Thursday, April 30, 2009

The Devil of Deflation

Hedge Idea of the week, May 4-8 (Airlines, REITS)

Don't see any "earnings trends" worth playing next week.....

I continue to look at DZZ on every single pull back. (ie short gold after every pop)...until gold hit's 750. I had called gold short up here LAST a dollar shy and a week early on the ideal entry, as it waited till this week to crater again. My opinion is gold is headed to 750 for starters, so I am always looks to enter it short, over and over again. (or hold it till that target, either or)
TM reports on Friday, may 8th...but there's no way I would play that long, even running into the ER. In my opinion its one of THE most overvalued stocks in the entire market. If it does however run into it's earnings, or even pop from it, i will likely be looking into a few JUNE puts on it.
SPG is setting up yet again as really nice here for a short here for next week.

- csco
- grmn
- fwlt
those 3 report on WED, next week, they are somewhat mini "momentum" stocks....but i don't think there is that much uuumph in those names going in to earnings. Might be wrong, but i just don't like em too much.
The AIRLINES are the sector that looks like the best buy here, to me. (uaua, lcc, etc)
- they do benefit from deflation (cheaper oil), and they really got sold off very hard from the "swine flu" this week. I think they get bought up big time as soon as "swine flu" fear goes away. (of course there is inherent risk, i mean if swine flu ends up being WORSE than the knee jerk fear, they will sell off even more...but i don't feel that is likely, i mean they got ALOT of "fear selling" this week, alot)
the short gold, again is something to me that is longer term than a week, I'm pretty much always short gold, as i believe there is still much more deflation ahead.
So next week, it looks like LONG airlines + SHORT reits for me.
I'll post the charts of each index, and just list the 2 names i like most from each, in order.
- lcc
- uaua

REITS (short)
- spg
- vno

Monday, April 27, 2009

Gold's headfake move....over 900

hope no one falls or fell for it.....

Friday, April 24, 2009

Neg divergance finally catches up..............

Finally a confirmed lower price, at the short term rsi resistance bar....

I would look to take it VERY easy on the bullish side next week.

(proposed ew count)

good luck to all

here's an quite alarming video and article on recent insider selling

Thursday, April 23, 2009

Hedge Ideas of the Week, April 27--May 1st (fslr, ma, jrcc, bcsi, aem, aapl, ms, bac, fslr)

Let the earnings trend be your friend (and the gravitation up OR down towards the 200ma...see charts)
Almost all stocks are BLOWING out earnings (yes the bar is set very very low, so it's all relative, but mentally no one wants to be short before a "blow-out earnings", even if it's still only b/c the estimate was lowered 20 times over)
Once trends begin to become visible to most, they start being "front-run" even sooner. Look for some short covering in these longs next week.

I narrowed it down with the highest short %, and most "momentum/cult" I could find that report next week, then selected the best 3 charts.
Longs (report next week, > 10% short float)

- MA (reports Friday AMC)
- JRCC (reports Friday AMC)
- FSLR (reports Wed AMC)

MA: 10.% short, target 174

JRCC: 10% short, targets 15.75, 17.00.....20.07 *my favorite*

FSLR: 15% short, targets 158....168

(200ma possible target for all 3)

***** sell BEFORE the close on earnings day NO matter what, no reason to "gamble"!******

Shorts: (stocks that have already reported, or do not report for another month)
"Sell the News!!"

- BCSI: 7 % short, target 12.05, reports may 22nd
- AAPL: 2% short, target 115, already reported
- MS: 5.7% short, target 16, already reported
- AEM: 4.9% short (wait to enter AFTER earnings on Wed)
- FSLR: 15% short, target 130, (wait to enter AFTER earnings on Wed)
- yep, trading this PIG both ways here
- BAC: targets 6.70, 3.50 (see chart entries)

*these shorts are all my favorites lol!*
*short float data is provided by (link is under my resources), it is updated twice a month*
If you have or know a site or program to view short float % updated DAILY, let me know please. Every broker or site I have seen are all twice a month, that's it.*

Wednesday, April 22, 2009

Earnings Earnings, all around

Buy the hype, sell the news

NO ONE wants to be short going into earnings.

Why would they? EVERYONE is blowing out, everyone...the economy must be strong!! Right?

The fear level was set so high from last qtr, the estimates have been set so low around the board, anyone and everyone can "blow-out" they HAVE BEEN!

I mean who didn't think aapl would not be green all day going into earnings?

Will the trend last all earnings season?
it very well might, no reason to buck it now.

A GAP DOWN on the following stocks is a BUY for tomorrow

why? yep...they all report Earnings tomorrow. AMZN reports at Noon, i believe, so that trend is only applicable for the morning, the others all report after the close, so watch them all for relative strength into the close.

Buy before earnings.....take profits immediately before......and short immediately after.

Ya can't tell me that hasn't been THE most profitable trade trend on about 99% of the stocks in this market here the past couple weeks. One of the oldest trends in the book.

A GAP UP is a short on any stock that has already reported.

for weakness tomorrow, look for the stocks that have ALREADY reported.
(yep that's mostly the financials)

Tuesday, April 21, 2009

SQNM....stinking it up so far.

After an over 25% profit on last week's hedge trade idea, perhaps it was due?

terrible terrible "idea" on SQNM, so far, I called.
Whew, what a stinker that's been so far this week.

I still love the trade, but I shoulda/coulda/woulda called a better long side play than this one, so far.

Why do i still like it (besides the t/a set up I "thought" it had provided on friday)
to put on your list to watch later, if ya choose too. (even tho the entry was obviously way off)

- the stock is 27% short float, that's a hell of a lot after a broad market rally like this.

- with out going into lengthy fundamentals, they have a blood-test of 99% accuracy to test for
down syndrome and other fetal chromosomal abnormalites (the best we have currently is amniocentesis, which also carries small miscarriage a big ass needle in mommies belly, which is only 95% accurate) I have been following this one for almost a year now, so i know it pretty well and how it trades (sometimes...) I won't give an "idea/opinion" of a trade, unless i have been following it for at least 3-6 months.

It's not a drug, it's a test. (ie likely no s/e news to send it -95% overnite)

- anyhow the longs of this stock are weak-hands, even though it's 95% owned by institutions, but the shorts really love this play, why??? when there are insolvent banks w/ less of a short %? who knows, but it get's the short float up high very fast, every time.

At any rate, fwiw, when this thing squeezes it is a monster, because of the short float % as well as their entire float is basically taken up already, hence the squeeze is even more powerful than normal. The best times I have seen to play it is when there is a conferance call or something up-coming. B/C shorts get nervous and cover going into them. (a conferance call for a bio-tech, is like X2 compared to earnings for a regular market bullish stock)

With current deflation, and financial yo-yo from the puppet masters in Washington, i prefer to stay away from longs related to either of those factors. (deflation, finacials)

you can likely stick a fork in the solars here...they are toast for the next several weeks.

Monday, April 20, 2009

$BKX headed to 26 --- (& the govt relief index)

for starters....imo

When the rsi breaks 50, it's likely going to be ugly, and get the 26 target.

For those not familiar w/ the index, the NASDAQ actually created an index (back in JAN!) compiling all the major "govt relief stocks" (thanks for the heads up jpmoy)

...stockcharts doesn't have it, to chart however as far as I am aware.

It's all up to "Timmy" tomorrow..... :o)

Dollar Watch (update)

3wks later (update)

Longer term, recall 90.02 is the next major serious test and decision point.
(the major 38.2% retracement level, see original post w/ weekly and monthly charts)

On the Hedge Idea of the week, I brought up the UUP wedge breakout (price/rsi) on the 60 min chart)

What I had almost not noticed, if $USD closes above 86.12 it will break out of an ascending triangle on the daily chart as well. Target would be an "estimated" at 90.00 via measurement of the widest portion of the triangle

Looks to me like we might be testing the 38.2% retracement level sooner than later.

Sunday, April 19, 2009

The Wedge, yet again.


Q: when will it break?
A: when it wants too

For early this week the line in the sand looks like 854-855 for the "could" find support here, if it does NOT...then the momentum has likely shifted for a little while (ie a few days or a few weeks?) to the down side.......if it does find support there, the wedge might likely live another day, so a bounce off that price "could" be very likely....(for those of us who went net short over the weekend, perhaps a good profit trimming area)

The nasdaq's looks like 1633-1635

Friday, April 17, 2009

Gold vrs Ags (4 week update)

March 20
DBA 25.01
GLD 94.35

April 3rd
DBA 25.00
GLD 87.59

April 17
DBA 24.51
GLD 85.22
(current--->see chart)

I said after the first 2 weeks, it would likely not move AS fast every week.

This is a update to long term play, with the target of "intersection" via the chart, not based on time.

Hedge Idea of the Week, April 20-24 (sqnm, xlv, fslr, qid, dzz)

SQNM: Long
XLV: Long

FSLR: Short
QID: Long (this is an ultrashort etf of the qqq's, see chart on last thread)
DZZ: Long (this is the 2x short gold etn)

My opinion on the NASDAQ intermediate term remains lower. (has been since Monday's close)

The UUP made a bullish wedge breakout today, on price and rsi. (a rising dollar causes downward pressure on all commodities)

So on the short side, look at possibilities that trade along w/ commodities. (solars go w/ oil....miners go w/'s go w/ the actual grain values, etc etc).

I personally think the solar's as a group have the most downside next week, b/c of the UUP break out, and also as the market has been pushing higher here but the solars are now lagging and making a lower high, so they look like the specific sector that money is coming out of most here.
Health care picks on the bullish side, i like the best here. Why? - The UUP breakout, makes me hesitant to look at anything that has any correlation at all to deflation. (which is alot of stocks) and the nasdaq wedge makes me not to want to call a tech, I mean goog "blew out er" and the nasdaq was basically like "ok...whatever", so they seem pretty overbought to me. Financials are a gamble, and have too much intervention to feel good going either way. Transports went up too much this week to feel good chasing here. (ie drys/lcc from last week).
I do like all these plays here, as that's how a hedge trade is intended.
Or at least that's I typically trade them. (25% sqnm, 25% xlv....17% FSLR, 17% QID, 17% DZZ)
(charts are intraday Friday data here)

Thursday, April 16, 2009

Wedge zoomed in

I prefer to try to focus on the most bullish "leading" index, when looking for a trade-able swing "top" look to lean short heavy on.

same when looking for a trade-able swing bottom to look to lean long heavy on, I like to look at the weakest index.

(just to me gives me more feel and confidence that entire thing is less likely to be a fake out, and more likely to a real-deal)

So to update the "leader" ie the NASDAQ, the wedge has became so close to the corner here, I'm actually going to use a 60 min chart here.

My opinion since Monday hasn't changed, as the chart pattern has not either. (even tho the NASDAQ has been flat since then, actually up 4pts i believe)

I feel pretty darn confident the NASDAQ is going lower here for the next couple weeks.

How are those Hedge Plays of the week doing so far? :oP
-when the week is over, the play is over

Hey Guys/Gals...............(don't window shop ads please)

(quick non-market note that's all)

This blog was "disabled" for the AdSense account on here today, due to "click activity"

i don't care about the money ok, it wasn't very much at all anyhow

-although it did feel pretty kool to get some pocket change, from the increased readers, like "wow, people are advertising on my blog" So perhaps I'm easily amused.

At any rate.

Please don't click on any online-ads...... "just to click them"

Not that it matters here anymore, but for other's who have blog's w/ AdSense so they can tell their followers to ensure it's not abused or misused.


Tuesday, April 14, 2009

Gold (update)

On march 13th I expressed an opinion that gold would see 750 before 1000, from what I saw on the Monthly chart. (I still do)

Figure it's been 1 month, so its time to update it, and zoom in a little closer (via the weekly charts this time) It's doing the same thing now on the weekly charts, as it was a month ago on the monthly charts. (retesting a prior major support/resistance, from the bottom)
Gold is at a critical point here, which is going to sooner than later possibly determine it's longer term trend, very shortly. This is what stops and targets are for, and why ya never fall in love w/ a trend or trade and watch them like a hawk.

900 is the line in the sand here on a weekly close.
weekly rsi is also descending, but it's right at 50.

(IE: total indecision here, and caution from both the gold bulls and gold bears)

-a weekly close ABOVE 900 would be very bullish for gold
(a close and breakout ABOVE the trend line on this chart)

- if gold stalls at 900, and can not break over that trend line here soon and hold it on a close for a couple days in a row (in the next 2 weeks?), the rsi will drop below 50, and the current leg down will continue.

Please remember, MONTHLY charts are for meant for monthly moves, weekly charts for weekly moves, and so on, etc etc. (i have no idea what the daily or 60min are showing, b/c the weekly and monthly trump them for longer term trends)

If gold gets to 899 and starts "stalling or spasming" lol....I'll post the daily or even 60 min charts to zoom in and see. (i personally dont use the daily chart, when looking for long term trends, UNLESS the weekly is totally undecisive and "on the verge")

My take on the NASDAQ action today

Never show your best hand first

IE: Wells Fargo

After WFC pre-announced their "record earnings" on Thurs, did anyone really think the overall broad market could continue to match that kinda momentum?

I haven't dissected INTC's earnings here, but the articles i read seem mixed, actually most sound bullish. "intell beats the street, sales improving, etc". Again i have not read the entire report yet, but it doesn't "sound" that terrible?

that doesn't matter, what matters is the market's REACTION, and i see them down 5% in the A/H, that's what i see, and that's all that matters is the reaction.

What was the market expecting? something like WFC?

That's why ya don't show your best hand too early in the game, and i feel that WFC set the market up to fall here. There is NO ONE going to duplicate those kinda earnings like WFC and GS did. (yet see both of those today...they were trading on life support)

Yes, it's b/c they (well gs on record) is selling to pay back tarp. However they would not have this opportunity and entry to if they did not blow out earnings like they did. So both are part of the overall picture.

Of course WFC and GS both have other motives here and want to pay back tarp, etc etc. So they wanted to get this out there ASAP, and get the boost in the share price, so they can dilute to pay back TARP.

(which is another gamble either way, b/c i don't think its a "lock" they will be allowed to)
maybe they will, maybe they reason to speculate either. But to be cognisant of either of each, must be.

Now i do agree that its still too early to jump on any negative momentum of INTC, as we saw that Alcoa sure had an "initial" knee jerk down reaction after they missed, then went parabolic in the days after that. (of course that was helped by the overall market momentum too, but still to be respected none the less)

So on to INTC, and they very well might go UP tomorrow, like AA...who knows? (i don't)

But take a look at Financials here, they were the MOST down YTD, and the expectations were basically nothing. So they have so far BLOWN away the earnings, and got a huge pop (well till today)

Reason (along w/ the charts) i like the Nasdaq short here for the next couple weeks, is they are basically the OPPOSITE of the financials here. The expectations for these things is VERY high, and they are UP the most YTD.

Lower the bar really low, there are going to be some huge upside surprises (wfc, gs)

Raise the bar really high, there are going to be some "decent" earnings, that are still disappointments.

If INTC beat estimates and its down here (even if it's just for today). Then what's gonna happen when a big cult tech names flat out MISSES? Because it's going to happen, we don't know to whom, but it will for a few, and its gonna drag down the index big time. (whew, its gonna be ugly) b/c there is not much love here for those tech guys. The bar is TOO high, and some people look like they fell in love w/ the WFC report, like it was a sign of things to come for others. (i hope no one really thought that, b/c it was all the m2m changes on the "books") But it sure does look like here, that WFC set the bar too high too soon for the broad market.

Fundamentally, in this economy, i don't "THINK" intc even be should be down in the a/h by 5%. I don't.

Fundamentally, who cares? Only thing that matters is the markets reaction. And if they react negative to those earnings, (even if its only 4-5 in a/h)..they are going to likely react VERY negative to when someone like intc flat out misses, or lowers fwd guidance. *intell was soft on fwd guidance, but again i have no read the report totally, nor do i plan too, over-analyzing the valuations and fundamentals IMPAIRS profitable trading in my opinion, b/c all that matters is how the market reacts, and that's all* I have no idea what other big tech names are going to report, no one does.

But i feel pretty confident that overall INTC's numbers will not the that bad compared to many others.

So if the market is not showing them love here, again...whats it gonna do when a big tech misses? ......we shall very soon find that out.

and that's why ya don't flash your best hand in the 1st qtr of the game, but i guess WFC couldn't resist.

tech is likely in for some trouble here for next couple weeks.
(i said that yesterday though, via the charts) :o)

Monday, April 13, 2009

Entry set-up to Short the Nasdaq (qqqq)

Very nice set up here, if this is a double top, if its NOT, the stop is 1% -2% away.

I Love the low risk clean set up's, like these, with the stop so close.

Stop: @ 1670 on the overall Nasdaq Index (very tight stop, that's only a 1.5% risk from here, so why i like the entry so much)

Target: 29.34 for qqqq
(1500 on the Nasdaq)

Sunday, April 12, 2009

Hedge Play of the Week, April 13-17 (LCC/DRYS & BIDU)

LCC: long ---or---- DRYS: long
BIDU: short

I would really like see airlines get a pull back here ideally, early in the week to get a good re-entry price.... but intermediate term i am bullish this sector.
Same w/ DRYS, like to get a little pull back, to be "ideal" of course.

Sunday, April 5, 2009

Gold vrs Ags (2 week update)

March 20 (then)
DBA 25.01
GLD 94.35

April 3rd (now)
DBA 25.00
GLD 87.59

almost 8% in 2 weeks, not too shabby for a hedge trade of 2 inflation plays (which is why i picked them, b/c the risk is so low w/ these kinda hedges)

I think there alot more legs left to this, but it could very well take a few months. Not a super fast mover, and I am not "expecting" a 4% every week avg either, like it has given the past 2 weeks.

If it does, great, it not oh well....what i do expect is they will intersect/cross again, that might be in 2 weeks or it might be in 3 months. No time table set on hedge trades, the target is when they meet, per the charts. (that doesn't mean i wont take some profits if let's say gold tanks 8% in a week and dba goes up 12%, heck yea ill take profits).

But in terms of % till this trade is complete, to me its just warming up. (compare then vrs now charts)

Target: when the weekly charts intersect again. (see chart)

Is EWT predicting GOOG will miss Earnings?

... .......

IS?, its a question. Not a statement or prediction.

For the disclosure/record, goog was my fav short during 2008, and it did VERY well for me, very well.

Yet the 1 time i shorted it in 2009, i was stopped out (ie lost money).

Reason i mention that part, is to disclosure that I do feel its extremely overvalued, and the multiple is that of a GROWTH stock in a bull market. (valuations are never a reason to make short term trades anyway, but they do admittedly make me LOOK into charting a stock, for entries to get short or long, depending on its relative valuation to the market, etc)

I'll say one thing I know for sure, there are some stocks that I call "cult" stocks, you know what i'm referring too, the ones EVERYONE "falls in love with" goog, rimm, aapl, even gs, pot even".

The same ones that Joe Bob Smith "invested" a lil in back a few YEARS back, so well ya can't tell Joe Bob his stock is over-valued, b/c well Joe Bob purchased at IPO he make one heck of a trade, there's no debating that (.....for now).

Big tech seems to follow the cult theme the most, b/c people actually DO buy aapl stock b/c they "love their ipods", and they can relate to it in that sence, and just seems like "THE thing to invest in, etc etc". That's the same reason to me, that cult stocks have the sickest ralliest, and also the nastiest falls. Because they have such a heavy "common retail investor" baseline, that LOVES to chase the rallies, and also LOVES to overpanic and oversell as well.

Point to that, is that "cult" stocks...when they rally...THEY FRIGGING RALLY, and when they crack, BOY do they friggin crack. Ya do remember RIMM was 140, then they "missed" in sept 08, and nosedived to like 40. (no wonder it was Cramer's "stock of the month for Aug" alert, red alert)

Well rimm was smart (imo), they also LOWERED guidance too when they missed, so they REALLY tanked. But that also got all the bad news and put it all out there and kinda got it over with too.
(no wonder they blew out earnings this time!! they put the bar way down there, from last time)

BTW GOOG does not give it's own guidance, fyi. One of the rare companies that just lets the analysts pick that, they says its "irrelevant" to the company, etc.

At any rate, I just wanted to disclose that i do have a "bearish opinion" of GOOG's stock price, that's all. Some of that due to the factual numbers, some partially also due to probably "falling in love" with how well the puts treated me in 2008, over and over again. So i wanted to disclose that, so it's evident the author has a bearish opinion. (which also makes it NOT the best stock for me to trade, b/c of that too)

So on the the EWT, something i am not an expert at, but i do dabble in and slowly adding that to my t/a skill set. As the EWT traders i follow (kenny, daneric, tiny) have been very accurate on the market, and once 804 on the spx was breached, it sure does look like they said it would if that did happen, etc.

Geez, where's the point...ok the point is when i look at EWT, and the waves, and its classic presentations, every time i look at this GOOG weekly chart i think "wow, this looks just like the book". So i figured id bring it up, to get some feedback and education as well.

And if this count is correct. (i mean looking at the chart, i don't see how there could BE a different count!!!). And assuming that if goog BEATS ER, its probably means it would send it at least temporally OVER 412 (which would violate ewt, correct?)

Gaming earnings is a terrible trade, probably the WORST in the book. (I have learned from experience, the best way). But with RIMM beating, and goog actually had their EPS raised once within the past 30 days. (fyi....last qtr goog was lowered significantly right before the earnings, like the last 2 weeks before the earnings, they kept getting lowered every other day), i have a hunch that people are assuming goog blows out, and that's mostly baked in here to it's current price.

(even though i think goog has alot more DOWNside than upside, i'm gonna run a may straddle on it, for full disclosure, b/c again when "cult" stocks move they friggin MOVE, enough to where either side will likely go well over 100%, paying for the entire spread + profits)

So......does this EWT correct????

b/c it sure looks "pure" to me
i know EWT traders have "alternate" wave counts, and most of the time when i look at their "alternate counts", they look plausable, and i can see how either fits the pattern.

But probably ya cant tell me, that goog has an alternate pattern, other than THAT chart to me it looks like that chart is about the prettiest wave structure i have ever seen"

ALT1: even tho the primary count looks 100X more pure to me, i did 2 alternates
this one is an ABC correction, so if A=C, target is 425

ALT2: Anything over 395 violates this basically, seems highly unlikely.

If goog breaks 412.11, its has a free ticket to likely 425 (per ABC, alt1)
If goog breaks 395, alt 2 is void, b/c wave 3 can not be the shortest
(alt 2 seems very unlikely to me, b/c of the weak wave 3)

If goog fails to break over 381, its not EITHER alternate pattern, which suggests
its the Primary count, and has already topped on wave 4, and now heading
into wave 5 (below 247)

TIA for any/all feedback elliott wavers....i did the alternate charts to look as non bias as i can, and BOTH alternate counts look to me like 1000X a stretch, as compared to the primary count.
So hence the Topic Thread Title....

Friday, April 3, 2009

VIX signals "do or die" for BEAR Market rally vs REAL Bull Trend

I had thought today would be a likely down day....end of week profit taking. (that was incorrect)

Yesterday's high (april 2nd top) was not taken out today, so to say today was "follow through" is not correct. It was an inside out candle day, as the highs were not taken out.

I have posted twice before in regards to the vix charts, this is the same theme. I do not use the vix to predict market movements. (some do, and very well).

I look at and use the vix for the clue to being able to DIFFERENTIATE between a bear market rally, that is headed back lower.....VRS.....a real intermediate term or even longer CHANGE of market sentiment shift, as that is an extremly valuable tool the vix can give us.

What The vix is telling me, from the past support's most likely going to go UP here big time. (market down), as it is now at the MAJOR support levels on the daily AND weekly chart at the same time. Established support and resistance must always be respected.

With due respect to the chart, the vix is also at "do or die time" here. As this is a huge support level.
"IF, IF IF" the vix breaks below this key support and closes the day at 39.00 (or less), to me how i use the vix and trade...that is a "COVER ALL SHORTS" swing signal.

imo, i would also NOT consider that 36ish level as a support, b/c recall this was on that extremely low volume rally during x-mas. (looking at 36 as the main support, instead of the 39 not respecting the t/a and "looking to be bearish" to me.

The more touches = the stronger the trend, so its clear that 39 is the key level that needs to hold for the bears.

I think the market goes MUCH lower from here over the next 2-3 weeks, and April 2nd high of day was a very very likely "top", and the next stop is the purple rsi main support, that's is the most likely to me. (see last post)
However the vix chart is not to be ignored here, it can't be, and the fact its hoving a hair above KEY support, must be watched closely.

Thursday, April 2, 2009

Here we the top (RSI wedge)

I posted on march 26th, we would TOP on April 2nd, and the Bears are "toast" till April 2nd. Then TURN OUT THE LIGHTS for the bulls.

So far so good, as we are a heck of a lot HIGHER now, than then....

So who cares, whats next......

IMO we are most likely going BACK to retest the main rsi support line, or "back test" the green line which we broke out from. At the angle they are both at, they will intersect "confluence" in approximately 2 weeks. I will not try and guess, only respect the support and resistance lines it has already provided us.

Tomorrow is probably going to be a down day, but that's not something to get bearishly excited about. Why? The probability irregardless is that Fridays (especially the afternoons) have a high trend to be "profit-taking", so tomorrow is likely down in ANY conditions. (that trend is the same in bear weeks, when we go up on Friday)

I was asked about RSI wedge's on yahoo board, and i think the spx weekly chart can be helpful in that explanation, to a pretty good extent.

I love RSI as a trading tool, mostly b/c like any other oscillators it can only range between 0-100. So there is no chasing it all over the place.

RSI is commonly used as a tool to look for "overbought or oversold" conditions. However it's use in that is very minimal to me. If you look at a MONTHLY chart, you can see the RSI of the SPX stayed OVER 70 for 4 consecutive years. (ie a huge bull market). Bull markets are supposed to be overbought, as bear market's are oversold. (that's the whole point) So if one shorted the market, just b/c the rsi reached over 80, they would of been in for 3.5 years of severe pain.

So rsi to me is worthless in that regard.
(to look at the calculations for RSI, go to and type in RSI, the link is to the upper right of the blog)
The patterns (wedge's) it develops however, are not.
What the RSI is very good for is wedges, as it can NOT exceed 100, and it can not go under 0. So it develops many wedges, or patterns which can be used as great buy/sell signals.
So it creates at many times "wedge's", ie a series of lower highs AND higher lows, till eventually the wedge runs small and it breaks out or breaks down. THOSE to me are the most clear buy and sell signals, of any one single t/a tool.....especially when the wedge has many touches. As they say, the more touches, the stronger the trend.

They can be used on any time frame:
- a weekly chart should produce moves for a couple WEEKS
- a daily chart for a couple DAYS
- 60 min chart for a couple HOURS
- 5 min or 1 min chart for quick DAYTRADING on and so on. (THIS is a Key point)

If you look at the SPX weekly and the RSI annotations, you can likely see what i am referring too, as the past buy and sell signals.

We are now at a MAJOR rsi resistance, established from the spx peak of 1576.
- hopefully the past 2 minor SELL signals (pink,blue) are appreciated
- as well as the past minor BUY signal (green)
(those are past wedge breakdowns, or breakouts)


**Also FWIW, the 2 red dotted (sell) lines correspond exactly to the EWT's that i do follow as the start of (3) 5 and (5) 5 down. **

3 touches = a trend, and when that trend is BROKEN (to the up or downside) the moves are very strong.

We also came within 5pts of the 20EMA, something we have not been above on the weekly in 10months. (added resistance, even tho the rsi's mean more to me)

How am I trading the weekly rsi:

I'm selling the RED line (now)
and BUYING the Purple line (if/when it comes)

Simply respecting the rsi till it breaks out or breaks down, as in previous annotations.

.....I will try to add another chart, with the purest examples of rsi wedge's to best illustrate

The absolute BEST signals are when the wedge's breaks (annotated w/ green or red dotted lines)

- selling the TOP and buying the bottom is the 2nd best, which is what we are at right now. (selling the top)


Instead of projecting a price target, (since i trade off rsi more than price) the most likely scenario / target to me is that we go much much lower from here, till we get back to the major rsi support line. (that will likely take a 2-3 weeks, and thats a pretty hefty ways down)

(attached is also the Russell 2000 daily 1yr chart)

which to me is the "momentum index"..when the market is good, the russell is VERY good, when the market is bad the russell is VERY bad".....triple top RSI resistance established today.

Wednesday, April 1, 2009

The Dollar Watch

The only UN-BIAS way to look at it, is to chart the dollar, and let the chart decide.

$USD Monthly: the 38.2% retracement level is 90.02, this could very well be the "line in the sand", that the dollar NEEDS to be broken above to prove the deflation has more longer term legs.

$USD Weekly: as you can see by the RSI, the sentiment is now constantly > 50, which is now strong support, this currently is BULLISH for $USD (ie deflation)

$USD Daily: strong support from the rising 200ma

Impression: As long as the weekly rsi REMAINS over 50, the dollar remains in a longer term bullish trend here. (deflation). What is going to be perhaps very telling is what if the dollar breaks 90.02, IF it does, it's "suggested" we go to 95, for a 50% retracement.

My personal "opinion" is that we have much higher prices to see on $USD and much more deflation left here. Even though there seems to be money being printed left and right (and oh there is!), for the dollar to NOT have totally tanked already here in past couple months, to me is a sign of relative strength.

It's not as much individual inflation as a nation we try to accomplish, as it is our inflation COMPARED to other nations. If we are mashing the printing press button, yet they are all mashing it FASTER than us. (ie: the great race to devalue one's own currency). Then the dollar will still gain in value, and the usa will remain in deflation. It's all relative, and since we are "the big gorrila", it takes alot longer for us to crush our currency compared to the smaller guys.

But that's just my opinion, more importantly let's see if/what happens at 90.02, and continue to watch the weekly rsi, which i think its the best t/a signal here for this "watch" and let it tell us what it's going to do.