Technicals (63)

Admin

Small Cap Bullish Butterfly?

1290883?profile=original1290900?profile=RESIZE_480x480We've all watching the weakness unfold in small caps and I would question whether it is truly weakness or has merely been consolidating after running too far, too quickly.  One distinct possibility is that it has now formed a bullish butterfly as shown right (click image to enlarge).

The measurements using a fat crayola are there, although butterfly patterns can extend down to a 161.8% extension so further downside would not void the possibility.  It would merely wash out all weak hands by taking out the low before reversing.

If so, here is your entry to get long with risk being very limited with a stop (alert) below the lows......along with everyone else's.

I would point out that even though everyone has wondered if small caps divergence from it's large caps brothers, there are no negative divergences really when it comes to indicators.  If it were bearish, one would expect to see bearish divergences indicating a further decline. 

We are not witnessing that in small caps.  I am al

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Admin

Divergence Continues

1290887?profile=RESIZE_480x480 Pick any one of 10 difference reasons; does it really matter?

  • Autumnal solstice
  • End of quarter
  • End of fiscal year
  • Rosh Hashanah
  • CALPERS beginning to liquidate hedge fund positions
  • Curreny-related pressures
  • Concern over weak earnings
  • Weaker China growth
  • Russia's asset seizure proposal
  • EU growth concerns
  • China's $10 in Biliion bogus trades
  • QE taper
  • Plain old valuation (nah, it's never that)

It is what it is.  (Click chart to enlarge) 

Small caps are definitely looking at the edge of a descending triangle.  Long TWM was recommended on this chart.

As warned previously, SPX has now broken $1979.  I have a sell signal in SPX.  Instead of buy the dips, I will be selling the rips with cover stop (alert) above $2003.00.   Be hedged or stay on the sidelines until after October 5th.  Work on your watch list of names you would like to buy.  Determine entry and exit points.  It's about time we got more than a 2-3% pullback.

If the stronger dollar persists, this wi

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Admin

Rosh Hashanah Trading

1290912?profile=originalThe weeks between Rosh Hashanah (which begins tonight at dusk) and Yom Kippur (October 4th) can be volatile ones with some traders taking time away from their desk to be at home with family and lower trading volumes exhibit themselves as a result.

While the old saying goes "never short a dull market", low volume tends to be bullish BUT there could also be a problem if there's no underlying bid, or bids are being lowered on a continual basis.

As of this moment, the September low is being tested; bears hoping to trigger stops below $1979 which would issue a wave of further selling.

It's important to understand the dynamics behind the candles on the screen, where stops lie and how the market has traded historically.  Be nimble or sit it out.

Data courtesy of the Stocktradersalmanac

 

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Admin

SPX Breadth Is The Problem

Edited 9/24/14 7:40am

1290875?profile=RESIZE_480x480Market breadth has deteriorated badly once again. In fact, breadth hasn't been strong for several months (since early July).  Even last Friday, when the market gapped higher on the Alibaba (BABA) mania, breadth was negative — a divergence that proved to be significant so far this week.  Cumulative breadth has been a problem since July.  Were market makers (MM) merely propping up the market until the IPO went off?  Surely a market selloff leading up the launch could risk Alibaba founder Jack Ma to possibly post pone the event; a smear the market wouldn't want to face (not to mention unhappy investors).

I'm sure Jack Lew's comments at the G20 summit that he is pursuing methods to curb tax inversions (and soon) along with funds approaching end of their fiscal year is not helping matters. 

Cyclicals (XLY) and consumer staples (XLP) experienced big selling today; the former closing below it's 50d.  Retail (XRT) also closed below the 50d; filling the August gap howev

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Admin

Small Caps

1290885?profile=RESIZE_480x4801290919?profile=originalSmall caps have been the 800 pound gorilla in the room as the Dow achieved a new all time high.  A stronger dollar would certainly have more of an impact on them of course as they tend not to have the cash reserves of their larger mid-cap and large cap cousins.  Lack of growth in the EU and China certainly do not help matters.

What some pose as a possible double top, could also be a bullish butterfly pattern beginning to emerge.  It's downside target would coincide quite nicely with it's rising 200 week simply moving average.*and* keep it within it's long term channel since the 2009 low (a buying opportunity) and then the reversal would kick in as the market would reverse (trapping shorts) and resume it's move upward.

BTW one must note that no support has truly broken yet.  It is entirely possible tomorrows opening drive low is bought and we begin to ramp up once again.  Just pointing that out.

The inverse ETF, $TWM, is nearing triangle resistance, which if broke, would give it a ta

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Admin

If The 10 Year Were A Stock

1290893?profile=RESIZE_1024x1024I'd be trading this bad boy to the long side.  In this seven year weekly chart, not only has it broken my three trend line rule, there was positive MACD convergence (as shorts began to massively cover) and the 200week SMA which was prior resistance, has now become support. 

It certainly appears that the "low" in low rates was in in 2013.

I should also note that the monthly chart is deeply oversold.  At some point, you simply run out of sellers.

I've long said that when in mortgage banking, we watched the 10yr. each week for direction of rates and we completely ignored the Fed raising or lowering rates.  They were a laggard; the 10yr was already there.

Yep.  If this were a stock, I'd be trading it long, buying at support or out of the short side completely.  Maybe not expecting anything spectacular in terms of upside but ROC would indicate no heavy selling; short covering more than anything else. 

I believe we've entered the phase in our bull market where "good news" is now bad new

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Admin

Shipping Rates Increase; $BDI Wedge Breakout

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Having felt that BDI had bottomed and recommended accumulation here, here and here it appears that $BDI came back and tested prior breakout support.  Certainly a not unexpected move.  Now, breaking out of a falling wedge, I would imaging that lower area to be tested once more where I will add further to my position in the belief that the bottom is still in and they're finally able to increase rates.

  • Drybulk shipping rates continue to move higher, adding to last week's run as iron ore shipments out of Brazil and Australia pick up.
  • On Friday, drybulk rates as measured by the Baltic Dry Index rose 7.7%, capping a 31% gain for the week driven by strength across the board but mainly in Capesize and Panamax rates.
  • After beginning its ascent on July 23, the BDI has jumped 40%, rising in every session except one.
  • Last week, Capesize rates surged 65% to $15,561/day, Panamax rates climbed 29% to $6,397/day, and Supramax rates added 9% to $9,170/day. (courtesy of S/A)

Full disclo

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Admin

Sector Red Flags

A few areas of concern are beginning to display in the consumer discretionary, consumer staples and industrial sectors.  We can point a finger at Russian sanctions, an overextended market, the Fed removing the punch bowl or maybe the consumer is simply tapped out but I think we all would agree, a decent correction certainly would be welcomed as an overdue buying opportunity.

1290870?profile=RESIZE_1024x1024

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Possible Small Cap Double Top

Some technicians draw with a wide crayon but when I see exact touches in a pattern, I feel it adds to it's validity.  Such is the case in IWM (daily and weekly shown).  The chart is simple to understand and we may simply be carving out a consolidation or trading range during these Summer doldrums however if lower support breaks with volume, then watch out.  Click chart to enlarge.

1290796?profile=RESIZE_1024x1024

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Admin

1290758?profile=RESIZE_480x480While it's obvious nothing will be done until after mid term elections this Fall and new officials are sworn it, it would appear there's hope for appropriations in the drilling and exploration area going to next year.   Per GovTrack.us

H.Res. 641: Providing for consideration of the bill (H.R. 4899) to lower gasoline prices for the American family by increasing domestic ...

... onshore and offshore energy exploration and production, to streamline and improve onshore and offshore energy permitting and administration, and for other purposes; providing for consideration of the bill (H.R. 4923) making appropriations for energy and water development and related agencies for the fiscal year ending September 30, 2015, and for other purposes; and for other purposes.

Introduced:
Jun 24, 2014
Status:
Reported by Committee on Jun 24, 2014
Prognosis
99% chance of being agreed to

Read full text

I had previously recommended ac

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Admin

I'm Not Insane, No, Maybe

For all you doubters out there, yes I have out my pompoms on the move in gold and silver this week.  You scoffed in March when I said a right shoulder could be formed.  Then again chuckled in April and May 3rd but I ask you who's laughing now?  Already I'm seeing tweets of a possible H&SB and I'm comfortably long SLV calls, enjoying the sunshine.  Scoff all you wish you financial gurus.  Charts don't lie; people do.

This daily for GLD and SLV is intriguing, showing both breaking out of falling wedges (they should test support which would be great to get in or add more shares or calls).

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Gold seasonal demand doesn't actually kick in until late Summer for festival season in India, unless you're a believer of getting in early.  Silver does see some season demand in the Summer due to coin manufacturing BUT these two could also be signalling some fear in the equity market topping.  Of course this could also be nothing more than short covering (inflation hedge?) but it is what it is  Bull

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Admin

The Draghi Squeeze

1290751?profile=RESIZE_1024x1024Sectors are squeezing higher in anticipation of ECB rate decision, expected to cut rates another 25-50bp (negative rates - wow) and possibly announcing LTRO (long-term refinancing operations) tomorrow before U.S. markets open in an effort to reign in inflationary pressures across the pond. I would assume much of this has been "baked in" however $1941 remains very doable.
One thing for certain if they don't, it will be ugly........but I'll still buy the dip.

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Admin

Trade War Brewing With China

From a chart point of view, there's a definite divergence in performance in U.S. solar stocks vs. their Chinese competitors.   Forget the cold war; is a trade war heating up with China?  Charts don't lie - people do.  Full disclosure StockBuz recommended long FSLR in 2013.

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The United States slapped new import duties on solar panels and other related products from China on Tuesday after the Commerce department ruled they were produced using Chinese government subsidies, potentially inflaming trade tensions between the two countries.

The U.S. arm of German solar manufacturer SolarWorld AG filed a petition complaining that Chinese manufacturers are sidestepping duties imposed in 2012 by shifting production of the cells used to make their panels to Taiwan and continuing to flood the U.S. market with cheap products.

The new complaint seeks to close that loophole by extending import duties to also cover panels made with parts from Taiwan.

In a preliminary determination, the Commerce de

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Variant Warns: Profit Margins To Head Lower

While the continual question remains, why are bonds holding up?  Why isn't that money flowing into equities?  We highly recommend recommend this piece from Variant Perceptions.  These gusy have nailed it over and over again in the past and maybe, just maybe big investors are embracing something that the little guy doesn't wish to accept.  That profit margins in our "new recovery" are unsustainable.  We may crawl higher, but they wouldn't bet the bank it will last long.  That's great!  I'd prefer reverting to the mean and loading up on names..........at lower levels.  Enjoy-

Profit margins in the US have hit modern-day record levels, and this has been used to help justify high equity valuations. Consensus estimates are for profit margins to remain steady, or even increase from current levels. We disagree for ironclad economic and accounting realities, and think margins will fall, taking equities down too.

Profit margins have, at least until now, exhibited mean-reversion like behaviour. Th

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Admin

Booyah MON

1290693?profile=RESIZE_480x480On Cindo de Mayo I had recommended long MON via either common or calls with a stop below $109.   Today it broke out with volume, triggering stops.  I've taken a partial, calls are up 347%, stop (alert) up to $112 and letting it run.  Will add back shares if it tests the 50d.  This one, I believe, will test the highs over the coming months.

(click chart to enlarge)

I don't always write about plays after they're posted due to time restraints but this one has been a thing of beauty.

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