This is funny
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Expert technical analysis of financial markets by JC Parets
by JC
by JC
I’m really excited to hear about a new blog called “The Traders Journal” brought to us by Stockcharts.com. As readers already know, I’m a big fan of anything John Murphy. We’ve been witnessing the growth of the Stockchart’s blog network for years. But I think the addition of technician Gatis Roze has the potential to be something special.
He caught my attention right away using baseball metaphors in his first post – I’m already hooked.
Here’s a taste from The Traders Journal:
I touched all four bases in my winning trades:
- First Base: I bought when the market was trending up.
- Second Base: I bought into one of the top two performing sectors.
- Third Base: I bought into one of the top performing industries in those sectors.
- Home Plate: I bought the best stock in the industry group.
The bottom line is simple. Focusing simply on stock selection for buys may make for scintillating conversation at cocktails parties but it is unlikely to put real money into your pocket. It’s like running the bases backwards. It’s good for a laugh but the scoreboard will ignore you. My interest is – and always has been – how to buy properly in order to increase the probability of taking money out of the market. I’ve had Nobel Prize winning professors lecture me on truly significant methodologies which are academically interesting but can’t help me make any real money. I’ll pass on their theories. Please review the chart below showing how you, too, can touch all four bases. I have chosen a stock that should be familiar to you. $AAPL
Needless to say, I’m excited for the trading lessons, I’m excited for more sports metaphors, and I’m excited for Stockcharts.com. Nice pick up guys.
Mr. Roze, good luck. Can’t wait for future posts.
Check out The Traders Journal Blog and make sure to add it to your subscriptions list. Also go through some of the other blogs on the site. You’ll find great stuff here: Stockcharts Blogs
Source:
Double Your Money – Buy on Rumors (Gatis Roze: Stockcharts.com)
by JC
Here is this week’s post for SFO Magazine:
SFO Daily: Playing the Gold Market—Eyeing Inverse Head and Shoulders
Friday, April 13, 2012
By J.C. Parets
Is gold tracing out an inverse head and shoulders continuation pattern?
That’s really the big question for me in the yellow metal.
We know gold has been in a massive uptrend for over ten years. This isn’t a secret. Every pullback or consolidation over the past decade has been an opportunity to get on board. Is this current choppy action just another one of those? Or is it a more significant top?
At first glance, I don’t see anything toppy about the action. Nothing in the chart or price action is telling me that a major topping formation is under construction yet. What it does look like to me is just corrective, healthy action —at least for now.
THE CHART
Taking a look at the chart of $GLD (SPDR Gold Shares Trust), it appears that the right shoulder of this potential inverse head and shoulders pattern has been forming since running into neckline resistance at the end of February. The neckline is more subjective here and one can make the argument that it stands somewhere between 174-175. The left shoulder of this pattern was built throughout all of October and then the Head down around 150 in December.
THERE’S SYMMETRY
The symmetry of this formation certainly increases the possibility of this in fact being the consolidation/continuation pattern described above. In other words, the left shoulder and potential right shoulder bottomed out around the same price. And the time that each low took to form is about the same as well.
Tags: $GC_F $GLD
by JC
Prices keep getting smoked. Every rally attempt gets crushed. No key reversal days to speak of. The destruction in Natural Gas just continues.
A few months ago Natural Gas prices were consolidating nicely within a much longer-term decline. We figured that it would break down to new lows and that this next sell-off could create the reversion to the mean buying opportunity that we’ve been waiting for. Unfortunately, the key reversal to present us with a fixed risk vs reward still hasn’t come. Just more lower lows and lower highs.
When the US Natural Gas Fund ($UNG) was up over $20, as hard as it was to believe at the time, the measured move on a break was down around $17-17.50. Here we are today at $15 with the commodity itself down under $2.00. What a train wreck.
Meanwhile, the Crude Oil to Natural Gas ratio continues its bubblicious ascent. Today, this ratio sits up over 52:1,
The average since 1990 has been 10:1. Can the market stay irrational longer than we can remain solvent? Yes, we are fully aware of this. But one day, this will end badly.
Until then, we’ll sit tight waiting for a solid risk/reward. What is it going to look like? While not totally sure, as I said on Business News Network, it could happen over a weekend, over night, or perhaps intraday. New lows will be met with buyers quickly warning us that those lows could not be sustained. Once we have a pivot point, or fixed level of support to trade off of, we can enter a trade.
It really is all about finding a defined risk vs reward. If it’s not there, fine. Wait for your pitch.
Related Posts:
About That Crash in Natural Gas Prices (Allstarcharts Feb 28, 2012)
Is This Natural Gas Rollover a Potential Entry Point? (Allstarcharts March 1, 2012)
Tags: $NG_F $UNG $GAZ $FCG $BOIL
by JC
Katie Stockton is Chief Market Technician at MKM partners. She sat with CNBC yesterday to discuss the recent corrective action in the S&P500. Stockton hasn’t seen any major breakdowns yet and is looking at 1340 for support. With the intermediate term momentum remaining positive and April’s positive seasonal influences, Katie believes that this pull back will be short lived presenting a nice buying opportunity. Her upside target is around 1440 so there is still room to run.
Here is the video in full where she also talks Copper, Oil, and the Dow Jones Transportation Average. Nice job Katie:
Source:
Technicals: What the Charts Are Saying (CNBC)
Tags: $HG_F $JJC $DJT $IYT $SPY $USO $CL_F
by JC
Arthur Hill over at StockCharts.com put a really important chart up this morning. The high yield bond market has been positively correlated with US Stocks for some time now. So a breakdown in this area is a negative for the stock market.
This chart shows the High Yield Bond ETF ($JNK) breaking below key support. Not shown here, you can also draw trendlines from the January lows and those uptrends are now broken as well.
Arthur Hill did a nice job of highlighting the December highs which also coincide with the highs from October. This former resistance could become the first support zone for $JNK.
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by JC
The six-month uptrend in the S&P500 was finally broken today. Six months of face-ripping gains. Six months of top-callers being wrong. Six months of some of the “worst” stocks outperforming some of the “best” stocks. I mean Bank of America doubled in 3 months. Doubled. JP Morgan was up just 50% during that December to March period. Is Bank of America twice as good a company as JP? No, it’s just that market participants were caught on the wrong side of the trade. And that’s the sort of mispositioning that causes awesome moves like this.
Here is the chart that shows the 6-month uptrend in the S&P breaking today:
A lot of market participants draw simple trendlines and make decisions based on a trendline break alone. Smart guys I know do this. I can be little bit more flexible at times. I mentioned in a recent post that the 1370-1375 area was key support that had to hold. So far it has held, but the sectors where I was looking for strength to confirm any buying, underperformed once again on Monday.
So I think the chances of 1370-1375 holding are not very good. A break below those levels and we need to go back and throw up the Fibonacci Retracements. When markets are correcting, these levels help point to areas where buyers could potentially show up.
Here is what makes our lives difficult; which low do we use? The October 4th low? November 25th low? or the December 19th low? All of these marked the beginning of important rallies and key turning points for the market. I don’t know the answer to this question so we’ll just have to use all of them. And if there is a key area where these Fibonacci levels cluster together – bingo!
It’s not an exact science, but you would be amazed how many times these fibonacci clusters become key support and resistance, especially when matched up with other key technical levels. As usual, I apologize for all the lines and colors on the chart. I hate that, but we have no choice in this case. Sorry guys, bear with me.
This chart shows the Fibonacci Retracement levels from all three key lows. The blue lines represent the Octobers lows, November lows in Green, and December lows in Purple, all up to last week’s highs:
The number that stands out to me is the 1288-1290 area, for multiple reasons. First of all, this is the most obvious cluster of retracements: 38.2% retracement off the October lows, 50% retracement off the November lows, and 61.8% retracement off the December lows. Secondly, the late October highs that were not taken out until mid-January are right at these same levels. And finally the upward-sloping 200 day moving average should catch up to this area by the time prices get down that low (if they get down that low). This would represent a little bit under a 10% correction, keeping the set back in the “normal and healthy” category.
Now, does this broken trendline mean that the S&P500 will absolutely correct 10%? Of course not. In fact, a reversal back above the trendline and to new highs would disqualify all of the fibonacci levels mentioned above. But continued underperformance in the offensive sectors like we’ve seen over the past week would signal a high likelihood of a bigger correction than just the 1370-1375 area mentioned in the earlier post.
Corrections are normal. This one would come after a 30% move in 6 months for the S&P500. 40% if you’re looking at the Russell2000. So what’s 10% after a move like that? Bottom line: 1370-1375 support is my line in the sand.
Tags: $RUT $SPX $SPY $BAC $JPM $RUT $IWM $ES_F
by JC
Stocks are selling off after Friday’s disappointing jobs number. That’s the reason I keep hearing about, anyway. Truth is that a pull back in prices was coming at some point. We’ve seen bearish divergences in S&P components’ new 52-week highs as well as momentum in the index itself.
I think that it’s too early to call for a major correction. But there are a couple of levels that I’m watching. The first important one is this 1370-1375 level that was resistance in late February and early March. There was about a week of selling here before the monster March 13th rally that saw lift-off from these prices. There is definitely memory here. You also have an upward sloping 50-day moving average to help catch falling prices:
This is really a key level. I would imagine that there would be some buyers here. More importantly, you want to see the right sectors being bought up. I think that’s going to be the tell. Last week we saw out-performance in the defensive areas like Consumer Staples and Healthcare. The most amount of selling came in Financials followed by the ‘global growth’ areas; Materials, Energy and Industrials. This is not the type of action you want to see in a bull market. Some flight to safety is normal during a correction, but any extended action like this would be worrisome.
We’ve said over the last couple of weeks that a rotation into Energy and Materials was necessary for the major averages to continue higher. Also, Copper was consolidating in a way that a breakout or breakdown would be an important tell. So here we are and not only has the rotation not come into the Energy and Materials sectors, but Copper appears to be rolling over as well. These are the areas that I’ll be watching to confirm that any buying that comes in is for real.
Tags: $XLB $XLF $XLI $XLE $JJC $HG_F $XLV $XLP $SPY $ES_F