Bounce Candidates

I ran some scans tonight looking for candidates for a bounce, these are not for anything beyond a bounce, but you may want to take a look at them for some short term trades.

PCAR
AMAT
SPLS
MSFT
NVDA This is one of my favorites
EXPD
RIMM
VOD

Treasuries

Remember this post? Or This one? (focus on the TLT chart) How about this one? There actually have been quite a few all focussing on treasuries and specifically what looked like a stealth move into treasuries. This would certainly run counter to what the biggest bond investor out there is doing (Bill Gross/Pimco), but ever since we first looked at TLT, it was showing bullish inclinations. It seems the market is delveraging risk so that money has to go someplace. Gold would be an obvious pick in an inflationary environment, although the trend there recently hasn't been as strong as I would expect. Long dated treasuries seem to be a perfect match as you'll see in following charts.


Ever since I posted these two charts on February 14th (we had a short in TLT and a long in TMV until I posted on Feb. 9th , "Both are at a small profit, but I'd close them down until we get some clarity on the recent surprising action in the bond market." ), something changed in the bond ETF's.


Here's the Feb 14th post...

Using TLT as a proxy for the 20 year, note the bullish wedge which is one of the reasons I began to grow skeptical of the trade. The wedge is accelerating recently. 

30 min 3C chart of TLT-a change coming? 

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Only a few days before we had a short on TLT/ long TMV. Then came these charts on 4/26

 This look a lot like the classic H&S bottom or inverse H&S, from here upside volume would have to pick up.

 The daily 3C chart seems to like this as a significant base.

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There were several other posts since-linked at the top, but lets take a look at the bond ETFs today.

 TBF short the 20 year Treasury- breaking down out of a H&S top

 TBT-UltraShort 20+ year Treasury-Also breaking down out of a H&S top

 TMF 20 year Treasury Bull 3x leveraged, breaking out of a H&S bottom

 UBT Ultra 20+ year Treasury- Breaking out of an inverse H&S bottom

 TLT 20+ year bond ETF vs the SPY in red.

 TLT's daily 3C chart, but notice volume is very low for a breakout of an inverse H&S. I mentioned in an earlier post, there seemed to be stealth accumulation, meaning that volume was being kept low as to not attract attention.

And here's the descending wedge that I saw and decided to end our short trade in TLT and long in TMV. The price pattern implied target is $108. It seems that the shorter maturity bond funds aren't seeing the same upside as the 20/20+ year funds. If you like the idea of this trade, since there's limited upside in TLT I would consider the 3x leveraged TMF which gained 3% today. The upside in TMF would be approximately 36% from here, although I suspect a pullback is coming in the next few days.

LVS and PCLN

As I suspected yesterday, support zones in both out PCLN and LVS shorts kicked in today.

 Daily LVS support zone

 LVS had a little more downside to travel before hitting the support zone, but note that in both cases, before either moved much higher, the stops were ran at both support zones. In LVS the first was hit at an intraday support level and volume spiked and the second at the daily support level, again volume spiked as stops were hit. This is a common theme and you should be starting to get use to the idea, if there's a nearby support or resistance level, it will be hit.

 And the reason... positive divergences on both breaks of support, Wall Street is picking up shares on the cheap.

 This is the stop I'd be using on LVS short positions to either take some profits off the table or close the position to reestablish at a later time. There's about a 14% profit here, I'd prefer to keep it.

 PCLN was right at the support level so it didn't have far to go to run the stops

 Again, the daily support trendline is hit briefly into a positive divergence meaning the stopped out shares were accumulated for a move higher.

 You can see it on the 10 min chart as well which is pretty significant that early in the day.

And here's the stop I'd be using to take partial or total profits in the PCLN short.

At this point it's too early to tell if this is a momentary hang up at support or if it'll be the base for a bounce and shakeout. Either way, when it becomes clear, I'd like to re-establish both shorts as I believe they have good downside potential.

As the market tops breaks definitively, there won't be a need to trade around these positions as much and trending trades will become a lot easier to manage.

USO

 USO was a bit tricky today with an intrady support zone stopped out, but it's .03% gain isn't reflective of its move today which was about 2.15% off the lows.

 The 10 min trend channel should work out okay for now as a trailing stop.

If you don't have my trend channel, try a 30 bar simple moving average on a 5 min chart.

Silver Today

If you picked up SLV along the lower boundary of the trading range, you may have made about 2.5% today, if you used AGQ, 4.5% today.

 As this trading range is looking like an accumulation zone, there could be further dips to the lower boundary. I personally would keep a trailing stop on this one until there's a breakout above the range and we see stage 2 mark-up.

The hourly chart remains very bullish looking.

Right now, to protect profits ( I prefer to never let a green trade turn red on me), I would use some sort of trailing stop. My choice would be the trend channel on a 10 min chart for the time being, if there are further upside gains, then it will be widened. If not, then you are still taken out at a profit, if you bought  long the lower trendline.

The NASDAQ 100

Perhaps one of the biggest surprises and no doubt shakeouts of today, has been the NASDAQ 100/QQQ.

Yesterday I couldn't find a single bullish looking chart except for the very end of day. Today though....

 The Q's put in the biggest price gain today moving into the green, considering it was the worst looking yesterday, I'm sure quite a few shorts were forced to cover today-currently up +.17%, far better then yesterday's 1.73% decline.

 As I mentioned, yesterday I couldn't find a single bullish looking 3C chart, except  for the closing.
This 5 min chart is a far cry from yesterday's outlook.

 The 10 min chart also improved substantially into a leading positive divergence in a day.

 As did the 15 min. chart.

Again though I have to point out the difference between short term tactics and fluctuations and the longer view which is decidedly bearish on this 60 min chart.

SPY EOD Take

I don't think we'll get a whole lot more upside out of th SPY today, but it did make some notable changes that so far are along the lines of what I've been thinking about a shakout to the upside.

Here's what I see thus far.

 The SPY made it above the 20 bar average, but it will take a little time for the Bollinger Bands to start moving up, they have begun that process, but in my view, the most likely outcome will be a consolidation in this area with the blue bands tightening up and then a more pronounced move up in the bands and the SPY.

 The  1 min chart put in several positive divergences taking it off the lows of the day, the first was on the open and then around 11 am, but recently 3C has turned more neutral here.

 The 5 min positive divergence in the SPY did not exist yesterday, it's fairly well defined today.

 The 10 min chart is in a leading position, so that's another change that didn't exist yesterday.

 Finally on the bullish side, the 15 min chart did not confirm the lows put in yesterday and today and rather moved into a positive stance.

Just so we have some perspective, the above charts are along the lines of the short term move to re-enter the triangle and possibly stage a false upside breakout, the Crazy Ivan shakeout mentioned last night. However our longer term view is still quite negative so I don't want to confuse short term tactics with long term strategic views. Make no mistake, the market is looking bad, that doesn't preclude a shakeout and the creation of a downside snowball effect by staging a shakeout which is centered on the triangle pattern which is obvious in all of the averages.

Targeting a Bear Market Bottom

I've long said that we have an unprecedented opportunity coming up, the market takes its time and tops are notoriously volatile. The 2007 top took 8-9 months to fully materialize. Right now we are not in a comparable situation as I stated last night in my very looong post, because the market is artificially high due to Fed monetary policy. Take away that monetary policy, which is what the market has been discounting the last several months, and we get a nearly instant plunge as compared with past tops that have progressed without artificial backing from the Fed.

I mentioned a target on the Dow 30 that could be sub $5000. I just read that Russell Napier gave an interview in which he thought the S&P would see lows of $400!!! That's a 70% decline which would put the Dow around $3700. At that point the real risk and the one that I believe we will see in the next several years is that of a secular bear market, which is just a way of saying a long term bear market. We've been in a secular bull market in equities for approximately 3 decades. No one alive has ever witnessed a secular bear market in equities, sure we had stagnation through the 1960's-1970's, but not a secular bear.

This is where I see an opportunity in equities like we've never seen and that includes the 90's tech revolution. Furthermore, I can tell you that from my years of publishing Trade-Guild and my years teaching technical analysis in the adult education classes, people have an inherent fear of trading the short side. I did most of my learning during the 2000 tech crash and became comfortable selling short and saw the benefits of short selling back then. It's a chance to make money a lot faster and the trade isn't crowded. It's a pure sheep slaughter!

In any case, we have some time and while opinions and speculation are fine, we still need to listen to the message of the market and readjust when need be.

I just thought it was interesting that Mr. Napier along with Albert Edwards shared a view that was even more extreme then my long term views.

The interesting thing is I made these projections over 5 years ago when people were still screaming Dow 20,000! Less then a year later the market plunged over 50%. The US has kicked the can down the road for way too long. Remember when Social Security was the hot topic? We're way beyond that being our biggest concern.

SPY Update

 Remember what we were watching for here... (in the green box).

We also have a leading positive 5 min chart on the SPY.

The Bollinger Band Screen

I've received several emails expressing interesting the Bollinger Band Screen I showed earlier so later after market I'll touch on some basics.

Looking at SLV and USO, there are some developments...

 SLV -much like the SPY I showed you earlier, you can see resistance at the mid range of the blue channel, SLV has crossed above that resistance zone, so this is a small observation, but we make a bunch of small observations and when they start pointing in a particular direction, we start to form high probability trades.

USO also was finding resistance n the middle of the range of the blue BB, it's now in the process of crossing above.

Here are the settings for the different BB's on the chart...
Blue: 20 period/20 width
Green 20 period / 30 width
Yellow 20 period/ 40 width
Red 20 period/ 50 width
The white moving average is a simple 20 bar.

USO/Silver

From yesterday's post about buying near the lows of the trading range in both...

 The point of these trade ideas has more to do with risk:reward then anything else. If you are using risk management like I hope you are, being wrong here on either one of these trades is a fairly low risk proposition. We get paid to take risks, although there's a difference between gambling and having an edge. The biggest edge individual investors have is time and patience. So SLV and other silver ETFs gave us a pretty decent shot at a low risk entry today.

 I wish the shorter term charts looked better, they don't look horrible, but this 60 min chart looks the best and it shows 3 positive divergences all at the lows of the range. That's the edge right now in the silver trades.

 USO gave us an opportunity as well, but also ran the stops, something you should be used to seeing by now.

 The old school day traders had a rule, in the first hour or so of trading, watch for a range to set up. Early this morning the lower range was established as volume shot up in USO at the first white arrow. The idea was which ever way the market  broke, above or below the range, is the direction it would take the rest of the day and eventually close at. So you can see where volume shot up again when the lower range was taken out. Then that old school idea failed and USO moved back into the range. This is Wall Street playing the TA game and as I often mention, TA traders not adapting to Wall Street's understanding of how predictable retail traders are.

Here's the 60 min chart in USO, it looks almost identical to silver.

Additional SPY information.

It's nice to hear some of our short term traders are making money trading the SPY today even in this crappy environment. Here's a chart you probably haven't seen, I don't use it too often, but it's useful.

The rainbow color channels are different length Bollinger Bands, trading them is another story and if there are short term traders who want to learn how to use this screen, let me know. The green and red spikes in the lower window are some custom indicators I made based on Demark concepts. You can see they do a pretty decent job of calling bottoms and tops on this 10 min chart (the white arrows are bottoms/ red arrows tops.). However what I wanted to show you is the Bollinger Bands. If we get this next run up on the SPY, notice that it's been turned back multiple times right in the middle of the blue Bollinger Band Range. The third red box was this morning's turn down exactly at the triangle's lower trendline so if there's going to be a change in character here, the first level the SPY will have to take out is the middle of the bands right now at $132.79, that will be the first hint of a change in character that may move through the trendline resistance.

Anyone interested in this screen, contact me afterhours and I'll send you the template.

SPY Update

The SPY failed EXACTLY at the lower triangle trendline. There looks like there's going to be another run here momentarily, we'll see if it can get past the trendline, with it already set up once as a failure, it would certainly catch traders off guard if it moved north of the trendline.

LVS and PCLN

Last night I wrote a little about both of these May 3rd shorts that have been performing pretty well. The price action this morning is pretty predictable thus far and that's why I warned about these two last night. Don't misunderstand, I still like both shorts, it's just that we have all kinds of different traders here, some don't mind riding out drawdown, some would rather trade around any adverse move.

 LVS approaching the support level I mentioned last night...

 Yesterday we didn't have much to work with on 3C, there was a hint of 1 positive divergence, however this morning a couple of positive divergences have developed.

 Even as such, keep an eye out for a move (likely a brief move) below the support line. It's been a long time since stocks held support "exactly", it used to be that way 6-7 years ago, but Wall Street has long since figured out the game and plays it well.

 Here's PCLN after that nice day down yesterday it's tangled up in the support zone.

 This is the kind of action more typical of the current market, the support zone is probed below and above several times shaking traders out.

Yesterday the yellow box is all we had to go on yesterday, a slight leading divergence. This morning we have a little more in the way of positive divergences right at the 10 a.m. low, an area where they'd be able to pick up stopped out long shares. This is still very early, I probably wouldn't make any decisions yet, but the tone of trade in these two is definitely now become something we want to watch.

Back to the prop traders I'm listening to in the background... all I can say is, "Oh My". I can't imagine guys who watch the market all day long, every day are still preaching TA crap that hasn't worked for 5 or 6 years and especially the last two years. I've now heard them enter and stop out of about 6 trades on the SPY this morning alone. However if you think about the nature of prop trading, they really don't care what these traders make, whether they survive or not, it's all about commissions and order flows/volume rebates. There's absolutely ZERO forward looking analysis, everything is chasing, chasing, chasing and by the time they start chasing, the move they chased is over!

It's certainly enlightening though and a bit entertaining!