Limitation of Technical Analysis

Tickerville's Quint Tatro (whom I took a webinar on TA from, and whom I've been using as one of my contra-indicators since April this year - sorry Quint) continues to be bearish.

He starts this Tape Talk, talking about how Friday's 3.5 hour market had a significant volume distribution, without even mentioning Dubai.

Tape Talk (11/29/09)

I'm wondering if this should be the last time that I even link to his analysis... (If you are his fan, make sure you bookmark his site.)

Without macro (financial, economic, political, even social) understanding (or at least an attempt), the investment/trading becomes reactive to the events (like Dubai) as they unfold, and technical analysis becomes justification after the fact.

Now the guys at Breakpointtrades.com, from which I receive free TA newsletters sent out Early Friday alert after Dubai debt crisis caused the U.S. stock market futures into deep red like it were September 2008 all over again. The alert arrived in my Inbox at 3:01AM PST on Friday, with 43 charts no less, so that we would be prepared mentally for a potential big gap down. They are also technical traders, but they seem to put TA in bigger context.

Early Friday Morning Market Newsletter Special Edition (11/27/09 Breakpointtrades.com)

I trimmed my holdings somewhat on Friday, but more of a housekeeping and not a panic selling. It was a gap down alright, but the indices went nowhere near what I was prepared for (at least not yet, it could still happen), and a peek into the Breakpointtrades.com guys' charts helped calm the nerve. (Disclosure: I'm not paid to recommend their site or their service.)

Dow 5-day Chart: Ascending Triangle?

It looks to me like "ascending triangle" formation over the two days. Usually the break is to the upside, but since today is a quad-witching day I don't think it will happen. But who knows? It's Mercury Retrograde, after all...



(If a breakout ever occurs out of this pattern (if this is an ascending triangle pattern, that is, LOL), the target for Dow is about 100 points up from here, bringing the index very close to 10,000. DISCLAIMER: I am not not qualified to advise, recommend on the stock market, and this is only for your and my entertainment.)

EOD (end of day), the crooks otherwise known as market makers and specialists, managed to end Dow Jones Industrial Average right on the dot on the lower ascending trendline. The ascending triangle formation is still intact, which may or may not be significant, as this was a quad-witching Op-Ex (option expiration) day.

Rally That Nobody Believes In Continues

Weekend Tape Talk from Tickerville. Quint is a technical trader, and of course he says what he says: [fundamentals don't matter, because] "We continue to play the charts."

Tickerville August 23: The Big Break

"People refuse to embrace this tape. And until they do the market is going to discourage them. When they capitulate, that is when we'll have to start to become concerned."

(Well, I've heard Q-man going short several times during the run from the March low and gotten squeezed out. Nobody is perfect.)

I took his stock trading camp (webinar) back in February 2008. The stock market was still iffy after (then-)miserable January. The webinar was mainly for the "future", when we could trade again from long positions. That future did come, after the Bear Stearns cataclysm in March, and my portfolio did recover almost back to 2007 high by June.

Then, after the stock market spending 3 months slowly descending, the real cataclysm hit in September. I do not think TA could have saved many investors/traders. You would have needed a macro perspective, not just economic but also political.

For now, TA for the long side is still working, and as long as it is working and the stocks that I've been holding (some of them since mid March) act well, I will keep the stocks and remain long. I'm keeping an eye on the emergency exit door, though.

What This Week May Bring

Chart analysis from Tickerville and Breakpoints Trades:

Tickerville Tape Talk

"Everybody is watching the head and shoulders in SPY. Intermediate term is bearish. Head and shoulders everywhere - IWM, XRT, EEM. But obvious is not necessarily actionable. We are at a very critical juncture right now."

Qman seems to like commodities (DBC, DBA, GLD), bearish on financials.

Breakpoints Trades Market Recap (end of Thursday 6/25. I'm supposed to get Sunday version but it hasn't arrived yet...)

Their longer-term market charts are always helpful. They have no illusion about the rally off the March low, and Wave C that will take out the low will happen eventually.

"In a choppy market like this, swing trade doesn't work well. You'd better take profit quickly."

What To Expect Longer Term In The Stock Market

Here's the link to Breakpoint Trades' chart analysis that came in to my mailbox on Tuesday (I subscribe to their free newsletter). These guys have been spot-on. Their longer trend charts in particular are very much worth looking at. These bigger pictures may put your mind to ease, no matter whether you're bearish or bullish; you would know what to expect, better. The link below will take you to the page full of charts, and the accompanying audio file starts automatically (if not, click on the audio link at the left top of the page).

http://breakpointtrades.com/controls/preview.php?la_id=705

Dow Jones Industrial Average in June 09 - top or ..what? (Part II)

So the 5 consecutive days of 'doji' on Dow Jones Industrial Average finally ended in large selloff today. No particular news to move the market, and it just sold off all day, no discernible panic, just quiet selloff.

However, the huge selloff volume was not there, and the index's May high wasn't breached on the closing basis.

So my quest continues. Is this peculiar formation top or bottom? Or the third way - terminal patient whose EKG monitor is going flat?


Here's the chart of October 2002 Nasdaq bottom. The index went down in a zig zag mode, making lower lows and lower highs, until one day it formed a 'doji' and then formed a 'hammer' the next day. Those were indeed the reversal signals, and the index was on the way to a recovery, no matter how tepid.

This doesn't resemble anything like what we have in Dow right now.

The next chart is Dow again, this time October 2007 market top (probably for the foreseeable future). Again, the movement is anything but stagnant, both on the way up to the top and from the top. The only place I found the index to stay about the same place was on the way up in September 2007, when the index ended 5 days pretty much flat. But they were nothing like 5 'doji's we just had on Dow.

If today's selloff marks the beginning of a new leg down, then this current pattern, I'm forced to conclude, is a new one. With so much intervention in the form of liquidity injection, quantitative easing from the Federal Reserve, so much Treasuries to be sold every week, already unprecedented government debt and tax to increase even more "to stimulate the economy", it just may be that the time-tested chart patterns no longer yield any meaning or prediction for the market.

(My longer-term outlook is bleak to say the least. I hope I'm dead wrong. Here's the post if you're interested.)

General Market Analysis

Here's the link to market analysis from guys at breakpointtrades.com. The link goes to a page with a whole lot of charts and MP3 audio file. I started subscribing to their newsletter in February. (Newsletter subscription is free.) They've been spot on, as far as I've listened to them.

Weekend Newsletter for May 17th 2009

Here are two long-term charts from them, which you don't get to see very often anywhere else. They are monthly and weekly charts of S&P 500 index. They've given me some peace of mind as well as better outlook on the market.

What This Week May Bring To the Market

Lacking an omniscient crystal ball, I rely on technical analysis (TA) while keeping the bigger macro picture in mind (at least I try to). To supplement my elementary TA skills, I regularly go to several sites on the Internet, and I want to share two of them here.

First one is Tape Talk at Tickerville.com. The link below is the latest Talk available to the general Internet public, in which Q-man, a.k.a. Quint Tatro, discusses the general indices and sectors he's been watching. (They have another set of videos for their paid subscribers.)

• Bullish Until its Not
  "The bulls were not going to give up easily Friday as they worked hard to regain just about all that was lost in the S&P during Thursday’s slide. The NASDAQ didn’t have as bullish a showing but what do we make of the underlying sectors? "

His analysis mostly uses trend lines and price/volume action, clean and simple. I participated in his online Boot Camp of stock analysis last year.

Second one is from a paid site, breakpointtrades.com. They have a free newsletter that you can subscribe to, which is a very, very detailed discussion of major indices by By Steve Nelson & Matthew Frailey. They use all sorts of TA tools - trend lines, price/volume, Elliot Waves, Fibonacci retracement numbers, RSI, MACD, etc. What I find it extremely useful is their long-term charts with parameters (EMA, Stochastic, MACD) set to clearly show when the bull market ended and where we may be heading. The link below is the latest Newsletter.

• Weekend Newsletter for May 10th 2009

They say an interesting thing which is worth highlighting: the last year's high was in May, right in the option expiration week. Will the history repeat itself? We'll see soon enough, but from their analysis the S&P 500 index seems to be fast approaching some critical resistance levels in various parameters. As is, the index is extended.