Longer Timeframes

If you read the articles posted on the previous thread, then you will begin to understand traditional charting technologies are becoming worthless. As the market manipulators continue their intereference (HFTs) the market will over the short term do what they want. However, over the long term, they can't, because over the longer term, the pushing the market around won't work: fundamentals will cause the prices to move where investors feel they should be. Like today, the P/E for AAPL is much smaller than what many analysts believe it should be, so in the longer term, AAPL is likely to correct to the upside (buy on any pullback). Now, longer term trend following will make you money, not short-term daily trading.

So I thought I'd post a few charts in which we have some mutual interest. First, the SPY on the weekly timeframe:



As you can see, we're in an upchannel. This is the basis of Mutt's call that we will have a 2000 point run in the DOW. Now, in the shorter term, the SPY on the daily timeframe with the overlay of the weekly channel markers:



If the trend continues on the downchannel, we could expect a reversal where the daily downchannel intersects the weekly upchannel. However, being trend followers, we'll follow the downchannel daily trend until it breaks out. We may have to redraw the weekly upchannel, depending on when it decides to break out.

So here's the weekly SLV:



Looking at the weekly, I think we don't need to redraw the daily chart, it seems to be headed down to it's lower weekly downchannel, around 23 and change. However, if it breaks out of it's current channel, a new weekly upchannel would be drawn starting around Dec/E and upwards, incorporating our current downchannel trend. I previously commented that I might nibble on Silver, but looking at these charts, I think it's too soon to take it seriously. (I typically don't short anymore because of the costs to borrow the shares). The other question to seriously ask is why, when the overall market trend is up, is the SLV on a dwwntrend? SLV gets used up in manufacturing processes and catalytic converters, and unlike GLD, goes away unless the miners dig up more. You'd expect a long-term upchannel.

Anyway, because of the HFT's, I'll miss the daily and sometimes hourly moves. The reason my trades were losing money is that I would wait for a trend to be clearly established, and by the time I made my trade, the trend was over and the algos reversed the move. So I've been making longer-term trades, and even though the overall market is going lower, I've made 2.77% in 3 days. With much fewer trades.

Warning, Warning Will Robinson!

Double top in the down channel on the spy.




You can see where the downchannel created by the gap was broken, and an upchannel to try to fill the gap was started. The big gap down isn't likely to fill today. Turnaround Tuesday is almost over, so I'm looking for a pop overnight. Strength in AAPL, TIF, LGF, SOHU SPRD, SCO POT CLNE CHS WMB, NTAP.

Scary? not for me. my iPad 1 is still in my drawer.....

The chart was edited to include the fib retracement information. Should have included it because we know we have an 83% chance of hitting the first retracement line....

Getting old, it seems.

Anyway, check out PCLN, AAPL,QCOM, and VTR. The revenue stocks continue to do well. No pullback for them.

So I will expect a pop in the AM to fill the gap. Keep us in the horizontal trend trading range.

AAPL Pullback

We saw AAPL hit 600 today.

It's just about it's own country, in size.

Here's the flag that's forming. Is this a bear flag or a bull flag? Was 600 a Bulltrap? Or after hitting 600, should we expect the country of AAPL to be more successful than ever?

I got out this morning, but am back in at 589.05. Will see.

Range bound or Breakout

Here's the chart. See the falling volume and the weakness in the MFI and Stochastic RSI. I'm looking for a Turn-around Tuesday (I think today's close will be higher than open, but I still lost money).



Falling volume like this can mean that the price isn't supportable. Meaning price should go lower.

It was pointed out to me that we could play the SPY as though it were in an upchannel like this:



If this is the play, it shows great weakness having broken the channel on the downside on extremely light and decreasing volume. In which case, it seems we should go lower and perhaps look for support points.

I don't think the second scenario will play out. There's too little volume and too many plungers. IMHO it's likely we will stay range bound until, as Mutt says, the market vomits and we go one way or another.

Watchlist for Upward Bias

For my weekly work, I use a prescreener which eliminates a lot of possibilities for me because I don't trust them. I screen for stocks >$12 and <$120. I screen for a minimum of 500000 shares traded yesterday, and a minimum of 2M shares traded last week. This gives me confidence that the results of these screeners are less likely to be moved by HFT's or somebody with deep pockets. (this is not always true, but seems mostly true).

Within this set of constraints, here are the stocks that have pulled back the most the last several days:


CAVM DECK GT IOC

OPEN AKRX NAV SKX DMND BCO

VNO MOH BX

AFL ALKS AMLN BBG CEG CNX CTRP CY DFT ESI EW EXPE FCN FSLR GFI GMCR GT ICON IRM MAKO NRGY OPEN TZOO UNG VALE VALE.P VVUS WLP WSM

ACI ANR ATI AYR BAK BAS CAH CCJ CMC CROX DE DELL DWA ERF FCX GG GILD GNTX GTI HPQ ILMN IOC JCP LIFE POT PPO QCOR RIMM RRD SIMO SLW STLD TDS TIE VCI WLP


Here's the strongest stocks,
(from Friday, the list of the best revenue growth: AAPL AMZN QCOM PCLN JOY VTR)

ACC BIG CINF COST CPN DISH FDO JAH ORLY OVTI RGC VRSK

and somewhat less strength:

ITB ARUN ANN TSO SPR ATHN KRO RYL DISH CPN ARO GTLS OC ZUMZ MTH AEO CRR SCSS VLO JAH LEN CLNE DHI INSP OVTI ITMN VHC JOE


Now, do we believe the strongest stocks will continue their run, or do we believe the weakest stocks will turn around and pop the most?

Here's the trend: The market is advancing, but my favorite leading indicator is down.



In all the other times in the near-term past when the SPXA50 was headed down, the market was also falling. Not this time. This time it looks like time is doing the consolidation, and we've been in the 134-138 range since Feb 10.

I think we have a market that's wound tighter than a $3 watch. I will be playing the long side, staying in overnight with partial positions. Initially, I will be playing strength, and watching the weakness for signs of a confirmed turn-around, then move into those.

I don't anticipate any structural changes, but one never knows.

Silver and dollar

Mutt started me looking at silver. Here's a couple of charts that are interesting.



Both charts are the same time scale. You can pretty much see that UUP trend is the inverse of AGQ, a silver ETF. Right now, the Bernank wants to keep the dollar moving weaker, but additional liquidity in the Eurozone is trying to thwart these plans. If China adds liquidity as well, the Bucky is likely to grow stronger, hence pushing silver lower.

What's the probability that will happen?

Here's another chart. It's the daily AGQ. I think you can see a H&S forming, with the peak volume at the head.



The last H&S I followed didn't complete, and resolved to the upside. My thinking is the dollar will continue it's downward trend, and this chart will also not complete, resolving to the upside. That's based on my previous observation that the Bernank knows how to push the dollar down.

Overnight Market Pops and Snappers

The SEC keeps a list of authorized exchanges. See
http://www.sec.gov/divisions/marketreg/mrexchanges.shtml

This is not a complete list, it is simply a list of exchanges administered by and under the set of rules provided by the SEC.

I looked into the NSX. I can not find how or when they move their data into what Investopedia calls the "consolidated tape". For NYSE and NASDAQ, it's easy because nobody lists their stock on both. But NSX lists stocks concurrently listed on NYSE and NASDAQ.

Looking at NSX volume, their volume yesterday was about 14M shares NYSE, and 9M shares NASDAQ.

It seems that there's a lot of trading activity at the end of the day. That's when the ETF's make their trades, and when the broker-to-broker trades are settled. I suspect that's when the other exchanges' trades get rolled up, but I haven't confirmed that suspicion. The rollup function is provided by clearing and settlement companies, and after they are all done, they report the price for the next trading activity. For a deeper understanding, see

http://www.tradersmagazine.com/news/102263-1.html

This article talks about the settlement activity, and that NASDAQ would be setting up their own settlement operation.

So at settlement time, the price may change. Dramatically.

Suppose broker A has a buy order of stock that it doesn't have. Broker A goes to the settlement house to get the stock. The settlement house may have to go to broker B who has the stock. Broker B may decide that the stock is worth more than the closing price, and transfers it to the settlement house, who sends it off to broker A at the new, higher price. The consolidated tape then reflects the higher price. There is no volume registered for this trade, because the trade volume was already reported during the day. This is just a settlement of that volume.

Now, how does that affect your broker, TDAmeritrade, for example? You bought the stock at a low price during the day, and overnight it pops up. The brokerage house (TDAmeritrade) has to come up with the money to settle the stock, so it's out the delta from when you bought it to the settlement price.

So now you can see how "snappers" happen. A stock who's relative strength compared to the index may be negative, but somebody thinks it's a deal and buys a lot of shares. Overnight, it pops up because of the settlement. In the morning, we all see the pop, and know this one is really weak, so we may short the stock because overnight nothing changed, it's still weak. Maybe it will become strong this quarter or maybe not. But the stock then trades lower, usually back to it's yesterday's trading point. If it's relative strength is negative, it will usually end up being lower than the delta of the index move.

If there's enough "snappers", then the market index "pops".

Don't worry about TDAmeritrade. There will be a Broker C going back to TDA to buy a stock, and TDA will raise the price so it covers it's original loss on your stock. I think it's a zero-sum game, because brokers continue to be in business.

An interesting study would be to screen for stocks that traded over 10X their average daily volume, and see what happens to price overnight.

Just so you guys don't get chart-starved, here's my chart I'm watching:



As you can see, my favorite leading indicator is looking down. Sometimes being oversold is resolved by time, and sometimes it's price. Which one will this be?