Reversal (Short-term)?

Yeah, this definitely looks like a reversal. I still think the ‘top’ is in, but this intra-week reversal on the weekly chart looks an awful lot like a candlestick bottom.

2016-01-22-ES_CHARTS

I suppose only time will tell whether a rally follows and how far it can go.  Good luck trading!

 

Post-Top Gyrations?

To my way of thinking, the U.S. (and global) markets have put a technical ‘top’ in place. The question that remains open in my present paradigm is whether the new trend is sideways or down. Either way, I imagine we should see a bounce in equities here. The U.S. is testing what should be solid support if the market is to continue trending sideways.

2016-01-19-ES_CHARTS

The global ETF (VEU) has shown greater weakness, but I have placed the sideways channel support a bit lower, using support from 2010, 2011 and 2012 for a bottom. That level is not yet being tested.

2016-01-19-VEU_CHARTS

One asset that is looking strong amid equity weakness is U.S. Treasuries, as usual. TLT appears to have broken to the upside of a recent pennant pattern.

2016-01-19-TLT_CHARTS

My suspicion is that the equity downtrend resumes after a brief rally here. In my search for new short candidates, cousin housing stocks look like appealing short targets: LOW and HD. Both have broken down from multi-year (steep) rising channels. But LOWE’s appears to be the weaker as it has broken under its 200 day MA in addition to breaking its trendline.
2016-01-19-LOW_CHARTS

2016-01-19-HD_CHARTS

One little philosophical note. To me, technical analysis is just a tool for analyzing the collective behavioral patterns of human psychology (I would suggest algorithms also reflect human consciousness in that they are guided by human logical constructions). In contradiction to standard economic theory, I would contend that we are clearly not rational animals and so, not surprisingly, the market is not a rational reflection of pricing. Good luck trading.

 

The Making of a Major Market Top?

For over a year now I have believed the U.S. stock market is going through a significant topping process. If this is indeed the case, we should start to get additional confirmation in the coming months.

One of the most bearish charts is QQQ, which formed a multi-year rising wedge and is currently retreating from resistance around the old 2000 highs. After breaking support last summer, it rallied back to support only to be rebuffed once again in classic bearish fashion.

2016-01-06-QQQ_CHARTS

The S&P chart can be read as either a rising wedge (bearish) or a rising channel (bullish). I have consistently viewed it as a wedge, which it broke down from last summer. In all of the (many) rallies, the 2100 area has provided consistent resistance. On the downside, 1850-ish provided support for two sharp pullbacks (one in 2014, and another in 2015), making for a sideways channel over the last year or two. Support from the rising channel comes into play around 1950.  It will be interesting to see if the S&P breaks out of this range in the coming months.

2016-01-06-ES_CHARTS

There are a couple of individual stocks which I have targeted as showing particularly bearish patterns. I noted QCOM some time ago. I have since covered my short, but continue to watch with interest as it is down nearly 50% from its 2014 high.

2016-01-06-QCOM_CHARTS

I also recently noted MMM, which is also breaking down from a long term rising wedge and appears to have been rebuffed after rallying to its old support

2016-01-06-MMM_CHARTS

Another company that I strongly dislike for largely fundamental reasons is HLF. It may be putting the right shoulder in place for a multi-year head-and-shoulders pattern. It looks like it may fall to $30 from here, and would likely go much lower if the strong support at $30 fails to hold.

2016-01-06-HLF_CHARTS

A stock that I have not shorted but am watching closely is HD. It has been a great couple of years for Home Depot, but they are dependent upon the housing market and enthusiastic DIYers. If the market takes a hit as I suspect it may, HD could be hit particularly hard. HD certainly has a chart that looks primed for a major selloff once support breaks.

2016-01-06-HD_CHARTS.png

Happy New Year and happy trading.

 

Breakout or Breakdown?

November 5, 2015 2 comments

U.S. markets have rallied massively in the last month and have returned to previous highs.  Resistance is at hand, and we should soon discover whether the late summer breakdown is re-confirmed by failure here, or another leg higher is in store.

Here is the S&P chart, with strong resistance around 2100. I am view this most recent rally as another small rising wedge.

2015-11-05-ES-ST_CHARTS

Here is the longer term view of that same S&P pattern.

2015-11-04-ES-LT_CHARTS

The Nasdaq QQQ also broke down from a multi-year rising wedge. It is now testing the underside of previous support.

2015-11-06-QQQ_CHARTS

One stock that may be a useful companion to that trade idea is MMM. Like the S&P, MMM broke down from a rising wedge, and has returned to the underside of old support.

2015-11-04-MMM_CHARTS

I remain of the view that we are witnessing a topping process.  As such, I see the current action as perhaps a final re-visitation of this price area. Naturally, it is a belief I hold loosely as recent years have made all such bearish wagers dangerous business on which profits needed to be taken pretty quickly. We’ll see if this plays out any differently.

QQQ clearly broken down

September 28, 2015 2 comments

The major indexes appear to have pretty conclusively ‘broken down.’ There was a large bullish wick put in place at the bottom of the initial breakdown, but upon returning to the old support, major indexes have since retreated.  Here is the long term Nasdaq (weekly) chart that shows a (7 year old!) rising wedge failing at the old 2000 high, forming a double top, and now breaking down.  Just based on the time and percentage moves involved in this chart, I’d imagine we have a good ways to fall.

2015-09-28-QQQ_CHARTS

Same ugly story in the S&P.

2015-09-28-ES_CHARTS

At this point I am settled into my short and have taken most long exposure off the table. Bear markets are typically incredibly volatile (much moreso than bull markets), so I am viewing big rallies as opportunities to add shorts and trim longs.

Market Leaders Breaking down at Multi-Year Resistance

It seems like I am always on the road when life gets interesting in the market. This is a post I had started a few weeks ago. I felt no urgency to get the post up because the time frames involves are a decade-plus, and the market topping process seemed to be playing out in slow motion. Last week slow motion turned to a rapid decline. But these charts have played out as indeed very meaningful (perhaps played out too quickly to be very useful now).  Remember these charts were produced BEFORE last week’s meltdown (so last week’s drop is not included in these images), but it shows the resistance that the high-flying market leaders were up against. As you can, they could have a long, long way to fall yet.

Three of the biggest names in tech faced serious multi-year resistance: Amazon (AMZN), Netflix (NFLX) and Google (GOOG).

2015-07-31-GOOG_CHARTS

NFLX:

2015-07-31-NFLX_CHARTS

AMZN:

2015-07-31-AMZN_CHARTS

Obviously, the resistance proved meaningful for each of these stocks. The S&P and QQQ have broken down from bearish patterns. I think we have a good bit further to fall, though I have no idea how far or how fast. Fundamentally, I think there is still far too much liquidity stuck in markets with very small doors.

The treasuries (TLT) breakout that I noted weeks ago continues to look very healthy. It looks like it may remain a good place to find peace in the current market turbulence.

Reversal in Gold Miners?

Very interesting action in Gold Miners, and Junior Miners on Friday.  Commodities have been obliterated this year.  Gold and Silver, in particular, appear to be flirting with a major breakdown as they hit multi-year lows.  But a dramatic reversal on Friday afternoon (7/24) comes at an interesting spot in the charts of mining indexes.

The ETFs for both large gold miners (GDX) and junior gold miners (GDXJ) have placed bullish wicks at the bottom support of a multi-year falling wedges.  First, GDX:

2015-07-24-GDX_CHARTS

And a matching chart in GDXJ:

2015-07-24-GDXJ_CHARTS

That chart pattern is promising and matched by a bullish wick at support in the chart in gold futures.

2015-07-24-GC2_CHARTS

Compare that with paper gold (GLD).  Notice how this week’s action relates to support? It broke support and never recovered.

2015-07-24-GLD_CHARTS

Interesting. It’s particularly funny to me given that I feel physical gold and paper gold and in some ways ideologically opposite investments – i.e. in a systemic crisis where the price of gold skyrockets, the paper version will likely be worthless.

What to make of Emerging Markets?

The Emerging Markets ETF (EEM) is a very interesting chart.  Is it a strong buy or a strong sell?  It seems both cases can be made.

The weekly chart posted a huge bullish wick last week. That is often a great reversal pattern that indicates the bottom of a selloff.

2015-07-17-EEM-W_CHARTS

But the daily chart paints a different picture. It experienced a massive breakdown and has now climbed back to the former support. This would typically be a good spot to short.

2015-07-17-EEM-D_CHARTS

So which is it? Strong buy or strong sell?  I don’t know, but it’s a pretty interesting situation.

Another very interesting, somewhat perplexing international chart comes from Hong Kong (EWH). It looked like a serious breakout earlier this year, then hit resistance from a decade ago.  It pulled back to support and has created a very bullish wick on the weekly chart. I suspect this is a bullish setup. At the very least, it looks interesting.

2015-07-16-EWH_CHARTS

As an unrelated aside, Netflix (NFLX) rallied 15% after earnings.  Breakout?  Maybe not so fast.  It looks to be coming up on a 20 year old line of resistance.

2015-07-17-NFLX_CHARTS

Happy trading.

The Euro-Summit ‘Agreement’ on Greece – annotated by Yanis Varoufakis

Yanis Varoufakis

The Euro Summit statement (or Terms of Greece’s Surrender – as it will go down in history) follows, annotated by yours truly. The original text is untouched with my notes confined to square brackets (and in red). Read and weep… [For a pdf copy click here.]

View original post 3,035 more words

Market Update: On the Brink of Breakdown?

The market has spent most of 2015 chopping sideways. The S&P (SPY) has failed to meaningfully breach 2100 and is once again threatening to turn meaningfully lower. Most eyes are watching Greece and the EU, but I suspect the far greater risk may be playing out in China.

First, however, here’s a quick survey of domestic charts. The S&P has broken the long-term rising wedge that I’ve been following since 2012 or so. At this point, I consider it to have “broken down.” But the 200 day moving average (i.e. ~50 week MA) has held since 2012 and remains a very important support that is still in place. We’ll see how it holds up over the coming weeks.

2015-07-07-ES2_CHARTSThe international equity markets (VEU) are at their 200 WEEK moving average. For comparison, SPY is about 20% above its 200 Week MA.

2015-07-08-VEU_CHARTS

There are reason to think this is not a “buy the dip” opportunity. One reason for caution is the huge bid that has broken U.S. Treasuries out of falling wedge, to the upside. Chris Kimble, one of my favorite technical analysts, also pointed out that the TLT/SPY ratio is topping out where it did in 2007. Here is the chart of TLT breaking to the upside of its falling wedge last week.

2015-07-08-TLT_CHARTS

To me, the most troubling news is not Greece, but China. The Shanghai composite (~FXI) has been in full meltdown mode, and it’ll be interesting to see when and how this impacts liquidity in global markets.

2015-07-07-FXI_CHARTS

The weakness in China has also triggered a serious breakdown in the wider Emerging Markets picture (EEM).

2015-07-08-EEM_CHARTS

While much of the world is watching Greece, I think China is the boogey-man most worth watching. It is not full-fledged Flail-and-Bail time yet, but it’s sensible to have a foot out the door and a finger on Bail trigger. I think the moving averages of SPY and VEU bear close watching for further weakness.

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