Thu 11/20/08 (SPY @ 75.45) You know what they say about catching a falling knife... The S&P 500 (I use the SPY as a proxy since that is what most of us trade), plunged through the ice after bouncing off it 3 times. It was a decisive, high volume penetration and the nearest support would take us back to the lows of 2002-3.
A breakdown of the sector action reveals that the story was overwhelmingly energy and financials. There has been clear capitulation in the latter, but the former makes little sense on a long term fundamental basis. We are not, despite the pledges of the Obama administration (how I like writing that!) going to stop using fossil fuels anytime soon, or if we aren't, China won't, so I imagine once this panic (and I continue to believe it's just that) passes, energy will surge again. If you have to back up the truck and buy anything, but XLE.
But right now, keeping your powder dry is prudent. If you reentered near what seemed a market triple bottom, no problem. Take your losses, get flat again and wait for a reentry point, which now would be a decisive close above those lows (in the 84-85 area).
This is what bear markets feel like. Capitulation, a sense of panic, everyone taking out companies, good and bad, and shooting them. Some deserve their fate; most don't. Choose the survivors which are starting to trade as call options on the recovery of the American economy and you should do very well, perhaps not in the next few months but certainly in the next few years or decades.
By the way, if you were using a trailing 20 day buy stop to reenter the market and a 20 day sell stop to exit it, you would have been SHORT THE SPY SINCE 125 with no false buy signals on the way down!! That's a 50 point open profit! The current buy stop if you are using this system is 100.86 but will probably drop soon.
If you are very squeamish at this point, you may want to lighten up, but immediately put in a buy stop order (or else you will be too scared or distracted to reenter the market), adjusting as the market declines.
Caveats: today is options expiration so that may have had something to do with yesterday's volatility and high volume. Sometimes markets snap back in the opposite direction the Monday after. Stay tuned.
Friday, November 21, 2008
Thursday, November 13, 2008
Has the S&P 500 Bottomed?
11/13/2008 Today the SPY (@ 91.17) formed what may be a climax low:
1. The market made a new relative low, but closed higher - this is known as a KEY REVERSAL DAY.
2. It did this on VERY STRONG VOLUME.
3. It was an upthrust day with an extended advance and wide range.
4. It found support right at the low of mid- and late-October (at around 83).
Fundamentally, the news is awful which does not rule out a significant rally or even bear market low. Remember that the market often advances several months before the fundamentals of the market start to change.
Yes, we are in uncharted territory and the market could certainly go lower, but we have muddled through past financial crises and will muddle through this one. I do not know if the market will be higher 6 weeks or even 6 months from now, but I would be surprised if those who did not buy around these levels will not be kicking themselves 5-10 years from now. Remember that if the market is down 40% from its peak, you are almost doubling the effective future returns of any dollar invested at these levels versus the same dollar invested at the market peak.
Stay tuned, but I am growing cautiously bullish.
Two factors almost no one is discounting is that 1.) the plunge in crude oil and gasoline has led to trillions of dollars of relief to the consumer going forward and 2.) President Elect Barack Obama's coolheaded approach and return of fiscal responsibility will probably inject some much-needed confidence into our system. Contrary to popular belief, markets perform much better under Democrats than under Republicans, particularly if those Democrats are centrists, as Obama is (despite McCain's misinformation to the contrary). If he stays true to his pledge to end the occupation of Iraq, this should add hundreds of billions to our economy going forward, probably lead to a stabilization in the region as the intensely unpopular American experiment in Iraq ends, and will further dampen oil prices going forward.
Wednesday, October 8, 2008
The Trend Remains Your Friend - Stay Short
Wed 10/8/2008 (SPY @ 97.51). During my last post, I lamented the lack of adult leadership in Washington and advocated selling the SPY, buying DOG (the inverse of the Dow) and GLD (gold ishares). Since then, the SPY has plunged 22.5 points (18.7%). Total open profit since the short sell signal at 125 in early September is DOG has surged and Gold has held its own in a down market.
So many pundits are trying to call the bottom of this market. It's a fool's game and you don't have to play it to make plenty of money. You don't get extra credit for guessing the exact bottom (and only liars do). Your objective should be to follow the trend as it unfolds, and I continue to pound the table that the most robust way to do this is with the 20 day high as a buy signal and low as a sell signal.
In a normal market, you will get plenty of whip saw trades for small losses, but will make most of your money in 1 or 2 monster breakout trades (up or down). All you need is a trend.
Well, a trend we have, and it's a mother, a financial tsunami. It's very ominous that writing $700 billion checks and slashing interest rates in a global coordinated fashion has done nothing to stop the bleeding, but it also shows the futility of trying to manage markets and defer the popping of the bubble. This pain should have been experienced in the late 90s or at least 2000. Now it has built with interest and the pain should cascade through the financial system.
If you are uncomfortable selling short, or wish to try this strategy in a tax-deferred account, check out the DOG ETF (DOG) that moves inversely to the Dow.
Currently, I would not buy until the SPY breaks above 128. Yes, that is far away, but obviously will come down with time.
I would not be surprised if there were a monster rally day or two, maybe to 110 or 115, the pundits declare the end of the rally, then the selling resumes. Markets rarely form V bottoms. They almost always form a bottom, rally off the lows, then sell off again to test the lows, usually exceeding them slightly. Just as everyone gives up, sick and tired of the roller coaster, the market surges, forming an enormous W. (Ironic, since his leadership got us in this mess.)
I believe all of the following are true:
1.) The market remains extremely dangerous in the short term and a true market crash is a possibility (no, what we have experienced is not a market crash, but perhaps a grinding bear market). In 1987, the market was about as much off its peak BEFORE it lost a third of its value in a day. In today's terms, that would be a 3,000 point drop in the Dow. Circuit breakers and other silly government gimmicks might delay the inevitable, spreading the pain out over several days, and perhaps that is what we are seeing now.
2.) The stock market is the single best place for your money over the very long term, and no matter what happens over the next few months, 10-15 years from now, we will all be kicking ourselves for not putting more money to work in stocks now, so long-term investors should do nothing.
3.) The world will not end, we will muddle through this, and the more the Feds try to muck around with the situation, the worse it will get.
The consolation prize for all this is that the plunge in the Dow virtually guarantees that a Republican defeat in November (incumbent parties almost always lose when the market plunges), and the sell-off in crude has knee-capped the Russian juggernaut. An ascendant Russia is less likely given the financial crisis Putin is now facing. Check out RSX for a sense of the incredible meltdown in the crude oil dependent Russian market.
Monday, September 22, 2008
The Bear Market Continues
Monday 9/22/08 SPY @ 121.31.
There is nothing reassuring in the government-mandated short-covering rally that occurred at the end of last week. We remain in a dire financial situation, the extent of which no one seems to know. The smartest guys in the room (whose compensation seems to remain politically untouchable) managed to blow up firms that have survived wars, depressions, crashes, disaster, but could not survive an incompetent Republican administration whose contempt for government became a self-fulfilling prophecy. The systematic defunding of our public infrastructure, from the people who inspect and maintain our levees and bridges to the people who are supposed to be enforcing our securities laws, is now coming home to roost.
The closest we have come to this crisis is at the end of another corrupt Republican regime that lied about about a land war in Asia: the end of the Nixon administration ushered in an enormous loss of confidence in all things American - check out the 1973-4 bear market.
Will it be as bad today? I don't know, nor does anyone else. I just follow the trends.
Keep selling the SPY. Shed any speculative long positions.
Buy GLD.
Buy DOG (the inverse of the Dow).
The fed clearly does not know what it is doing, and has abandoned any principle, bailing out one institution one day, letting another fail the next. This Suharto-style of short-selling-banning is the kind of economic idiocy I thought those Street-savvy Republicans were too smart to fall for... oh, well, on yet another front, these guys are proving an enormous failure.
You can't spin a war, a hurricane, or a financial meltdown. It's time for grown-ups to be in charge. Let's send these clowns home in November and let our government be run by people who understand what Lincoln really meant by of the people, by the people, and for the people. Not the lobbyists, or the neocons, or the Abramoff-Delay-Cunningham-Bush-Cheney-Libby-Chalabi (remember Chalabi?) crowd, but the people. That's us. It's our country and it's time we took it back. You can't spend it if you didn't earn it, and yes, government costs money and if you make more, you should be prepared to spend more in dues for living in a civil society. Freedom isn't free. We can't just go shopping to get out of this mess.
If anyone votes for More of the Same McCain or Thanks but No Thanks Palin, then you really have not been paying attention to the damage their ideas have caused. Insanity is just doing the same thing over and over again and expecting different results. By that definition, a vote for McCain is truly insane.
Send these guys home.
Monday, September 15, 2008
Don't Panic... But Quietly Move Toward the Nearest Exit...
Monday 9/15/08. SPY @ 120.00. Today, the market got hammered, with the Dow selling off over 500 points and the S&P 500 off almost 5%. A chart of the S&P 500 Depository Receipts (SPY) indicates why the trend is your friend and bottom-fishing is an expensive sport (click on the chart to enlarge it).
The market peaked at around 144 in May, then issued a sell signal at 137 and change when the 20 day trailing low was punctured to the downside. This short trade was profitably closed when the 20 day high was taken out in August at 129, an 8 point short sale.
Had you reversed (as you should), you would have been stopped out at 126 when the 20 day low was violated.
Monday, September 8, 2008
Stock charts update
Stock charts update
9/8/08
SPY @ 127.27: Spiders are in a sell state since a sell stop was hit at 126 only two trading days ago and 1.3 points away.
Gold ishares (GLD) @ 78.9 remain in a sell state since 90. They are currently at 78.9 after a recent spike high to above 84. They gapped up and then gapped down and looked headed toward their recent lows of 76.61. A buy signal would not be given until 86.9, their 20 day trailing high.
The 50 day is below the 150 day moving average (87 below 89).
XLY, consumer discretionary spiders @ 31.7 have stalled a bit following their decisive breakout, pulling back from a high of 32 to a recent low of 29.4 before closing today at 31.7, near their twenty day high of 31.9.
XLB, the materials spiders @ 37.2 remain in a sell state and downtrend since their high over 46 in May. Their sell state is short since just below 43 with a buy stop just above 40.2, but they look headed lower, closing down .19% on a strong up day for the rest of the market.
XLU, utitilities @ 36.3, are also in a down state after triggering a false buy signal at 38.4 that led to a 2-point loss in three days, closing out at 36.5!
XLI, industrial spiders are also in a buy state, since a dramatic decline from 40 to 32.5 from May to mid-July. Most recent buy signal was at 35.4. Sell signal at 33.7.
9/8/08
SPY @ 127.27: Spiders are in a sell state since a sell stop was hit at 126 only two trading days ago and 1.3 points away.
The market surged 2% today but closed off of its highs and is in the middle of its four-week range between 131 and 122.
Note that the volume on today's surge was less than that of the selloff of only two days ago.
The July low of 120 was approached; the low of the most recent move was 122.
Buy stop is at 131.5 but will soon dropped to the 131 area.
Spiders trade above the 50 day moving average (127) but far below the 150 day (132).
Spiders sold off from a high of 144 in mid-May to 120 in mid-July, a decline of 17%. A sell signal from 137 would have been profitable with an exit at around 129.5, a short profit of about 6%.
This would have been followed by a3 point loss to be stopped out at 126.
Gold ishares (GLD) @ 78.9 remain in a sell state since 90. They are currently at 78.9 after a recent spike high to above 84. They gapped up and then gapped down and looked headed toward their recent lows of 76.61. A buy signal would not be given until 86.9, their 20 day trailing high.
The 50 day is below the 150 day moving average (87 below 89).
Homebuilders ETF. On August 22, I wrote that "homebuilders ETF is looking bullish. At 19, it's punched above its recent 20 day high of 19.24 only to settle back to 17.5, before rallying the last 2 trading days to 19.. Note it is in a buy state since 18.75 in mid-July. After exceeding this amount, it pulled back into its trading range, formed a flag in the upper end of it, and seems to have broken out again."
Since then, the home builders have broken out on huge volume at 22.8 but then closed back in their trading range at 22.6 up 3.8 percent for the day. The sell stop is at 19.6.
The most recent low is at 18.5.
The 4 week low jumped to 17.5 and should head higher soon.
The 4 week low jumped to 17.5 and should head higher soon.
XLY, consumer discretionary spiders @ 31.7 have stalled a bit following their decisive breakout, pulling back from a high of 32 to a recent low of 29.4 before closing today at 31.7, near their twenty day high of 31.9.
Current buy state is long since 29.9 or so, following a protracted decline from a high of 33.5 as recently as May. It declined from 33.5 to 26.0, its mid-July low.
Sell stop is at 29.0, 3 points (10 per cent) away.
XLP, consumer staples spider, continue to surge higher after breaking out at 27.5, now at 28.9 with a 20 day low of 27.8 after a pullback to below 28 last week.
XLV, health care spiders @ 32.3, hit a sell stop last week at about 32.4, closing a profitable trade from 31.4 in early July.
4 week high is at 33.7.
XLF, the financials @ 22.7, broke out after a dramatic past two months. They stalled three times in the 23 area. They sold off to below 20, where they tripped a sell stop in mid-August.
XLF, the financials @ 22.7, broke out after a dramatic past two months. They stalled three times in the 23 area. They sold off to below 20, where they tripped a sell stop in mid-August.
They surged 4.3 percent today, breaking out above their 20 day high of 22.8, but then settled back to close in their trading range.
There was a dramatic 6-day surge from 17 to 23 (35% rise) in July, following a plunge from 28 in May to below 17in July.
XLB, the materials spiders @ 37.2 remain in a sell state and downtrend since their high over 46 in May. Their sell state is short since just below 43 with a buy stop just above 40.2, but they look headed lower, closing down .19% on a strong up day for the rest of the market.
XLU, utitilities @ 36.3, are also in a down state after triggering a false buy signal at 38.4 that led to a 2-point loss in three days, closing out at 36.5!
They were at 41.5 in June, but a sell signal was given at just above 40.
XLI, industrial spiders are also in a buy state, since a dramatic decline from 40 to 32.5 from May to mid-July. Most recent buy signal was at 35.4. Sell signal at 33.7.
RSX, Market Vectors Russia @ 34.5, remains very bearish, since a short signal from 54.5, representing a 37% open profit. it is noteworthy that since the sell signal was generated in June, RSX has never traded above even the middle of its 20 day range. Buy stop is at 42.6 and plunging.
Bottom line: the trend remains your friend. Don't try to guess a bottom! Just adapt to what the market is telling you and let it ride...
Sunday, August 24, 2008
Stock charts update August 22, 2008
Spiders are in a buy state since about 129.50 triggered early August. Sell stop is at 123.42 (20 day low) but a rising trend line connecting the lows from the mid-July 120 low is currently at
128. The spiders (SPY) violated this trend line and traded as low as 126 and change last week before rallying to close the week at 129.7.
Negative signs are that the spiders have not yet attained their most recent highs of 131.51 and the up volume was lower than down volume. Spiders trade above the 50 day moving average (128) but far below the 150 day (132.9).
Spiders sold off from a high of 144 in mid-May to 120 in mid-July, a decline of 17%. A sell signal from 137 would have been profitable with an exit at around 129.5, a short profit of about
6%.
Gold eye shares (GLD) remain in a sell state since 90. They are currently at 81.2 after a recent spike high to above 84. They gapped up and then gapped down and looked headed toward their
recent lows of 76.61. A buy signal would not be given until 92, their 20 day trailing high.
The 50 day is below the 150 day moving average (88 below 90).
Volume on recent up days has slighlty exceeded volume on down days.
Homebuilders ETF.
Homebuilders ETF is looking bullish. At 19, it's punched above its recent 20 day high of 19.24 only to settle back to 17.5, before rallying the last 2 trading days to 19.. Note it is in a buy
state since 18.75 in mid-July. After exceeding this amount, it pulled back into its trading range, formed a flag in the upper end of it, and seems to have broken out again. The most recent
low is at 16, about 3 points of risk (15%).
The 4 week low jumped to 16.1 from 13.8.
XLY, consumer discretionary spiders, have stalled a bit following their decisive breakout, pulling back from a high of 32 to a recent low of 29.4 before closing the week at 30.7.
Current buy state is long since 29.9 or so, following a protracted decline from a high of 33.5 as recently as May. It declined from 33.5 to 26.0, its mid-July low. Sell stop is at 27.7, 3 points
(10 per cent) away.
XLP, consumer staples spider, continue to surge higher after breaking out at 27.5, now at 29.7 with a 20 day low of 26.9 after a pullback to just above 28 last week.
XLV, health care spiders, are at 33.3, since a break-out at around 31.4 in early July. 4 week low is at 31.6, about 6% away, bringing the most recent trade to breakeven or better.
Up volume was much better than down volume but this has changed in the past few days.
XLF, the financials, broke a rising short term trendline after stalling three times in the 23 area. They sold off to below 20 before surging 3.8 per cent to 20.7 on Friday. They
had earlier broken a downtrend line that bought them from 28 in May to below 17 in mid-July, a 40 per cent decline, but the chart has turned more bearish; a 20 day low stop was triggered
at about 19.7. There was a dramatic 6-day surge from 17 to 23 (35% rise) in July, but the financial spiders then settled back to the middle of the range (20) before forming what looks like a
flag with a low of 21 and high of 22.5. They are currently in a buy state since 22.5 and closed Friday at 21.36. Volume is ambiguous but slightly better on recent up than down days.
Ecks Ell Bee, the materials spiders remain in a sell state and downtrend since their high over 46 in May. They closed at 39.75 on Friday, 14% off their peak, with a flag in the upper end of
their trading range. Their sell state is short since just below 43 with a buy stop just above 41.
XLU, utitilities, are also in a down state with a flag below the most recent range which was however broken to the upside. They were at 41.5 in June, but a sell signal was given at
just above 40. The current close of 37.9 and change translates into an 8% open profit in this short trade.
XLI, industrial spiders are also in a buy state, since a dramatic decline from 40 to 32.5 from May to mid-July. Most recent buy signal was at 35.4. Sell signal at 33.7.
Are Ess Ecks, Market Vectors Russia, remains very bearish, since a short signal from 54.5. At 39.5, Russia is trading close to its 20 day low of 38.7. Volume is much heavier on down
days, indicating a possible selling climax in this case. But stop is at 45.9 and plunging.
128. The spiders (SPY) violated this trend line and traded as low as 126 and change last week before rallying to close the week at 129.7.
Negative signs are that the spiders have not yet attained their most recent highs of 131.51 and the up volume was lower than down volume. Spiders trade above the 50 day moving average (128) but far below the 150 day (132.9).
Spiders sold off from a high of 144 in mid-May to 120 in mid-July, a decline of 17%. A sell signal from 137 would have been profitable with an exit at around 129.5, a short profit of about
6%.
Gold eye shares (GLD) remain in a sell state since 90. They are currently at 81.2 after a recent spike high to above 84. They gapped up and then gapped down and looked headed toward their
recent lows of 76.61. A buy signal would not be given until 92, their 20 day trailing high.
The 50 day is below the 150 day moving average (88 below 90).
Volume on recent up days has slighlty exceeded volume on down days.
Homebuilders ETF.
Homebuilders ETF is looking bullish. At 19, it's punched above its recent 20 day high of 19.24 only to settle back to 17.5, before rallying the last 2 trading days to 19.. Note it is in a buy
state since 18.75 in mid-July. After exceeding this amount, it pulled back into its trading range, formed a flag in the upper end of it, and seems to have broken out again. The most recent
low is at 16, about 3 points of risk (15%).
The 4 week low jumped to 16.1 from 13.8.
XLY, consumer discretionary spiders, have stalled a bit following their decisive breakout, pulling back from a high of 32 to a recent low of 29.4 before closing the week at 30.7.
Current buy state is long since 29.9 or so, following a protracted decline from a high of 33.5 as recently as May. It declined from 33.5 to 26.0, its mid-July low. Sell stop is at 27.7, 3 points
(10 per cent) away.
XLP, consumer staples spider, continue to surge higher after breaking out at 27.5, now at 29.7 with a 20 day low of 26.9 after a pullback to just above 28 last week.
XLV, health care spiders, are at 33.3, since a break-out at around 31.4 in early July. 4 week low is at 31.6, about 6% away, bringing the most recent trade to breakeven or better.
Up volume was much better than down volume but this has changed in the past few days.
XLF, the financials, broke a rising short term trendline after stalling three times in the 23 area. They sold off to below 20 before surging 3.8 per cent to 20.7 on Friday. They
had earlier broken a downtrend line that bought them from 28 in May to below 17 in mid-July, a 40 per cent decline, but the chart has turned more bearish; a 20 day low stop was triggered
at about 19.7. There was a dramatic 6-day surge from 17 to 23 (35% rise) in July, but the financial spiders then settled back to the middle of the range (20) before forming what looks like a
flag with a low of 21 and high of 22.5. They are currently in a buy state since 22.5 and closed Friday at 21.36. Volume is ambiguous but slightly better on recent up than down days.
Ecks Ell Bee, the materials spiders remain in a sell state and downtrend since their high over 46 in May. They closed at 39.75 on Friday, 14% off their peak, with a flag in the upper end of
their trading range. Their sell state is short since just below 43 with a buy stop just above 41.
XLU, utitilities, are also in a down state with a flag below the most recent range which was however broken to the upside. They were at 41.5 in June, but a sell signal was given at
just above 40. The current close of 37.9 and change translates into an 8% open profit in this short trade.
XLI, industrial spiders are also in a buy state, since a dramatic decline from 40 to 32.5 from May to mid-July. Most recent buy signal was at 35.4. Sell signal at 33.7.
Are Ess Ecks, Market Vectors Russia, remains very bearish, since a short signal from 54.5. At 39.5, Russia is trading close to its 20 day low of 38.7. Volume is much heavier on down
days, indicating a possible selling climax in this case. But stop is at 45.9 and plunging.
Tuesday, August 19, 2008
Stock Market and Sectors Update
Stock charts update August 19th, 2008
Spiders are in a buy state since about 129.50 triggered around August 8th. Sell stop is at 123.42 (20 day low) but a rising trend line connecting the lows from the mid-July 120 low is
currently at 128. This short-term uptrend line was violated and the Spiders are currently at 126.99, down 2 and a half points since the 129.5 buy signal. Risk is 3.5 points away.
Spiders sold off from a high of 144 in mid-May to 120 in mid-July, a decline of 17%. A sell signal from 137 would have been profitable with an exit at around 129.5, a short profit of about
6%.
Gold eye shares remain in a sell state since 90. They are currently at 80.4 after a strong Tuesday rally. Volume was lower than on down days, however. They were trading below their May lows down to almost 76 after gapping down.
A buy signal would not be given until 95.86, their 20 day trailing high.
The 50 day is below the 150 day moving average (88.8 below 90.0).
Volume on recent down days has greatly exceeded volume on up days.
Homebuilders.
Homebuilders are looking weaker after what seemed a promisng breakout. At 17.8, it fell below its mid-range after earlier breakding out at a recent 20 day high of 19.24. Note it is in a buy state since 18.75 in mid-July. After exceeding this amount, it pulled back into its trading range, formed a flag in the upper end of it, and seems to have broken out again then fallen back. The most recent low is at 16.1, about 1.7 points of risk (10%).
The 4 week low jumped to 16.1 from 13.8. A short-term uptrend line was broken.
Ecks Ell Why, consumer discretionary spiders, have followed through on their decisive breakout, after pulling back from a high of 32 to a recent low of 30 before closing last week at 31.2, then pulling back to 30.1 on Tuesday. A short-term uptrend line remains intact. They continue to trade about the middle of their range, although just barely. Sell stop is at 27.7, 2.4 points away.
This chart seems more bullish than the homebuilders'. Current buy state is long since 29.9 or so, following a protracted decline from a high of 33.5 as recently as May. It declined from 33.5
to 26.0, its mid-July low.
Ecks Ell Pee, consumer staples spider, continue to surge higher after breaking out at 27.5, now at 28.5 with a 20 day low of 26.8. Strongest of the charts in this recent pullback.
Ecks Ell Vee, health care spiders, are at 33.2, since a break-out at around 31.4 in early July. 4 week low is at 31, 10% away, but will soon climb to the 31.6 area, only 6% away, bringing the
most recent trade to breakeven or better. Up volume much better than down volume.
Ecks Ell Foxtrot, the financials, seem to have broken out to the downside again after failing to launch following the break of the downtrend line that bought them from 28 in May to below 17 in mid-July, a 40 per cent decline. There was a dramatic 6-day surge from 17 to 23 (35% rise) in July.
They just triggered a sell state at 19.75 (they are trading at 19.9). It looks as though they want to test their lows of 17.
Ecks Ell Bee, the materials spiders remain in a sell state and downtrend since their high over 46 in May. They closed at 38.75 on Friday, 15% off their peak, with a flag in the lower end
of their trading range. Their sell state is short since just below 43 with a buy stop just above 41.
Ecks Ell You, utitilities, are also in a down state with a flag below the most recent range. They were at 41.5 in June, but a sell signal was given at just above 40. The current close of 37 and
change translates into a 10% open profit in this short trade. The 20 day high is at 39.6 but will no doubt come down dramatically in the next few days - the high of the most recent flag is at
37.5, and the flag prior to that is above 38.5.
Ecks Ell Eye, industrial spiders are also in a buy state, since a dramatic decline from 40 to 32.5 from May to mid-July. Most recent buy signal was at 35.4. Sell signal at 33.57, up dramatically from 32 just a few days ago.
Russia, by the way, as represented by the Market Vectors ETF, ticker Romeo Sierra Ecks, is selling off brutally. After a peak of 59 in May, a sell signal at 54.5 in June was issued that would still have you short at 39.2, a decline of over 33.5 per cent, and an open profit of 28.5 per cent. Up volume greatly exceeds down volume. Interestingly, the Are Ess Ecks was selling off on heavy volume in late July, prior to the invasion of Ossetia. The gap down today was on very heavy volume.
Stay tuned.
Spiders are in a buy state since about 129.50 triggered around August 8th. Sell stop is at 123.42 (20 day low) but a rising trend line connecting the lows from the mid-July 120 low is
currently at 128. This short-term uptrend line was violated and the Spiders are currently at 126.99, down 2 and a half points since the 129.5 buy signal. Risk is 3.5 points away.
Spiders sold off from a high of 144 in mid-May to 120 in mid-July, a decline of 17%. A sell signal from 137 would have been profitable with an exit at around 129.5, a short profit of about
6%.
Gold eye shares remain in a sell state since 90. They are currently at 80.4 after a strong Tuesday rally. Volume was lower than on down days, however. They were trading below their May lows down to almost 76 after gapping down.
A buy signal would not be given until 95.86, their 20 day trailing high.
The 50 day is below the 150 day moving average (88.8 below 90.0).
Volume on recent down days has greatly exceeded volume on up days.
Homebuilders.
Homebuilders are looking weaker after what seemed a promisng breakout. At 17.8, it fell below its mid-range after earlier breakding out at a recent 20 day high of 19.24. Note it is in a buy state since 18.75 in mid-July. After exceeding this amount, it pulled back into its trading range, formed a flag in the upper end of it, and seems to have broken out again then fallen back. The most recent low is at 16.1, about 1.7 points of risk (10%).
The 4 week low jumped to 16.1 from 13.8. A short-term uptrend line was broken.
Ecks Ell Why, consumer discretionary spiders, have followed through on their decisive breakout, after pulling back from a high of 32 to a recent low of 30 before closing last week at 31.2, then pulling back to 30.1 on Tuesday. A short-term uptrend line remains intact. They continue to trade about the middle of their range, although just barely. Sell stop is at 27.7, 2.4 points away.
This chart seems more bullish than the homebuilders'. Current buy state is long since 29.9 or so, following a protracted decline from a high of 33.5 as recently as May. It declined from 33.5
to 26.0, its mid-July low.
Ecks Ell Pee, consumer staples spider, continue to surge higher after breaking out at 27.5, now at 28.5 with a 20 day low of 26.8. Strongest of the charts in this recent pullback.
Ecks Ell Vee, health care spiders, are at 33.2, since a break-out at around 31.4 in early July. 4 week low is at 31, 10% away, but will soon climb to the 31.6 area, only 6% away, bringing the
most recent trade to breakeven or better. Up volume much better than down volume.
Ecks Ell Foxtrot, the financials, seem to have broken out to the downside again after failing to launch following the break of the downtrend line that bought them from 28 in May to below 17 in mid-July, a 40 per cent decline. There was a dramatic 6-day surge from 17 to 23 (35% rise) in July.
They just triggered a sell state at 19.75 (they are trading at 19.9). It looks as though they want to test their lows of 17.
Ecks Ell Bee, the materials spiders remain in a sell state and downtrend since their high over 46 in May. They closed at 38.75 on Friday, 15% off their peak, with a flag in the lower end
of their trading range. Their sell state is short since just below 43 with a buy stop just above 41.
Ecks Ell You, utitilities, are also in a down state with a flag below the most recent range. They were at 41.5 in June, but a sell signal was given at just above 40. The current close of 37 and
change translates into a 10% open profit in this short trade. The 20 day high is at 39.6 but will no doubt come down dramatically in the next few days - the high of the most recent flag is at
37.5, and the flag prior to that is above 38.5.
Ecks Ell Eye, industrial spiders are also in a buy state, since a dramatic decline from 40 to 32.5 from May to mid-July. Most recent buy signal was at 35.4. Sell signal at 33.57, up dramatically from 32 just a few days ago.
Russia, by the way, as represented by the Market Vectors ETF, ticker Romeo Sierra Ecks, is selling off brutally. After a peak of 59 in May, a sell signal at 54.5 in June was issued that would still have you short at 39.2, a decline of over 33.5 per cent, and an open profit of 28.5 per cent. Up volume greatly exceeds down volume. Interestingly, the Are Ess Ecks was selling off on heavy volume in late July, prior to the invasion of Ossetia. The gap down today was on very heavy volume.
Stay tuned.
Tuesday, August 5, 2008
SPY Update 8/5/08 (SPY @ 128.36) buy stop if market exceeds 129.15
8/5/2008
Market update: SPY remains in a sell state at 128.36 since a 136.5 sell signal in mid-May (6% open profit). The market has had a nice run down (if you were short) and l The action remains sloppy, however, with a sell stop just above 129.15. ooks as though it's trying to form at least an intermediate term bottom.
Positives: the market is probably short-term oversold, sentiment is very negative, volume on up days has recently been somewhat stronger than volume on down days.
Negatives: the fundamental situation remains atrocious although it often does until 6 months after a bear market bottom, the market has failed to make a 20 day or 4 week high and there is the possibility that the action since mid-July has been a wide, sloppy flag pattern, which is more often a continuation than a reversal pattern.
At any rate, the market does not require clairvoyance, only adaptability. If the market closes above 129.15 and follows through, buy. Often the first buy signal following a protracted decline is a fake-out, but that's OK since risk is pre-defined - I would sell if the market broke below 125.
Monday, April 28, 2008
Interview on seasonality on Traders Talk Live
Craig Weil of Traders Talk Live, a Saturday morning AM radio show, interviewed me about seasonality and the stock market and how Democratic victories lead to much better stock market returns than Republican ones. You can listen to the mp3 podcast or visit the website. You can find all the old shows archived; it's a good source of information and inspiration (you have to fast forward through all the Chicago traffic updates though). :)
Saturday, April 12, 2008
Seasonality Continues to Work
Seasonality Continues to Work
The "sell in May" strategy has continued to hold up despite its wide publication. Even since 2000, when the overall market as measured by the S&P 500 went nowhere, $10,000 invested in the S&P 500 in November and moved to cash in May would have grown to $11,140 versus dwindling down to $9.003 for buy and hold.
Investing in the best 3-month cluster, November through January inclusive then moving to cash during the other 9 months of the year would have done even better, turning $10k into $12,618, or 40.2% better than buy and hold with only 25% of the exposure to the stock market.
2000- March, 2008:
| B&H: | 11-1 | 11-4: |
| 9.003 | 12.618 | 11.140 |
| v BH: | +40.2% | +24.0% |
| | | |
| | 12/99 | 03/08 |
| S&P 500 | 1469 | 1322.7 |
| buy and hold: | | -9.9% |
| 11-1: | | +26.2% |
| 11-4: | | 24.0% |
Looking back further:
Dec 64-Mar 2008: S&P 500 Total Returns (including dividends, investing in 90 day Treasuries for other periods):
$10,000 would have grown to $624,542 dollars with reinvested dividends from December 1964 to March 2008 using a buy and hold strategy.
If one had invested only in November through April, then parked in 90 day Treasury bills for the other 6 months, one would have had a final $806,508, 29% more, although only exposed to half the risk!
Conversely, investing in the other 6 months, May to October, then parking in 90 day Treasury bills would have led to a flat nominal return with a grand total profit of $10 over the 44 years!
| BH: | 11-1 | 11-4: | 5-10 |
| 624.542 | 470.644 | 806.508 | 10.010 |
| | |||||
| | Pres Yr: | | | | |
| | Post | Mid | Pre | Ele | All: |
| Month: | 1 | 2 | 3 | 4 | |
| 1 | -0.30% | 4.24% | 0.54% | 1.37% | |
| 2 | -1.12% | 1.06% | 0.88% | -0.28% | 0.14% |
| 3 | -0.12% | 0.14% | 1.82% | 0.82% | 0.67% |
| 4 | 1.03% | 0.45% | 3.24% | 0.97% | 1.43% |
| 5 | 1.47% | -0.50% | 0.15% | 0.42% | 0.38% |
| 6 | -0.79% | -1.83% | 1.84% | 2.04% | 0.29% |
| 7 | 1.57% | 0.24% | 1.19% | 0.01% | 0.77% |
| 8 | -1.29% | -0.50% | 1.19% | 0.67% | 0.01% |
| 9 | -0.51% | -1.89% | -0.76% | 0.19% | -0.69% |
| 10 | 1.22% | 3.08% | -1.10% | 0.70% | 1.02% |
| 11 | 1.49% | 2.65% | 0.68% | 1.59% | 1.62% |
| 12 | 0.54% | 1.72% | 3.20% | 1.10% | 1.62% |
| All: | 0.36% | 0.36% | 1.40% | 0.73% | 0.72% |
| | 4.4% | 4.4% | 18.2% | 9.1% | 9.0% |
There has never been a down pre-election year; 2007 was no exception: +3.5% on the S&P 500 before dividends.
| Exact Average Returns 1980-Aug 07, spx: | | ||||
| | Pres Yr: | | | | |
| | Post | Mid | Pre | Ele | All: |
| Month: | 1 | 2 | 3 | 4 | |
| 1 | 2.22% | -0.45% | 3.69% | 0.97% | 1.61% |
| 2 | -0.61% | 0.56% | 1.26% | 0.11% | 0.33% |
| 3 | -0.76% | 1.68% | 2.37% | -0.79% | 0.62% |
| 4 | 1.60% | -0.40% | 3.63% | 0.71% | 1.39% |
| 5 | 2.91% | 0.81% | 1.82% | 0.06% | 1.40% |
| 6 | 0.31% | -1.07% | 1.81% | 1.64% | 0.67% |
| 7 | 2.44% | -2.01% | 0.32% | -0.20% | 0.14% |
| 8 | -2.24% | 0.15% | 1.29% | 1.88% | 0.27% |
| 9 | -1.81% | -2.77% | -0.56% | 1.15% | -1.00% |
| 10 | 0.76% | 5.61% | -1.87% | 1.04% | 1.39% |
| 11 | 3.70% | 3.01% | -0.45% | 1.96% | 2.05% |
| 12 | 0.98% | 0.47% | 4.79% | 0.40% | 1.66% |
| All: | 0.79% | 0.47% | 1.56% | 0.74% | 0.89% |
| | Oct-Apr close only: | | | | | | | |
| | | | | | | | 10k: | |
| date | April | Oct: | 5-10: | 11-4: | 'Win? | Nov-May: | 5-10: | 11-4: |
| 2000 | 1452.4 | 1429.4 | -1.6% | -12.6% | - | -11.00% | 9,841 | 8,741 |
| 2001 | 1249.5 | 1059.8 | -15.2% | 1.6% | + | 16.80% | 8,347 | 8,883 |
| 2002 | 1076.9 | 885.8 | -17.8% | 3.5% | + | 21.27% | 6,866 | 9,195 |
| 2003 | 916.9 | 1046.9 | 14.2% | 5.8% | - | -8.41% | 7,839 | 9,725 |
| 2004 | 1107.3 | 1130.2 | 2.1% | 2.4% | + | 0.29% | 8,001 | 9,954 |
| 2005 | 1156.9 | 1207.0 | 4.3% | 8.6% | + | 4.25% | 8,348 | 10,809 |
| 2006 | 1310.6 | 1377.9 | 5.1% | 7.6% | + | 2.44% | 8,777 | 11,628 |
| 2007 | 1482.4 | 1549.4 | 4.5% | -14.6% | - | -19.15% | 9,174 | 9,927 |
| 2008 | 1322.7 | | | | | | | |
Subscribe to:
Posts (Atom)