Wednesday, July 6, 2011
The Miner Trading System Update
Both systems are still long NUGT, but took a turn down today toward moving out of the position. There's no signal yet, but may be in the next few days.
AAPL
It's this kind of action that we are looking for, although this s rather mild, we may still see a stronger move.
EEE Follow Up
Since June 17th, when I first posted the EEE trade, I've posted numerous follow ups including yesterdays.
EEE has had a very strong daily 3C chart and for this reason, I've stuck with the idea of the trade. I also feel the trade has the ability to add to the gains. However, for trades like this, my rule of thumb is to take partial or total profits on gains of double digits (%).
EEE still looks good on the 60 mn chart, I don't have any real reason for alarm, but still I'd start to take some profits and place a trailing stop behind the rest.
The 15 min 50-sma seems to be a decent trailing stop, allowing for some consolidation.
As you can see, if you bought on the 17th, you''d have at least a 13% gain, others who have bought more recently may have gains in excess of that. These type of trades (Cats and Dogs) are a good leading indicator. I didn't trade them years ago because of their speculative nature, but I did watch them as they seemed to fire off right at the end of a bull move n the market. I do think EEE still has potential in the intermediate term, that doesn't mean that it won't pullback and erase gains over the last few weeks. For this reason, I would consider taking some profits and trying to lock in at least a break even trade with whatever you leave on the table.
Market Update
I have a lot of charts that I want to get out quickly so i won't be commenting on each. Just remember what I said last night about the shorts have been squeezed, it wouldn't surprise me to see the longs get set up n a bull trap, which would require some breakouts from significant areas. Still the market tone continues to deteriorate. If you have questions on specific harts, let me know.
DIA
DIA makes a new marginal high above local resistance
DIA 50 bar 10 mn chart as support, there's a recent break and the average is starting to flatten.
Hourly linear regression channel
DIA hourly ADX trend change and Trend Channel close to a stop out, starting to head sideways.
DIA 60 min 3C chart, RSI is negative and Stochastics at 100
DIA 30 mn chart, RSI negative divergence
DIA 1 min chart, backing off the highs of the day w/ a negative divergence.
IWM
An ideal false breakout for the IWM would be around $85.
The daily 50 sma has acted as support in the past, this may have been a significant crossing recently.
IWM intraday 50 sma (15 min chart ) acting as support, a recent break and a move just above recent resistance. RSI went from confirmation of the trend to a negative divergence.
Linear regression on an hourly chart of the IWM, starting to trade n the lower channel, volume has been dismal.
IWM 10 min negative divergence after days of confirmation.
The IWM 5 mn hart looks bad at new highs for the bounce.
IWM 60 mn trend channel has held the trend, starting to flatten out. ADX signaling a weakening trend with a cross below 40.
QQQ
QQQ makes a marginal new high above local resistance, volume is dismal (daily).
QQQ 50 sma (15 min chart) acts as support, the average is starting to flatten. RSI is negatively divergent.
QQQ hourly linear regression shows the Q's trading toward the bottom of the channel.
QQQ 30 min trend channel has held the trend, after a break above local resistance it starts turning flat. ADX turns down from over 75! This is signaling a weakened trend.
QQQ 30 min 3C has been in confirmation (green arrow) and now is going negative.
QQQ 15 min 3C is in a nasty negative divergence.
QQQ 10 min 3C also a nasty divergence.
Q's hit a negative divergence (1 min hart) after breaking through local resistance.
SPY
The SPY is a bit away from a solid breakout that could lead to a head fake, but the other averages, especially the DIA have already made such a breakout. SPY is n fact having trouble with resistance of the past 3 days.
SPY Bollinger Bands are nice and wide throughout the trend up, the SPY was also walking the upper band n a show of strength until recently.
The 30 min SPY Bollinger Bands show good volatility on the move up, recently they are squeezing very tight considering the past trend, this is indicative of a directional move about to take place.
SPY 15 min 3C in confirmation (green arrow) and now a negative divergence
The SPY 10 min 3C chart continues to fall apart.
The SPY just peaks above resistance of the last 2-days with a negative divergence there.
SPY Trend Channel (60 min) is now turning lateral, ADX signaling a weaker trend as it crosses down fro nearly 60!
There's still room for an upside head fake, keep the possibility of a Crazy Ivan in mind too, that's when there's a shakeout to the downside and long side. I think a Crazy Ivan is a high probability.
DIA
IWM
QQQ
SPY
There's still room for an upside head fake, keep the possibility of a Crazy Ivan in mind too, that's when there's a shakeout to the downside and long side. I think a Crazy Ivan is a high probability.
China/FXI/FXP
If you recall my post last week about trade management and specifically determining Swing Trade Trends then what is to follow will make some sense or perhaps refresh your memory. Remember, PRICE IS ALWAYS THE FINAL JUDGE AND IT IS PRICE THAT PAYS OR DEPLETES YOUR ACCOUNT so understanding how to qualify a trend is important, especially when the market enters a more trending environment.
Lets look at China and the FTSE/Xinhua China 25 Index ETF, the ticker is FXI, it's inverse (short the China 25 is FXP). This week China has had so not so great news including the discovery that they've been hiding about $500 billion $USD in bad debts, made largely to local municipalities with poor documentation. Then we also have the most recent rate hike today by the PBoC of 25 basis points on deposit and lending rates, the 3rd hike by the PBoC this year.
Using today's data and assuming there are no major changes, we can qualify FXI as having experienced a change in trend on a swing basis from up to down.
Starting from the left, the first daily candle inside of the white square s our downtrend signal candle because as you may remember, it is the last candle in the downtrend of June to make a lower low and a lower high. The second candle inside of the white box with the yellow arrow below it is the trend changer. It changed the trend to up as the low of this candle is higher then the high of the previous signal candle. The uptrend has begun, however, as I mentioned to you in the first post, this is a concept and does not need to be viewed as a stand alone system. You may have entered FXI long for any number of reasons that you choose according to your trading style.
The trend continues up for another 5-days. As an aside, FXI largely follows the US equity markets and this is around the time we have been in rally mode.
The candle with the red arrow above it is the last signal candle in the trend as it has posted the last higher high/higher low. Now we look at the two candles inside the red box, the first candle is considered noise, its high is not lower the then previous (signal candle) candle's low which is drawn in with an orange trendline. However, thus far today, our price candle has a high that is lower then the signal candle's low qualifying today as a change in the swing trend to down. The fact that yesterday's candle posted a lower close and thus far today's candle looks to be on track to post a second consecutive lower close, we have a newly established Swing downtrend in FXI.
The natural swing trade candidate would be the inverse of FXI, FXP.
As for FXI and 3C, as I mentioned, there could be many different reasons to enter the trade, but it's important to understand where you are currently as a trend's direction is the most likely path of least resistance.
3C 60 min FXI shows a positive divergence at the lows from the June swing down and recently distribution via several negative divergences.
The 1 min chart of FXI gives us more detail as to the reversal, you can see the last qualified higher high/higher low day saw a nearly day long negative divergence followed by lower prices. Currently 3C is in line with price. Should the broader stock market make a higher high, there's a chance FXI will try to fill some of today's gap down, that doesn't mean the trend will change as there are specific conditions mentioned above for determining a change in trend. A fill of the gap may register simply as noise within the downtrend.
As for the trade, lets look at FXP.
Following the same Swing Trend concepts above, FXP (the inverse of FXI) was in a downtrend, the last candle of the downtrend to make a lower low/lower high is in the red square. A candle on the close with a low that is above this signal candle's high, qualifies the trend as an uptrend which thus far, today's candle does. In addition, yesterday and today posted to consecutive higher closes (as of this point-the day is not over).
Looking at the hourly 3 chart of FXP we can see several negative divergences as FXP made higher highs (remember distribution occurs in to higher prices). The tell-tale reversal signal came with a false breakout which was revealed as a false breakout the same day it broke out above local resistance at the red trendline. Being FXP opened higher then the trendline, we had a breakout, it was confirmed as a false breakout not only by 3C which made a negative divergence, but also by the fact that the close on the same day fell below the breakout level. As I stated before, you can use many different techniques for entering a trade, I'm simply trying to help you qualify trends versus noise in a trend that may not be relevant. We have a short positive divergence at the lows of FXP's decline and price heads higher.
Assuming this price action is similar to our close, today confirmed the trend reversal to up in FXP
Right now, FXP looks like a decent long candidate.
One other thing I should point out, as I mentioned earlier, FXI tends to trade in similar fashion to our broad market indices. When looking at the price action of FXI vs the SPY, we were offered a warning signal.
**(Note the candle labelled as the 25th should be labelled as the 27th). When comparing the SPY (above) to FXI (below), we see the FXI lead the market in starting the rally first. When we compare the last 3 days n the red boxes, FXI has fallen apart while the SPY struggles laterally.
Remember, the more observations we can objectively make, the better chance we have of putting together a solid opinion of what the market is likely to do; this is just 1 piece of the puzzle, but recall yesterday I also showed you the Australian dollar (FXA) which tends to be a leading indicator for the US equity markets. In looking at both, we would have two pieces of the puzzle confirming each other and perhaps fitting in objectively with other observations we have made.
Lets look at China and the FTSE/Xinhua China 25 Index ETF, the ticker is FXI, it's inverse (short the China 25 is FXP). This week China has had so not so great news including the discovery that they've been hiding about $500 billion $USD in bad debts, made largely to local municipalities with poor documentation. Then we also have the most recent rate hike today by the PBoC of 25 basis points on deposit and lending rates, the 3rd hike by the PBoC this year.
Using today's data and assuming there are no major changes, we can qualify FXI as having experienced a change in trend on a swing basis from up to down.
Starting from the left, the first daily candle inside of the white square s our downtrend signal candle because as you may remember, it is the last candle in the downtrend of June to make a lower low and a lower high. The second candle inside of the white box with the yellow arrow below it is the trend changer. It changed the trend to up as the low of this candle is higher then the high of the previous signal candle. The uptrend has begun, however, as I mentioned to you in the first post, this is a concept and does not need to be viewed as a stand alone system. You may have entered FXI long for any number of reasons that you choose according to your trading style.
The trend continues up for another 5-days. As an aside, FXI largely follows the US equity markets and this is around the time we have been in rally mode.
The candle with the red arrow above it is the last signal candle in the trend as it has posted the last higher high/higher low. Now we look at the two candles inside the red box, the first candle is considered noise, its high is not lower the then previous (signal candle) candle's low which is drawn in with an orange trendline. However, thus far today, our price candle has a high that is lower then the signal candle's low qualifying today as a change in the swing trend to down. The fact that yesterday's candle posted a lower close and thus far today's candle looks to be on track to post a second consecutive lower close, we have a newly established Swing downtrend in FXI.
The natural swing trade candidate would be the inverse of FXI, FXP.
As for FXI and 3C, as I mentioned, there could be many different reasons to enter the trade, but it's important to understand where you are currently as a trend's direction is the most likely path of least resistance.
As for the trade, lets look at FXP.
Right now, FXP looks like a decent long candidate.
One other thing I should point out, as I mentioned earlier, FXI tends to trade in similar fashion to our broad market indices. When looking at the price action of FXI vs the SPY, we were offered a warning signal.
Remember, the more observations we can objectively make, the better chance we have of putting together a solid opinion of what the market is likely to do; this is just 1 piece of the puzzle, but recall yesterday I also showed you the Australian dollar (FXA) which tends to be a leading indicator for the US equity markets. In looking at both, we would have two pieces of the puzzle confirming each other and perhaps fitting in objectively with other observations we have made.
USO Update
Yesterday I wrote about USO breaking above some long term resistance, the longer charts on USO look good and the IEA's strategic petroleum release fundamentally sounds like a no win situation. When or if what is left of the OPEC cartel led by Iran takes their revenge by cutting output to offset any price declines by the release, oil will likely see increased volatility and upside, unless the wild card Russia, who unlike Saudi Arabia actually does have the proven reserves to effect the supply/demand balance, chimes in, oil should see higher prices not so far off.
As for yesterday's breakout, the thing that bothered me and the thing that is needed to send oil in to the mark up phase is volume, specifically I was and am concerned about the lack of it.
So USO s at a transitionary point right now and should be watched carefully.
The breakout yesterday and today's price above the red trendline is the precarious position oil/ USO is n. Volume should have picked up substantially on such an important break out.
The 60 min chart reflects the price/volume action above resistance, still volume has not picked up substantially which casts a shadow of doubt on USO until such time as that happens.
As I said, the longer term charts, much lke the SPY through June, look good (60 min)
The 30 min hart shows some more detail, but largely looks good.
At the 15 min timeframe, we are not seeing confirmation of the breakout yet, it could still happen, but this is a warning flag.
The 1 min chart shows details of yesterday and today, the rally in the early afternoon was turned back by a negative divergence and was the opening strength this morning. It will be important for USO to hold above the trendline, around $37.55. You may want to set an alert. In my opinion, should USO turn back down from the breakout, it will likely did strength on a pullback as the SPY did after the 6/23 drop from resistance that 3C warned of.
Just so there's no confusion, DUG which I just posted on is different then USO. DUG is a inverse 200% short of the Dow Jones US Oil and Gas Index and as such, it's components include oil and gas service industry components as well.
As for yesterday's breakout, the thing that bothered me and the thing that is needed to send oil in to the mark up phase is volume, specifically I was and am concerned about the lack of it.
So USO s at a transitionary point right now and should be watched carefully.
Just so there's no confusion, DUG which I just posted on is different then USO. DUG is a inverse 200% short of the Dow Jones US Oil and Gas Index and as such, it's components include oil and gas service industry components as well.
