Monday, February 28, 2011

Rebound to 61.8% Fib, Now What?

I should be getting used to it by now, but it never ceases to amaze me and sometimes nauseate me. The US stock market went up again today for no good reason other than Warren Buffett being bullish. Dow, S&P, Nasdaq all retraced back to 61.8% Fibonacci retracement; Dow and S&P past 61.8%, Nasdaq, barely. My short Amazon worked today, although I wish I had had enough money to put NFLX. Oh well. Can't win all the time.

So what now?Will it trace all the way back to the February 18 level and keep going up? I shouldn't be surprised, but as I said, it's nauseating, partly because it's been levitating like this for too long.

Here's the daily chart of Nasdaq. It was the weakest index today, along with Russell 2000 (so much for economic recovery and growth). I see negative signs - RSI, MACD and price in negative divergence, up-volume not as significant as down-volume, a hanging man formed today which could be a bearish reversal signal.

I am not shorting the market (just short AMZN), so if it keeps going up that should be good for my commodity stocks. If it corrects more seriously, that should be also good for my gold and silver stocks and VXX.

Friday, February 25, 2011

Dow Theory Also Worked...

Non-confirmation between Dow Jones Transport and Dow Jones Industrial was a warning sign for a market correction.

(Not that I was paying much attention to the Dow Theory. I was paying more attention to the Yahoo stock MB, as you know... They both ended up working.)

For more on the Dow Theory, read here.

Weak Rebound, Putting AMZN

My unscientific indicator (Yahoo SKF MB) is showing more signs of a major move still coming.

In addition to the know-it-all jerk, now there are stock peddlers (spammers) coming in. More ominously, there is some bickering among long-time posters. All of these all at the same time.

As I've said, this is just my personal, totally unscientific indicator. Don't quote me on it or count on it.

The US stock market is trying its best to put in a rebound, but S&P500 smacked right against the trendline (slightly above 1320) of the rising wedge that was broken two days ago.

I putted AMZN that was forming, I thought, a bearish rising flag on a very small volume, when AMZN was up 45 cents for the day. We'll see. One logical stop would be 50-DMA, currently at $181.83.

I'll put the charts later.

Thursday, February 24, 2011

Three Black Crows?

It's past midnight in California, and do you know where your S&P500 E-mini is at?

It's down 9.5 points (or 0.79%). The reason? I don't know. Asia was down big on Thursday, except for Shanghai and Taiwan, although the gains were very modest.

But if tomorrow is another big down day, the three-day pattern may resemble "Three Black Crows", which could be a harbinger of a much more serious correction.

GL. Be safe.

Tuesday, February 22, 2011

Watch for EMA Crossover on VIX...

So my know-it-all jerk indicator on the Yahoo MB worked again... at least for one day. AMZN calls got whacked, KO calls back to my buy point, MTL got whacked (down 5% - can you say "de-risking"?). And all that was made up by gains in DGP, SLV, and VXX. My portfolio was totally, absolutely flat for the day.

Now the US stock futures are already showing cheerful numbers like Dow +30. As if the 2% sell-off was all they needed to reload the longs (BTFD, as Merrill Lynch already advised clients).

That could well be the case, but I just wanted to link this interesting chart from the guys at Breakpoint Trades (they let you subscribe for their free TA newsletter).

It's a chart of VIX, except it's a chart plotting the two exponential moving averages (13 and 34) without showing VIX. Watch for a definite crossover of EMA13 over EMA34, after a positive divergence on EMA13. The last time that positive divergence happened was right before the last year's Flash Crash (May 6).

This time, relentless POMO bombardment unleashed by Ben seems so far to have retarded the spike on VIX. We'll see if bears can use the geopolitical turmoil to push for more downside..

Sunday, February 20, 2011

Thoughts at the End of a Long Weekend - A Big Turn in the Market?

I have an extremely unscientific indicator that has worked pretty well for predicting the direction of a next significant move in the stock market: Yahoo's stock MB for SKF.

When either of the following two happens, a significant market move may be near:

1. All of a sudden, a burst of new posters appear, peddling penny stocks, stock newsletters, winning strategies, etc.; or

2. A know-it-all jerk appears.

In both occasions, many long-time posters disappear, or post very infrequently.

When it is the case No.1, the market direction is usually down. The case No.2 can break either way, depending on which direction that jerk is proposing; in the past it often broke in the opposite direction.

As it so happens, the US stock futures are down big tonight, with Dow futures down 97 as of 11:29 PM EST, supposedly because of the "unrest" in Libya (it's a revolution).

But then it doesn't mean much to Ben and the Inkjets at the Fed. All they care about is how to pump the market using whatever means imaginable. I wouldn't be surprised at all if the futures go back to unchanged by the time the cash market opens tomorrow morning. J.P.Morgue seems to be very busy trying to suppress the price of silver, which has been beaten down from $34.40 to $33.40. (Friday's close was $32.52.) It is also trying to put gold down back below $1,400.

But my very unscientific gauge, Yahoo stock board, is flashing a warning sign that the market may be ready to move big, and I think it may be to the downside.

Whichever the direction may be, I'm pretty happy with what I've got - gold and silver shares, an iron ore company, a uranium company, and VXX. AMZN calls and KO calls will suffer if the direction is down, but I'm not too worried about them because positions are small.

Hold on to your seats...

Friday, February 18, 2011

2/18/11 Low Vol Op-Ex Day

like the last one.

Let's see, they (option MMs) would want:

AMZN below $185

GOOG below $630

NFLX below $230

AAPL below $350

So Nasdaq is dutifully in red, ever so slightly.

By the way, analysts and chartists have been saying this has been the late-stage rally, indicating this may be the major top. Calling the top has been a losing game ever since April 2009, but one of these days it will be the top. Whether it is next week, next month, or 10 years from now is anybody's guess, but we have Ben Bernank to the rescue....

Nothing to do here in the market but watch the silver squeeze (J.P. Morgue is trying its best to beat it back down) Enjoy your long weekend.

Wednesday, February 16, 2011

Update: Denny's (DENN) - Nice Intraday Recovery

Those of you who had wits about them early morning and bought the stock at the support (as I said yesterday, $3.50) were richly rewarded with nearly 15% profit for the day. Congrats (if any out there who did it...).

Tuesday, February 15, 2011

Denny's (DENN), Anyone?

(UPDATE) Denny's bombed on the earnings, missed the estimate by 5 cents/share. $3.50 seems to be the support since November.

Since the economy is improving so fast, supposedly, people may have moved to more upscale restaurants (like McDonalds). Or the weather was bad. Or margin squeeze due to high input cost (=food).


The chart looks good. Oh I forgot TA doesn't matter any more. LOL.

It looks to me like a very large cup formed over 10 months, with the first target somewhere above $5.80. I think it may run above $6.50 (I'm looking at 10-year chart), given time. Technical indicators are not too great, but that hasn't stopped other stocks from going up higher. So far.

I have no position, and I just found out they are reporting after hours today (2/15/2011). Do your DD.

Tuesday, February 8, 2011

Q-Man (Quint Tatro at Tickerville) Seems to Be Catching On...

with the antics of Ben the destroyer of capital and wealth. Oh uh... My days of using him as contrarian indicator may be approaching to an end...

And here's a post from Washington's Blog, arguing that you cannot just talk about economics without knowing about politics.

I wholeheartedly agree with Washington's blog, and I would add that you cannot talk about investment or trading without knowing about economics OTHER THAN Keynesian or neo-classical economics. Why? Because Keynesian economics would uncritically approve of what Ben has been doing, and neo-classical economics would simply ignore whatever the government does.

I think investor/trader-friendly economics that provides you with insight and perspective into the government actions and non-actions and their effect on private businesses is the Austrian economics. But that's my take, and you should do your own DD. Good places to start doing DD is here and here.

Having a better, clearer idea of where all these (Barry's fiscal insanity, Ben's monetary insanity) has helped me stay in my positions in gold and silver and commodities. Today's purchase of KO? Well, that's more like calling Ben's bluff - the stock market will never go down as long as he's the chairman of the Fed...

Running on Empty? Who Cares? (Updated with KO Chart)

My call last November before Ben Bernank announced QE2 that Dow would reach 16,000 someday may not be far-fetched, and my target for S&P500 of 1,340 is just around the corner. My left-for-dead AMZN March call is coming back to life (AMZN is jumping over $6 today). All thanks to Ben Bernank, who only has our welfare in mind.

My latest purchase today is KO. Has a very peculiar chart formation, but I'm just looking at the buy signal in Slow Stochastic set at 60. MACD histogram shows positive divergence. Oh uh, tomorrow is their earnings report. Will it matter? Maybe. Maybe not. Here's the chart of KO, 9-month daily.

I also set up a call backspread on MTL, using April calls. It may be ready for a bounce here, after steadily losing all the gain from Feb 1, but it is at the support around $32.50. If I'm wrong, then I will lose out-of-pocket cost, which is about 30 cents (x100).

Do your own DD, but for me, I've sort of given up. If S&P500 can remain above 1,320, it could go up to 1,380 or so, then 1,440 (May 2008 top).

And of course I may be the perfect contrarian. If I am, I still have VXX....

Sunday, February 6, 2011

Out of Favor Trades: US Long-End Treasurys, Munis and USD

As I said in the yesterday's post, TA is broken, the stock market is broken, but those of us who still want to make money in the market can still look at the last remaining good TA signal - divergence. It has worked for me, most recently with ISRG.

I'm looking today at one of the three things that have been widely despised as close to worthless: US Treasuries, long-end. The chart is TLT, an ETF on Treasuries 20-years and longer. It is actually breaking down from the tight bollinger band, and whether it can snap back up from here remains to be seen. It has been pretty much in the lower bollinger band since late August/early September when Ben Bernank started QE Lite, and QE2 hasn't helped at all, contrary to what Ben said.

But what do I see in the chart? Positive divergence in MACD, and MACD histogram. RSI also has a slight positive divergence.

Checking on call options on TLT, I found a large volume on February $90 calls with the volume of 3677 with open interest of 1415. February $91 calls had the volume of 1862, but as a call spread it doesn't make sense. Checking the etrade intraday volume, the calls were being bought pretty much throughout the day for both strikes, not in one single purchase.

TLT ended Friday at $88.81.

The other one is US dollar, but I haven't seen the positive divergence on the chart yet, although it seem to sit at the point of "make or break". I think if the Obumbum's administration decides to do the American Homeland Investment Act Part Deux, it may be highly favorable to USD short-term. Combine that with the number of speculative short on USD in contrast to other currencies, and can we say "SQEEEZE"??

Munis are even more despised and hated, but it clearly shows positive divergence in MACD, RSI, and slow stochastics. See for yourself.

Do your own DD, and be safe. Although Ben's put seems eternal, if these three (Treasurys, munis, USD) dare follow the positive divergence and start going up, that may not mean well for his beloved stock market.

Saturday, February 5, 2011

Joe Saluzzi with Chris Martenson on HFT

Saluzzi confirms it is not a stock market any more, and carbon-based traders have no chance, and that technical patterns, which have worked for years and years, don't work any more.

The last one, that TA doesn't work any more, is what you suspect but don't want to admit. Looking at the market indices keep on levitating on ghastly volume, or certain momo Naz stocks just keep bid up no matter what, I've long admitted that is the case. I almost have a pity for people like Q-man who seems to earnestly believe everything is expressed in the charts and that most traders are still carbon-based, and who never even mentions HFT.

About the only aspect of TA which has seemed to sort of work in indicating the market turn is positive/negative divergence on some technical indicators - RSI, CCI, MACD, MACD histogram. But even that seems only allowed to work for a select set of stocks like gold and silver related ETFs and stocks (for obvious reasons - JPM, HSBC, Ben at the Fed...).

Here's the link to the podcast;

and the link to the transcript of the interview.