Saturday, March 31, 2012

31 Mar 2012

 Long term has still steadily increased the last few weeks.  This is definitely a lagging indicator.
 Slight decrease on Friday.
 Slight decrease on Friday.
My short term indicator summation index has steadily declined since February.  Amazingly, it looks like it is sold off enough that it could bounce like Nov 2011 or continue its slide like May 2010.  No way to really know.  One outside factor is that November is in the seasonal "sweet spot."  May and June are not.

For those that want to know, I created this by offsetting my short term summation index by -0.5 to make it have a mean closer to zero.  One thing I find interesting is that the peaks in the negative area have only reached -4, but the peaks in the positive are around 6.  This shows the seemingly positive bias for gravitation.  The oscillator (blue) is then multiplied to make it easier to see against the other indexes.

Thursday, March 29, 2012

29 Mar 2012

The Russell 3000 Advance / Decline line still lags the Russell 3000 itself.  None of my indicators are oversold.  Long term is still overbought.

Wednesday, March 28, 2012

28 Mar 2012

BBVA is one of Spain's major banks.  STD is the other ADR I know of.  It is straddling long term support connecting 2009 and the end of 2011.  Of course, someone could see this as the triangle forming that it could break up and out of.  However, the large difference between this performance and many other European banks (UBS, LYG, BCS, etc) tells me that something is brewing in Spain.  Oh, and National Bank of Greece (NBG) is breaking down again.  I think IRE (Ireland) will be soon to follow.

XIV went on a wild ride today.  Down 10% to down 2% at close.  Still overbought using a few RSI timeframes, stochastics, and something I call my brain.
I have been playing with this indicator in my other chart package to try giving us better top estimates.  My traditional short term indicators that work fairly well for bottoms fail miserably for tops due to the low volatility.
 Slight declined today.
Slight decline today.

Tuesday, March 27, 2012

27 Mar 2012

 The medium term inched higher today.
The short term also inched higher today.  Closer to overbought than oversold.
This is the percent of stocks over their 40 day moving average.  It has been declining since 7 February while the major indexes continued their march upwards.  Yes, it is actually only 59%.

Oh yes, I forgot to add, out of all the junk ETFs out there, I just discovered what may be the worst yet, inverse VIX ETFs.  While these basically should do the almost the same thing (go up when market goes up) as ummm, the SPY, DIA or QQQ, remember that they are inverse, and that means they are if any of the other inverse products are an indication, junk.

One look at XIV compared to VIX someone can see that it is already down 33% from 8 July of last year where VIX was roughly the same value as it is today.  This problem has been covered by me and many others so I will not go into the why again.  SVXY is the other.  It hasn't been around long enough to decline yet, but it will.

Monday, March 26, 2012

Sunday, March 25, 2012

25 Mar 2012

As anyone would do when something has not worked perfectly for them, I began to study what has went wrong with my analysis in the first quarter.

First, I believe I became too prideful after my results from 2011.  I plan to try further suppressing the ego.

Second, I would say that my assumption of something needing to decline because it is overbought or rise because it is oversold is mostly what has caused pain.  From looking at my charts, I've found that it is the divergence of oversold/overbought conditions that are the most important.

Third, I decided I need a more formal way of making decisions with my investments.  I've noticed trends in the past, but never fully put them down in something that reminds me constantly of them.  I am still trying to figure out a way to do this as Excel doesn't easily allow graphical annotations.  The main trend I refer to is the cycle of  strong to weak stocks.  The strong ones (stocks that remain above or near 50/200 day moving averages) will almost always bottom first, and the weak ones will also almost always bottom (just later) in a given positive investment cycle.

Fourth, in order to invest and survive, you have to acknowledge present reality, but remain optimistic for the long haul.  It seems that optimism persists in the stock market for up to 2/3rds of the time.  Stock market declines that erase previous gains generally take place in 1/3rd of the time taken to get to a given height.

For the Dow:  10/17/2002 - 10/5/2007:  1829 days;  10/5/2007 - 3/9/2009:  521 days; about 28% of the time.  I'll still just use 1/3rd for simplicity.

Depending on when you would say the generational high is, here is another example.  S&P:  8/06/1982 - 10/5/2007:  9191 days; 10/5/2007 + 3063 days = Feb 23, 2016.

This is also near the time I predicted the gold bull market would end as well while comparing its faster cycle (hard asset cycles historically seem shorter than soft asset cycles).

Housing topped around May 2006, although its "bottom" is harder because prices in nominal terms steadily rose from 1970 until 2006.  Using 1982 as the real price bottom, it should bottom around April 17, 2014.

If you like this, try some out for yourself.

As part of cleaning up, I restricted my charts to only show the hold long values and made the color coding match for each time frame.

Long term view.
 I think the medium term index (not the moving average) probably shows this pattern best.  The key is to look for persistent divergences in peaks or lows.    If you look at the dates of divergences and compare them to a variety of stocks, you will that sometimes it affects them, sometimes it doesn't.

However, you will see that after persistent weakness (the gold line declined from 11/1/2010 to 8/1/2010) that the odds of seeing the weakness in individual stocks also went up - seems obvious.  The opposite also applied to the recent rally.  There is a reason it didn't really show up in the Dow until after most of the bottom forming work had completed in August.
Short term view.

Update 1729 EDT:  Saw this and thought it was worth posting.  Gold in terms of miners (GDX) back to 2008 levels which marked a low for both the miners and gold.

"Constant development is the law of life, and a man who always tries to maintain his dogmas in order to appear consistent drives himself into a false position."
Mohandas Gandhi

"When I despair, I remember that all through history the ways of truth and love have always won. There have been tyrants, and murderers, and for a time they can seem invincible, but in the end they always fall. Think of it. Always."
Mahatma Gandhi  

Thursday, March 22, 2012

22 Mar 2012

Where to now?  I don't know.
 It is probably no surprise that we are overbought for the long term measure.
 Medium term is challenging its trendline up from last August.
 S&P 500 has significant weakness in volume.  This is also no surprise, but the MoneyStream in the middle really shows it.  I don't know if volume matters because this has gone up for so long on low volume.  I guess in a few years we'll know.
 Not quite oversold yet in the short term, but nearing that level.
My short term summation index still remains at very lofty heights.  It is interesting to see that despite the Dow rising while this fell from Sept 10 to June 11 that the Dow actually erased all those gains in less than a few weeks once the weakness finally "infected" it.

"Successful investing is anticipating the anticipations of others."
John Maynard Keynes

Wednesday, March 21, 2012

21 Mar 2012

 People have been saying the crisis would rotate to Spain and Portugal for sometime now.  Notice how BBVA, one of Spain's biggest banks, is very near long term support and resistance.  It could break up or it could break down.
 Here is an upclose view.  Remember in early February that you could take some short positions if you were patient.  This is one of the few stocks that recommendation has worked for.  Anyways, the yellow line is a recent support and the bottom white line is what goes back to 2009.  I will be watching.

Oracle had a nasty reversal candle today despite good earnings.  Notice how the RSI and TSV have divergent peaks and are no where near oversold as it hits its descending trendline (not on graph) and the 50 and 200 EMAs.
 Medium term turned down today.
Short term continued its descent.  When, not if, will the indexes notice?

Tuesday, March 20, 2012

20 Mar 2012

 Buying climaxes still remain high despite not many stocks actually making 52 week highs.
 Hold long long term creeping back to levels from June of last year.
 Medium term declined today and is currently neither overbought nor oversold.  The divergence between this peak and last is worth noticing if it does continue downward.
Short term also declined today.  Current reading is neutral.
 Is VIX really all that low?  I know this is weird coming from me, but I honestly try to be non-biased.
This descending triangle could provide a spring board in the short term for the VIX.  Notice it is also on my flat red line.

Not trying to be a downer, but I found this quote amusing.  The reference at the time was the telephone.  Now, we have so much more.
What we call "progress " is the exchange of one nuisance for another nuisance. 
Henry Havelock Ellis 

Monday, March 19, 2012

19 Mar 2012

Update 19 Mar 12:  2146.

 The short term slightly declined today.
It has become obvious to me that my indicators do not do well with finding tops due to the possibility of them being pegged near the upper bound.  That is why I created this over the weekend.  This (green line) sums the previous 50 days of values (red line) - think of it as an integral:  the area under the curve.  It has helped mark significant bottoms as well as tops, but it also appears to be more accurate when its peaks/valleys diverge from one another.

Two banks that passed the stress test sit at key juncture:  BAC and RF
Note that RF actually auctioned off $900M more in shares in the days following the stress test to .... partially pay back TARP debt.

Saturday, March 17, 2012

17 Mar 2012

Israel voted to attack Iran yesterday.  I'm not sure if that means they will actually do it or not.  Nor am I sure of when.

I decided to create my bull market comparison chart using Brent crude instead of West Texas Intermediate Cushing.  My understanding is that Brent crude has the larger relevance due to its usage in Europe and the US. It certainly has appreciated more.  The US and UK completely mistimed their announcement of the SPR, and the waivering on it caused crude to shoot right back to where it was even though it has now been formalized.

Rydex Funds providing some measures of how overbought the market was on March 1st.  The first chart is the amount of money in their bear funds plus money market (safe) assets / the amount of money in the bull funds.  If bull funds dwarf that of the former, the number is smaller and near the top of the inverted graphic below.  This is from  Visit their site if you would like to learn more.  I don't have more up to date data, but doubt it has changed much.
Screen shot 2012-03-02 at 9.19.37 AM
The second and fourth charts show just how little money is in the MoneyMarket and Bear Funds, and the last shows how retail investors have mostly left the building since Jan 2011.  The downtrend from October 2005 also signals something...I don't know what.  More money into hard assets, more people managing their own money?
Update:  17 Mar 2012, I found the CBOE Options SKEW index is essentially off the charts and decided to post it.  To read more about it, click here:  It wasn't very good with peaks/valleys until what looks like after March 2009.  Since then, it appears to have been a bit more accurate with finding relative peaks and valleys.

In my long term measure, we are approaching the highs made last June.  This lags the market by quite a bit as prices precede long term moving average cross overs.  Divergent peaks / valleys provide even more accurate turning points than the current value.

In my medium term measure, we are still heavily lagging recent highs.  On one hand, this implies a possibility for further rise.  On the other hand, it says there is significant weakness beneath the pretty cover put on by the indexes.  Similar to above, divergent peaks / valleys provide even more accurate turning points than the current value.
 In the short term, we have turned down again the last three days.  I noticed that it was once again the most beat up stocks (long term) rallying on Thursday and Friday like BAC and IRE as opposed to AAPL which closed below recent highs. As I have talked about before, I find that when the trash rallies a given cycle (no matter the time frame) is nearly over.  The red line below bottomed on 3/6/12.  BAC did nothing until 3/12/12 while AAPL went up each of those days.
 This is the percent of stocks 2 standard deviations above their 200 day moving average.
 This is the percent of stocks 2 standard deviations above their 40 day moving average.  Like above, on one hand this shows oversold conditions for a lot of stocks.  It also shows distribution that is unseen by the average investor.

In case I seem like a broken record or that I should lose my apparent bias (note that I did say to buy in December), I'm not the only one who doesn't understand the market's persistence.  I unfortunately always underestimate the length of rallies and forget that according to my measures over time, 2/3rds of the time the market is optimistic.  This is one reason I believe my indicators work well for bottoms, but not so well for tops.  I apologize if I have misled you.

See Bert Dohmen's most recent letter for his comments on it:

"This is the strangest market behavior we have ever seen. Such a prolonged, low volatility upmove on declining volume is one for the record books. Furthermore, on March 6 the DOW plunged over 200 points, the largest daily decline this year. That was followed by a similar one day surge one week later, the largest daily rise this year. That was just one day after the lowest volume day this year. Does anyone really believe that this is normal, or is it a confirmation that the “high frequency traders” control the markets? Market manipulation is something we apparently have to live with until the regulators do their job."

He predicted the 2008 crisis with his book Melt Down.