Wednesday, June 29, 2011

BUY TZA @ $35.58

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.
My TSI Trading Record has been updated.


  1. So now how do you determin selling point? According to the previous post's chart, it may run up to the 37$ trendline.

  2. Do you also have any stops if by chance it falls below your buy in?

  3. In the upper left hand corner of the homepage is a link to: 6 Buy/Sell Techniques Using the TSI Indicator.

    Just as I used the TSI indicator to tell me when to buy using the *Trend Line Break* technique, I will try to wait patiently until it tells me to sell using one of the 6 techniques. It may be the same technique, or it may be another. I have no clue until I see it setting up.

  4. Mike - I never use stops but it's probably a good idea to try and not lose money.

  5. The WSJ is now reporting -$165M Selling on Strength on SPY? Anyone surprised?

  6. Good call John...worked better than mine.
    What is your exit strategy?

  7. John,
    Thanks for the answer.
    Freestockharts uses Silverlight and my computer seems to have a problem installing it and TOS is not free.
    I will read your techniques and read your blog.

  8. Actually TOS is free but you have to jump through a few hoops. I know a lot of people with Apple computers who run Silverlight and FreeStockCharts - but again, apparently there is some kind of snafu that is just difficult enough to figure out that it discourages most people. Don't you just love the comradery of our two American software giants - Microsoft and Apple?

  9. I have an IBM computer and the Silverlight installer is bungled.
    Strangely (or not), Silverlight is a Microsoft product that I can't install on a Windows 7 platform.
    Way to go Billy.

  10. What's the moving average you have applied to the TSI to monitor this trade for a possible sell signal? I had it set to 5, but I think that might be too low. It already crossed that. I moved it up to 9 after re-reading your buy/sell indicators. Thanks.

  11. whoa - now Selling on Strength of SPY has swollen to -$336M. The boyz are selling to the dummies as fast as they can. This is the 6th day I have seen this in the past 14 trading sessions. And -$336M today is by far the most outrageous selling of them all. Honestly, if I get some iffy TSI SELL signal I may just not sell. I don't see how the ship will float for much longer.

  12. Hey John,
    Great work! and great charts. Thanks for sharing the setup. Now all I need is a chill pill to let these last to trades "Come to Papa."

  13. Is selling on strength the same as money flow index?

  14. I have Silverlight working on my Windows 7. Maybe it has to be installed by the 'administrator' of your machine? Beat's me.

    Moving average - use whatever you want. They all have a time lag. I guess I have used 5 more in the past. I don't use moving averages now.

  15. It gives me an error code of 1603. I mught have to reinstall Windows because it's been 6 months of semi-stable running.
    Visa and MasterCard rocketed due to the fee-cap being higher than expected. This is pushing the S&P a bit higher for now.

  16. Wild SOS$ on SPY. We should see a downturn tomorrow but the Feds don't like that.

  17. MrMiyagi, I am using windows 7 but chose to use Google Chrome as my internet browser because the many problems I encountered with IE.
    Therefore I am having no issues with my setup and Freestockcharts. In fact I love the way it works so well.

  18. I signed up for FreeStockCharts and did some reconstructions of your layouts for TZA. Not sure why you edit the settings you do but I'm sure all that will become clear as I follow you along for a while. Got to say it's fascinating the amount of info you can pull with this. Hope I can learn to make use of it all.
    But now a question: I set up the longer time period chart for TZA you used on the first post about the stock. And what I noticed is that when it ticked up it broke through the 200dma. So I'm figuring that what I'll be looking for as a sell signal is a break through the 200dma again. Right? And is it also the case that everything is OK until the 200dma moves below the cost of buying the stock?
    One last thing,I'm guessing that the move down today to 35.54 -- with the TSI below the zero and red candlesticks all the way down would be a sell signal -- except that we're in and expecting an inevitable break upwards?

  19. crackor,
    IE? Who uses that? I love Firefox.
    The problem is with Windows installer, I know that for sure.

  20. Hi John - Forgive me, I tried really hard to understand your question but I got lost trying to reference the 200 dma to something and things only got more confusing for me after that.

    1. What settings did I edit?

    2. The 200 dma is in reference to TZA or SP-500? Which time period? 10 min, 60 min, daily, something else?

    3. I chose to use the TSI (7,4) set on the 10 min magnification to generate the BUY signal of a trend line break of the indicator. It did give me that signal and I bought at $35.58.

    Price then rose 2.56% and peaked at $36.50. Then, price dropped back and the TSI on the same 10 min chart gave me a trend line break SELL signal on the bar that price traded within a range of $35.92 to $35.62.

    If I had decided to take the SELL signal I would have broke even. I decided to keep the trade.

    A couple of days ago I was personally musing whether the dollar had just put in the top of its daily cycle. I assessed it as a good possibility but leaned toward a last run higher.

    On reflection, I think I was wrong and that means the dollar will likely continue generally falling until its cycle low is in next week.

    (Which also likely means I will go under water with this trade, as well as ZSL, until the first week of July).

  21. John, Thanks for the fast reply. Sorry I lost you. Let me try again. As I looked at the chart of TZA I noticed that when it broke upwards on June 22 it went above the 200 moving average line (that's shorthanded 200dma right?) and then dropped. Same thing happened to a smaller extent on the 23 but more noticeably on the 27th which was the last time the stock broke through the 200dma. So with that in the rear view mirror I was trying to see if I would be right in saying that if it breaks upward again, it's likely to push through the 200dma line and that when it does that, it would be a signal to sell. Or not???
    After that I was just musing that if you bought at 35.58 it would not be a good thing if the 200dma dropped lower than 35.58 because that would mean that you would still lose even if it broke out. Or am I speculating through my hat here and asking really stupid questions.
    Sorry if I am.
    And again, thanks for the reply.

  22. John -- you and I may be on different planets and if we are, that's OK. I can handle that.

    Today's 200 dma on the TZA daily chart closed at 48.48. That is light years higher than any TZA price reached between June 22 and today.

    My guess is that you are referencing the 100 dma. It closed today at 37.78 and did indeed meander around price in the manner you described several days ago.

    Assuming you meant the 100 dma all along, no, I don't think that if/when TZA price closes above the 100 dma any kind of SELL signal is generated. If anything, that is a very encouraging sign of strength.

    Any chance we are on the same planet again?

  23. looks like the 4-hour charts of XAG and XAU each have a nice trendline to break within the next day or two

  24. rckt - indeed, if the dollar continues to fall all night, as it is now, there should be a clear trend line break on the mining index.

  25. Hi John. Thanks for your great efforts. TZA. To me you look at this trade not as a daytrade but rather a swingtrade lasting a week or more? If so, Alexander Elder will demand that you look at a time frame 8 times longer, ie 60min chart or even daily chart to see hints of a trend change. And hereafter you use the 10 min chart to get a good entry. As I see it, you have only considered the 10 min chart for your decision to trade? Or am I wrong. Or do you disagree in his wiews? Hans.

  26. Hans - you ask a very excellent question and one that would benefit us all to ponder. I had never heard what A. Elder thought about this, nor anyone else for that matter, so I found that interesting. In explaining my observations to readers I have concluded that the time frame used is generally reliable for only 4-5X, not 8X.

    Indeed, my using the 10min chart yesterday with TZA proved to only be optimal for 3X, though I was quietly mindful that a BUY signal was simultaneously generated on the 15, 30 and 60 min magnifications.

    And, I was also quietly aware that at each longer time magnification the BUY signal deteriorated in quality when the proximity of the TSI indicator to the ZERO crossover was considered.

    To digress a moment, when a BUY signal occurs with the TSI below or deeply below the ZERO, the odds are less to much less in one's favor. This is because any subsequent lower price movement will guarantee that the TSI moves lower below ZERO - which obviously is bad news. What then happens is that, if one is fortunate, price moves lower but the TSI does NOT make a lower low - thus setting up a positive divergence - another BUY signal.

    But to answer your first question, I was initially trying to model the analysis procedure for a daytrade. But as the trade progressed and did not pan out as well as I had hoped, I made a personal decision that I would just keep the position because I do think it will be very profitable in a week or more, as you have written. I did not *bet the house* on TZA so I can add to this position if I wish. And, as this is an ETF and not futures, options or stock purchased on margin, I need not be in any extreme hurry to unload.

    Thanks again for the excellent question. I absolutely agree that the time frame magnification used to enter the trade will likely have great odds in determining the viable length of the trade. I also think if one uses the 10 min to enter, they should strongly consider using the 10 min to exit, as well.

  27. How much longer can the rally go on without a pause?

  28. How much longer? ha ha That is always the question, isn't it?

    The EURO has just broke up through its overhead downtrend line on price dating back to May 4, and now retreated back down to this trendline. Meanwhile, the dollar has not reached its corresponding uptrend line but is within 25 points of doing so.

    The 4 Hour Euro chart shows a TSI negative divergence and personally, I think this is just wishful thinking - to think that it goes much higher, or the US Dollar much lower.

    Meanwhile, the SP-500 1 hour TSI has made a clear negative divergence and the indicator is beginning to lean like the Tower of Pisa towards the TSI trend line I identified in the post, 'SP-500 Cover Your Ears'.

    I knew all along that this trend line would have to be violated for a good longer term trade. We're reading 0.78 now. Something around 0.73 would put the TSI right on the trend line. If/when it falls through that I will probably buy more TZA.

    Silver and gold have moved lower in the past 12 hours and considering the weakness in the Dollar, that rather surprises me.

    Also interesting, there has been no SPY selling on strength so far. That can be interpreted lots of different ways, however.

    Anyway, the bigger picture, as far as I am concerned, is favorable.

  29. John,
    Looks like the move up from 131 to 132 on the SPY resulted in a lower TSI reading on the hourly chart (0.93 vs. 0.83). That's bearish, yes? Also interested in the discussion about chart lengths. What are the standard time lengths of future moves that are indicated by various charts, i.e. weekly, daily, hourly, 10 minute, etc. ?


  30. Hi John,

    Are you planning to sit tight for TZA to recover or cut losses?

    The market just rises strongly every day this week!


  31. Hey John,
    I'd love to hear your thougths on this mornings doings. Are we seeing a short squeeze in the S&P? I'm getting murdered times 3 in my TZA position. Thanks Adam

  32. Hi Fung and Adam,

    Overnight the dollar essentially reached its uptrend line and bounced strongly. Now it appears traders are hell bent on retesting that trendline again. So this, in the mean time, has given stocks an excuse to rally further.

    74.505 was the overnight low in the dollar. Now the dollar is traveling south and at 74.66 (Sept DX). So another 15 points down and we'll see what happens. I'm just watching in the mean time.

  33. Thanks John, I appreciate your insight and wisdom. Adam

  34. Would you buy more TZA at this point John? S&P is more overbought than 3 days ago.

  35. MrMiyagi - I am watching like a crook outside the jewelry store. :)

  36. All indicators pegged in overbought for S&P (SPY) although I know they can remain there for long, given the economic state this might come tumbling down.
    I can't be convinced that "smart money" would stay in at these levels and past week's action.

  37. John,

    I was with you on the TZA buy a couple of days ago, and took a position. I'm now beginning to think that it's time to sell and chalk it up as a loss. The 10 minute trendline on the TSI broke, but the hourly only came close to breaking it's trend, and still hasn't while attaining even higher TSI numbers. Meanwhile, the TSI on the daily chart is nowhere near breaking its trendline. Nor is it up in nosebleed levels relative to recent action. Based on all of that, it seems to me that the overall trend is up and that in the very short-term there may be a correction in the uptrend. If that's the case, then the best action is to wait for the hourly numbers to work in our favor and sell the ensuing short-term rally and cut our losses. Would love to hear your comments.


    P.S.: Love the blog, keep it up!

  38. Thanks Jeremy for the encouragement and sorry to hear you are under water on TZA. I think I am -7% at this point and I must say this last couple days was quite a surprise. Judging by the smart money that was selling on strength days ago I guess a few of them are surprised too.

    The dollar ended up right above its uptrend line and is now due to bottom and begin a new cycle. But maybe it slices right through that uptrend line and continues lower for some more days. That would be bad news.

    Most of the time these sharp rallies come back to test the 50% retracement which, in our case, would be about where the sp-500 50 dma is located. About TZA = 36.

    I'm going to give this some more thought and may decide for myself to see what the dollar does the next few days and also assess how the market reactes. It's very possible that I will decide to sit out, try to buy more if I can spot a turning point and go that route.

    I did not put my life savings on this trade so a drawdown is not pleasant but OK. For sure, "when in doubt, just get out" is a good way to sleep better at night and come back the next time with a little less steak on the table.

    I hope I helped you Jeremy. Apologies, again.

  39. Important to keep in mind that the dollar trades inversely to the Euro on which it is largely valued (58%).$USD,$xeu
    The dollar's recent so-called weakness has little to do with the dollar and everything to do with the Greek "solution." The Greek rally (and dollar weakness) is likely to be short lived with the realization it does not solve the Euro's underlying problems. That may explain why the PMs & miners broke away from the dollar yesterday and took a dive.

  40. Douglas - your thinking makes sense to me. Thank you. I am inclined to think the dollar will now linger then bounce off its uptrend line, having completed its daily cycle in 18+ days, and that should put some hesitation in the stock market and send gold to complete its intermediate cycle correction.

    These are very strange times. Why in the world has the SP-500 rallied up 80 points in 6 days in the face of QE2 ending? That makes absolutely no sense to me. Unless, of course, QE2 is not ending. Hummmm......

  41. Wasn't the release of some of the oil from our nations "emergency reserve" a form of QE? I suppose we will be replenishing the reserve at a later time at higher oil prices which will be another government policy supporting "big oil".

  42. Loren -- your point is, if I may say so, BRILLIANT! (Now why didn't I think of that, first?)

    Absolutely this should be thought of as another form of QE. How could it not?

    And this line of thinking could go a ways down the road towards explaining the stock market rally - if energy costs are magically and instantly lower, corporate profits will be magically and instantly higher. Duh!

    Gold has dropped from $1550 to near $1475 in the past 7 sessions. Meanwhile HUI (gold miners index) is literally unchanged at $515. If oil price helps stocks in general, it most definitely helps miners in particular.

    Apparently the Federal Reserve Bank of St. Louis thinks there is going to be a whole lot of money printing, giveways, whatever, in our *future*:

    Such honesty is a bit uncharacteristic and makes me wonder what they know that the rest of us do not know.....yet.

  43. Hi John,
    Love the site, check in every day to read your thoughts, appreciate your humour too. I see last week Aubie Baltin was calling a 200-300 increase in the Dow due to options expiry. Not sure how relevant this is to recent discussion on the s&p, just thought I’d mention it anyway.

  44. John -

    Even though QE2 is "officially over," the Fed is continuing to purchase Treasuries with the proceeds from "maturing debt it already owns" - up to $300 billion in the next twelve months.

    Nothing is really changing short term. My guess is we are going to see the squirrely behavior of the markets continue for some time, with possibly even a short term bull trend like we are seeing now.

    Best bet is probably short term target trades, much like you have been presenting. Personally, I have continued to make money on the metals (or the inverse ETF's) and miners . . . using the TSI to pick the buy and sell points of course! They're roller coasters, which suits me just fine . . . . "buy wholesale . . . sell retail . . . repeat" . . . . where have I heard that before?!?

    Thanks again for a really fun blog . . .


  45. Hi John,

    I use thinkorswim but have got freestockcharts working on my computer. As far as the TSI is concerned is there any reason to use one charting program over the other? I'm somewhat fluent with TOS and would rather just stay with it rather than have to learn freestockcharts. Thanks for all you do.

  46. Trevor - well, I'll say this: I have at least 50/50 odds of being right and I'll bet Aubie Baltin does too.

    Phil - Nothing makes me happier than to hear that someone is successfully using the TSI to beat the market. My congratulations to you and everyone else who is experiencing TSI success!

    Bruce - I cannot think of a compelling reason to use one over the other. I like the 24 hour a day futures data from TSO, and their programable indicators, but other than that, it's a coin flip. Thanks for saying thanks.

  47. John,

    Curious on your views with the jump that past couple days. We are still above the 150dmva for gold and above the 200dmva for silver so viewing this from past corrective action, IMO it would be premature to assume the summer doldrums are over but am curious what your seeing.

  48. Hi John, this bounce on silver now may be the last opportunity for zsl entry?
    Thanks a lot for all of your work

  49. Hi John
    Please give us some insight on ZSL.It has corrected today owing to some strength in silver. Is this correction an opportune chance to buy ZSL???
    Thanks in advance for your comments/analysis.

  50. Dan - It's a puzzling situation at the moment, that's for sure. The dollar has made a swing low today and that suggests its daily cycle concluded yesterday on Day 21 with a bullish right translated top occurring on Day 16. Perfect. One would now expect the dollar, beginning a new cycle, to start to power higher, putting pressure on the precious metals and stock indexes.

    But gold today also made a swing low and that suggests its Daily cycle concluded 2 days ago on Day 14 with a neutral Day 7 top. One would expect that gold and the precious metals, having begun a new daily cycle, should power higher. And for the past couple of days, they have.

    But the rub is that I have never seen a gold daily cycle that lasted just 14 days. Either this is a first (unlikely, but I guess anything is possible) or gold's recent strength is simply a fake out.

    TC and Anon - well, fwiw, I am going to hang on to my double position and see what happens. This is a really unfortunate way to trade - I don't like being in a position under water .... but who does?

    The TSI suggests to me that the dollar has bottomed. But it is much less clear that either gold or silver has topped. Gold is presently testing its 50 dma for the 3rd time in 5 days.

    With what I see right now, there is no way I am going to buy more TZL. The situation needs to clear up first.

  51. John,

    Thanks for your response. If you take a look at the IT correction last year in July we also had a $20+ bounce around July 20th after going through it's 75dmva only to have it roll back over and fall $50 in the next 3 days and mark the final bottom at the 150dmva so there is has very similar similar action the past. Would really hate to sell my positions on a day like today anyways.

  52. Hi John
    thank you so much for your comment on ZSL. I would appreciate your kind endeavours to update us once the situation clears up and becomes more definite.Unfortunately i do not know how to use TSI but i religiously follow your comments and trades.
    thanks once again for your kind efforts and updates.

  53. S&P exhausting finally? Portugal might play a bit on the markets here?
    Who knows anymore!

  54. Dan - yes, I hear you. Well, gold and silver kind of have a mind of their own - which is both good and bad. Sometimes these things are short covering rallies and when everyone is cleaned out of their positions the thing falls. Here's a toast to that idea.

    Anon - Wow, I appreciate that you read my website. Thank you for that. Silver has been on quite a roll today, but it has made its first negative divergence so that is a good sign for ZSL faithful. Problem is that signal is on the 5 and 15 minute charts and well, that doesn't usually mean too much.

    If silver were to get down to around 35.30 in the next hour or so, it could get interesting (in a favorable way).

  55. Is the S & P a long or a short?

  56. We might be really on the wrong side this time. The problem is not only gold and silver is going up, oil and all the other commodities are all going up. That probably indicates somehow dollar will go down. Today's dollar going up could be fake. The dolloar index line developed a clear negative divergence for both TSI as well as MACD. Does that mean that the dollar most probably will drop further in short term. Dollar cycle could extend to a longer period. That looks normal based on its history.

  57. Hello John,

    What are your thoughts on the USD ? It's forming a nice pennant.Bounced off the support line and making it's way toward the resistence. Could break either way. I'm betting on the upside.

  58. Duke - thanks for your question. I just wrote a new post and perhaps it will let you decide for yourself. I hope it does, anyway. For myself, I have not made up my mind.

    TiKi - The USD troubles me. It looks OK on the chart but everything around it seems to be behaving like it is going to crash.

    Anon - thanks for sharing your thoughts. I tried my best to explain my thoughts in the new post. At this moment things are about as clear as mud to me but I can see some resolution to that fairly soon, thank heavens.