Is this all on the UUP and UUP?

So, I was looking at the blog and how often I have NOT been posting the past year. It's been very stressful with the combination of market ups and downs, President Obama and Congress officially cancelling my job, the Constellation Program, and the passing of my dear grandmother.

I come across a year-old chart of UUP that I posted, and almost thought that I was looking at today's chart! We're back to the same price levels, and the past year's data looked strikingly similar. I pulled up the current chart, marked up both for comparison, and posted below.

THEN:

I see a VERY DIFFERENT setup in today's action. Last year, there was a well-defined trendline that was eventually broken with supporting info from the indicators. There's a lot of up-pointing arrows on this first chart, showing positive divergence.

NOW:

Today's chart shows a year of much more wild behavior. While a similar trendline is respected, the other indicators aren't really giving any signals, all except volume. Volume is supporting hope for a bottoming out and reversal. We still need to penetrate (huh huh) that trendline, though. It's like a squished version of the first chart, more caffeinated and energetic. Another good sign is that price has gone above the 20-day MA. Let's see if it can cross the 50-MA.

Remember that this is an ETF that follows the Dollar Index. The whole world is in play here, and this is a simplified version of where the US is related to everyone else.

Another thing I noticed, Stockcharts.com has added price tags to the right side of their free charts in the past year. Sweet.

QE2 in Q4

The past two months of monster stock price rises are being attributed to inflation of stocks due to the falling dollar. The Fed has been pumping money by the billions daily into the world economy through POMO, and you can compare the inverse relationship between the Dollar Index to the S&P 500.

Traders are talking about just staying out of the market, and blaming all the noise on high frequency trading algorithms. And now I've heard two different guys in radio interviews claim that the rising prices aren't due to current POMO pumping, but due to anticipation of the upcoming Fed's Quantitative Easing, Part II; also known as QE2, or QE Lite.

I've been looking for turnaround signs to cause the market to dip back again, probably right after the elections on November 2. Marc Faber suggests that the signal won't be elections results, but the Fed announcement.

I am currently short, and I'm sweating for jumping in too soon! But the thing I'm starting to notice is that the Russel 2K is staying flat, while the Dow and S&P are fluctuating more wildly. There is a dissonance forming between the indices, and I think it's the cracks starting to form.

An Answer to the Previous Post

I found this video on etf-central.com recently. It shows that China is actually not THE big holder of our debt, but one of three. The "Other" category is supposed to be the rest of the world outside of the U.S.

Holders of Treasury Securities, 2004-2010 from Computational Legal Studies on Vimeo.

Staring Down Destiny

I thought I'd come back from the shadows to post this link to a very concerning video. It explains how I've been feeling for the past year or so, and how I have been approaching my investing. I am currently bearish, but cautious of the rising trend in the Indices due to POMO hand-pumping.

Nicolas Darvas

How I Made $2,000,000 in the Stock Market by Nicolas Darvas is my latest read. I just came across this line at the end of Chapter 3, and wanted to repeat it here:

"What, I asked myself, was the value of examining company reports, studying the industry outlook, the ratings, the price earnings ratios? The stock that saved me from disaster was one about which I knew nothing. I picked it for one reason only -- it seemed to be rising."

Greecy French Fries

My godmother recently passed away, leaving me with her interest in several assets. If given the chance to liquidate some of these assets at actual, par value, then I may finally get a chance to start that full-time investment company (a.k.a. hedgefund) that I've been planning. If that ever happens, I'm going to make my traders dress up like superheroes and work in a spacious office surrounded by computer equipment that I'll buy surplus from the 1960's. I think it'll look a little something like this:

Out of the xBox

Guess what I got for Christmas? Here's a hint:



Now that I've got first Prestige, level 70, and Fall camo for the Intervention, I figured I'd look at the charts again to try and make heads or tail of what's going on. Ok, ok, I've been watching the whole time. So, here's where I am right now:

I recently bought the dips on AVF, DMND, and ETW. I tried to get KKD on a second dip to 2.51, but it never happened and it took off while I watched in the cloud of dust. I'm still watching it, looking for a dip-buy opportunity.

I've already sold DMND for a quick profit, and I'm still watching it for a second entry opportunity. It looks like a rising wedge that's ready to break.

There's a limit order to dabble in some CNOA at $.90, which has been hovering at $.901 for 2 hours now.

The traders I listen to are trending in the positive direction for the markets right now. I don't know how they see it, but I'm trusting their judgement (with stops, of course) while I try to figure out what they're seeing. Meanwhile, I'll be studying the basics again to engrave Chart Patterns 101 in my mind.

Hat tip to Traderstewie for the training session:
Link Here

Cheers.

If anyone happens to read this, my XBOX Live tag is R4ND0M THR33.

UUP with Ben!

Ok, ok... so I'm not a whiz with Photoshop; you get the point. It's after 2 AM and I finally finished the image I had in my head this weekend.

I've noticed other traders are talking about throwing their hands up in disbelief in this rally. We all know it's tied to the dollar, and all the money that's getting conjured up and thrown into Treasuries. I've been in and out of UUP and some other small stocks that I was watching for patterns, like KKD.

Speaking of which, WTF happened with KKD today? I sold in the panic this morning, as it dropped lower and held it for most of the day. Then, in the afternoon it took off and closed higher for the day. Sheesh!

Update: I'm out of KKD, still riding HW, and now have a spot of TIV. I was thinking of getting back into UUP, but that ticker moves so slow that it would probably be better to find some other vehicle to ride any kind of dollar comeback. Then again, I might have a while to look for one if this death-defying rally continues.

I heard an interview with Tom McClellan of the McClellan Oscillator Clan, on The Disciplined Trader podcast. I liked what both of the guests said that I listened to the show twice. But the reason I bring it up now is because Tom McClellan mentioned that he forecasts a dip in the US markets through much of December. He even went so far as to say that we might go back to screaming 'doom & gloom' before it bottoms, even though it won't go farther down than maybe what it was in July. So, I'll be keeping that in mind for the next month or so.

Alright, gotta go to work in a few hours, time for some sleep.

Power UUP

Looks like the Dollar is trying to make a comeback en force. Today's move bounced it off the 20MA and punched through the 50MA. Last time, it was stopped by the 100MA, which now stands at 23.12. Rising past this barrier and continuing on may spell doom for the local markets as long as the Dollar-Stock Market inverse relationship continues.



But if it does go though, I'll be interested in learning the reasons why. I've been hearing a lot of noise about a Dollar carry trade, which could make dollars 'worth' more. But that didn't really seem to work for Japan. Then again, we're not Japan.... read it how you like.

On a tip from the ChartAddict I bought some PLA today.



I had actually been watching this one as it was forming a nice Holy Grail setup, easing back down to the 144MA. But I didn't check back in time, and I got in at 4.00. Right now, I'm losing in the aftermarket, and I found out later that the jump was due to news that Playboy might get bought out. This was a rumor play, and I might have moved in too late. Support is at 3.82, so that's where I'll start to sweat. Otherwise, I'm going to see how this 'plays' out.

I dumped GSX at .48, and I might have to wait until December to see if it will bottom out. Trendline support is still only around .45 or so, but that's a healthy 7% for this penny pincher!


I also might include a short of the Dollar/Yen through the FXY etf. Don't know if I'll be able to short that etf until I try, and I'm still watching for a few more weeks as it approaches resistance. The wedge it's riding in now has such a low slope, it might not be until January or almost February before the Yen falls. Say, is there a Euro/Yen etf out there for us to buy?

Modern Warfare 2 Released, Volume Low. Coincidence?

We don't have an XBox, and I surely can't afford $80 for COD6:MW2. So, I have time to work out some more trading techniques.

I've been starting with the weekly charts to find patterns, since my schedule prevents me from trading more frequently than daily. I've stuck my toe in the water with the following four tickers, and the charts are shown daily for a little more clarity.

UUP

Boy, looks like I'm bucking the trend on this one. But I've thrown a little fundamental assumptions into this, since it's a Dollar Index follower. I jumped-in following the break in trend on good volume last week. I later found through ZeroHedge that the big spike might have been limited insider trading, and not actual capitulation. Notice that UDN didn't move in tandem, and only UUP was announcing more share issues.

Nevertheless, UUP is still fighting support at this time. There is one heck of a lot of noise on which way the Dollar is going to go from here, and most of it is bearish. So, I have my doubts, but I'm trying to make a point of ignoring the noise more and more, and just watching the charts. For now, I'm holding out and ready to pull the plug. One thing that gives me hope is that yesterday's candle sure looks suspiciously like a stop-sweep...which are often followed by swift moves in the opposite direction. But I've only found those intraday before.

KKD

I was so excited when Krispy Kreme went IPO about 10 years ago... it was around $18 and I wasn't even trading stocks yet then. It closed at $3.39 today and hasn't ever split. I remember thinking about how a share was only a dollar back in March, and wondering how many shares I could get for the price of a dozen "hot doughnuts now."

This chart shows a nice and steady uptrend that might also be a rising wedge. As long as this trend holds I'll keep confident all the way up to 4.38... where I'll keep holding through the 4th attempt to break support. From the first test on resistance, this chart actually looks like a cup and saucer formation brewing.

HW

Headwaters, I don't even know what they do. But this chart shows another rising wedge squeezed near the end, looking to break out. It appears that I may have jumped in a bit early, as there's more downside risk in this narrow range at the tip of the wedge. It also might be a failed pattern since resistance was broken for several days in October, but then failed to become support. This stock may be entering a new trend, but I've put my money in that this could be a bull-flag and the main trend will continue. There's low tolerance if this trend gets broken, however.


GSX

I bought Gasco thinking we might have a Holy Grail pattern off the 51 MA, and that's when I got in. Unfortunately, the 51 MA has been broken and I have to count on the upward trend holding out. This is a penny stock, so moves either way could be severe. Keep the safeties off.

About that Time...

I've been getting itchy to find a solid point to jump into this market. After getting burned over and over again, I've held back to observe the 'pros' and see if I can learn something. Well this recent over-the-top action in the indices is looking ripe for action.

To work with my busy schedule, I've zoomed out to daily charts to look for patterns, but will zoom in for details. It looks like the Dollar might finally get a second chance, as UUP has broken it's falling wedge trend and stayed there with increasing volume. It's already close to resistance, and I'll be watching it and the S&P for further confirmation tomorrow and dip-buying opportunities. But it appears that the 6-month trend has been broken, and a new one must form. Now that trend might still go in the same direction, but I have an itchy-trigger finger that thinks it sees opportunity.

NASA took 2 days and continuous launch-time pushbacks to get Ares 1-X off the ground. I heard several engineers were quoted saying something to the likes of, "just push the button and light it up already!" Likewise, I've held off getting back into the markets for fear of being too late on a trend. It's time to fly.



Hooah.

More Extensive Research

As I sit in my makeshift lab, the sun long gone and the children in bed, I have come to the conclusion that the most reasonable explanation for this insane (an inane!) increase in our beloved Stock Market is inversely related to the falling Dollar. But I AM biased: I stay emotionally bearish because I don't see or hear about any of the true problems getting fixed. All it seems is that the people with the ability are using this crisis as an opportunity to amass as much wealth and power toward themselves as fast as they can, while the chance is still there.

Whatever, there's nothing I can do as a debt-laden, middle-class serf. So I shall accept the situation and adapt by trying to ignore my emotions and rolling with the flow.

For charting & trading, I'm watching UUP, which tracks the Dollar Index (see DXY). And I've noticed that we are rather close to a strong low that was established almost 2 years ago, back when Countrywide and Lehman were names to be reckoned with.


Notice the long, orange support line extending from early 2008 to today.



Same chart zoomed-in to the present. There's that orange support line, and the Aftermarket trading just hit it! This should mean higher Index futures tomorrow morning.



Here's SPY, which follows the S&P 500. Looks like we have room for another gap-up in the morning. Last time we hit this resistance, you can see that we went flat for a week before bouncing back to the lower support. I don't see why we can't do that again.



This chart got a little busy, hence the extra colors. I anticipate that we'll keep the uptrend until the second week of December. That might also correspond with UUP hitting around 21.85, which could happen since SPY:UUP doesn't move with a 1:1 relationship.

In the short-term, I see a very bullish opening tomorrow, with a possible doji day. Next week will be flat, followed by some consolidation down to about 1050 S&P. And then the final push to the finish line in December. After that, who knows? Also to note, UUP is showing a falling wedge, while SPY has a rising wedge. This rally has shown me that such patterns are almost useless, so make of it what you will.

On the other hand, I just do all this to try and get a big picture of the whole Market and its direction. For actual trading (simulated for now), I'm usually only looking at small-priced stocks with decent volume, scanning for breakout formations and positive trends. They are mostly moving independent of the S&P, and I'm using them purely for technical trading practice.

Watching and Waiting

Here's what I'll be watching tomorrow and the next few days to see how they play out. I'm all cash right now.

DSU (+3.63 BREAKOUT [BO])
AIS (1.06-1.25 CHANNEL [CH])
AVII (1.52-180 SYMMETRICAL TRIANGLE [SM])
CFW (1.15-1.16 CH)
FLOW (2.73-2.91 CH)
HILL (2.01-2.38 CH)
KERX (2.17 SUPPORT [SP])
MNI (3.11 SP)
LVLT (1.22-1.58 SM)
SRZ (TARGET ~6.00, BREAKING OUT)
SYMX (1.12-1.36 SM)
TPI (3.65 SP)
UIS (TARGET 3.10)
VVR (BO ABOVE 4.09)

It's late, so I'll have to fill in the rest tomorrow.

Still Bearish at 30,000 ft

Good rally today, but this SPY chart feeds my pessimism. Looks like S&P resistance is around 1070, low support around 970. But I'll respect a breakout.



I'm still overall Bearish. Pro's on Bloomberg are saying with confidence, "the Recession IS over!" What bothers me is that volume has been falling since the beginning of the year, and long before this recovery started...until now. Volume is climbing on negative movement in this recent downward push.

It's hard not to get emotional, as there's still that feeling that the fundamentals haven't improved yet. I must give credit to the Feds for trying to lubricate the Markets again, but I think the effort is fading. The commercial real estate shoe to drop is looming, and it appears that foreclosure and short-sale buying is meager. Meanwhile, the Dollar is falling which I theorize is partially to blame for the rise in all Dollar-denominated products: stocks, bonds, oil, gold, McDonalds....

Which reminds me, it's Monopoly time at the Golden Arches. Here's to Crack Fries!

Situation Normal

I've closed out all positions and am now in cash. My brother is winning our trading game with a nice win in FAZ a few days ago before pulling out just in time. That dropoff in AONE killed me yesterday, and I've made a little back today with a quick trade in FAZ, and by pulling out of everything else before it fell off.

Around 11:30 today, I had a feeling that the S&P was getting tired, and that's when I setup the FAZ trade. I considered tweeting it to GreenFaucet and StockTwits, but Zero Hedge had just posted a commentary on how the S&P is headed higher today and tomorrow. Those guys know a bit more that I do, so I decided to keep my opinions to myself for the time being. There was also the thought that some other Direxion ETF might have been better, like a Russel 3x Bear, but there really wasn't much time to check it out and compare.

Right now, I'm clueless on market direction: both Bears and Bulls seem to be getting more passionate about their opinions. I'm still hearing bullishness on this market, but it doesn't feel right! So, for another reality check, here's a weekly S&P:



Roubini's been out there saying that we have to drop now to recover from all the gains made since March. But this chart shows that what just happened WAS a recovery from the October plummet. And now the S&P can go back on the track of steady declines like we've been doing since 2007. But there's good support at 1015, and I see light resistance at 1090, and 50% retracement at 1122. If we break above these levels before the end of the year, my inner Bear might finally go hibernate this winter.

A123, Back to Step 1

AONE just lost half of a week's gains in one friggin' day. I didn't see it coming, and only a stop would have saved my (play money) losses. I didn't have any stops in place because I didn't anticipate a drop like this, and I wasn't watching the Markets today.. still had to take care of that day job, ya know.



I haven't found any news yet to explain why the drop. And since this stock is still only 2 weeks old, all the indicators are in new territory. I'll try to be watching at the opening bell tomorrow morning.

First of all, hats-off to India for discovering water on the Moon a week before LRO does. At first I thought NASA slipped-up to play some politics... trying to influence the Administration's decision for the future of the Space Program. But, now that I know India made the discovery, I will forgo any further political commentary.

I jumped on a few of the stocks I was watching, and I have a few in play money that I'm using in a game with my brother out in Cali. Here's the list of stocks I'm riding, most are about 3%-5% of equity as I see which way they'll go, while I'm riding big on others:

CBAK
FAZ
AONE
NGD (short)
CHTP
XJT
EJ
VRMLQ

I had jumped on a couple of others, but they broke down and I got off. Most of these are small-price stocks who aren't necessarily moving with the Indices, they seem to have their own rhythm, and must be watched individually.

Meanwhile, what's the S&P going to do?


Looks kinda like anybody's game tomorrow. We're right in the middle of a channel that also defines 100%-78.6% Fib retracement using the March lows to September's highs. RSI is already bouncing off support, and we're already respecting an upward channel that also goes back to March.

After looking at this chart, I feel that we're still in a short-term bearish move for a few more weeks. But, the first few days of this week are geared-up to see positive action as the S&P takes a breather from the losses last week. I see Monday's range of activity between 1020-1050 for the S&P. The direction the Market wants to take beyond that should be more clear within a few days on this same chart.

Until then, I'll be checking on Gold, Oil, and currencies to look for correlations.

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:

SYMBOL (SUSPECTED SUPPORT LEVEL)

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?

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.

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.