below $12 in April 2009 and I have kept it ever since. Unlike my gold ETF (DGP, also a long-term holding), SLV has never dipped below my buy point. I have no intention of selling either of them anytime soon.

I've read analyses by gold/silver bugs saying silver will go much higher percentage-wise than gold. I've seen a target price of $100. Well, if J.P.Morgan Chase is forced to cover its silver naked short positions, that should do the trick...

Tuesday, August 24, 2010

Third Confirmation of Hindenburg Omen Today

or 4th occurrence in 9 trading days (August 12, 19, 20, and 24). For more, see Zero Hedge.

The stock market seems and feels under heavy stress every day, and the struggle gave way today near the close. This is not good for the remaining longs.

Remember the "Cardinal Climax" that was supposed to happen around August 1? Maybe it was delayed and is happening right now...

Friday, August 20, 2010

Second Confirmation of Hindenburg Omen

says Zero Hedge, noting also the Iranian nuclear reactor event on Saturday:

"Longs may be forgiven if they are sweating their long positions over the weekend: not only did we just have a second, and far more solid Hindenburg Omen confirmation today, with 82 new highs, and 94 new lows, but the Saturday is the day when Iran launches its nuclear reactor, and everyone will be very jumpy regarding any piece of news out of the middle east. As for the H.O., the more validations we receive, the greater the confusion in the market, and the greater the possibility for a melt down (or up, as the case may be now that the market is unlike what it has ever been in the past). Furthermore, with implied correlation at record levels (JCJ at around 78), any potential crash will be like never before, as virtually all stocks now go up or down as one, more so than ever before. And should the HFT STOP command take place, the future should be very interesting indeed (at least for the primary dealers, and the Atari consoles which are unable to VWAP dump their holdings in the nano second before stuff goes bidless)."

Be very careful out there. Back to back Hindenburg Omen (see the previous post for the first confirmation, which was yesterday), I bet it's the first...

On the other hand, you could argue that this stock market is so broken with HTF algo-bot infestation, regulatory incompetence (SEC and CFTC), regulatory power-grab (FinReg bill aka Dodd-Frank bill aka Donk bill) that a Hindenburg Omen now occurs regularly, signaling absolutely nothing.

Thursday, August 19, 2010

Uh Oh... Hindenburg Omen Confirmed

From Zero Hedge today:

"Today we got our first Hindenburg Omen confirmation. The number of new highs was 136, and new lows was at 69 (per the traditional WSJ source). Granted this particular criteria set was a little weak as the 69 is precisely on the borderline for confirmation (the 2.2%), and the new highs number was not more than double the new lows (although it was close). Less gating were the McClellan oscillator which was negative at -83.6, and the 10 week MVA, which rose, which were the two remaining conditions. The first omen was spotted on August 12 - a week later the H.O has been confirmed. The more confirmations, the scarier it gets from a technical perspective, not to mention the conversion into a self-fulfilling prophecy (like every other technical indicator)."

As a reminder, the criteria for the Hindenburg Omen is in my August 13 post, one day after the first H.O.

Sunday, August 15, 2010

German Bourse Looks Much Better than US Counterparts

Amid an incredible amount of "doom and gloom" (most recently the Hindenburg Omen), I went looking for a constructive (if not downright cheerful) chart. I'm a contrarian in nature, and when just about everyone (not just people like Gerald Celente and Peter Schiff) is doomy and gloomy, it's either everyone is right for once or everyone is wrong again.

Anyway, I found a constructive chart, and it is German DAX Composite.

The 3-year DAX weekly chart shows the index is still above the 40-MA, unlike the US indices which struggled to fully regain that line and ended the week below. The correction that started in late April looks more like a consolidation, forming an ascending triangle pattern above the 40-MA. If the ascending triangle pattern plays out, the target would be 7027. That's about the target of the point and figure chart also. The index ended the week at 6110.

Germany's economy grew by 2.2% in the second quarter, the fastest in 20 years since the reunification. It grew by making things that people around the world want to buy, even at a premium. It grew DESPITE the government stimulus, which many in Germany acknowledge was misspent and probably unnecessary.

A stark contrast to the US.

Friday, August 13, 2010

Hindenburg Omen on August 12, 2010

Just so you know.

It doesn't mean we will have a market crash, but they say all major market crashes were preceded by the Hindenburg Omen.

The Hindenburg Omen criteria from Wikipedia:

The traditional definition of a Hindenburg Omen has five criteria:

  1. That the daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 2.2 percent of total NYSE issues traded that day.
  2. That the smaller of these numbers is greater than or equal to 69 (68.772 is 2.2% of 3126). This is not a rule but more like a checksum. This condition is a function of the 2.2% of the total issues.
  3. That the NYSE 10 Week moving average is rising.
  4. That the McClellan Oscillator is negative on that same day.
  5. That new 52 Week Highs cannot be more than twice the new 52 Week Lows (however it is fine for new 52 Week Lows to be more than double new 52 Week Highs). This condition is absolutely mandatory.
These measures are calculated each evening using Wall Street Journal figures for consistency. The occurrence of all five criteria on one day is often referred to as an unconfirmed Hindenburg Omen.

A confirmed Hindenburg Omen occurs if a second (or more) Hindenburg Omen signals occur during a 36-day period from the first signal.

The Hindenburg Omen mechanism can be applied to other stock exchanges like Paris, Berlin, Tokyo or Sydney but the criteria for it must overall be the same.

Monday, August 9, 2010

Go with the Index (Bearish) or Individual Stocks (Bullish)?

A bit of a conundrum.

While I continue to wait for FAS to break out (FOMC meeting just in time...), I don't know which way the market may break. On the major indices like Dow and S&P500, I see a rising wedge pattern with declining volume (=bearish) coupled with negative divergence on MACD. But if I look at individual stocks, I see a reverse head and shoulders pattern (=bullish), FAS being one of them.

Here's a take from Matthew Frailey at Breakpoint Trades (from their free newsletter).

Thursday, August 5, 2010

Bull Flag on FAS?

Is it finally breaking out?

(Of course you would have been better off trading JPM or GS for the last month...or even MS.)

Monday, August 2, 2010

CCJ Gapped Up, So Did GLW

A gap up this morning is taking Cameco (CCJ) half way to 50% Fib. And another materials stock that's been on my watch list for eternity is breaking out, too.

Corning (GLW). Like CCJ, I've been watching this for a company-specific, fundamental reason and not TA reason. Yesterday I read about how Corning's super-strong glass from half a century ago was finally finding profitable applications in electronics. I went to look at the chart, and what I saw was a rather sloppy consolidation for the past two weeks or so. I thought it was too sloppy for a decent breakout, but I liked the news of this super-strong glass named Gorilla. Just see the chart today. A huge gap up (up 5%). What do I know...

Materials sector seems particularly strong. Another one that's gapped up today is Freeport-McMoran (FCX). FCX has broken out from a better formed flat-top consolidation (than GLW). Congrats to those who are in these stocks. I wish I were.

Sunday, August 1, 2010

Second Bull Flag on CCJ

Focusing too much on the major indices is not a very smart thing to do if you simply want a good trade. See the trees instead of the forest, in other words. Since algo bots latch on to the indices and index ETFs and a few beta big caps on Nasdaq, some less-known individual stocks may be still relatively free of bots.

Here's one example. Cameco (CCJ) has been on my watch list for very long time. I invested in the stock once, from . I kept watching mainly for macro and fundamental reasons (Cameco is a uranium miner). Last I looked at the chart was more than a year ago, and the stock hasn't gone anywhere. It is actually back to where it was a year ago.

But if you just look at the short-term, it would have been a good enough trade.

This is CCJ's 9-month daily chart. It seems to be forming a second bull flag after breaking out of the first one. There is a positive divergence in MACD and RSI. Slow (very slow at 89) stochastics has already signaled a buy, when it crossed 20, and when it crossed 50. 13-EMA and 34-EMA have also crossed back, signaling a significant trend change.

The stock just passed 38.2% Fibonacci retracement from the July low to the January high. It could go to 50%. Between 50% and 61.8% there seems to be a lot of overhead resistance. If you had bought the stock when the slow stochastics crossed 20, you might be sitting now with 20% gain in a month. Not bad in a volatile market.