Another Case of Bearish Divergence
Posted on 03. Sep, 2010 by Founder in Blog
Okay yesterday we rallied again. And honestly, I would have thought that profit takers were coming going to send us marginally lower – but I was wrong. Looking at the intra-day chart this morning the one thing that stands out like a sore thumb is the Bearish Divergence on RSI.
We talk about divergence a lot around here and it’s one of (not the only) better signals you can get in a market. When the stock is moving higher and momentum is falling it means that smart traders are getting out quietly without YOU knowing it. Hence the stock will likely fall.
My true gut tells me that we could be headed for 50% retracement of the big move or about 1,065 over the next week.
All The News Is Positive – Now What?
Posted on 02. Sep, 2010 by Founder in Blog
So all the economic news that came out this morning is positive. Pending home sales were higher. Retail sales where higher. Jobless claims came in lower than expected.
All in all this should be a feeding frenzy for the bulls today – but right now it’s not. The market is still crawling higher but not launching into new territory. So what does this tell us?
Well, maybe all the news today had been expected and priced in yesterday during the 3% jump higher? That’s my main guess. Even though the news wasn’t out, investors could have already been expecting better results and started buying up stocks.
Now that the news is finally out I still think we are going to see some selling pressure purely on profit taking from yesterday. Investors aren’t that stupid to think it could continue straight up from here (at least for rest of the week).
Anyhow, those are my thoughts. For our members, we are sitting very nicely. We have a lot of great positions below the market so the higher it goes the better off for us!
Jobless Claims Lead Markets
Posted on 02. Sep, 2010 by Founder in Blog
Initial jobless claims are once again the focus of the day for the markets. Following yesterday’s huge move higher of nearly 3% we should see a light day and possibly a little profit taking (only natural). Historically, jobless claims have continued to come in lower than expected.
If we do head higher, then next intra-day resistance level is close by. I’m more inclined to think that we will see some profit taking back down to 1,065 before moving substantially higher.
The Expected Yet Unexpected Rally
Posted on 01. Sep, 2010 by Founder in Blog
What a big reversal for the major markets today. As the market does best, it brought a very unexpected rally to start off September. Yet, we had just finished a post not even a week ago about Bullish Sentiment At All Time Lows in which we said:
Now of course, just because the masses believe the market is NOT bullish doesn’t mean we are headed lower overnight. As I’ve tried to teach and preach on this blog – it’s the opposite view that usually wins i.e. the markets will actually head higher! When everyone else is bearish YOU want to be bullish.
Case in point today. Nobody, including myself was expecting a 3% move higher (or was I expecting it…)
Bullish Divergence on USD/CHF MACD Indicator
Posted on 01. Sep, 2010 by Founder in Blog
Scanning through our charts we noticed a very clear and might I say “BLATANT” bullish divergence signal on the USD/CHF forex pair. The indicator we have below is a MACD with a histogram for added analysis.
From the chart you can see that although the USD/CHF pair looks to be in a free-fall, MACD has moved higher significantly. So what does this tell us about future direction? Well, at least that momentum is coming INTO the pair and you could catch this falling knife right at the bottom (or near it at least).
Crude Oil Continues To Slide – $70 Target
Posted on 01. Sep, 2010 by Founder in Blog
Crude Oil has had a tough time during the month of August – historically which should have been a positive month. Right now it’s having a very hard time getting above the downtrend line it broke in mid-Aug. Short term target for this leg lower is easily $70 before we see a reliable bounce.
Crude inventories jumped 4.7 million barrels last week according to the American Petroleum Institute which had forecast an increase of only 1.9 million barrels – clearly way off. This of course is not helping Crude gain footing.
GOOG 5 Year Stock Chart
Posted on 31. Aug, 2010 by Founder in Blog
We love options on GOOG every now and again. Looking at the 5 year stock chart this afternoon, it seems like the consolidation in GOOG might be coming to an end and we could see a large rally ahead of us.
Historically we have pretty VERY accurate trading GOOG. Here are two past posts we did on GOOG’s most recent bottom and top. Of course we are not bull-headed enough to think we can accurately make every call, but we have been pretty good thus far…
GOOG Stock Analysis – Buying Opportunity
GOOG Earnings Beat, But Stock Falls?
EWP iShares Spain ETF – Head And Shoulders Pattern?
Posted on 31. Aug, 2010 by Founder in Blog
I ran through my ETF list last night to come across the EWP iShares Spain ETF forming what looks to be a pretty large inverted head and shoulders pattern. Now of course the main complaint I have is that it’s not at the bottom of a downtrend, still the shoulders and head are very clearly defined.
As always, it’s not what you THINK you see in the market (which is usually what you pray you see so that you can make money). The charts NEVER lie, maybe there is something we DON’T see in this chart…at least right now.
Bullish Sentiment Once Again At Lows
Posted on 30. Aug, 2010 by Founder in Blog
The American Association of Individual Investors’ Bullish sentiment chart below shows just how bad investors/traders “think” the market are…
Now of course, just because the masses believe the market is NOT bullish doesn’t mean we are headed lower overnight. As I’ve tried to teach and preach on this blog – it’s the opposite view that usually wins i.e. the markets will actually head higher! When everyone else is bearish YOU want to be bullish.
Waiting For The VIX? Could Take A While
Posted on 30. Aug, 2010 by Founder in Blog
We’ve talked about a VIX breakout from it’s massive wedge pattern for over a month now. We even had two posts about it back in early August:
Volatility Index VIX Making A Come-Back?
Option Volatility Skew Charts
Overall we have been pretty good about forecasting it’s direction but right now we are stumped (honestly). It’s rare you find a site that will tell you that we DON’T know where it could go. The big reason we are so confused with the VIX right now is because we are bottoming in the markets (or at least we think so). If we bottom out on the SPX then the VIX could actually head much lower AND given that we don’t see the SPX selling off hard anytime soon we can’t image a big spike in the VIX either. We are in a pickle.
Our gut tells us that the VIX could get higher but it might take until the end of the year at the earliest.
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