Wednesday, September 30, 2009

Watch list for Thursday & Friday

I went through some patterns found through ThinkOrSwim's ProphetCharts. These are the ones that look promising in the near future:


AONE (20.90)
APAC (5.84)
CPST (1.30)
CBAK (4.70)
DPTR (1.72)
HAFC (1.61)
LAVA (1.70)

I'm not finding a lot of good stuff out there right now, but what do I know?

Tuesday, September 29, 2009

Turning this into Rocket Science?

I've been trying to get a feel for the big picture of the economy these days. I was listening to Bloomberg talk bonds, commodities, and FOREX, trying to piece it all together and figure out what hand is moving this market.

The way I figure, the Fed is printing money to buy government debt (even if it's only 20 days old) as well as everybody's mortgage. To do this, it is printing money by the billions, which is making the dollar fall. The falling dollar intrinsically raises the prices of dollar-based stocks, thus giving us a 'bullish' market. I happened across Motley Fool for the first time in years today, and read a claim that the falling dollar raises local stocks because it increases export revenues (in dollars). Sorry, but that just sounds like reaching and cheerleading a la CNBC, and I'm still too cynical.

To get a big picture, one must survey the area from 10,000 ft. So, I decided to just get technical and examine the S&P on a weekly scale, figuring this would also be a good time to take a closer look at the technical indicators that I've been exploring.

By taking a step back and looking at the weekly chart, it seems that a few of these indicators forewarned of the big October 2007 slide, and the March 2008 recovery. It's a matter of simple divergence between the stock price and RSI and the slower %D of Stochastics.

The red line of %D is hard to see in this picture, but the yellow arrows follow the higher lows, and lower lows. I also noticed that there were three lows in the trend before the reversal occurred, which is something Constance Brown mentioned in All About Technical Analysis. She said to watch for three peaks or valleys in Stochastics when looking for divergence to price; that will be the more reliable signal.

Also of note is that weekly RSI has powered its way back to a value close to 65, which has been a reliable level of resistance for the 5 years shown in this chart. Support for RSI is kind of rough around 50, and sometimes 40. Combining where RSI is with the direction of RSIS and %K Stochastics might help signal immediate and short-term trends.

Here's the same chart again:

While staring at this chart, I suddenly noticed the double top at the peak of the market. Another important indicator mentioned by Constance Brown, she says that double tops/bottoms are the most reliable reversal indicators around. Volume is supposed to play a part in that, but for some reason Think Or Swim won't give me volume for the S&P 500 Index.

In short, looks like the S&P is due for some more pullback from a rising wedge formation. But it probably wouldn't go below 1012.

Monday, September 21, 2009

Time to Get Back in the Game

The pizza joint I bought a few years back might finally be getting liquidated this week, and I'll have almost nothing left but bad memories and a LOT of debt. Work's been full of deadline after deadline as we race to a finish that we wonder might never come (pending Congress cancels the whole #$!#@ program). And then there's that family to tend to...

I've been spending my few quiet moments trying to listen to Bloomberg and figure out what is going on with Bonds. Who's buying and why? It would seem that foreigners (China) are still buying Treasuries because there's not much else to invest in around here. Corporate bonds are all the rage (bubble), and gold crossed $1000 but is about to get flooded by 1/8 of the IMF's gold reserves. They say it's about $13B worth, way to cash out, guys.

I've finally accepted that this bull market won't quit... just like I finally accepted that we were in a Bear Market back in March. I don't understand how program trading is supposedly the driving force, volume doesn't seem that low as other traders are claiming. I see that a correction is in effect right now, and I'll be watching for new setups.

Sometimes I'd like to stop thinking about the Big Picture so much, and just look at 20-day charts. But I've there's real work to do, and this trading thing is still part time.

Wednesday, September 09, 2009

Nothing Posted in Weeks

What? Nothing to say for weeks at a time? But of course!

I have a job, you know!

It's been 6 months since the triple-6 bottom, so where are we now?

Remember when we had a rising wedge back in May/June and we thought that the rally would finally end? Bought FAZ and lost more money? Yeah, I remember now. It appears that this was a smaller wedge within a larger wedge that should be nearing breakout soon. With the smaller wedge, we got "sideways action" back to a nice, 23.6% Fib retracement from the Oct, 2007 high to the March low.

I'm thinking we won't see much excitement from this next correction. We're flirting with the 38.2% retrace level (1014), and we might not drop below that. If we do, however, the next best choice to me seems to be back to the 23.6% level at 881. But if this wedge wants to freak us out and retrace to its own 50%, then we could bottom around 851.

Whatever happens, RSI has negative divergence so it's gonna go down before it pops up!

Meanwhile, I'm still trying to figure what to make of Treasuries. The Fed is flooding the auctions with new paper, but it appears that there are still buyers out there. I thought China & friends had their fill of our debt. So who's buying??? And how will this affect all this corporate paper that every one's been hyping for a few months now? Can you say, 'bubble?'

Creeping inflation can't hide anymore; millage rates have gone up to compensate for the lack of taxes coming from all the empty homes in foreclosure. Rates for electricity and natural gas have been officially hiked, and more permanent 'transportation/energy costs' have snuck their way into invoices for everything from pizza delivery to hotel rooms.

On the bright side, I hope Americans will start to lose weight with all the reduced sizes of the portions inside every package at the grocery store. Oh sure, the package is still the same size or made to appear the same size, but we're getting less per ounce, while the price stays flat. We're getting closer to par with the rest of the underprivileged world. So I don't want to hear any more complaining from over the wall, ya hear?