Archive for the ‘technical analysis’ Category

Time to Short Yet?

I have done precious little posting over the last 6 months or year, in large part because the market has been marvelously uninteresting. It has largely served as an undramatic source of steady income for those heavily invested on the long side. Despite my Trump-loathing and deep skepticism of both U.S. economic policy and the state of the global economy, the chart-reader in me sees no cause for skepticism in the S&P (SPY) chart. (That said, later I will suggest that some big-name tech stocks do seem primed for a short attempt – so stay tuned!) As it stands, SPY looks like it’s in a garden variety upward trending channel for now.


My economic skepticism is more comfortable with the upward trend evident in long term U.S. Treasuries (TLT). TLT bounced off support, and has trended up this year. To me, only genuine economic growth and excitement would seriously damage Treasuries, and I don’t see that happening. Here is the TLT chart:


Emerging markets (EEM) have surged over the last two years and are pushing against a decade-old downward trending line of resistance. It’ll be interesting to see if EEM can break through to the upside. I would (and maybe will) bet against it. That is some pretty well-established resistance there:


One interesting asset class to watch is junk bonds (JNK). If the equity market is running into weakness, JNK is likely to provide an early indicator. It appears to be near the end of a slightly rising wedge pattern that basically includes the duration of the Trump election through present.


Now for those shorts.  Amazon (AMZN) has had a phenomenal run in recent years. It recently made headlines with its purchase of Whole Foods. Surely buying governments wholesale in on its to-do list at some point in the not-too-distant future. Lord knows the U.S. government is for sale. All that said, the stock’s ascent over the last four years is a sharply rising wedge pattern. There is still room on the upside, but between the hype and that pattern, I’m taking a crack on the short side here.


Over a slightly shorter time frame, Google, err Alphabet (GOOG) has formed a similarly rising wedge pattern. It is still in a wider phase of the pattern so may have more room on the upside without breaking the pattern, but it’s butting against the resistance trendline, so I’ll take my chances with a short here.


I’ve seen nothing to alleviate my big picture concerns. If anything, they are more pronounced than ever. That said, I think the market casino is primarily self-reflective. It is not a reflection of the economy so much as a reflection of its itself. I think it will take a major catalyst to break through the momentum and market-wide commitment to self-induced price growth for the benefit of major market participants. Who knows when the spell will break or what will finally break it.



Post-Election Market Update

Well, a man who I assumed was a joke candidate will soon be President of the United States. Call it a win for life’s beautiful ironies and paradoxes that a billionaire has won the Presidency on wave of populist rhetoric. So it goes. What does it mean for markets? Who knows. But I’ll do my best to cycle through some of the major market charts.

Despite my pessimism regarding the larger state of neoliberal capitalism and the array of macro-economic warning signs to be found in social and capital structures, the equity markets looked poised to breakout with a Clinton win. Trump’s upset victory sent global markets into a bit of tailspin. Then U.S. equities rapidly recovered, pushing to new highs. In keeping with Trump’s promise of building out infrastructure and quashing global trade deals, there has been a somewhat predictable divergence within U.S. markets. Industrial stocks have markedly outperformed the tech darlings that rely more heavily on unified global markets. So let our tour begin.

The S&P (SPY) has pushed to nominal highs, though not (yet) to a level indicating a full-on “breakout.”


Presumably driven by the prospect of immanent infrastructure work, the Dow Jones (DIA) appears to be a classic “breakout” after almost two years of sideways consolidation. I have entered a double-long position on the Dow (DDM).


The Nasdaq (QQQ) has markedly underperformed its U.S. equity peers. I imagine newfound risk to global trade deals is pertinent, as is the technically relevant observation that Nasdaq is trading at the old highs of 2000. Hello, resistance. Seems like a good time for a pairs trade: long Dow, short Nas.


The most significant movement post-Trump has come in the currency and bond markets. The Dollar (UUP) rallied violently on Trump’s hawkish talk, and is testing long term resistance levels.


Long term U.S. Treasuries (TLT) sold off quite precipitously and are testing a rising support trendline in place since around 2008. It may be an interesting buy point here. TLT is sitting near its 200 week moving average, with a support exit nearby and current sentiment quite bearish.


Global markets (VEU) and emerging markets (EEM) show similar patterns, with rising support trendlines in place and resistance overhead. There was a bullish “reverse head-and-shoulders” shaping up, but it hasn’t played out very cleanly.


One asset that remains intriguing to me is gold. My particular angle of interest has been miners, since they were drubbed so terribly from 2010-2015. After the significant breakout of gold miners early this year, the junior miner index (GDXJ) has now pulled back 50% off its rally top. It is a standard Fibonacci retracement, and after offloading most of my GDXJ shares in the 40’s, it may be time to reload a bit here.


I am not committed to bullishness, so I have taken a short position on one the leading auto loan providers, Ally Financial (ALLY). Ally is apparently of the leading providers of student and auto loans, which strike me as an inevitable calamity just waiting for a catalyst to ignite the trash heap. There is a possible triple top here. I don’t plan to stick around if there is breakout above this resistance level.


Well, that’s all for now. Happy trading all.






SUNW: Microcap Solar Breakout

A few weeks ago, I bought into Sunworks (SUNW) on what looked to me like an upside breakout from a falling wedge. In the weeks since, the stock has churned higher much faster than I expected. So fast, in fact, that I suspect a pullback is probably around the corner. That said, the action also suggests to me that the breakout is legit. Here is a 3 years chart of the stock:


I am a sucker for companies that offer good growth with positive earnings and little debt. SUNW appears to fit the bill on all counts. I used to live on microcap breakout plays like this, but SUNW is the first such buy I’ve made in quite a while. +20% so far. It’ll be interesting to see where it goes from here.

I remain ambivalent towards the broader market. The SPY has technically broken to the upside of serious resistance, but I am not convinced that it is anything more than a head-fake yet. Treasuries remain close to trendline resistance and I have taken a short position against TLT via TTT. Here is the chart of TLT:


I have also shorted Nasdaq by buying QID, so I remain a bit bearish towards equities despite the apparent breakout in SPY.

Today (8/2) was a weird one in that both QID and TTT were winners, as both equities and Treasuries were down. Then again, despite their roles as theoretical counterpoints, I suppose if they can both rise over a half decade, they can both fall.

Good luck trading!

U.S. Markets breaking to upside?

Anyone who has followed my blogging knows that I’ve been bearish for a long time. I remain psychologically bearish. But I trust the pictures painted by market participants more than my own analysis of underlying fundamentals. As technical analysis goes, just two current pictures suggest a fairly clear (and bullish) reading of the market environment.

The S&P (SPY) appears to be breaking out. We’ll see how this plays out in the coming weeks, but given that there has been strong resistance for 18 months now, a break-out seems likely to suggest significant upside in my view.


Here is a shorter term look at the S&P.


Alongside the breakout in U.S. equity markets is an apparent topping in long term U.S. Treasuries (TLT).


All of this appears to portend a very equity-friendly environment going forward. It may be the commodities will be along for this upside ride after missing out entirely in the most recent equity rally.

Headfakes do happen, so that’s something be wary of. Treasuries seem to confirm equity upside, as I see it, but time will tell. Happy trading.

Brexit status review

Brexit has made for some market excitement, so perhaps it’s time to review some charts. The major breakdown that that I anticipated (and still seems inevitable to me) has not transpired yet. Instead, the markets have settled into a sideways pattern over the last couple years. Today’s bloodbath doesn’t really change anything. American markets are near highs with plenty of room to fall before encountering meaningful support.

Here is what the S&P SPY looks like:


Here is what the Nasdaq QQQ looks like. It may be forming a head & shoulder pattern:


International markets are in much worse shape, but the VEU ETF (global equity) is still well above channel support.


The gold miner breakout that I’ve been tracking for awhile continues unabated. I have no sense for where a top might be. I have expected a pullback on a few different occasions, but so far no shakeout has lasted more than a few days. Gold looks to have broken out solidly from a bullish wedge.


GDX and GDXJ were beaten much more savagely in recent years, and the breakout has reflected that oversold condition. Neither GDX nor GDXJ has even reached the 23% Fibonacci retracement from 2010 highs! Despite a 100%+ gain from this year’s lows, there still appears to be plenty of upside in the longer term.


Though I seldom consider fundamentals in my trading analysis, I do think the continued ZIRP and push towards NIRP provides continued support for gold prices. The punishment for holding gold (no interest return) is a nonfactor, and gold feels like a much ‘safer’ holding to me than the digital or paper cash offered by banks. NIRP is, imho, a very real potential driver for gold prices.

That’s a rough overview of the way I see things right now. Gold or gold miners remain a hold or buy in my view. I would prefer to buy on a big pullback, but I don’t have a sense for when that might occur. I think markets will trend down, but I don’t think Brexit is any kind of singular catalyst for collapse. I will sit up and take notice when this sideways channel that dominates (American) markets is broken – either to the upside or downside.



Precious Metal Miners ready to Rally

February 12, 2016 2 comments

Gold miners (both GDXJ and GDX) appear to breaking out of a multi-year falling wedges in very convincing fashion. Should there be a pullback to test the breakout, I imagine I will add to holdings by loading up.

Also (at the bottom), Conoco-Phillips (COP) is hitting multi-decade support as oil is putting in a huge intra-week reversal.







The initial S&P reversal failed (my previous post), but it looks like the S&P is trying to put another intra-week reversal on the chart this week. I still suspect the market gets a multi-week rally, but am even more convinced that a  longish term top is in place. I think the downside risk far outweighs the upside potential here over the mid/long term in the broad market.

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.


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.


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.


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


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.


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.


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.


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


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


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.


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.


Same ugly story in the S&P.


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).






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.

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