Monday, December 26, 2011

Stay Cynical

After a few days off from the market we came back refreshed and energized and happy to see the Santa rally.   But then we looked through our charts and one thing really stood out — silver action, or in this case, non action.
$SI_F chart — dead in the water.    Silver is a “risk-on” metal, what’s happening here?
Here’s a chart of the gold/silver ratio overlaid with $SPY.   As you can see they usually have an inverse relationship but have recently begun to  trend higher together  (meaning that market is moving up while gold outperforms silver).   It’s too short a time-frame to draw firm conclusions but it’s something to keep in the back of your head.
SPY chart near resistance zone from V move from 120 support — needs to digest this move.    We’re in short-the-rally mode until the V formation is worked through.  In bullish markets this means pops are faded intraday but support buyers show up before the close- – and this happens until the move is digested.  In bear markets it means complete reversals.

Monday, December 19, 2011

Remember that 2009 trendline

We wrote about the $SPY 2009 trend-line on this blog at least a dozen times earlier this year  — it was for us the only chart that counted.     Take a step back and take a look at what the market has done since we broke it– churn.   Like a dumb old fish bobbing its head up and down in the water.    A bunch of nothing.

Market looks like it’s establishing a new trend-line range:
Taking that into account with what we wrote about yesterday, it looks like we’re in for some interesting times.
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Sunday, December 18, 2011

Bonds and the case against a market bottom

A quick look at the March 2009 bottom versus our current position at the end of 2011.      Note how the inverse correlation between bonds and equities started to crumble in the three months before the S&P 500 market bottom.    $TLT topped 3 months before equities (just one more piece of evidence that equities are the last to know after bonds, currencies, and futures).      If history is to repeat in this 2011 Euro crisis then we’d expect the inverse correlation bond/equity to also start to falter, something that hasn’t occurred  yet.    Something to keep on radar.

Wednesday, December 14, 2011

Metals trying to hold support

Gold ($GLD), silver ($SLV), and our favorite junior miner ETF ($GDXJ)  all are attempting to find footing (bouncing intraday before the market) today as they hit major levels of support.     If these levels crater then it would be a major blow for reversion-to-mean strategies that have worked well so far this year.

Major weekly level on GDXJ
SLV bounce near 100 SMA on weekly
GLD first touch of 50SMA on weekly since 2009
Even if you aren’t interested in trading these keep an eye on them as a greater market tell.

For relevant commodity quotes check out  Jet Fuel Prices,   Coal Spot Price,  Crude Oil Price, and Electric Power Maps.

Saturday, December 10, 2011

Houston: We have our base

We’ve talked about the 200SMA wall for months — every time the $SPY got close to this major resistance in it did so from an exhausted V-type move.   But not this time.     We hit it again this week and just like always, retraced, but on Friday the market came right back up to base under it — we’re at the cusp of breaking through this coming week.    It hasn’t paid to anticipate now for 5 months and we held off from doing so but we’re on break-out watch mode and have a list of decent candidates as our go-to stocks.
Furthering the bull case is the bar down below the 50SMA for $TLT
On the worry side we’d like miners to act better– but we’d defer to the actual metals ($SI_F and $GC_F) and if they break-out that’s good enough for the bull case.
Copper has broken out of the range and now is basing nicely.  $HG_F
Euro on the other hand is just following the trend-line down — Note however that one good day would break it out of the pattern.
The same can be said for this risk-on metal — silver right now has a bearish pattern but one good day would take it above the trend-line.    Many charts to us look the same — we’re not anticipating but we do understand that they could be on the cusp of a break-out and it’s good to have that possibility  in your trading plan come Monday.
So to recap — we’ve seen this scenario before where things are lining up, bulls are excited and bang bears pull the rug out.   So yes we approach break-out possibility with cynicism but at the same time we do see that this is the first time $SPY has approached the 200 SMA from a decent base which increases the possibility that yes, this time will be different.

Thursday, December 08, 2011

200 SMA wall

We posted this chart yesterday showing the few times we’ve been above the 200sma on the $SPY since the August sell-off.   To be exact we were above it for 2 days on Oct 27-28 before reversing, then one day above on Nov 8 before again reversing,  and yesterday we closed above the 200SMA for the fourth time since the summer sell-off.   If the bulls can manage additional closes above it in the near term ( we’re a point below it  right now) then it likely will shift the sentiment away from  the current “sell-strength” environment.
The most bullish scenario for us is for the market to flat-line and base near the 200SMA and then break through which is exactly what has been missing from previous break-out levels is the base — we’ve approached it every time from exhausted V -moves.     Churn baby churn, indeed.
On the bearish side of the argument,  the 200sma is a wall until it isn’t, the Euro ($6E_F ) acts like death, and silver/gold can’t find any traction.
The recent randomness of news/rumors has diminished the edge for our type of trading strategy and  as we’ve posted on the stream — we’ve pulled back  from being active in this tape.     We’re ok with giving back on trades that simply did not work, but we’re not ok with getting chopped up in a tape that offers no good set-ups for our strategy.        All that being said, things can change in a heartbeat and it’s still important to stay involved and watch price-action, looking for hints of change.