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..

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).

Big Move Coming: Bollinger Bands Tightest in 2 Years

so says Breakpointtrade.com. They are hoping to trade the break to the upside, but are also ready to trade the short side should the break be to the downside. And they are urging us to be ready, either way.

Here's a partial screen capture of the bollinger bands on major indices from their newsletter on December 9, 2009. The anticipated big break didn't happen today. Thrill and suspense. I am yet to get ready for the short side though.



And here's the link to their Wednesday newsletter. You can sign up at their website to receive the newsletters for free.

They also mentioned trading ideas in the newsletter. Two of them happened to be the stocks I've been watching to enter on the long side: IBM and POT. Other ideas that looked interesting was ALB, JASO, and GD (all long), and NKE (short, but only if the general market breaks down). Please do your own DD.

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