29 Feb 2012

I hope my comment about silver breaking that trendline didn't lead you to buying it.  I use trendlines for channels, and only use them for buying when the price easily crosses the trendline - something where the price is flat for a while, the trendline comes down to it and it only requires a few percent gain to break up and through.  A 30% gain and then a break is not a good risk/reward choice.  The time if any to buy is on significant pullbacks - touching lower bollinger bands, not upper.  Sorry if I misled you.  I never chase performance, even if it breaks a trendline.

However, it and gold breaking their trendlines and then reversing as hard as they have is bearish for both of them.  Sorry if that seems obvious.

 As you can see we have had a slow moving small decline from the peak in the Summation index.  The RSI and TSV still remain at overbought levels.  However, there is no guarantee that this won't try to turn up again like it did several times in 2009 and 2010 after a long increase.

My short term oscillators (top 3) show that we are getting a little too negative in the short term.  Yes, really, and all we got was -53 in the Dow.  However, as the time frame gets longer, we are still not cheap for the medium term (the bottom one).

"When the facts change, I change my mind. What do you do, sir?"
John Maynard Keynes

28 Feb 2012

It is amazing the amount of weakness these breadth indexes have shown that has not materialized at all in the popularly watched indexes.  I believe Apple is largely responsible for that.  It appears that it is possible for a strong day in the indexes to lift a few of these stocks from their slump.

Silver, strong day - definitely broke through resistance trendline.

The McClellan Summation Index declined again today.  I plan to do some data analysis of what happens when its performance varies largely from the indexes.

27 Feb 2012

Percent of stocks with 50 day over 200 day still climbing the wall of worry.

 Medium term mostly trying to decline, but looks apprehensive to do so quickly.

Short term reflecting the same.

23 Feb 2012

 Medium term stayed the same from yesterday.

 SP-500 in terms of TLO (long term treasury ETF) on the bottom.  "Risk on" is not really being priced into long term bonds.  Lots of fresh money with nowhere to go may be the cause instead of fear.  Either way, the ratio is showing an extreme divergence between it and the SP-500.

 VIX is still heading back to its "new normal" level.  Notice the old normal level is a few dollars below.  The divergence still persists between SP-500 in VIX units and the SP-500 itself.

Pretty hard and fast bounce on my short term index. 

 Dollar sitting on 500 day moving average (light blue) as well as ascending white trendline.

Although nice, I don't consider today's move in silver a break in the red trendline.  In my opinion (which has lost credibility the last few weeks), it seems to have happened as the rally was already a bit too mature.  Stochastics are overbought again. TSV doesn't show that it is dear or cheap.  If you remember, I still maintained that it might trace back to the light blue trendline or its 61.8 retracement line which is sitting around 25.

"Impossible is a word to be found only in the dictionary of fools."
Napoleon Bonaparte

22 Feb 2012

 Long term indicator still climbing.  Not nearly at old highs (not much data)

 Medium term still declining.

 Short term resumed downturn.

Cumulative volume nowhere near new highs.  Many other sources have been talking about the phantom volume lately.

 As two of my favorites, gold and silver, have heated up again, I thought I would put charts.  I'm glad to see gold go up personally, but I hate to understand the implications/causes and knowing I don't have much of it.  Anyways, we brought you pretty close to buying at the last low spot in mid December.   We like to buy at the lower bollinger bands, not the upper. 

So once again, I will call people crazy like I was doing when silver was doing it last year.  Its fun to chase, but it is not prudent.  Here we are at the upper 3 standard deviation bollinger band.  We could keep going higher in the short term, but the odds are getting more stacked against us.  On the bright side, we seemingly broke out of the white resistance line.  However, we are now up against an old support line.

Silver remains in its channel as defined by the white and green lines.  The yellow is another old support that should serve as resistance.  We are also near the upper 3 standard deviation bollinger band.

As always, remain calm when making decisions. 


"... over a protracted period of good times, capitalist economies tend to move from a financial structuredominated by hedge finance units to a structure in which there is large weight to units engaged in speculative and Ponzi finance. Furthermore, if an economy with a sizeable body of speculative financial units is in an inflationary state, and the authorities attempt to exorcise inflation by monetary constraint, then speculative units will become Ponzi units and the net worth of previously Ponzi units will quickly evaporate. Consequently,units with cash flow shortfalls will be forced to try to make position by selling out position. This is likely to lead to a collapse of asset values."
-- Hyman Minsky

21 Feb 2012

Just a quick update.  I hope to post more charts later if errands go quickly.

 Medium term showing persistent signs of undoing its overbought condition.  This is largely yet to be seen in the indexes.

Yes, this actually did go straight sideways since Friday.  This weakness is also yet to be seen in the indexes.

The index itself, the TSV, and the RSI all remain at extremely high levels despite the recent fall in the index the last week. This usually changes direction with a corresponding violent move in the thin indexes Dow and S&P, but this time it has actually turned downwards and the indexes have continued to drift aimlessly upwards.  Who is leading who?
Around the world:

 London up against resistance line. 

Nikkei back to 50% retracement line - the recent low was also near the low formed immediately following the earthquake last year.  TSV and RSI both overbought. 

 XLF at a perfect 61.8% retracement line from its peak from 2/17/2011.  Here we are 369 days later.

20 Feb 2012

 The 21 day moving average of the McClellan oscillator is showing us what we already know - still overbought, but declining in overall strength.

I knew this move was extreme, but not this much.  The summation index actually is outside its 2.5 standard deviation bollinger band.  This is something that usually happens only to the downside as markets tend to move faster in that direction.  Humans seem to build confidence much more slowly than they lose it.  I marked previous times when it did this - only one to the upside on 5/5/2009 which is approximately six months after the monetary base doubled and "slowed" around 12/1/2008.  The most recent large increase slowed around 6/1/2011, also about six months before now. I don't know if there is a direct correlation or not, just analyzing.








"Is there any reason why the American people should be taxed to guarantee the debts of banks, any more than they should be taxed to guarantee the debts of other institutions, including the merchants, the industries, and the mills of the country?"
Senator Carter Glass during Senate debate on the Banking Act of 1933 (Glass-Steagall Act) [source: Rixey Smith and Norman Beasley, Carter Glass: A Biography (1939)] - nowandfutures.com

18 Feb 2012 (Gold, Silver vs Nasdaq Update)

 Gold and oil are tracking pretty well due to the time shift between their starts.  I really hope oil doesn't do what it did soon in the 70s, but as we all know, hope doesn't do much in place of action.

 Short time frame oscillators show a negative divergence between the index peaks and these. 

All time frames combined give us a pretty good look at how overbought / oversold something is no matter your investing perspective.  If you want to buy, the odds are currently against you no matter how you look at it.  If you are an outstanding individual stock picker, this may not matter for a little while to you.

 Dow Transports in terms of Dow Industrials ratio (bottom).  Usually it is good for bull markets if this is increasing.  The glaring exception being the glaring transports dead cat bounce in 2008 after a more steep decline in 2007.  The Industrials have been outpacing the transports since early 2011.

JJC (the Copper ETF) in terms of the SP-500 (bottom - green).  Generally a rising ratio (JJC outpacing SP) indicates a strong bull market.  Again, since early 2011 we have seen deterioration. 


I didn't know if JJC was as bad as tracking actual copper as USO is at tracking crude so I decided to check. 
http://stockcharts.com/h-sc/ui?s=$COPPER:JJC&p=D&yr=3&mn=0&dy=0&id=p77344439382
Sure enough, actual copper has outpaced JJC by about 16% since 2009 so my chart is not completely accurate above.


Here is a better one, but it is not that much different:
http://stockcharts.com/h-sc/ui?s=$COPPER:$SPX&p=D&yr=3&mn=0&dy=0&id=p30938694681


As a reminder of how poorly USO tracks crude:
http://stockcharts.com/h-sc/ui?s=$WTIC:USO&p=D&yr=3&mn=0&dy=0&id=p42110621925


You can say well using this I would have missed this last rally.  Yes for the overall Dow and Nasdaq, but if you check out the chart of C, you will see it is still down 40% from that point.  Others are up significantly.  This is one of the reasons I advocate trading; if done well, it allows you to experience the good parts and miss a lot of the bad.

SP-500 in terms of VIX (bottom) shows a divergence between the SP price and the ratio still in both the longer term and currently (until it changes) the shorter term. 


"To combat depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection or production, we want to create further misdirection- a procedure which can only lead to a much more severe crisis as soon as the credit expansion comes to an end."
I don't know what will force our effort to expand credit to end.  Extreme inflation?
Fredrich Hayek, 1933

17 Feb 2012

 Horizontal move today for medium term.

Increase in the hold long short term. 

Copper continues to show deterioration along with the Dow Transports.  However, it is probably safe to let the Dow reach out to 13K and let my short term indicator try climbing a bit higher.

16 Feb 2012

Bounced in the short term, stalled the decline of the medium term.  Still seems the Dow wants to wrestle with 13K. 

"To buy when others are despondently selling and sell when others are greedily buying requires the greatest fortitude and pays the greatest reward."
-- Sir John Templeton

15 Feb 2012

As you can see we have finally come off highs for the top two indicators.  Both are nearing their lower bollinger band.  I am a perfectionist so as this has been declining I haven't been initiating new shorts because there usually is a few more pandemonium days at a top, especially after an increase like this, to make a nice U pattern. I only try to initiate positions when the shortest term indicators are at the most extreme levels to increase confidence right away, but for all intents and purposes, the medium and longer term are still pretty overbought. 

Apple blew through my target but only for a bit.  Today was a classic euphoria blow off.  It should have a few other similar candles during violent oscillations if this is a medium term top.  I actually was told by someone that they had all of their money in AAPL stock.  I said to consider selling; they thought I was crazy.

November 15, 1923 & beyond

1. "Firms that mushroomed during the inflation now found that the real interest they paid on loans for the first time was positive rather than negative, lower though the rates appeared to be. Perhaps most significant, for the first time they were obliged to pay real taxes, many of which were extremely high because of the necessity rapidly to balance the budget and to bring official salaries, which had fallen disastrously, up to an acceptable level again. Companies were often unable to buy new machinery after stabilisation came, so much so that huge stocks of unsold iron and coal began to build up in the Ruhr. Not even the foreign loans flowing in were able to prevent the seizing up once again of the Ruhr mining industry where pit after pit, especially any producing poor quality coal, was forced to close. Workers were to flock from pit to agriculture, from mines and quarries and engineering to the production of food and direct consumer goods, and to building. Hugo Stinnes himself had been deceived by the artificial prosperity of inflation into a fanatical confidence in the future of coal. It was the post-stabilisation depression in the coal, iron and steel industries, contriving even the depopulation of Ruhr townships, which led eventually in June 1925 to the collapse of the Stinnes empire. "
2. "That event finally pricked the abscess. The great groups who had resisted over-expansion during the depreciation — Krupp, Thyssen, Gelsenkirchen — were able to ride the storm. Others such as the Sichel and Kahn groups foundered. The defects of 'vertical' industrial concentrations, embracing all stages of manufacture from raw material to finished article, had been revealed, the strength of horizontal combines confirmed. The speculators, in a word, found they had to pay for their folly, improvidence and greed; and the old captains of industry resumed their sway.
   The Stinnes debacle demonstrated above all that great industrial possessions could not be held without adequate liquid resources (as early as June 1924, Stinnes had been trying to pledge Bochumer Verein and Gelsenkirchen shares against Dutch loans); and that vertical combines were inefficient and unprofitable except under the exceptional conditions which had bred them. "
3. "In the inflationary period new factories were built, old establishments reorganised and extended, new plant laid down, participations in all fields of industrial activity bought up, and the great amorphous concerns founded. Too late, it was found that this process had undermined the capital structure of the country: capital was frozen in factories for which, because of the extermination of the rentier and the reduction of the real wages of so many of the great consumer classes, there was no economic demand. Once the demand for goods was shut off and the flow of cash dammed, the fate of the productive apparatus was sealed. Even in 1924, firms of undoubted solidity and large assets were unable to pay out trifling sums of money. In 1926 that apparatus was still too great in relation to the working capital and the nation's power of consumption. Thus, whereas in 1913 there were 7,700 bankruptcies, and in 1924 only 5,700, the figure for 1925 was 10,800; and between the third quarter of 1925 and the second of 1927, bankruptcies numbered 31,000 — a rate of 15,000 a year. " 

courtesty of nowandfutures.com

14 Feb 2012

The fighter in the market still seems to be alive despite internal weakness. 

I think Daneric was right last week when he said the Dow will likely be drawn to 13K before a top starts forming.

 The percent of stocks with the 50 day over the 200 day is slowly creeping higher again.  Despite new highs in the indexes, you can see this is still lagging.

 The medium term still declined today despite the day end rally.

The short term declined, but not as much as it would have if the market closed mid-day.  If this bounces back into overbought territory (it appears it might based upon some more Greek rumors), that will give both bears and bulls a terrific spot to sell.  The McClellan also declined today, but can't get much higher either way.

From a seasonal perspective, February is usually the second worst month.  I would not be surprised to see a mild pullback that lasts into March.  March will likely form a bottom for a rally into May that will be more narrow then this recent rally.  Then the summer should be weak again.  That is just how I am feeling based upon current levels of indicators and memories.  I have no idea if it is right.

Treasuries are still on their plateau.  Free money everywhere or is it fear?  Or both?


""Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the Bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst yourselves, and when you lost, you charged it to the Bank (me:  Second Bank of the United States). Beyond question this great and powerful institution has been actively engaged in attempting to influence the elections of the public officers by means of its money..

You tell me that if I take the deposits from the Bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin. Should I let you go on, you will ruin fifty thousand families, and that would be my sin. You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, I will rout you out." "
 President Andrew Jackson

13 Feb 2012

 As you can see in the shortest term (top) we reached an oversold status and bounced.  Hard to believe isn't it?  However, beneath the surface things were weakening for a while before the first red day in a while on Friday.  All the rest remain elevated.  The 3 over 8 slowed its descent today, but I will highlight that later.

 See the black box on the left.  that is the first Greek bailout causing a sudden spike in the hold long medium term.  As you can see, we had already had weakness before it so a bounce was easier.  This time all we got was a slowing of the descent of the HL-MT.

 This shows the huge bounce in the short term after the first Greek bailout was passed.  I was short up until the Friday before it, covered half, and felt huge pain on the Monday, but it turned out all ok a few days later. This time we just got a slow of the descent, but a possibility of a bounce for a few days as vapors might continue to push this thing up.  We will see.

The white line still hasn't crossed the orange (if you zoom in you might be able to see there are two lines) and we had an up day on the index today.  TSV and RSI. are both extremely overbought in the longest term.  So, even if we don't get the exact direction over the next few days, the path of least resistance has to be down for the longer term.


 AAPL has hit the target I pointed out last week on news that they will infect the rest of the Milky Way with their iDevices.  I highlighted some sections where TSV got ahead of itself. It always signified a slowing in the shorter term, but obviously has not done much damage to the long term.  Who knows where this beast will stop.



What is up the Republicans' sleeve? Trying to get Ron Paul to peak at the right time?

12 Feb 2012

I know a lot of people think that VIX is rigged along with every thing else so they don't bother to look at VIX.  VIX has remained mysteriously higher than previous lows despite this relentless rally. 

 

Yes, it did touch the long-running low yellow line briefly, but for all intents and purposes the majority of the prices stayed above the slightly ascending white line. 

But, maybe it shows up better here. 

As you can see in 2007/2008, this existed for a long time before prices really caught up.  It also helped create a divergence near the March 09 bottom but in the opposite direction. Now, price is substantially higher than the May 2010 peak, but $SPX in terms of $VIX (green line) is down from that point.  You can also look closely and see examples of this in shorter time frames.  See the May 10, Feb 11, and July 11 tops where price stayed elevated a bit longer than the ratio. 

11 Feb 2012

 Silver update:  still haven't reached the target from the pennant (I don't know if it will) or the 61.8% retracement line from the 2008 low which sits around 24.  You can see the current channel, the current red line resistance and the green line which should also be support. 

I was able to program in the buying climax code to auto update.  I still have to work on forming a meaningful ratio of how many new highs turn into buying climaxes.  Don't let the word percent fool you, those are raw numbers of stocks for the middle two.  You can also see the RSI for the McClellan summation index for this long term view is at an overbought level.  I wasn't investing in 2006 so I have no idea what it was like then where it stayed up for longer.