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| Click on the chart to ENLARGE |
I just bought Direxion Small Cap Bear 3X (TZA) at $35.58. This purchase is a followup to the posts I wrote earlier this morning.
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My TSI Trading Record has been updated.
Nov. 16 Weekend report
1 day ago
Wednesday, June 29, 2011
BUY TZA @ $35.58
I just bought Direxion Small Cap Bear 3X (TZA) at $35.58. This purchase is a followup to the posts I wrote earlier this morning.
*
My TSI Trading Record has been updated.
Buy Wholesale, Sell Retail. Repeat.
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This happens over and over again. It's incredible.
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Thank you True Strength Index (TSI) indicator.
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| Click on the chart to ENLARGE |
This happens over and over again. It's incredible.
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Thank you True Strength Index (TSI) indicator.
S&P 500 - Cover Your Ears
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| Click on the chart to ENLARGE |
I was taking a walk in the forest this morning, enjoying the pleasant tweeting of birds and musing at the occasional squirrel that would flitter by, when my eyes caught a glimpse of men, far off in the distance, wearing red flannel shirts and heavy blue overalls. The more I strained to see them I began to hear the faint sound of a chain saw......and saw some gray smoke kinda floating in the air beside them. Hummm.... I guess they are loggers - earning a day's wage cutting down the beautiful tall evergreen trees in the forest.
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But as I neared closer to them, I began to make out their faces. Gee, they looked familiar.
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I've see these guys before. Somewhere. I just know it. But I am just not sure where.
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They kinda remind me of this bunch of institutional money managers I once watched at the floor of the NYSE. Nah. Could not possibly be the same guys. Impossible.
*
The sound of the chain saws grows louder as I continue nearer. Then, all of the sudden, the sound just stops. Curious.
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Incredible - the men are covering their ears with their hands. I see several crouching down, others scurrying to take cover behind their huge truck. Heck, what is going on?
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Maybe a tree is about to fall?
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Yes, I'll betcha that's it!
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Then I hear a loud cry from the man with the shiny gold hard hat - he obviously does not do any work as his hands are too clean, his clothes too perfectly pressed.
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Timberrrrrrrrrrrrrrrrrr!!!!!!!!!!
Tuesday, June 28, 2011
Gold's Expected Crawl and TSI (25,13)
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| Click on the chart to ENLARGE |
I just wanted to write a quick post this evening to call attention to a couple of subtle phenomenon of gold's intermediate cycle conclusions. We should be able to use this knowledge to help ride this bull down to the bottom of this correction and jump back on the long side of the A-wave.
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Before I get to these two phenomenon, I just wanted to express what my study of gold in the past few weeks has taught me. And it is this: people's emotions, call it sentiment if you wish, lead them to act in rather predictable ways. For us in the stock market, it's the old swing from optimism to dispair, fear to greed, and overconfidence to flight.
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In the case of the parabolic, for example, when it tops, it explodes. That is, when bullish sentiment reaches a peak and the consensus agreement is that this investment is the surest way to make easy money ever invented, the market runs out of buyers, sentiment turns to panic and the elephants cannot get out the door fast enough. In fact, it takes several days for the smartest ones to get out....and the rest are left behind wondering what just happened....why their AGQ was $400 and in the blink of an eye it is now less than $200.
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Then, predictably, optimism is the emotional cure for disaster. Things will get better. And price rallies for some time as nerves begin to sooth. Sometimes, if fundamental conditions are just right, this rally can dally along for a few months - maybe even coming close to the previous high. In any event, more elephants get restless being stuck in a position that is under water, so they hold their breath and run. Price collapses.
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What do you suppose will happen next? Well, chances are good that the elephants still in the room will figure the one's who left were traitors or some such nonsense. Maybe even decide to double down at these good prices and wait it out. So price creeps higher and now makes a bear flag under what was previously a reaction uptrend line.
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But going without bread and water for a long time is getting really uncomfortable. Several days of this and some more elephants bolt for the door. Then a dozen, then a hundred. It becomes a stampede of sorts, but they cannot all get out. And why can't they get out, you ask? Well, I don't know. It's human nature. Maybe we could call it denial. Maybe character. Beat's me.
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So price drops precipitously but most that have been left behind manage to cling to a little line on the chart. Like this line is going to save them or something. It's called the 50 dma. And this brings us now to where we are in the current story.
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Price will crawl along the 50 dma, maybe even close above it a day or two. You know, it's that optimism thing, right? Everything is going to be OK. Just say that to yourself over and over again.
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Sadly, we know how the rest of the story plays out before it happens. More elephants lose optimism - having been told that story about 2 or 3 times too many already. And the final race to the door begins, and continues, until there is no one left behind who really cares. And that is the bottom in price.
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The other observation I wanted to offer in this post is the uncanny accuracy of the TSI (25,13) to get very close to the exact bottom of each intermediate correction. I encourage you to put it on your chart and see for yourself.
Monday, June 27, 2011
SOLD DAG - $12.78
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| Click on the chart to ENLARGE |
I bought and sold this DB Agriculture Double Long ETN (DAG) in about 3 hours and made 1.8%. Nothing impressive. I continue to think the positive divergence that gave me a small gain will assist share price higher, but I lost my interest. There are other fish to fry.
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Hey how about that ZSL today? +4.14% today with 20 minutes of trade left to go. It looks to me like it needs to take a breather, TSI wise, but I'll keep holding that trade, just the same.
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My TSI Trading Record has been updated.
BUY DAG @ $12.55
This is just a little day trade. I just bought DB Agriculture Double Long ETN (DAG) at $12.55. I have been eyeing various ETFs for a week or more, waiting for something to get a little too out of line.
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I found one the other day (YINN) and couldn't quite get myself to pull the trigger. Too bad because it was just a shade higher than $36 and now two days later it is $41. Anyway, it had the same positive divergence as DAG has now so........
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My TSI Trading record has been updated.
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Sunday, June 26, 2011
X Marks the Spot for Gold's Bottom; Silver Update
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Believe me when I tell you I entirely understand that nothing under the sun works 100% of the time in being able to fortune tell the exact movement of the financial markets. Our task as successful traders and investors is simply to do our very best at putting the odds in our favor - fully understanding we will never bat 100%, at least not for very long, and we should be very pleased when we manage to get the majority of trades to go our way.
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Having said that, I hoped it would be encouraging to some readers to again take a closer look at gold's daily and intermediate cycles. This time with an eye on the intermediate cycle top that occurs about every 6 months, and a closer look at what happens after the top is in.
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Click on any chart to ENLARGE
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On this daily chart of the World Gold Index (XGLD) you will notice that I have used an 'X' to mark the spot of each of the recent intermediate cycle bottoms. I also used an 'X' to mark the spot where at least one daily cycle concluded before the final left translated daily cycle (which is also the bottom of the intermediate cycle).
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I'm sure you will notice the relative symmetry of the intermediate cycle tops. Kind of like clock work, don't you think? Also notice how accurately the True Strength Index (TSI) indicator nails the exact bottom usually within a single day or the very day itself.
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Finally, the three preceding intermediate cycles concluded with a left translated daily cycle. This is what we presently have as gold appears to have topped on Day 7 of a 20-28 day cycle.
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And let's take a quick look at silver. The continuous futures contract began trading a little over an hour ago. Traders were very quick to test silver and succeeded in bringing it down to $33.88 in fairly short order.
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Believe me when I tell you I entirely understand that nothing under the sun works 100% of the time in being able to fortune tell the exact movement of the financial markets. Our task as successful traders and investors is simply to do our very best at putting the odds in our favor - fully understanding we will never bat 100%, at least not for very long, and we should be very pleased when we manage to get the majority of trades to go our way.
*
Having said that, I hoped it would be encouraging to some readers to again take a closer look at gold's daily and intermediate cycles. This time with an eye on the intermediate cycle top that occurs about every 6 months, and a closer look at what happens after the top is in.
*
Click on any chart to ENLARGE
*
On this daily chart of the World Gold Index (XGLD) you will notice that I have used an 'X' to mark the spot of each of the recent intermediate cycle bottoms. I also used an 'X' to mark the spot where at least one daily cycle concluded before the final left translated daily cycle (which is also the bottom of the intermediate cycle).
*
I'm sure you will notice the relative symmetry of the intermediate cycle tops. Kind of like clock work, don't you think? Also notice how accurately the True Strength Index (TSI) indicator nails the exact bottom usually within a single day or the very day itself.
*
Finally, the three preceding intermediate cycles concluded with a left translated daily cycle. This is what we presently have as gold appears to have topped on Day 7 of a 20-28 day cycle.
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And let's take a quick look at silver. The continuous futures contract began trading a little over an hour ago. Traders were very quick to test silver and succeeded in bringing it down to $33.88 in fairly short order.
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Friday, June 24, 2011
BUY ZSL $19.05 -- Silver/Dollar Charts
This morning I doubled my position in Proshares Ultrashort Silver ETF (ZSL) with this buy at $19.05. A reader wrote to inquire about the possible upside on ZSL, I got to looking at it, and what I saw convinced myself to buy more.
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Click on any chart to ENLARGE
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I also drew a trend line on the True Strength Index (TSI) indicator to assess the threat of a trend line break sell signal, and observe that the TSI is not currently making a negative divergence (that is, current TSI reading is higher than the previous high TSI reading of 0.24).
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Also, there are various moving averages that will act as resistance to upward price movement. The 50 dma appears to have been conquered. The 100 dma is overhead at about 23.71 and should ZSL make it to the 200 dma before the correction in silver ends, I estimate that resistance level to be about 39.50.
Finally, a look at the daily charts of, on the left, the US Dollar continuous contract (DX), and on the right, the Silver continuous contract (SI). The idea is that if the dollar goes up, silver will go down and the challenge is to assess whether it is reasonable to expect this price movement to occur in the near future.
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In brief, these two charts do convince me that the upside expectation for ZSL is reasonable. The silver chart shows that the overall pattern has played out exactly as I expected and wrote about a few days ago. Namely, the parabolic rise blows up, a reaction rally creates a trend line that is finally broken to the downside. Then a bear flag forms just under the former trend line - which is a second attempt to rally silver price. The previous trend line of the reaction rally acts now as resistance, not support, to upward price movement. Then the bear flag fails with price dropping sharply lower.
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On the dollar side, price is trying to get through the 100 dma. If successful on a closing basis there is a decent chance the dollar could make it to the blue 200 dma overhead. If the dollar should make it all the way up to its 200 dma, that should be the bottom in this silver correction and definitely a time to sell ZSL.
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My TSI trading record has been updated.
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Wednesday, June 22, 2011
I Think the Lightbulb Just Got Switched On
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I think the lightbulb just got switched on.
*
What lightbulb?
*
Why, the one in my tiny brain, of course.
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This post will be about gold and I do hope it is both enlightening (yes, pardon the pun) and better yet, I hope that what the light exposes will be truth and not just technical nonsense.
*
I am going to briefly review where we have been with an old chart of gold, provide an updated chart identifying gold's most recent daily cycles, then plug the electrical chord into the wall fixture and ask you if you see what I do. Actually, I'll know if you see what I see because your light will turn on, too.
*
*
Last weekend I introduced this daily chart of the World Gold Index (XGLD). (Yeah, Blogger is letting me upload charts now - hooray).
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Click on any chart to ENLARGE
*
I have not changed the chart. What I did not mention last weekend is that this chart's time frame spans 3 intermediate cycles.
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Intermediate cycles are also know as 'weekly cycles' and for gold are normally 20-24 weeks. Each cycle length, whether a daily or weekly cycle, is measured from trough to trough - or from one bottom to the next bottom - as I have identified on this chart.
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As gold's intermediate cycles tend to be roughly 6 months in length, at somewhere around the 4th or 5th month of each is the top in price. This allows gold 4-8 weeks to descend from the conquested lofty level of the cycle high to the low that identifies the conclusion of the intermediate cycle.
*
Oh oh. I see your lightbulb has not turned on. Here, let me plug you into this wall socket. There you go. All plugged in and ready to flip the switch for you.
And I am flipping the switch for you right now.
Light. Beautiful light.
*
And this you now understand: we are 4.5 months, nearly 5 months, into gold's current intermediate cycle. It's time for the intermediate cycle top to be in and for the correction bringing us to the low at the end of 6 month intermediate cycle to begin.
*
Great. So let's move on to the second chart which identifies the daily cycles of our current intermediate cycle. We are now zooming in for a closer look at the progression of events within this intermediate cycle.
*
*
Here is a close up look at Gold for the entirety of the current intermediate (6 month) cycle. I have identified 4 completed daily cycles and today was Day 7 of the 5th daily cycle. The number of days counted for each daily cycle is noted below price. The counted day that was the highest day of the daily cycle is also identified.
Bull market daily cycles top on a day to the right of the midpoint day of that cycle.
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For example, daily cycle #1 was 32 days and topped on the 26th day. The midpoint day of a 32 day cycle is 16. As this cycle topped on the 26th day, this cycle was 'right translated' and demonstrates a typical cyclical characteristic found in a bull market.
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And we note that the three daily cycles following the first one were also 'right translated'. (If I miscounted cycles 2 and 3 and they should have been a single cycle of 36 days, it is 'right translated' anyway, so no harm done with the logic).
*
So here is where my lightbulb found some electrical current and started to glow.
*
I had forgotten that the final daily cycle in the intermediate cycle is usually 'left translated'. And if this daily cycle is relatively short, there could even be a bearish second 'left translated' daily cycle that follows.
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This makes sense because when a bearish cycle tops early - left of the midpoint day - there are lots of days left on the shot clock for price to fall considerably to the final low before the bottoming low price is reached and the cycle concludes.
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Now, let's say that I did miscount the daily cycles, as mentioned above, and the two daily cycles of 20 and 16 days were really one longer cycle of 36 days. The summary of daily cycles within this intermediate cycle then measure as 32, 36 and 27 days.
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And today, as I mentioned, was Day 7 of the current daily cycle. By my math, gold is due to peak any day now.....certainly before Day 15 or thereabouts.
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My hunch is that gold already has peaked.....today.
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*
*
Ah heck, let's look at one more chart. The stock market and gold and silver revolve around the almighty US Dollar. It isn't always this way, but for now, it is this way.
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This is a 4 hour chart of the US Dollar continuous contract (DX). Of special note is the day and one half that the dollar rallied when the concern over Greece reached moron fever, then the following three and a half days, bringing us to today, when the dollar was brought back down to where it started 5 days ago.... Yep, everbody was waiting to hear what Ben would say today.
*
Well, Ben has spoken. He affirmed that he was quitting QE2 at the end of June. He gave no hint today that he is about to implement QE3. With the implication that the money printing will more or less immediately cease, the markets have been freed from the notion that the FED is going to go right on printing money and devaluing the dollar.
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So where is the dollar now?
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As you can see from this current chart. the dollar is heading north and with conviction, too.
*
Can you turn those lightbulbs down? They are kinda blinding me. OK, thanks.
*
btw - that indicator you see on the lower portion of the chart is a concoction I devised the other day. It is the True Strength Index indicator with the Bollinger Bands applied to the TSI - along with a moving average or two. Works pretty good.
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The charting software shown is from www.ThinkorSwim.com
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Best!
*
John
tsiTrader@gmail.com
I think the lightbulb just got switched on.
*
What lightbulb?
*
Why, the one in my tiny brain, of course.
*
This post will be about gold and I do hope it is both enlightening (yes, pardon the pun) and better yet, I hope that what the light exposes will be truth and not just technical nonsense.
*
I am going to briefly review where we have been with an old chart of gold, provide an updated chart identifying gold's most recent daily cycles, then plug the electrical chord into the wall fixture and ask you if you see what I do. Actually, I'll know if you see what I see because your light will turn on, too.
*
Last weekend I introduced this daily chart of the World Gold Index (XGLD). (Yeah, Blogger is letting me upload charts now - hooray).
*
Click on any chart to ENLARGE
*
I have not changed the chart. What I did not mention last weekend is that this chart's time frame spans 3 intermediate cycles.
*
Intermediate cycles are also know as 'weekly cycles' and for gold are normally 20-24 weeks. Each cycle length, whether a daily or weekly cycle, is measured from trough to trough - or from one bottom to the next bottom - as I have identified on this chart.
*
As gold's intermediate cycles tend to be roughly 6 months in length, at somewhere around the 4th or 5th month of each is the top in price. This allows gold 4-8 weeks to descend from the conquested lofty level of the cycle high to the low that identifies the conclusion of the intermediate cycle.
*
Oh oh. I see your lightbulb has not turned on. Here, let me plug you into this wall socket. There you go. All plugged in and ready to flip the switch for you.
And I am flipping the switch for you right now.
Light. Beautiful light.
*
And this you now understand: we are 4.5 months, nearly 5 months, into gold's current intermediate cycle. It's time for the intermediate cycle top to be in and for the correction bringing us to the low at the end of 6 month intermediate cycle to begin.
*
Great. So let's move on to the second chart which identifies the daily cycles of our current intermediate cycle. We are now zooming in for a closer look at the progression of events within this intermediate cycle.
*
Here is a close up look at Gold for the entirety of the current intermediate (6 month) cycle. I have identified 4 completed daily cycles and today was Day 7 of the 5th daily cycle. The number of days counted for each daily cycle is noted below price. The counted day that was the highest day of the daily cycle is also identified.
Bull market daily cycles top on a day to the right of the midpoint day of that cycle.
*
For example, daily cycle #1 was 32 days and topped on the 26th day. The midpoint day of a 32 day cycle is 16. As this cycle topped on the 26th day, this cycle was 'right translated' and demonstrates a typical cyclical characteristic found in a bull market.
*
And we note that the three daily cycles following the first one were also 'right translated'. (If I miscounted cycles 2 and 3 and they should have been a single cycle of 36 days, it is 'right translated' anyway, so no harm done with the logic).
*
So here is where my lightbulb found some electrical current and started to glow.
*
I had forgotten that the final daily cycle in the intermediate cycle is usually 'left translated'. And if this daily cycle is relatively short, there could even be a bearish second 'left translated' daily cycle that follows.
*
This makes sense because when a bearish cycle tops early - left of the midpoint day - there are lots of days left on the shot clock for price to fall considerably to the final low before the bottoming low price is reached and the cycle concludes.
*
Now, let's say that I did miscount the daily cycles, as mentioned above, and the two daily cycles of 20 and 16 days were really one longer cycle of 36 days. The summary of daily cycles within this intermediate cycle then measure as 32, 36 and 27 days.
*
And today, as I mentioned, was Day 7 of the current daily cycle. By my math, gold is due to peak any day now.....certainly before Day 15 or thereabouts.
*
My hunch is that gold already has peaked.....today.
*
*
Ah heck, let's look at one more chart. The stock market and gold and silver revolve around the almighty US Dollar. It isn't always this way, but for now, it is this way.
*
This is a 4 hour chart of the US Dollar continuous contract (DX). Of special note is the day and one half that the dollar rallied when the concern over Greece reached moron fever, then the following three and a half days, bringing us to today, when the dollar was brought back down to where it started 5 days ago.... Yep, everbody was waiting to hear what Ben would say today.
*
Well, Ben has spoken. He affirmed that he was quitting QE2 at the end of June. He gave no hint today that he is about to implement QE3. With the implication that the money printing will more or less immediately cease, the markets have been freed from the notion that the FED is going to go right on printing money and devaluing the dollar.
*
So where is the dollar now?
*
As you can see from this current chart. the dollar is heading north and with conviction, too.
*
Can you turn those lightbulbs down? They are kinda blinding me. OK, thanks.
*
btw - that indicator you see on the lower portion of the chart is a concoction I devised the other day. It is the True Strength Index indicator with the Bollinger Bands applied to the TSI - along with a moving average or two. Works pretty good.
*
The charting software shown is from www.ThinkorSwim.com
*
Best!
*
John
tsiTrader@gmail.com
I Wonder What Is Being Sold on Strength Today
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Well, it's now the NOON hour EST and we have the SP-500 just turning flat after being a little more green earlier this morning, gold is up about .5% but starting to fade, silver is up .5% but starting to fade, and GDX (gold miners) are very happy and +1.80%.
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Just for the yucks of it, I wondered if anything in particular was being sold on strength this morning on the NYSE, so I took a peek. If you want to, look at this chart and you can take a peek, too. I'm not saying it means anything, but it does have me scratching my head.
*
OK - after literally 17 attempts to get Blogger to successfully upload the picture, I give up.
http://online.wsj.com/mdc/public/page/2_3022-mflppg-moneyflow.html
Here is what the 12:33 pm WSJ update on Selling on Stength says:
SPY -$182Million
IWM -$9Million
IJH -$7 Million
GDX -$5Million
It's probably just smart money covering shorts in case Ben goes koo-koo again.
Update: 2:32 EST
SPY -$254 Million
IWM -$162 Million
QQQ -$20 Million
IJH -$7 Million
TNA -$3 Million
PS. Just a well-intentioned heads up:
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When a ticker symbol, such as SPY, closes negative for the day,
it will not show up on the WSJ's Selling on Strength page at all.
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Why? Because it is considered Selling on Strength only if the stock is
green (positive gain), not red (loss).
Well, it's now the NOON hour EST and we have the SP-500 just turning flat after being a little more green earlier this morning, gold is up about .5% but starting to fade, silver is up .5% but starting to fade, and GDX (gold miners) are very happy and +1.80%.
*
Just for the yucks of it, I wondered if anything in particular was being sold on strength this morning on the NYSE, so I took a peek. If you want to, look at this chart and you can take a peek, too. I'm not saying it means anything, but it does have me scratching my head.
*
OK - after literally 17 attempts to get Blogger to successfully upload the picture, I give up.
http://online.wsj.com/mdc/public/page/2_3022-mflppg-moneyflow.html
Here is what the 12:33 pm WSJ update on Selling on Stength says:
SPY -$182Million
IWM -$9Million
IJH -$7 Million
GDX -$5Million
It's probably just smart money covering shorts in case Ben goes koo-koo again.
Update: 2:32 EST
SPY -$254 Million
IWM -$162 Million
QQQ -$20 Million
IJH -$7 Million
TNA -$3 Million
PS. Just a well-intentioned heads up:
*
When a ticker symbol, such as SPY, closes negative for the day,
it will not show up on the WSJ's Selling on Strength page at all.
*
Why? Because it is considered Selling on Strength only if the stock is
green (positive gain), not red (loss).
Tuesday, June 21, 2011
Looks Like the Bulls Are Going to Win. (But Maybe Not).
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As the markets await the outcome of tomorrow's FOMC meeting, the bulls were out dancing in the street today - pushing gold and silver right up to the edge of an out and out breakout, and sending the S&P 500 soaring up some 17 points with a mighty bounce off its 200 dma. The HUI gold miners index rejoiced as well, matching the S&P's 17 point route, and convincingly offered their stamp of approval to the recent strength in both gold and silver.
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It looks to me like the bulls are going to win this time. They finally have a bottom in place that is the last word and it's time to get long and strong.
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Hallelujah!
*
But what's that? I see dark clouds on the horizon in the other direction. And nobody is looking over that way.
*
Ah, it's probably nothing. Forget about it. Who cares anyway? This deal is done. The bulls have this market finally by its balls.
*
Yes, but, these clouds don't look too friendly. Shouldn't we at least tell the others so they can decide for themselves what to make of it? to decide if the clouds are really a threat to our confidence or not?
*
OK, fine. Go ahead. So them your silly charts and they can do as they please. Satisfied?
*
Yes, sir. Just two 'silly' charts and then I will thank you for listening.
*
Here goes.
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This first daily chart is of the SP-500 from the latter part of January to the present day. The numbers on the chart are data I gleaned from the Wall Street Journal. Each number represents a significant day when the big money players were selling on the strength of an up day. The number itself represents the net number of millions of dollars they took out of the market on that day.
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Here is a link if you wish to investigate this further some time:
http://online.wsj.com/mdc/public/page/2_3022-mflppg-moneyflow.html
*
Click on either chart to ENLARGE
*
*
What's interesting is to observe first, how impressively accurate this 'smart money' is at selling just before the top. I have no clue why they were so anxious to sell right about the time their taxes were due (April 15), maybe something to do with the quarter ending, I have no clue. But except for that, these guys really are, well, 'smart money'.
*
But what I don't understand is, for the last 6 weeks they did not sell into strength even once. And now that we are at this 'so-called bottom', they are selling every single rally that pops up. Hmmmm.... I would think they would be buying on weakness now, not selling on strength. You think these smart guys think the cyclical bull market for stocks is over? That it's time to get out because this is about as high as the market is going to get for a long long time?
*
And here is the other dark cloud on the horizon I doubt few are aware of. This is a daily chart of TICK. Each day stocks go up and down, of course, and this indicator called TICK counts the number of stocks on the NYSE that are rising and compares that with the number of stocks that are falling in price. A rising TICK value is bullish and suggests the index of stocks will, with increasing momentum, continue to rise. And of course, a falling TICK value is bearish.
*
Everything is just great except that when you throw an apple up in the air, there comes a moment in time when the upward momentum expires, the apple is literally not moving higher or lower, and then gravity does the rest. And you know what that means.
*
So, look at the chart and see what you think.
(I think the TSI is telling us that momentum is nose bleed high and going to have to fall).
*
God help us all, bulls and bears alike.
*
Oh, and THANK YOU for listening.
As the markets await the outcome of tomorrow's FOMC meeting, the bulls were out dancing in the street today - pushing gold and silver right up to the edge of an out and out breakout, and sending the S&P 500 soaring up some 17 points with a mighty bounce off its 200 dma. The HUI gold miners index rejoiced as well, matching the S&P's 17 point route, and convincingly offered their stamp of approval to the recent strength in both gold and silver.
*
It looks to me like the bulls are going to win this time. They finally have a bottom in place that is the last word and it's time to get long and strong.
*
Hallelujah!
*
But what's that? I see dark clouds on the horizon in the other direction. And nobody is looking over that way.
*
Ah, it's probably nothing. Forget about it. Who cares anyway? This deal is done. The bulls have this market finally by its balls.
*
Yes, but, these clouds don't look too friendly. Shouldn't we at least tell the others so they can decide for themselves what to make of it? to decide if the clouds are really a threat to our confidence or not?
*
OK, fine. Go ahead. So them your silly charts and they can do as they please. Satisfied?
*
Yes, sir. Just two 'silly' charts and then I will thank you for listening.
*
Here goes.
This first daily chart is of the SP-500 from the latter part of January to the present day. The numbers on the chart are data I gleaned from the Wall Street Journal. Each number represents a significant day when the big money players were selling on the strength of an up day. The number itself represents the net number of millions of dollars they took out of the market on that day.
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Here is a link if you wish to investigate this further some time:
http://online.wsj.com/mdc/public/page/2_3022-mflppg-moneyflow.html
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Click on either chart to ENLARGE
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What's interesting is to observe first, how impressively accurate this 'smart money' is at selling just before the top. I have no clue why they were so anxious to sell right about the time their taxes were due (April 15), maybe something to do with the quarter ending, I have no clue. But except for that, these guys really are, well, 'smart money'.
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But what I don't understand is, for the last 6 weeks they did not sell into strength even once. And now that we are at this 'so-called bottom', they are selling every single rally that pops up. Hmmmm.... I would think they would be buying on weakness now, not selling on strength. You think these smart guys think the cyclical bull market for stocks is over? That it's time to get out because this is about as high as the market is going to get for a long long time?
And here is the other dark cloud on the horizon I doubt few are aware of. This is a daily chart of TICK. Each day stocks go up and down, of course, and this indicator called TICK counts the number of stocks on the NYSE that are rising and compares that with the number of stocks that are falling in price. A rising TICK value is bullish and suggests the index of stocks will, with increasing momentum, continue to rise. And of course, a falling TICK value is bearish.
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Everything is just great except that when you throw an apple up in the air, there comes a moment in time when the upward momentum expires, the apple is literally not moving higher or lower, and then gravity does the rest. And you know what that means.
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So, look at the chart and see what you think.
(I think the TSI is telling us that momentum is nose bleed high and going to have to fall).
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God help us all, bulls and bears alike.
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Oh, and THANK YOU for listening.
Saturday, June 18, 2011
BUY ZSL $18.30 -- Update Gold, Miners, Silver and SP-500
I took an initial position Friday afternoon in Proshares Ultrashort Silver ETF (ZSL) at $18.30. This 60 minute chart shows that my timing was well intentioned but honestly, it did not work out quite as I hoped. As you can see I was looking for an upside break of the True Strength Index (TSI) indicator. But after my purchase the indicator bounced downwards and took out the lower trend line, leaving price to close for the day at $17.95. A little more patience and confirmation of both a favorable trend line break and ZERO crossover would have served me well.
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Click on any chart to ENLARGE
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My outlook on gold, miners and silver continues to be bearish. This point of view is strongly influenced by my observation of past price performance. The ebb and flow of sentiment seem to yield similar price movement and I will show you how this analysis seems appropriate.
Let's begin with this daily chart of the World Gold Index (XGLD). I notated the previous intermediate cycle tops and bottoms of the past 2 years, then studied how price has behaved during the period separating the top and the corresponding intermediate cycle bottom.
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My observation is that there is a surprisingly repetitive pattern, as follows:
1. price tops then falls
2. a new up trend line is established, which fails
3. a second new up trend is attempted beneath the previous trend line (which forms a bear flag).
4. this bear flag fails and price moves down to make a final low
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I would also like to point out that each of these recent intermediate corrections bottomed when gold reached its 150 dma (green moving average line in the chart).
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My thought is that we are soon going to conclude the bear flag phase and then gold will head lower until it makes a final intermediate cycle low.
This is a daily chart of the Amex Gold Bugs Index (HUI--X). The same repetitive pattern of price behavior seems to apply at the same intermediate cycle tops and bottoms.
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The twist this time, however, is that it appears the miners have already completed the entire corrective process. However, I know that in past intermediate cycle corrections the miners always bottom within a few days of gold.....and if gold has not bottomed, the miners have not either. My hunch is that miners will rally soon with the stock market, then put in a lower low.
The next chart up is a daily of the World Silver Index (XSLV). This analysis is more of the same song, second or third verse. I expect silver to let go of the bear flag and continue falling.
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My other concern about silver is the pennant/wedge pattern that has developed. In a matter of just 4 trading days, silver plummeted from near $50 to $32. Longs who blinked missed their chance to get out. They are trapped and should price begin to slip, I imagine they will be extremely motivated to sell.
*
And finally, let's look at the Standard & Poors 500 (SP-500) first with a weekly chart then conclude with the daily chart.
As I believe we are now heading into the next major down leg of the secular bear market, a peek at the previous down leg may be instructive.
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I think a decent case can be argued that a head and shoulders pattern existed at the top of the previous cyclical bear leg in latter 2007. What followed in early 2008, as we all know, was nothing short of brutal.
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Perhaps coincidental, but I can envision another head and shoulders pattern setting up at the present time. Price is likely to rebound soon but I seriously doubt it can be sustained - particulary with the conclusion of QE2.
This daily chart hypothesizes that a rally of about 2 weeks may occur next. For what it's worth, that would place the left and right shoulders exactly 9 weeks apart from the head. Don't you love that symmetry?
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My TSI Trading record has been updated to reflect my purchase of ZSL.
Saturday, June 11, 2011
Gold, Silver, Miners, Stock Market and the US Dollar
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Today, June 11th, is the one year anniversary of The TSI Trader. Hooray! I started this website last summer when my summer vacation as a public school teacher began with utterly no clue as to what I would write about, other than my passion for the True Strength Index (TSI) indicator, and had no idea how many truly remarkable people I would be blessed to befriend. To all who have read and to all who have written to me I offer my deepest expression of appreciation for the contribution you have made to my life. I look forward to sharing a new year of adventure, conquest and conversation with you. May we all enjoy this journey together and be a selfless help to one another.
*
As I have not posted anything for a while I guess the best place to start today is with an overview of where the various markets appear headed. For each investment instrument I have prepared a two pane chart - the left side being the daily chart and the right side is the weekly chart.
*
*
Our first chart will consider gold.
*
Click on any chart to ENLARGE
*
Gold has held up remarkably well since reaching its all-time high of $1577 in early May. In fact, gold came close to regaining that high just this past week. But to be very blunt, the party for now is over.
*
On the weekly chart we see that even if gold had been able to regain the all-time high of $1577 the height of the TSI would have created a glaring negative divergence with respect to price. The counter rally of the past 4 weeks was doomed from the start and now it is virtually over. A break of the TSI trend line on the weekly chart (green line) will confirm this. A ZERO crossover of the TSI on the daily chart will also confirm this. It is much clearer to me now that the D-wave of gold's ABCD repetitive wave pattern has begun.
*
*
Next let's consider silver.
*
This chart is fascinating and frankly, down right scary. On the daily chart we note that last Friday's action has just barely given us both a TSI trend line break sell signal and a bearish ZERO crossover. Not good news for silver.
*
But what I find scary is the weekly chart. Silver price has formed a pennant and will break out of it, either upside or downside, in the next week or two. Pennants are quite reliable patterns that usually mark the midpoint consolidation price of a larger trending move. In this case, silver began its bearish move at $50 with a now defined midpoint consolidation price of $36. As the first half of this trending move has been a $14 drop in silver price, this projects a final completion of the pattern with silver reaching $22.
*
The TSI on silver's weekly chart is sickly hovering just below ZERO. Any price movement at this point will send the TSI into an immediate downward trajectory and certain fatality. If one is interested in playing this setup with something like Proshares Ultrashort Silver ETF (ZSL), I suggest one wait to see how the price pennant breaks and keep an eye on the daily TSI to make sure it is continually falling below ZERO.
*
*
Next up are the miners - Amex Gold Bugs Index (HUI--X). Forgive me for being so bearish today with my assessment of things, but this chart, too, just looks bad.
*
First of all, the weekly chart reveals that the price uptrend line corresponding to gold's entire C-wave was tested last January but has now been decisively violated. The TSI for both the daily and weekly time frames is below ZERO - that's always bearish. A number of T1 patterns on the daily chart would suggest we are currently making a T1 pattern and only half way to it's completion. (A T1 pattern, btw, is identical in concept as the pennant pattern we discussed in the silver secion above. The difference is that price in a T1 pattern does not make a pennant). And finally, there is no TSI trend line break BUY signal likely for weeks and weeks into the future.
*
An aggressive way to play this setup would be to buy the Direxion Gold Miners Bear 2X ETF (DUST).
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*
The SP-500 has not been doing so hot for the past 6 weeks, as we observe a string of recent red candles on the weekly chart. However, I would caution that the time to play this aggressively has probably passed for now. On the daily chart the TSI is on the pavement indicating that price is oversold and there is a positive divergence in place (lower low in price, higher low on TSI) suggesting a bounce is forthcoming and very soon.
*
The other thing on the daily chart that should make aggressive bears think twice is the 200 dma which is just 15 points lower. I seriously doubt price will be able to get below that on the first try.
*
The weekly chart, however, gives us an idea of the bigger picture. If Ben does indeed discontinue QE2 at the end of this month, what will hold the market up then? Answer: nothing (in my opinion).
*
The weekly TSI is below ZERO and for as long as it stays there there will be no rejoicing among the bulls. It would be better to have cash in a retirement account than stock. No matter what happens in the next year, at least you would still have all your money.
*
*
And finally, let's consider a daily and weekly chart of the US Dollar (DXY0). The powerful bullish move that began earlier this past week gave us TSI trend line break and ZERO crossover BUY signals. Obviously a new 20-25 daily cycle has begun and we should expect the dollar to be generally higher over the next couple of weeks.
*
This analysis is confirming my bearish thoughts on gold, silver, miners and the stock market, as they have tended to perform inversely in the recent past. I imagine the US Dollar will at least test the overhead price trend line, perhaps more than once, in the next couple weeks. After battering away at this trend line during this daily cycle, I view it as highly likely that in the following daily cycle US Dollar price will scream higher through this trend line - sending gold, silver, miners and the stock market to their knees. To put a general time frame on this I would suggest that the month of July will not be friendly to the bulls.
*
Today, June 11th, is the one year anniversary of The TSI Trader. Hooray! I started this website last summer when my summer vacation as a public school teacher began with utterly no clue as to what I would write about, other than my passion for the True Strength Index (TSI) indicator, and had no idea how many truly remarkable people I would be blessed to befriend. To all who have read and to all who have written to me I offer my deepest expression of appreciation for the contribution you have made to my life. I look forward to sharing a new year of adventure, conquest and conversation with you. May we all enjoy this journey together and be a selfless help to one another.
*
As I have not posted anything for a while I guess the best place to start today is with an overview of where the various markets appear headed. For each investment instrument I have prepared a two pane chart - the left side being the daily chart and the right side is the weekly chart.
*
Our first chart will consider gold.
*
Click on any chart to ENLARGE
*
Gold has held up remarkably well since reaching its all-time high of $1577 in early May. In fact, gold came close to regaining that high just this past week. But to be very blunt, the party for now is over.
*
On the weekly chart we see that even if gold had been able to regain the all-time high of $1577 the height of the TSI would have created a glaring negative divergence with respect to price. The counter rally of the past 4 weeks was doomed from the start and now it is virtually over. A break of the TSI trend line on the weekly chart (green line) will confirm this. A ZERO crossover of the TSI on the daily chart will also confirm this. It is much clearer to me now that the D-wave of gold's ABCD repetitive wave pattern has begun.
*
Next let's consider silver.
*
This chart is fascinating and frankly, down right scary. On the daily chart we note that last Friday's action has just barely given us both a TSI trend line break sell signal and a bearish ZERO crossover. Not good news for silver.
*
But what I find scary is the weekly chart. Silver price has formed a pennant and will break out of it, either upside or downside, in the next week or two. Pennants are quite reliable patterns that usually mark the midpoint consolidation price of a larger trending move. In this case, silver began its bearish move at $50 with a now defined midpoint consolidation price of $36. As the first half of this trending move has been a $14 drop in silver price, this projects a final completion of the pattern with silver reaching $22.
*
The TSI on silver's weekly chart is sickly hovering just below ZERO. Any price movement at this point will send the TSI into an immediate downward trajectory and certain fatality. If one is interested in playing this setup with something like Proshares Ultrashort Silver ETF (ZSL), I suggest one wait to see how the price pennant breaks and keep an eye on the daily TSI to make sure it is continually falling below ZERO.
*
Next up are the miners - Amex Gold Bugs Index (HUI--X). Forgive me for being so bearish today with my assessment of things, but this chart, too, just looks bad.
*
First of all, the weekly chart reveals that the price uptrend line corresponding to gold's entire C-wave was tested last January but has now been decisively violated. The TSI for both the daily and weekly time frames is below ZERO - that's always bearish. A number of T1 patterns on the daily chart would suggest we are currently making a T1 pattern and only half way to it's completion. (A T1 pattern, btw, is identical in concept as the pennant pattern we discussed in the silver secion above. The difference is that price in a T1 pattern does not make a pennant). And finally, there is no TSI trend line break BUY signal likely for weeks and weeks into the future.
*
An aggressive way to play this setup would be to buy the Direxion Gold Miners Bear 2X ETF (DUST).
*
The SP-500 has not been doing so hot for the past 6 weeks, as we observe a string of recent red candles on the weekly chart. However, I would caution that the time to play this aggressively has probably passed for now. On the daily chart the TSI is on the pavement indicating that price is oversold and there is a positive divergence in place (lower low in price, higher low on TSI) suggesting a bounce is forthcoming and very soon.
*
The other thing on the daily chart that should make aggressive bears think twice is the 200 dma which is just 15 points lower. I seriously doubt price will be able to get below that on the first try.
*
The weekly chart, however, gives us an idea of the bigger picture. If Ben does indeed discontinue QE2 at the end of this month, what will hold the market up then? Answer: nothing (in my opinion).
*
The weekly TSI is below ZERO and for as long as it stays there there will be no rejoicing among the bulls. It would be better to have cash in a retirement account than stock. No matter what happens in the next year, at least you would still have all your money.
*
And finally, let's consider a daily and weekly chart of the US Dollar (DXY0). The powerful bullish move that began earlier this past week gave us TSI trend line break and ZERO crossover BUY signals. Obviously a new 20-25 daily cycle has begun and we should expect the dollar to be generally higher over the next couple of weeks.
*
This analysis is confirming my bearish thoughts on gold, silver, miners and the stock market, as they have tended to perform inversely in the recent past. I imagine the US Dollar will at least test the overhead price trend line, perhaps more than once, in the next couple weeks. After battering away at this trend line during this daily cycle, I view it as highly likely that in the following daily cycle US Dollar price will scream higher through this trend line - sending gold, silver, miners and the stock market to their knees. To put a general time frame on this I would suggest that the month of July will not be friendly to the bulls.
*
Thursday, June 2, 2011
Pre-Market SALES -- DGP, NUGT and SIL
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I was able to sell 3 of my 4 mining positions in the pre-market this morning. The 4th position will be sold at the market open.
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I sold DB Gold Double Long ETN (DGP) for $49.25 and a 2.6% gain. Also sold Direxion Gold Miners 2X Bull (NUGT) for $32.88 and a 2.8% gain. And Global X Silver Miners ETF (SIL) for $25.00 and a 1.2% gain. That just leaves Global X Gold Explorers ETF (GLDX) to be sold at the open.
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Overnight the US Dollar made another precipitous 50 basis point fall but gold essentially went no where and is now around $1541. My expectation is that the dollar will rally within a few to several hours and that likely will pressure the precious metals lower.
*
My TSI Trading record has been updated.
I was able to sell 3 of my 4 mining positions in the pre-market this morning. The 4th position will be sold at the market open.
*
I sold DB Gold Double Long ETN (DGP) for $49.25 and a 2.6% gain. Also sold Direxion Gold Miners 2X Bull (NUGT) for $32.88 and a 2.8% gain. And Global X Silver Miners ETF (SIL) for $25.00 and a 1.2% gain. That just leaves Global X Gold Explorers ETF (GLDX) to be sold at the open.
*
Overnight the US Dollar made another precipitous 50 basis point fall but gold essentially went no where and is now around $1541. My expectation is that the dollar will rally within a few to several hours and that likely will pressure the precious metals lower.
*
My TSI Trading record has been updated.
Wednesday, June 1, 2011
Bought/Sold DUST -- Update Tomorrow's Trades (Today!)
This is the 60 minute chart of Direxion Gold Miner Bear 2X ETF (DUST) which I bought today at $40.75 for a little day trade.
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Click on any chart to ENLARGE
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You can see that the TSI (7,4) was sporting a wedge pattern that looked likely to break in one direction or the other. The positive divergence between the True Strength Index (TSI) indicator and flat price gave me the clue the break would be to the upside. And that it did, indeed.
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I have just two more days of school to teach and then I will be able to trade and write and post my thoughts all day every day. I am so ready for that.
Anyway, the last class today was going to take my eye off the computer so I sold my position for $41.50 at that time - just before DUST made a really nice move higher. As you can see from this second chart, the TSI indeed broke through the wedge to the upside and crossed up through the ZERO line in the process. I guess I will just have to rebuy this ETF soon again.
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I am going to recommend that all open trades in Tomorrow's Trades (Today!) be closed tomorrow morning on the open with a market price sell order. These stocks include PLG, AZK, CDY, NGD, HL, EGI, NUGT, DGP, SIL and GLDX.
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Of these stocks, I personally own NUGT, DGP, SIL and GLDX. I will sell each and every one of them on the open tomorrow.
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It would take me several charts and a lot of time and energy that I simply, and unfortunately, do not have this evening to explain in detail why I think it is time to throw in the towel on the miners and the precious metals.
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In brief, on the TSI indicator issue, if gold were to make a new high it would do so as a negative divergence (higher price, lower TSI high) and that would be a sell signal. We reached $1550 today and that was higher than any day in history, except two (April 29 and *THE TOP* May 2). That is close enough for me to say enough.
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Secondly, gold's daily cycle is on Day 18. Tomorrow will be Day 19. For a cycle that usually runs about 20 - 24 days, the clock does not have many more ticks before the buzzer. He who stays on the frying pan too long gets burned, or something like that.
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Thirdly, gold's intermediate cycle is on Week 18. This cycle usually runs 20 - 24 weeks. And, the normal intermediate cycle correction (think Dec/Jan `11, June/July `10 and Dec/Jan `10) usually lasts 4 - 8 weeks. So, if we subtract 4-8 weeks off the weekly shot clock of 20 - 24 weeks, well, the correction could begin at any time or even likely began with gold's peak of $1577 a month ago. The most important point is that we are very late in the intermediate cycle and hoping for great fireworks at this time is not in the cards, in my opinion.
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Fourthly and enough said, if I am wrong, as far as I am concerned, big deal. I have never apologized for taking profits when, with hind sight, it is obvious I sold too soon. If things set up a little better somewhere down the road I will get back up on my horse and ride it. But for now I suspect the next good setup is going to be in another direction - DUST, DZZ, ZSL and so on.
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My TSI Trading record has been updated.
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