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发表于 2009-4-2 16:14
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September 21, 2008VIEWING OUR "RISK AVERSION" CHART By Chip Anderson
Richard Rhodes
We'll admit last week was one of the more "interesting" trading weeks we have seen in a number of years, and if we must liken it to anything we've seen in our 25-years of trading - it would be the week before and of the 1987 Crash. The question we and many others have is whether last week was "The Low" or just "A Low" in the stock market; and to be perfectly frank...we don't know. But perhaps the most important chart in our trading universe at the present time is the simple "tactical allocation" ETF ratio chart between stocks and bonds - we use the S&P 500 Spyder (SPY) and the Lehman 20+year Bond Fund (TLT) ratio as our guide. In essence, this is a "risk-aversion" chart.
Quite simply, as stocks have moved lower, we've seen bond prices move higher/bond yields move lower as institutions/investors/traders have sought out the safety of the bond market at the expense of stocks. This resulted in the SPY/TLT ratio chart moving lower; and it has done so since July-2008 - breaking major support levels along the way. However, last week's unprecedented government intervention related to collapsing credit markets pushed stocks higher and bond prices lower/bond yields higher as market participants "feared" losing more money in the bond market as yields rose, with the only place to put that cash was in money market funds or in stocks - they chose stocks.
Hence, a bullish key reversal has formed off quite low levels, which the 14-week stochastic turning higher from oversold levels. In the past, this has led the ratio higher and coincided with higher stock prices. Whether or not we or you agree with the government intervention - the technicals are showing that last week was at least "a bottom", with the jury still out as to whether it was "the bottom." As we move forward, we'll certainly be able to fill in more of the myriad of technical blanks. Until then, sector and industry tactical long and short rotation will be paramount to outperformance.
Want more of Richard's award-winning advice? Check out his Web site: Rhodes-Capital.com
Posted by Chip Anderson at 4:02 PM in Richard Rhodes | Permalink
September 21, 2008FINANCIALS SURGE By Chip Anderson
John Murphy
A massive government rescue plan and a temporary ban on short selling has boosted the Financials Sector SPDR by nearly 12% (Chart 1). It's the day's strongest sector on a day when all sectors are in the black. Brokers (not shown) are up 12% and banks nearly a similar amount. Chart 2 shows the PHLX Bank Index trading over its 200-day moving average for the first time in more than a year. If the financials can hold most of those gains through the end of the day, it will be a big positive for them and the rest of the market.
Subscribe to John Murphy's Market Message today!
Posted by Chip Anderson at 4:01 PM in John Murphy | Permalink
September 06, 2008DOLLAR'S RISE CRUSHING COMMODITIES By Chip Anderson
Tom Bowley
The U.S. dollar couldn't move lower forever. It had to turn and when it did, we knew things might get ugly for commodities. Since the July 14th low in the dollar index, we've seen the greenback rise over 10% (see Chart 1). That has sent commodity prices reeling. Crude oil prices per barrel have tumbled nearly 30% (Chart 2). Silver is down approximately 37%. Copper is down close to 25%. Gold has fallen about 19%. Commodity-related stocks have been bludgeoned as institutions have been liquidating stocks that the bears simply couldn't touch just a couple of months ago.
Volatility provides opportunities, especially as options expiration approaches. Take a quick look at the VIX, which broke out of a downtrend early last week.
We will be watching the action very closely as we finish next week and then head into another options expiration week. Analysis of max pain generally serves us well. If you're interested in learning more about max pain and how options expiration can affect the stocks you trade, then go to www.investedcentral.com/maxpain.html for more details about an upcoming LIVE presentation. Best of all, it's FREE!
Happy trading!
Join Tom and the Invested Central team at www.investedcentral.com. Invested Central provides daily market guidance, intraday stock alerts, annotated stock setups, LIVE member chat sessions, and much, much more.
Posted by Chip Anderson at 4:05 PM in Tom Bowley | Permalink
September 06, 2008MOMENTUM TURNS BEARISH FOR DIA By Chip Anderson
Arthur Hill
Stocks opened weak after Friday's employment report, but the bulls found their footing late morning and rallied for a mixed close. While it may seem positive that stocks firmed after bad news, keep in mind that stocks already priced in a lot of bad news with Thursday's sharp decline. Chart 1 shows the Dow Industrials ETF (DIA) firming just below 112.5 and closing with a small gain on Friday. Despite Friday's firmness, the rising wedge break and support break remain in play. One day of firmness is not enough to undo such a sharp decline. Also notice that CCI (20) moved below -100 to turn momentum bearish. In general, a move above +100 reflects bullish momentum that stays in effect until a move below -100. While this is not meant as a stand-alone trading system, I consider the move below -100 to be bearish and it confirms the bearish signals on the price chart. These bearish signals remain in effect until proven otherwise.
There is also a video version of the this analysis available at TDTrader.com - Click Here.
Posted by Chip Anderson at 4:04 PM in Arthur Hill | Permalink
September 06, 2008BREAKDOWN POINTS TO LOWER PRICES By Chip Anderson
Carl Swenlin
On August 15 I wrote an article pointing out that an ascending wedge had formed on the S&P 500 chart. I noted that this is a bearish formation, and that the most likely resolution would be a breakdown from the wedge followed by a price correction. The breakdown did in fact occur two days after I made my comments, but the correction did not immediately follow. Instead prices moved sideways for about two weeks before finally breaking down again on Thursday, belatedly fulfilling the expectation of a correction. Now we must ask if this is the beginning of a deeper correction or if it will merely end as a successful retest of the July lows.
The first evidence to consider is that we are still firmly in a bear market, and the down trend is clearly visible on the chart below. Another worrisome sign is that the PMO (Price Momentum Oscillator) has topped below the zero line, which should always be viewed with apprehension, particularly when it occurs at the end of a rally.
The next chart shows our On-Balance Volume (OBV) Indicator Set. The Climactic Volume Indicator (CVI) measures extreme OBV movement within the context of a short-term OBV envelope for each stock in the index. The Short-Term Volume Oscillator (STVO) is a 5-day moving average of the CVI. The Volume Trend Oscillator (VTO) summarizes rising and falling OBV trends. These charts tell us if the index is overbought or oversold based upon volume in three different time frames. All three are giving us useful information at present.
The CVI recently hit a climactic top just before the price break forced a climactic CVI low. Since this CVI low occurred in conjunction with a price trend change, I assume that it is an initiation climax that will lead prices lower. The STVO supports this conclusion because it is topping in overbought territory. The VTO, is not particularly overbought, but you can see that it is topping at the same level as it did at previous price tops.
It is also worth mentioning that September is historically one of the worst months of the year, and the market is entering this dangerous period in a very weak condition. A crash is not out of the question, although, that is not a prediction, just a caution to not get too anxious to pick a bottom.
Bottom Line: While positive outcomes can and do happen during bear markets, the odds are strongly against them. Another decline has emerged out of a short, weak rally, and I think that a continued decline is more likely than a simple retest of the July lows.
Posted by Chip Anderson at 4:03 PM in Carl Swenlin | Permalink
September 06, 2008MORE S&P 500 DECLINES AHEAD? By Chip Anderson
Richard Rhodes
The world's temperature gauge for risk is what we refer to as the "carry-trade" indicator...or the Euro/Yen Spread. When this spread is rising, then the world is said to be putting the carry-trade on and expanding risk profiles; conversely, when the spread is falling...the carry-trade is being taken off and risk is being shunned. We look at this to take the temperature of the capital markets in terms of risk. Right now, the patient is sick, and risk is being shunned, and the technical prospects for the patient indicate further risk aversion and a continuation of the "de-leveraging process."
Our statement is backed up by the simple technical fact the weekly Euro/Yen Spread chart has broken below its bull market trendline as well as its bull market 120-week exponential moving average. This would imply the "triple top" will breakdown with a close under 1.52, which would then target previous high support at 1.40 and then even lower.
Therefore, the trend is lower, and we'll note the recent lows in the spread all coincided with trading lows in the S&P 500. Given this material breakdown in the spread, then we'll have to assume that further S&P 500 declines are ahead of us...perhaps sharply so. Henceforth, we are aggressive sellers of rallies as they materialize, with our downside S&P target still rather wide between 960 and 1090.
Good luck and good trading, Richard
Want more of Richard's award-winning advice? Check out his Web site: Rhodes-Capital.com
Posted by Chip Anderson at 4:02 PM in Richard Rhodes | Permalink
September 06, 2008FIBONACCI LINES - HOW MUCH IS "TOO MUCH"? By Chip Anderson
Chip Anderson
How high is "too high?" How low is "too low?" Think back to any time that you've owned a stock and think about when you started to get worried about it's performance. At what point did "your gut" start to tell you that you needed to sell? Chances are your gut started talking to you after the stock had moved up (or down) by 38.2%.
Wow, that's a really specific number - "38.2." It seems kind of arbitrary also. There's no way that could be correct, right? I mean, without knowing anything about the stock you were trading, or the amount of money involved, or the overall market conditions, or anything else - how can we stand here and tell you that you got nervous right at 38.2%?
The reason is because 38.2 appears to be programmed into the human psyche (as well as many other parts of nature). 38.2 is one of a set of numbers called "Fibonacci Percentages." They are derived from the "Fibonacci Sequence" which is a list of numbers where each number equals the sum of the previous two. i.e.,
1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610 etc.
The branching in trees, arrangement of leaves on a stem, the flowering of artichoke, an uncurling fern and the arrangement of a pine cone - all these things exhibit Fibonacci characteristics . In addition, if you take any large Fibonacci number and divide it by the previous number, you'll get something very close to 1.6180339887 (the larger the number, the closer you'll get). Now, 1.6180... has been known for centuries as "The Golden Ratio" - mostly because we humans tend to prefer things - art, sculptor, architecture, etc. - that have proportions that equal the Golden Ratio.
Which of these picture looks the most "natural" to you? The middle one has Golden Ratio proportions.
Getting back to stock charting, R.N. Elliott made the first well-known connection between price movements and the Golden Ratio. He noted that many reversals occurred around 61.8% or its compliment 38.2% (i.e., 100 - 61.8). Combined with 50% and 100%, they make up the standard set of Fibonacci Percentages.
Regardless of how the numbers were arrived at, chart analysts have observed that prices often will reverse after moving up (or down) by one of those percentages. Basically, those percentages are where something tells many people that it is time to take action - and thus prices reverse. Strange but true. Check it out:
The Fibonacci Lines on this chart were created based on the move from Feb. 9th to May 30th - so just focus on the shaded blue area of the chart. Like a weatherman, the lines "forecast" that support for IBM would occur around 118.35 essentially because lots of people would probably feel that IBM had "fallen enough" and would start buying it again. That is precisely what happened at the end of June (red arrows).
Unfortunately many people have gone on to claim that Fibonacci lines (and their variants) have almost "magical powers" to predict price movements. Like most Technicial Analysis tools, we think Fibonacci Lines are useful forecasting tools - but not magical.
You can add Fibonacci Lines to your charts using our ChartNotes annotation tool. To get started, simply click on the "Annotation" link below any SharpCharts.
Chip
Posted by Chip Anderson at 4:00 PM in Chip Anderson | Permalink
August 17, 2008THE DOLLAR GOES GREEN AND MAX PAIN REVISITED By Chip Anderson
Tom Bowley
The dollar has bottomed and is beginning to trend higher for the first time in several years. Dropping crude oil prices are pushing gas prices lower at the pump and the dollar is strengthening. That's a combo that should make most consumers feel wealthier in time. Europe's economic woes as well as weakness in other parts of the world is putting pressure on foreign currencies. With the Federal Reserve here in the U.S. on hold - at least for now - the dollar is strengthening on a relative basis to its foreign counterparts. What's good for the greenback is not-so-good for commodities. The commodity run appears to be over. I'd be a seller into strength. The technicals have quickly deteriorated to levels not seen in the last few years. The strength in the dollar will make it difficult for commodities to regain their earlier form. Take a look at Chart 1 below to see how the technicals on the dollar are beginning to change for the better.
For the first time in over two years, the dollar has moved above the 50 week SMA. While the dollar could encounter some short-term resistance near 78, the long-term resistance area will be in the 80.00-80.50 range. Should the dollar push through that resistance, I believe we'll challenge the 92.50 level possibly by the end of 2009 or early 2010. A stronger dollar will push all commodities lower, but will especially hit gold hard. Until conditions suggest otherwise, you should consider trading the trend at hand.
In the July 19th issue, I discussed the effect of max pain and how the market gravitated higher to lessen the impact of net in-the-money put options. The same thing just occurred for August options expiration, only in reverse. Financials and consumer discretionary stocks had led a sizeable market rally into the beginning of this week. I calculated on Monday evening that the XLF (ETF tracking financials) had $118 million in net in-the-money call option premium. I'm only talking about one ETF here, so you can imagine what the total value of net in-the-money calls were at Monday's close across all index, stock and ETF options. Tuesday's decline in the XLF erased $67 million of this net call premium and Wednesday's 61 cent drop finished off the rest. JP Morgan Chase (JPM) had one of its worst days ever on Tuesday, wiping out millions of in-the-money call premium. Stock prices tend to gravitate towards the area of max pain, which is the price point where in-the-money call premium equals in-the-money put premium. While this gravitational pull doesn't work with every stock or sector at every expiration date, I'd caution any trader from trading stocks during options expiration week without first checking the underlying open interest. A quick glimpse at the open interest and in-the-money call and put options could save your portfolio dearly.
If you're not familiar with the concept of max pain or are interested in seeing how it might help your trading, follow the link below to an audio/video presentation that was done on Tuesday for our members. The presentation was shortened to highlight the discussion of max pain as it pertained to several stocks - mostly commodity stocks. I think you'll find it interesting at the very least. Go to www.investedcentral.com/maxpain.html for more details.
Happy trading!
Join Tom and the Invested Central team at www.investedcentral.com. Invested Central provides daily market guidance, intraday stock alerts, annotated stock setups, LIVE member chat sessions, and much, much more.
Posted by Chip Anderson at 4:05 PM in Tom Bowley | Permalink
August 17, 2008ASCENDING WEDGE IMPLIES CORRECTION IMMINENT By Chip Anderson
Carl Swenlin
The rally that began off the July lows has not demonstrated the kind of strength we normally expect from the deeply oversold conditions that were present at its beginning. Instead, the meager price advance has served only relieve oversold compression and advance internal indicators to moderately overbought levels. In the process, as the chart shows, the price pattern has morphed into an ascending wedge formation, a bearish formation that usually breaks to the downside. Since we are in a bear market (the primary trend is down), odds of the negative outcome are increased.
The next chart shows our On-Balance Volume (OBV) Indicator Set. The Climactic Volume Indicator (CVI) measures extreme OBV movement within the context of a short-term OBV envelope for each stock in the index. The Short-Term Volume Oscillator (STVO) is a 5-day moving average of the CVI. The Volume Trend Oscillator (VTO) summarizes rising and falling OBV trends. These charts tell us if the index is overbought or oversold based upon volume in three different time frames. All three are giving us useful information at present.
The CVI shows that upside volume climaxes have been quite mediocre, certainly well below the levels that we see when significant rallies are launched. The STVO and VTO show that the oversold conditions that existed at the July low have been cleared, and that the market is beginning to become overbought. With overbought internals and a bearish chart formation, we should be expecting a correction very soon.
A correction would not necessarily be a bad thing. The July low needs to be retested on a medium-term basis, and a successful retest would set up a broad double bottom, suitable to support a decent rally; however, in my estimation, prices will need to go a lot lower than they were in July before internals will be sufficiently oversold to fuel a healthy advance.
A bullish take on current conditions would emphasize that the subject ascending wedge is a short-term condition, and any downside resolution is likely to be short-term as well, meaning that a very short correction could result in a higher low that keeps the rising trend intact, albeit at a less accelerated angle. There could even be an upside breakout from the formation, but that is a long shot.
Bottom Line: While our trend-following model has us on an intermediate-term buy signal, my opinion is that we should expect a correction which, at the very least, will retest the July lows. Since we are in a bear market, there is also a strong possibility that any correction could be the start of the next leg down.
Posted by Chip Anderson at 4:03 PM in Carl Swenlin | Permalink |
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