Part one OF Trends for 2011

I'll be covering some of the opportunities that I'm seeing arise, hopefully they'll be somewhat secular in nature.

One of the first is the Fed's plan to buy treasuries on the long end of the curve that can be found in the Fed minuted I posted today from the December 14th meeting.

TMV is an ETF that is bearish on the 20 year, last year we had a decent trade there by buying TMV, it seems that trend may be about to reverse. They said they plan to buy throughout 2011. On tonight's new January Trade List this trend is reflected in the trade, TMF.

I like TMF right here and now, although it's prudent to manage risk.

Here's the chart...

First we see a positive trend in MACD, I use a long version so it cuts out noise and reveals the trend, it is certainly turned positive. Next we have a high volume event that is indicative of a type of capitulation-meaning sellers gathered steam and all sold on that day en masse. Finally in the white box, we see TMF breaking out of the trading channel.

Next on this 15 minute chart, intraday resistance over the last several days is marked by the red trend line, as you can see, TMF is very close to breaking out of that resistance.

10 minute 3C chart. As you can see, today saw a very positive divergence, it looks like a head of steam is building towards a breakout. You could use a limit order, but I personally would have no problem entering this trade in the morning at market.

The 5 minute chart looks just as bullish.

Remember, this is a 3X leveraged bull ETF on 20 year treasuries. ETFs do have some limitations, but this seems to be a fairly good way to play this trend. I believe this could end up being a longer term trending trade, which is my favorite kind. However, it requires that you have a sufficiently wide stop, there will be ups and downs, the overall trend is what we need to be concerned with, not the intraday or even daily gyrations that are found in any trend.

Other 2011 trends that seem to be emerging that will be covered this week include European banks which could be facing a lot of trouble in 2011. US housing and related service industries are another theme. Certain financials will probably develop as the foreclosure crisis takes shape. Certain FX/currency markets are offering some opportunities. Precious metals is unfolding now at a make or break point and there are a lot more. The trade list as well as featured trades will reflect these themes and we'll be looking for the best low risk/high probability setups. I suggest setting alerts on the limit trades, not actual orders. We don't want to show the market our cards ever, including stops. FreeStockCharts.com will allow you to set alerts and use realtime intraday feeds without the 20 minute exchange imposed delay and it's free.

As for the market today, Monday was strong, today was mediocre like we saw late December. As I mentioned last night, the Price volume relationship seemed to be indicating a one day overbought condition and I believe that's why we did not see follow through buying today.

Today the price volume relationship was more moderated with the theme being close down and mixed between volume up and volume down.

Here's what the closing 3C charts looked like

 The DIA ended with 3C roughly inline.

 The Q's looked the worst with a negative divergence

 The SPY looked the best as it was perfectly in line with price.

From the charts above it's difficult to say which way we'll open. There's been weakness thus far overseas so that may filter into the US market but it is more likely a reaction to the lack of upside follow through in the US markets.

Tomorrow I'll continue adding trades. With good risk management, (as per the risk management link) you shouldn't be too bothered with pulling the trigger on trades that trigger. A few subscribers did excellent with PEIX today, but they had to pull the trigger. Good risk management should put you in a position in which any losing trade shouldn't cost you more then 1-2% of portfolio value at the most (although we can't account for surprise gaps other then not investing more then 15% in any one position). In reality you can have a majority of losing trades and still make very positive returns with good risk management.

There were many informative posts today about where the market is at, if you missed them, please take some time and go back to read them.

It's also getting to be about that time in which we take a look at market breadth again, so perhaps tomorrow or tomorrow night we'll take a closer look at the market's internals.

 I'll be adding more trades tomorrow, for tonight, TMF is my favored long trade.