Tuesday, June 30, 2009

Chart's-a-plenty

By special request and for your consideration, three 30-minute charts covering trading in the SPX for the month of June, all with embedded Blue Wave Trend Model signals .


Renko



Bar



Mystery Chart


I'm curious to see how long it takes one of my readers to identify this third, "Mystery" chart. I'll reserve my comments for now, hoping to generate a discussion of what everyone sees in these charts, in these signals.


A

Intraday Renko & Blue Wave Signals

This is what a combination of Blue Wave trading off of a Renko 30 minute SPX chart looks like, real time, real prices as of 11:15 (Pacific) today:


Note how Monday's rally morphed into Tuesday's decline with the above-referenced signals catching much of both swings.

That's all for now as I continue to study this new model with increasing levels of confidence and respect.


A

Monday, June 29, 2009

The Renko Experiment

I read The Harrad Experiment by Robert H. Rimmer during my first year of college. A couple of my very best friends, one male and one female, read it at the same time. The three of us then went on to live out the fantasy experiment laid out in those pages over the course of the next decade of our lives. Some of the very best, some of the very worst days I have ever known. Looking back, we were so naive, but we were invincible, or so we convinced ourselves.

In any case, The Renko Experiment has nothing to do with The Harrad Experiment, so if you have landed here from Google expecting some coming-of-age titilation, sorry, we're into money now.




Starting above with a Renko chart of the SPX for the past week, some very clear trends shown, all tradable including the final swing up into today's close. Below, a close up of just today's trading:


Compare the above two Renko charts to the two candlestick charts of the SPX below. As with the Renko charts, the first one is a one week view, the second chart a one day view:


Zooming in on today, six blue "stay long" bars:


Open to close, staying long in sync with these signals generated about 1% on the unleveraged SPX or SPY. The SSO double-beta ETF gained about 2%. Near term in-the-money options rose about 30%


In my testing of Renko over the weekend, one of the standout performances was given by TZA, a triple-beta ETF emulating 3X the performance of the Russell 2000 index. I had this one on my screen all day and it didn't disappoint:



If you look at the right of the vertical dash line that goes the length of the chart, that area represents the trading in TZA for today, Monday. Here is a close-up:


There are two trades shown, a Buy at $22.51 and a Sell at $22.84. TZA closed today at 22.52. That is a gain of $0.33 on the first trade and a gain of $0.32 on the second trade. Total win is $0.65 or 2.8%

In summary, be careful what you let your kids read, especially if you sending them off to college where traditional rules of morality are subject to examination, skepticism and above all, experimentation.

As for Renko charts, first day was promising, with examination, skepticism and experimentation the order of the day.


A

Harry Dent's Road to DJIA 4000

Is Bernanke the new Madoff?

Something to think about while the media circus surrounding Madoff sentencing is shouting out across our television screens today.

A

--------------------------------------------------


Federal Reserve Cannot Account for $9 Trillion

(from Moneynews.com)

The Federal Reserve apparently can't account for $9 trillion in off-balance sheet transactions.

When Rep. Alan Grayson (D-Orlando) asked Inspector General Elizabeth Coleman of the Federal Reserve some very basic questions about where the trillions of dollars that have come from the Fed's expanded balance sheet, the IG didn't know.

Worse, nobody at the Fed seems to have any idea what the losses on its $2 trillion portfolio really are.

"I am shocked to find out that nobody at the Federal Reserve is keeping track of anything," Grayson says.

Grayson asked Coleman if her agency had done any research into the decision not to save Lehman Brothers, which “sent shockwaves through the entire financial system,” Coleman said it had not.

“What about the $1 trillion plus expansion of the Federal reserve’s balance sheet since last September?” Grayson asked.

“We have different connotations,” Coleman replied. “We’re actually conducting a fairly high-level review of the various lending facilities collectively.”

Translation: Nobody at the Fed knows where the money went.

Do you know what who got the $1 trillion or more in the Fed's expansion of its balance, Grayson pressed.

"I do not know. We have not looked at this specific area at the particular point on that specific review," Coleman answer.

What about the trillions of off-balance transactions since last September, Grayson asked.

Coleman demurred again, saying the IG does not have jurisdiction to audit the Federal Reserve.

Grayson pointed out that it was the inspector general's job to audit such spending and asked again if the office had done any investigation at all.

Coleman's answer: Not enough yet to even respond. "We are in not a position to say if there losses."

Grayson concluded, "I am shocked to find out that nobody at the Federal Reserve, including the inspector general, is keeping track of this."

Meanwhile, Federal Reserve Chairman Ben Bernanke says the bank is working on ways to rein in the massive balance sheet commitments.

"A majority of the members who made these projections just recently took 2 percent as being an appropriate number" for inflation, Bernanke said Monday.

"Somewhere between 1-1/2 to 2 percent is basically the number that our committee has individually stated is the appropriate medium-term inflation rate.

"To achieve that we need to demonstrate that we will be able to exit from the balance sheet position that we currently have, and have been working on this intensively," Bernanke said in response to questions after a speech to a conference organized by the Federal Reserve Bank of Atlanta, reported by Reuters.

Saturday, June 27, 2009

Discovery, exploration, adventure, odyssey & quest

Yesterday Lasertrader posted the following comment to my last post:

Now getting back in theme in this Bear Cave, although I use the SPX as a proxy to the market i am interested that this DOW Renko chart went on sell for the first time since the March low:

http://stockcharts.com/h-sc/ui?s=$INDU&p=D&st=2008-12-15&id=p29271801842&a=171181543

and I know how Allan likes mechanical system..check out this GDX Gold Miner 60 minute Renko chart. It went long a couple of days ago and has been an extremely good mechanical trade

http://premium.fileden.com/premium/2006/9/9/209573/gdxrenko2306.png"


An astute observation by Lasertrader, Allan is drawn to mechanical systems, objective rule-based strategies and maybe something Lasertrader didn't know, Allan reads and considers every Comment to his posts, whether or not he responds to it (publicly or privately) or not.


Here is the Renko Dow chart:




Here is the Renko GDX chart:


I've never traded Renko charts, although I from time to time take a look since they are included in most technical analysis platforms as well as at Stockcharts.com.

Below is a Renko chart of the SPX, along with Blue Wave's Trend Model, Stops and CCI:



Following is a table of the trades shown on this above chart:





As you can see, 341 S&P points in a little over 60 days. Those results are way too good to be true. But while I try to find out why, I submit this exercise as an example of how a trader spends his free time, spends his weekends, trying to hone his skills, learn new techniques and follow-up on ideas, wherever they may come from.

So thanks to Lasertrader for killing another Saturday for me, but this is not work; it is a discovery, an exploration, adventure, odyssey and quest.



A

Thursday, June 25, 2009

Web of deceit

More shenanigans from the bulls today. Look at this chart from Karl Denninger:

"That's last night. Over 12,000 contracts traded in two five-minute periods, over 10,000 right up on the time of that spike. There was no news of any sort related to the US markets on the wire last night. Zero. None. I and many others were wondering what the heck caused that. This morning, the buying began in earnest at 8:30 Central, and then again at 10:00 Eastern - one hour in front of the "announcement", again on heavy volume. Where is the SEC?
"Where is the SEC's demand for trading records on these contracts, particularly the ones last night on Globex? That was a highly unusual trading pattern that strongly suggested that someone knew something and acted on it front of a news release. Well, now we have the news release. It sure wasn't the (bad) unemployment or (neutral) GDP numbers. So what's left?"

There is much to say about the ability of these markets to hold up in front of just plain horrible economics and now politics (Bernanke's grilling today by a Congressional Committee). What there is though can be said with these three charts:


SPX - Daily



BW triggered a buy signal on the Daily chart. Not enough to get me to go Long, but just enough to take off my intermediate term short, for now.


SPX -120 minute


Once again, Fibonacci levels down from last week's top. Still less then a 50% retracement of initial decline. I am ready to slap my shorts back on with any show of weakness.

SPX - Weekly


This is why, it's a Weekly chart suggesting the Wave 5 decline has begun and this week's rally is nothing more then a Wave 2 set-up for a third wave down.

I exited my short so as not to hold against a Blue Wave buy signal, rules are rules. There will be plenty of downside to come and I can jump back in faster then you can say, "The Bilderberg Depression."


A

Wednesday, June 24, 2009

Tracking the Invisible Man


Guest Blogger: Smiddywesson



We have all heard the parable about the three blind men who try to identify an elephant. The first one grasped the tail and claimed it was a stork. The second held the trunk and thought it was snake. And the third one hugged its leg and thought it was a tree. All three men were wrong because they failed to recognize the limitations of how they were “viewing“ the beast. Unfortunately, we are faced with a greater task than the three blind men, and are therefore even more blind than they. The beast we are trying to see is huge, amorphous, and non corporeal. The beast you can’t see it, smell, taste, or touch, is the market, and yet we believe we know it. We view the market through our indicators, but most of us fail to recognize that those indicators are as limited as our sense of touch in their scope. They can describe what the market is in some limited fashion, and they can tell you where it has been, but they can’t show you the market directly, and they can’t tell you with any degree of certitude where it is going.

The market is an invisible man that we traders track across a snowy field. Deaf, dumb and devoid of any sense of touch or smell, we methodically follow our quarry’s footsteps, hoping that our indicators will make some sense of who he is, and where he is going. Unfortunately, tracking a real market is even harder. The invisible man could be expected to maneuver around obstacles, like a fence or a tree. However, the market operates in a fog of war where even the obstacles are invisible. We can see the obstacles that can move a market far off in the distance, like deficit spending or the specter of inflation, but once they draw near into the fog bank, we can’t say when they will alter the path of the market. After the fact, we can guess like CNBC what moved the market, but we never really know the causes for sure.

The good news is you don’t need to have remarkable powers of prediction to catch the invisible man, you just have to survive long enough to trap him. There are a thousand ways to win in the market, and you only have to be an expert in one of them. This goal is achieved by identifying where profits come from. If your average win, multiplied by your percentage of wins, outweighs your average loss, times your percentage of losses, than you have found your edge. Successful traders use this formula to evaluate their systems. Those systems don’t have to be perfect, they merely have to have an exploitable edge. In fact, successful traders sometimes boast that they could trade profitably over the long run using only a coin flip to determine entries. Now a coin only has a 50% chance of landing favorably, but these traders know they will win that boast because they are aware that the flip of the coin is a small part of their profits. The majority of their success or failure rests with their risk and money management. Profits depend upon controlling the size of their wins and losses (something in your control) rather than some special indicator or system delivering an incrementally higher percentage of wins (a goal whose pursuit delivers diminishing returns). In short, for most successful traders, the equation is dominated by the size of the wins and loses more than the percentage of wins and losses. Successful traders know you don’t need a holy grail to win. Similarly, you don’t need to find the perfect indicator to trade profitably. In fact, profitable traders often repeat the mantra that they keep their indicators to a minimum and keep their trading simple.

As I have said, there are a thousand ways to win in the market, and you only have to be an expert in one of them to win. However, I offer a caution to my fellow traders that the inverse is also true. There are also a thousand ways to lose in the market too, but on the down side, you have to be intimately familiar with each and every one of them in order not to lose.

There are hidden dangers in tracking an invisible quarry. Some types of price action, like when the market moves after a big economic announcement, are easily explainable. But the reasons for price action are not always clear. I’m not even sure there always has to be a reason. If the market reflects the actions of living beings, then shouldn’t it have some movements that are purposeful and some which are autonomic? Maybe the market is doing something and maybe it is just scratching its butt. Through our limited trader’s lenses, we can quantify all of our quarry’s behavior, but we can’t really sort out the different categories of market behavior due to our inability to observe the elephant directly. Some day, there may be dozens of alternate wave counts yielding very precise interpretations of price action based on the recognized categories of market behavior. Until then, kidding yourself that you are not mostly blind to the market, believing that systems and indicators are more important than money management and risk management, will remain on of the most common of those thousand ways to fail.

Eerily we roll along

First up tonight, a continuation of today's 30-minute SPX chart:


Next, a screen shot of the Daily SPX chart:


And finally, the Weekly SPX chart:




Anything stand out here?

Maybe eerily similar patterns, rounding tops bumping down off of down trending channel lines.


A


Wednesday intraday update - Part II

Just to keep some perspective, here is my 30-minute SPX chart, showing a well defined channel containing prices and today's rally barely edging out the 25% Fibonacci retracement level from last week's top, circa SPX 956.




Blue Wave's Sell trigger for this time frame is currently at 904.82.


A

Wednesday intraday update

Euphoria reigns, did you think being Short for a market crash would be easy?

Here are my most relevant charts:



On the left, the 120-minute SPX chart, in Buy mode. On the right, the Daily SPX, still in Sell mode.

I'm standing aside, waiting for short-term model to go Short again, or for Daily model to flip positive in order to even consider the Long side.


A

Tuesday, June 23, 2009

Never quite as it seems

A special song
by special request
from a special friend.

A



"One day the bottom will drop out"


The above chart represents a Daily chart of the past six months of the SPX as seen through the eyes of Blue Wave Trend Model, Advanced GET and the Blue Wave Precision CCI Oscillator (bottom panel).

Note how the price bars changed from mostly red to mostly blue around the first week of March. At about the same time, Advanced GET detected a new 5-wave sequence up. Also around then, the CCI Oscillator went from well below it's zero line to well above it's zero line.

Add it all up and what we had was a down trend flipping to an up trend and in the past few days, apparently flipping again to a down trend. This is not a perfect system, but it is several degrees better then guessing.

Not shown are other indicators and trend lines that add to the information gleaned from the chart. Information that is essential in recognizing and navigating through market trends.


A


Monday, June 22, 2009

Writing on the wall

Here is my most telling chart tonight; the Weekly SPX:



The seemingly endless Wave 4 up from March seems to be over and absent a last minute reprieve from the Governor, the writing is on the wall.



The 120-minute chart confirms an initial target under 850.

A couple new indicators appearing on my charts are the BW Precision CCI and the Andrews Pitchfork. The latter is available on most charting programs, but I only recently discovered a use for it: Identifying Wave's 1 and 2 of burgeoning 5 wave sequences. More on both indicators in the days ahead.

Finally, here is a very bullish a 60-minute on FAZ:




A

FAZ

FAZ 120 minute BW chart:


High Risk: High Reward trade, October calls, 5.0 or 7.5, should double if upper target range of $5.75-6.50 is reached in next 30 days.


A

Weekly SELL on Triangles

First of the longer-term trend models to drop, Market Club's Weekly S&P chart has triggered a SELL SIGNAL @ 903.78, reversing a BUY generated March 18, 2009 @ 780.12:



Blue Wave S&P Weekly will flip SHORT at 873.22:


Blue Wave 120-minute already well entrenched in SELL MODE, targeting 840:




A

Thursday, June 18, 2009

Insiders - Part II



Above weekly chart of the XLF Financial ETF annotated with the levels of Insider Buying from previous post.



The above weekly QQQQ chart with Insider Buying annotations.


Below, weekly SPY chart with Insider Buying annotations:




A

Insiders

Are Insiders Buying or Selling?

So what if they are?

What do they know?




With the help of the following charts from SEC Form-4, an excellent service for Insider Buying/Selling data, let's see if we can't answer these questions.

Starting with a couple of sector-specific charts, since they reveal so much, so clearly and unequivocally:


Technology



The above chart represents the ratio of Buys/Sells by insiders in the Technology sector (blue line). Against that ratio is plotted a chart of the Nasdaq (red line). Notice how all of the peaks of insider buying corresponded with important market lows. Conversely, all of the lows in insider buying correspond with important market highs. Finally, look at how insider buying in technology peaked at the November, 2008 lows and then peaked at a lower level at the early March, 2009 lows.


Financial


Same analysis, same colors, same uncanny correspondence of Insiders buying/selling at key market reversals. The only difference is that unlike in the Technology sector, the peak of Insider buying in early March, 2009 was higher then the peak in November, 2008.


Total Market


Opening the same analysis up to the total market, a similar correspondence is evident. It looks like insider buying levels currently are about what they were in the first six months of 2008. We all know what happened next.



A

Wednesday, June 17, 2009

Going home

Glenn Neely - 50% decline before end of year

NEoWave Institute's Glenn Neely is forecasting the largest vertical drop of the decade for the S&P 500. Neely predicts the stock market will decline 50% in the next 6 months.


Aliso Viejo, CA (PRWEB) June 16, 2009 -- Glenn Neely, founder of NEoWave Institute and prominent Elliott Wave analyst, today announces a startling prediction: The S&P 500 is forming a major top in June, which will be followed by a large decline, eventually pushing the stock market to record lows for the decade.

"Technically speaking, according to NEoWave a correction began at last October's low; the March-June rally is the final leg of that correction," Neely explains. "The March-June rally is now ending, allowing the bear market to resume. During the next six months, the S&P will decline 50% or more, breaking well below 500!" Currently, the S&P is hovering around 917.

Glenn Neely is providing this information not as a specific trade recommendation but as a general public service announcement. A prominent Elliott Wave analyst, Neely was recently recognized in Timer Digest's May issue as the #1 stock market timer for the past 12 months.

Full Release here

S&P analysis from Market Club

Good seven minute video here, pay attention to final 2 minutes and Parabolic Stop & Reverse (poor man's Blue Wave) and Trend Line analysis:

S&P 500 - A correction or a major turn?




A

Tuesday, June 16, 2009

A rose by any other name

What's in a name? that which we call a rose By any other name would smell as sweet; So Romeo would, were he not Romeo call'd, Retain that dear perfection which he owes Without that title. Romeo, doff thy name, And for that name which is no part of thee Take all myself.
---Juliet


Let's take another look at our Weekly S&P 500 chart. This time as a line chart, with the Blue Wave Precision CCI Indicator along the bottom.


Going as far back as January 2008, my Advanced GET software places a Wave 1 label about the time the CCI was at it's then lowest. It then placed the top of Wave 2 corresponding with the highest subsequent level for the CCI.

Note that these are two independent pieces of software, they don't even know each other exist (we call that marriage here in the States)
.

The CCI remains under it's zero line for the next nine months, while in the chart above, a Wave 3 takes hold of the market and doesn't let go. Finally, around mid-March, 2009, the CCI emerges into the top half of it's range, above the zero line and then peaks two weeks ago and now has turned down, headed toward the zero line.

That is where we find the market this week. The suggestion here is being made by confirmatory analysis of two independent tools and points to the end of the counter-trend Wave 4 and places the market at the very beginning of Wave 5 down.

By-the-way, Blue Wave will confirm the Weekly down trend at 869.95, now a mere 40 S&P points away.

As I posted earlier today, the shorter-term stuff is pointing down and only the Weekly has yet to confirm. If this CCI connection works, it may very well be first hard evidence that Wave 5 Down has begun.


A

Intraday update


Above chart is a Daily SPX showing rally up from early March lows and embedded with the Blue Wave Trend Signals. What I see is a new Blue Wave Sell Signal today at 920.49 together with prices just barely breaking the three-month long Trend Regression Channel up from those March lows.

We are coming up onto the final 120 minutes of trading for Tuesday. As I mentioned before, there has been significant buying coming into the market late in the trading days supporting prices. The market is just now popping off of today's lows, so maybe it is beginning early today.

But, if this phenomenon does not materialize and/or prices cleanly break below the three-month long trend regression channel, look out below.


A

Monday, June 15, 2009

An immense sensibility

Experience is never limited, and it is never complete; it is an immense sensibility, a kind of huge spider-web of the finest silken threads suspended in the chamber of consciousness, and catching every air-borne particle in its tissue.

Henry James






The 120-minute SPX chart above shows a clustering of Wave 5's (various degrees), followed by a breakdown of the Up-Trend Regression Channels and a Blue Wave Sell Signal, all taking place since last's Thursday's close.


The above chart the SPX pans out to the Daily perspective and reveals a rounding top that is just barely holding onto an 11-day-old Blue Wave Buy Signal that did flip to Short on an Intraday basis today, before those mysterious institutional buy programs again propped up a weakening close.



Finally, the above is a Weekly chart that is about as long in the tooth as it can be.

I want that Weekly trend regression channel broken to the downside and/or a Blue Wave Sell Signal before committing a total and immense sensibility to the Short side of this market.



A

Sell levels

Blue Wave Trend Models

SPX - Weekly Sell below 870.71
Daily Sell below 920.22

SPY - Weekly Sell below 87.59
Daily Sell below 92.62


Market Club Triangle Trend Models

SPX - Weekly Sell below 881.45
Daily Sell below 927.97

SPY - Weekly Sell below 88.31
Daily Sell below 93.20




A

Saturday, June 13, 2009

New stock pick - CEP

Why would someone warning we are on the precipice of a huge decline post a blog highlighting a new stock pick? How does a vastly inferior team win four out of five games over the class act of the NHL? Why are their aliens living underground in New Mexico?


If all answers were obvious, our brains would have no use for reason.



Lets start with the charts.


First up is the Triangle chart, a quick and dirty way of assessing technicals. We see a +100 score accompanied by both weekly and monthly bullish triangles. This is enough information to make a nice living off of the stock market. But the explanation underlying that statement is being saved for a future blog, all to it's own. For now, suffice it to say thumbs up; way, way up.


Above is the Blue Wave weekly chart, providing the most conservative view of potential. Here, a Wave 4 advance is shown, targeting a move to $10-15. With CEP trading at $4.57, even if the 90% downtrend is still in effect, the stock has potential to double or triple from current prices.


I'm posting the above daily chart, a time period that you seldom see me post. Why not? Because everyone is looking at the dailies, I like looking from more unique perspectives. But the daily chart does provide an important piece of the puzzle, a stop. Blue Wave will turn bearish on this chart at the level of $3.81. Thus we have a risk:reward perspective. The risk is about $0.50, or about 12%. Earlier it was suggested that a 100%-200% gain was being targeted. So the play here is to risk about 12% to gain between 100%-200%. I'll take that bet.

Let's drill down to the 120 minute CEP chart:


Some added information shows an Elliott Wave 3rd Wave, confirmed by the Elliott Oscillator. All the EO is suggesting is that since it is making new highs along with share prices, that the current rally (Wave 3) is stronger then it's predecessor (Wave 1) as should be the case is if the shown 3rd Wave is being accurately counted. We would expect a non-confirmation to accompany the next bullish wave up (Wave 5), so again, the likelihood is that this isolated upmove is not a terminal wave and will be followed by a weaker advance, sometime into the future. It is those non-confirmation advances that have us looking out for an ABC decline of significance and none can be assumed imminent from the above chart.

Now the bad news.

CEP is a Limited Liability Company and thus it's income/expense items are passed through to owners/shareholders. It also means that it's hefty dividend yield is part income, part return of capital. Not much of a problem for stock held in retirement accounts, but added confusion when it comes time to file income taxes for non-retirement accounts. Personally, I ignore such issues when it comes time to buy something that has a 12% risk against a 100%-200% gain. But to each his or her own.

Fundamentally, the company looks pretty damn good as long as natural gas continues to rise, or even holds firm, or even eases somewhat from current levels. If natural gas takes the pipe, i.e. a significant haircut from current pricing, the payout may be threatened.




CEP was a $50 stock in August of 2007. They arguably have a better array of properties and natural gas reserves both proven and unproven today. Like other MLP's (Master Limited Partnerships) their shares price to pay-outs and are aligned with junk bond status securities which make them somewhat sensitive to the direction of interest rates.

But then there is this:



"These reserves provide long-lived production, low risk, low-cost drilling opportunities and a high percentage of proved developed reserves."



The cross-bar. Zetterberg's third period shot hit the cross-bar, bounced to the ice and skipped harmlessly away from the Penguin goal............and we knew, it was over.

The agony of a game of inches, where reason and right, collide against cold hard steel, then dance inexplicably into the abyss.


A

Friday, June 12, 2009

Know when to fold 'em

Here is a 10-minute SPX chart that pretty much says it all for a Friday when Red Wing fever has taken over our world:


Mama said there'll be days like this,
There'll be days like this Mama said
(Mama said, mama said)
Mama said there'll be days like this,
There'll be days like this my Mama said
(Mama said, mama said)

A