Oct 312014
 

I’ve received a few questions since yesterday which I plan to reply to as soon a I get caught up on the charts. With the markets not very conducive to trading lately, I had taken the day off & I don’t plan to trade today either. With that being said, we have some market moving news today with the Bank Of Japan unexpectedly announcing additional stimulus measures. I recent commented on the Yen along with the Euro as those two currencies make up the bulk of the US Dollar index. Here’s a quick look at two variations of the Yen via the USD/JPY (US Dollar/Yen pair) along with a 10-year weekly chart of the $XJY (Philadelphia Japanese Yen Index).

 

Gold & gold mining stocks are trading lower due to the effect the falling yen has on the dollar (yen down=dollar up, dollar up=gold down). As of today, GLD has gapped down below the well-watched mid & late 2013 lows which now moves up my former alternative scenario of a temporary flush-out move below that support level, as my new primary scenario. More on gold & the gold stocks later.

I was also asked if I though that this overnight move by the BOJ could turn out to be a major bull trap in equities & if it is, my thoughts on adding back exposure to the recently stopped out IWM trade.  My reply: The market reaction to the BOJ’s move could very well prove to be fleeting. I took the day off yesterday and plan to catch up on the charts today so I’ll try to get back to you asap on my thoughts. Glancing at the USD/JPY currency pair, I can see that it just popped slightly above the 2008 former high which is bullish (for the dollar, bearish for the yen) but it’s too early to say if that breakout will stick. There are also some significant divergences on the price & momentum indicators & oscillators for that pair when viewed on the weekly chart which increases the odds of a reversal soon (dollar down, yen up). However, like your plan, I would only add back a short position following a reversal of today’s pop on the RUT, maybe even wait to see the last couple of day’s gains wiped out in an impulsive manner before adding back short exposure.

Oct 292014
 
WLT 60 min Oct 29th

WLT 60 min Oct 29th

WLT is scheduled to report earnings tomorrow before the open. With this trade up 34% since the entry just two weeks ago & close to the 2nd target, those long might consider whether to hold through earnings or book early profits in order to risk a possible gap against your position. T3 remains the final target for now although additional targets may be added. So far the case for a lasting bottom in WLT & several other of the recently mentioned coal stocks seems to be firming up although it is still too early to say with a high degree of confidence that the latest rally in these names is anything but a dead cat bounce.

Oct 282014
 

Here’s a quick look at some of the major US stock indices from a longer-term perspective, all of which except the Nasdaq 100, have recently broken below their primary bull market uptrend lines. Some of the large-cap indices, such as the $OEX & $SPX, have rallied up to close just below those key resistance levels today (i.e.- backtesting) while the small & mid-caps ($RUT & $MID) remain comfortable below their respective bull market trendlines at this time. As mentioned earlier today, all major US stock indices remain on intermediate-term sell signals as per the 20/50-day EMA pair although the $NDX is very close to Golden Cross, should that tech heavy index print a solid positive close for another day or so (it is always best to use the closing values of whatever period the signal is based off of, e.g.- daily close for daily charts, 60 minute candlestick close for hourly charts, etc..). Even then, I never put too much stock into any one single indicator triggering a buy or sell signal, preferring to see multiple buy or sell indicators or chart patterns triggering (or at least aligned in close proximity).

 

 

Oct 282014
 

Over the last couple of trading sessions I’ve struggled to find something in the charts worth highlighting but have come up empty. The recent bounce in the markets has exceeded my expectations but it is far from unusual for the market to experience such a sharp snap-back rally following the equally sharp move lower that immediately preceded it. Most of the short-term trend indicators that I follow have just recently flipped back to bullish on the Nasdaq 100 while the S&P 500 has a mixed bag of bullish and bearish short-term trend indicators. However, every major diversified US equity index, from the small & large caps alike, remain solidly on intermediate-term sell signals as defined by the 20/50-day ema pair (although the 20-day ema on the $NDX is getting close to crossing back above the 50-day, should that index climb much higher over the next day or so). One thing to watch in the coming days would be a backtest the 50-day ema by the 20-ema from below in either the $NDX or the $SPX. The recent IWM short has just moved above the 2nd suggested stop level (horizontal resistance plus the 50%/61.8% Fib cluster) but remains well below the upper-most suggested stop of 144.55 for now.

Gold, silver & the mining stocks have been floundering around lately as the $USD chops around just below long-term resistance. However, not all dollar sensitive assets are waiting to follow the US dollar’s lead; $Wheat (WEAT), $Corn (CORN), & $Soybeans (SOYB) have been climbing steadily all month with MTD gains ranging from about 10-15%. Regardless of whether or not this bounce in the equity markets ends up taking us to slightly above the prior highs or not, which at this point is a coin-toss IMO, the charts continue to indicate more downside in the coming months at this time.

Oct 232014
 
GDX 60 minute Oct 23rd

GDX 60 minute Oct 23rd

GDX (Gold Miners ETF) managed to claw its way into positive territory today (trading up as much a 1.3% at the highs today) to close up 0.59% after being down nearly 2% earlier today. One day does not make a trend but it could be an early start to a game of catch-up following the recently move higher in gold prices.

This is a 60 minute chart showing some near-term resistance levels which could also be used as price targets for a quick trade although my preference would be to see GDX take out the 22.00 resistance level (first horizontal line on this chart) as well as making sure that gold prices hold up (i.e.- don’t start moving much lower). GDX recently broke above a bullish falling wedge/slightly contracting descending channel, followed by a backtest of the channel with prices recent making a marginal new low while extending the positive divergences that were in place on both the MACD & RSI. Again, best to wait to see prices clear that 22ish resistance level before establishing or adding to any long position in GDX but if/when that level is taken out, the odds would favor a relative quick move up to the 23.75 level, about an 8% gain.

Oct 222014
 

I was recently asked my thoughts on the triple-bottom in gold/GLD last week, to which I replied: On the gold triple bottom, there isn’t really much to say other than so far, so good. I haven’t commented on it much lately because my focus has been on the broad market & nothing much has changed on my outlook for gold (I still believe a case can be made that gold is bottoming and so far, nothing technically has negated that). I still own the PM stocks that I started scaling into a bit too early this last time around and although I haven’t been adding for a while, I may start to add some more exposure if the current strength in gold continues. I have been meaning to update gold, silver & the miners but I’m leaving town for the weekend today so that might have to wait until early next week.

To add to the fact that so far, gold is exhibiting bullish price action lately by bouncing off the mid & late 2013 lows, it is also worth noting that much of the recent rise in gold prices is largely attributed to the decline in the US dollar. As recently discussed, the longer-term bullish case in gold hinges largely on my expectation Continue reading »

Oct 222014
 

I’ve been making the case for a potential bottom in the US coal sector recently, including several of my top picks in the sector (and three active trades: WLT & ANR, both of which continue to look very bullish near-term as well as potential longer-term bottoming plays, and the etf- KOL). As the technical case for a potential bottom in coal has already recently been made, this 10-year weekly chart makes the case not only for a bottom in crude oil as well but also highlights the tight correlation between crude oil & coal, which typically move in sync with each other including major tops & bottoms.

As this 10-year chart of USO highlights, every single oversold reading over the past decade (and likely beyond) has either accompanied or slightly preceded a major bottom in crude oil prices. Currently we have the first oversold reading (<30 on the weekly RSI 14) since mid-2012 (which coincided with the start of a 36% bull market market in USO that peaked in Sept 2013). As I always say, oversold can always become “more oversold” but at the very least this chart helps make the case that the current bear market in oil (and coal) is more than likely in the final stages, if not already finished. It should also be noted that USO has currently fallen to the top of this multi-year support zone which has contained prices since the financial crisis ended.

Remember, this is a case for a potential bottom in the energy sector, namely coal & oil. By most metrics, these commodities are still solidly entrenched in a downtrend & therefore, any trades at this time should still be considered aggressive, counter-trend trades. My preferred strategy for establishing a longer-term position in the coal sector is to use a scale-in strategy (buying very small lots over time as long as a bullish technical case can be made) using a shot-gun approach (spreading out my exposure to the sector amongst various coal mining stocks with the most compelling charts). With coal prices in a prolonged & severe bear market, the possibility of one or more bankruptcy filings or dividend cuts (which will most likely cause the stock to drop sharply) among my top picks in the coal sector is a very real possibility in the foreseeable future. Therefore, the shotgun approach and/or the use of KOL (coal ETF) as a proxy to gain exposure to the sector is the best way to mitigate risk (along with appropriate stops based off of your average cost basis on each position). As always, DYODD (do your own due diligence) and only consider trades that align with your own trading style & risk tolerance.

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