Tuesday, January 31, 2012

BUY CGR @ $1.41

Yesterday I decided to quadruple my position in Claude Resources Inc (CGR) at $1.41 per share. Selling volume, though persistent, appears to be nearly extinguished. 

Click on the chart to ENLARGE

My TSI Trading record has been updated.

Saturday, January 28, 2012

Bought LSG @ $1.47

I bought shares in another Canadian gold miner yesterday. This one is Lake Shore Gold Corp (LSG) which trades on the AMEX exchange. My purchase price was $1.47.

This first chart is a weekly of LSG and uses the slower 'trending' setting of the True Strength Index (TSI) indicator set at (25,13). The TSI rendered three BUY signals which I regard as strong confirmation this stock has turned the corner on its downward momentum and should see better days ahead soon.

Click on any chart to ENLARGE

The next chart is a daily and compares the price performance of Lake Shore Gold (LSG) with gold (XGLD) and the Junior Miners ETF (GDXJ). Here we see the familiar TSI BUY signals, as on the weekly chart above - trend line break, positive divergence and ZERO crossover - and note that this stock has severely underperformed both XGLD and GDXJ beginning last May, 2011. We also note that Lake Shore Gold now trades at just 60 cents on the dollar with respect to its book value.

I have done several hours of due diligence to learn what explains the sky dive from $4.50 per share to $1.05 in the past 9 months. The company has several mines in Canada with one that went into production beginning January 2011. The expectations for the amount of gold they could process were lowered by the company at about this time and that triggered several analyst downgrades. Add to that the general swoon one can easily see in the GDXJ beginning last May and the recipe for price to move to the opposite extreme was put into action. 

My interest in this stock begins with its ridiculously under priced stock market valuation and is sustained by the technicals (TSI) that suggest it is a candidate for price appreciation in the near future. Also, the current book value of Lake Shore Gold is $1 Billion and it began trading on the AMEX exchange last August. 

Price projections are usually tough to get real excited about because they are often overly optimistic, or so my experience has led me to believe. But, for what its worth, here is what the 11 analysts who follow this company think about its prospects for future price appreciation (Jan. 26, 2012).

Thursday, January 26, 2012

Bought CGR @ $1.46 - CDY Update

First a brief update on Cardero Resources (CDY). I introduced this stock to readers on December 26 when it was trading for 95 cents. Though I did not purchase CDY (I set a limit price that was never hit) I am very pleased that many readers did buy the stock, as it closed today at $1.53. This daily chart updates the stock's subsequent performance and highlights what can happen when the overhead resistance of the 50 dma and 200 dma are overcome.

Click on any chart to ENLARGE

Today I purchased Claude Resources (CGR) for $1.46 per share. Having missed the strong run of CDY I decided to just get on board Claude Resources and be patient. Let's begin with a look at the weekly chart.

I've looked over a couple hundred miner charts to find this one. I was impressed with the cup with handle pattern and the recent/current retest of the handle. In a really ideal environment, such as I think is now developing in the mining stocks, the retest that pulled price down from $3.00 to nearly $1.00 in the space of a single year could act like a sling shot - energizing upward price movement when selling pressure is finally exhausted. 

This chart of daily price movement shows that CGR currently has some of the same challenges as CDY had when I brought it to your attention. That is, overhead 50 dma and 200 dma resistance.

The stock has made it up through an initial price trend line of resistance just this week, but there are a couple others waiting overhead. The True Strength Index (TSI) indicator shows that sometime before the end of February we should have a break out of significance, up or down. Should price be able to navigate through the next 50 cents of landmines - up past $1.90 - there will be little if any resistance from there on, whatsoever.

If we take a look at a closer view of the daily chart we can see that CGR has some positives going for it at the moment. Two BUY signals have been given by the TSI - a trend line break and a ZERO crossover. Additionally a stealth positive divergence has been building for a number of weeks as price seems to be consolidating and at last dissipating the last of the downward momentum of the past year. Today we had our first test of the 50 dma and it's not surprising to see it fail on the first try. But I am quite sure there will be more attempts.

You may have noticed the earnings projections for Claude Resources that I put on a couple of the earlier charts. I found it nearly impossible to find another stock with more explosive projections: 2010 2 cents, 2011E 10 cents, 2012E 21 cents and 2013E 30 cents.

CGR has a smallish number of shares outstanding, with 164M. It is a Canadian company with all of it's mining operation in Canada. And best of all, for me anyway, is that it is currently priced at just 1.4X book value. That's cheap. There are a several other AMEX miners that trade with a lower price to book value ratio - CDY, KGC, AUMN, GSS, GBG, BRD - but the estimated earnings of these did not impress me as favorably as CGR.

In closing, here are a couple tidbits from my study. The first is from The Motley Fool (11-17-2011) and provides an overview of Claude's business/operation. The second tidbit shows that despite the stock's continual slide over the past six months, large institutional buyers have continued to load up on CGR.

Go get 'em!

Wednesday, January 25, 2012

The MouES Bit Too Hard - Covered ES @ $1322.50

I have a certain tolerance for pain when trading and when it is reached I get out of the position and move on. Today the MouES (E-mini S&P 500 Index Futures ES) bit me repeatedly - until it reached my tolerance level. Then I covered my two sold futures contracts with a buy at $1322.50. 

I had a number of very excellent trades earlier in the month and decided to define my tolerance level such that it would not allow those trades to go entirely for naught. So, if this should be my final trade of January (unlikely) I will conclude with a very modest 3% gain in my account value for the month of January 2012.

Here is the daily chart of ES as of a short while ago.

Click on the chart to ENLARGE

Yesterday I spent a few hours studying the S&P 500 price movement since the March 2009 low. The takeaway for me is the similarity of this rally with the fall 2010 rally. In that case, rather than the daily cycle bottoming on Day 35-40, it bottomed on Day 59 - clearly stretched in response to QE2. 

But we don't have QE3 to account for current price action. Or, do we? 

Is the FED printing money to 'loan' to the European Central Bank (ECB) at 0% and we don't know about it? Maybe Saudi Arabia is selling oil to China for Chinese currency - rather than US Dollar currency? Maybe there is huge liquidation of accounts in Europe that is being first converted into US Dollars (which would be US Dollar bullish) but then invested in our or other stock markets (which would be US Dollar bearish)? Or something else having to do with credit default swaps (CDS) between the US and Europe?

Or maybe I am just being paranoid and the overdue daily cycle for the S&P 500 is just a little late arriving this time. At this moment that explanation seems (to me) about as likely as Santa Claus visiting my chimney on December 25 or 26 and saying he forgot what day it was, but I guess it is possible. 

In any event, the TSI is now sky high, price is at the very top of the 3 week price channel and the downtrend line from 2007 is still overhead. The FED meeting is over and I would think that the ES will go into a profit-taking correction soon. 

Sunday, January 22, 2012

The Mother of All Trend Line Breaks (?)

With the Sunday overnight trade about to begin in the Asian futures market, how about we take a look at what could be the mother of all trend line breaks this week. Yes, I'm talking about the Standard & Poors 500 (SPX). We'll look at a couple of daily charts that should frame exactly what is at stake and take a guess as to how this intriguing question will soon be resolved.

I created a new indicator this weekend and it is shown in the lower indicator panel of the SPX daily price charts. The output of this indicator shows us the relationship between the daily price of the SPX and its 50 day moving average (dma). A reading of ZERO means that the SPX and its 50 dma are the same. Positive readings are the percentage the SPX is above the 50 dma while negative readings are the percentage the SPX is below its 50 dma.  Also, positive readings differ in color as the SPX rises above its 50 dma.

This first chart covers the past 3 years and begins just before the historic 666.79 March 2009 bottom. Additionally, I have identified the daily cycle lows (DCL) which are typically 35 - 40 trading days apart and the intermediate (weekly) cycle lows (ICL) which are generally 5-6 months in duration.

Click on any chart to ENLARGE

The things I note about this chart is that a daily cycle low (DCL) is now due. Also, it's fairly unusual for the SPX to exceed its 50 dma by 3% (magenta), quite unusual for a reading greater than 4% (dark blue) and 5% has been a very rare reading for the past 2.5 years - in fact, in the most recent 2.5 year time frame I can count only 3 such occurrences and each lasted a matter of a single day. 

By the way, we nearly reached the 5% mark this past Thursday with a SPX close 4.76% above its 50 dma.

So, here is the trend line that all eyes are on. It is derived by connecting the 1576.09 high achieved on October 11, 2007 with the highs achieved in April and July of last year, 2011. 

We are very close to reaching that trend line. Something in the neighborhood of 1330 would be a break out. Heck, that's only 15 buck higher than last Friday's close of 1315.38. That does not sound like much, does it?

So we slice right through 1330 and keep heading to 1400, maybe to all-time highs and rival 1576.09 by summer. Kewl!


I think all the profit taking that stopped the SPX in April and July of 2011 is about to repeat, leaving the daily cycle to top and go into its timely sky dive. Additionally, those two runaway rallies since 2009 went by the name of QE1 and QE2. My hunch is that we need a QE3 to inflate the stock market so it will blast up through the line of resistance overhead. I have not heard that QE3 will be announced, nor do I think it will be announced at this Tuesday's Ben speech. 

But 4sure - if Ben does announce something like QE3 I have no doubt we will see the mother of all trend line breaks.

Have a great week!

Wednesday, January 18, 2012

4 Hour Dollar Chart Reveals Imminent SP-500 Correction

I was looking at the US Dollar Index ($DXY) 4 hour chart this evening with my favorite True Strength Index (TSI) indicator set to (7,4) and I began to notice the occasional but very severe down spikes in the TSI over the past 8-9 months. These unusually severe readings are, of course, temporary periods in time when the US Dollar Index has come under extreme selling pressure and downward momentum is incredibly and unsustainably intense.

But just looking at this chart really did not tell me much more.

Then I got to wondering. How do these down spikes compare with a chart of the S&P 500? I mean, is there any correlation between the two? Could these extreme and unusual selling episodes in the US Dollar Index possibly tell us something about the movement of the stock market?

So, being the researcher type that I am, I dutifully wrote down the meanest looking down spikes noting their dates, hour and TSI reading. Then I began to locate these dates on a daily chart of the SP-500 - then I recalculated the stock market's daily cycles.

Somewhat to my amazement, there it all was in one easy to grasp picture. The down spikes were not random after all. 

Each daily cycle had just two of these critters, with the second one coinciding within days, if not hours, of the beginning phase of the journey into the final cycle low. 

Click on the chart to ENLARGE
The most severe reading was recorded on July 26, 2011 at -0.86 (far left daily cycle rectangle). The second most severe reading occurred today with a measurement of -0.81 (far right daily cycle rectangle).

As we are on something like Day 35 of the current daily cycle and with the TSI reading of an unusually severe sell-off in the US Dollar Index occurring today I have no doubt the stock market is about to take a nice nose dive. 

The other thing I would mention is the size of these daily cycle finales. I don't see one on the chart any less that 100 S&P points. Do you?

Thurs. Jan 19 
2:30 pm est

The current reading is not -0.81 as last evening, but -0.89. This is incredible selling pressure.
I think if the US Dollar's sellers put any more logs in the fire the iron pot belly will begin to melt. 

ES, GC + SI - Riding the TSI Teeter-Totter

You can probably remember those good old days when you and your friends would head down to the local park and play on the teeter-totter. I sure do. And my memories of watching my children discover the joy of riding a teeter-totter, remembering their laughter and their screaming back and forth at one another is very precious to me as well.

The topping process in the stock market is much like the teeter-totter, it seems to me. Using the True Strength Index (TSI) indicator to observe the up and down swings of momentum as price begins a new rally, continues to rally then reaches an expiration or temporary peak, can be seen as an easily understood and familiar teeter-totter ride.

This post will look at three of our favorites - S&P 500 Emini Futures Index (ES), gold futures (GC) and silver futures (SI) - and use the TSI to examine the teeter-totter experience of a rally that, as always, needs to take a break before beginning anew.

Let's begin with this 4 hour chart of ES. Notice the up and down swings of the TSI - much like a teeter-totter - as this current rally has unfolded.

The teeter-totter is great fun but also requires lots of energy to be expended. The TSI indicator shows us that at some point - like the point where we are right now, as a matter of fact - fatigue begins to set in. The highs in the TSI indicator begin to not reach as high and the indicator drifts lower and lower, like a hot air balloon running out of umph, towards the ground. The ground, in this case, is the trend line break (green line) and the ZERO crossover (red line).

Another observation of this teeter-totter characteristic can be seen in this 4 hour chart of GC. Here we observe that as this rally has continued, the length (measured in terms of time) of each upswing shortens. It is indeed like watching children play on a teeter-totter. The initial burst of excitement yields a lengthy and robust time of play, but as time goes on fatigue begins to set in and each following burst of enjoyment becomes shorter and shorter - until the kids just get off the thing and take a rest.

And how about a third and final look with a 4 hour chart of SI?

I hope you enjoyed your time at the park today!

Tuesday, January 17, 2012

Oh Wow! I Just Caught Another MouES ($1300.0)

I had my trap set to try and catch another mouES overnight and surprise, surprise - I caught one. Not another mouse like the kind with a long tail and cute little ears. No, this one is the kind that is spelled ES - as in E-mini S&P 500 Futures Index. Actually, as soon as the mouES was captured I sold him to someone else for $1300.0 with a promise to buy the cute critter back at a later date. 

Here is a daily chart of the ES futures index.

Click on any chart to ENLARGE

It kinda looks like this mouES is never going to stop running higher and higher. Well, I agree. 

But all mouES have to stop for a drink of fresh water and a nap sooner or later ......

Next, a 4 hour chart.

Still looks good for the mouES, wouldn't you say?

I guess if I have a card up my sleeve, besides knowing today is Day 35 of a daily cycle that usually bottoms somewhere between Day 35 - 40, it is this next chart.

This is a 4 hour chart of the SP-500 and it shows the True Strength Index (TSI) indicator's closing whereabouts from last Friday afternoon's session. If the mouES continues to run another couple hours until the NYSE opens we will get an impressive gap opening in the SPX. And no doubt the TSI indicator will take a healthy pop higher, as well.

But how high will it jump?  From 0.07 clear past 0.35? 

Obviously, I am skeptical. And besides eye-balling the possibilities, I have seen this drill before. The futures get run up over a (long) weekend, the SPX opens with an impressive gap higher, creating a negative divergence SELL signal on the TSI, then price gets (for some reason or another) clobbered.

We shall see.

Sunday, January 15, 2012

Gold: Next Direction

With overnight Sunday trading of gold futures set to begin in a matter of hours I offer this post to lay out some of the parameters of the precious metal's current technical situation. We will look at gold through a variety of time frames beginning with a monthly and weekly chart, then progress to the daily and four hour cycle charts. 

It would be gratifying for me to jump to the conclusion that gold has finished its multi-month correction but I cannot do so in good conscience considering the particular set of technical tools I use. A few brave souls (Hubert Moolman, Alf Field and Rick Ackerman), however, have a different skill set than I and have recently suggested gold's low is probably, if not definitely, in the bag. Could be - but I am just not quite so sure.

Our first chart to contemplate is the monthly of the World Gold Index (XGLD). We see that the price of gold has continued on a nice trend line and is presently contained by a descending line of resistance originating from the September high. The True Strength Index (TSI) indicator has been declining for the past 5 months - yielding no clue of an end in sight....yet.

Click on any chart to ENLARGE

Next up is the weekly chart of XGLD which does hint that there may be an end in sight. None of the TSI BUY signals have been triggered decisively, but it sure is looking promising.

Well, the TSI on the daily chart just made me smile.  Not so much because it tells us where gold is going next, but because it did another incredible job of perfectly nailing the recent December 28 low with not one or two, but three BUY signals.

Anyway, I also threw the trending TSI (25,13) magnification on this chart to give us a clue whether this rally was the definitive start of something new - think 'A-wave'.  

Here again, we are close to having confirmation but nothing decisive. If gold were to now immediately turn lower the TSI (25,13), as it is still below ZERO, would also turn lower (perhaps with the lag of a day or two at most). Should this happen it would spring load the slower TSI with a lot of energy that, when unleashed, would launch gold into orbit.

Now for a look at the 4 hour cycles chart of gold. We will begin with a broader view of the last several months then zoom in even closer with a final chart that includes the True Strength Index.

The observations that catch my eye are the top on Day 9 of this daily cycle, the top on Bar 21 of the current four hour cycle and the price trend line break of the daily cycle.

These cycle count readings put us just barely on the 'not so safe side' of left translated cycles. If these tops are not taken out soon I would have to wonder if the $1605.7 level of this four hour cycle will hold. If that does not hold, then possibly the $1523.90 level of this daily cycle will not hold either. And that of course would mean that the D-wave is continuing and the A-wave has not begun.

And as promised, here is the final chart with the TSI having the last word. 

The week ending trade of last Friday saw the True Strength Index yield two accurate trend line break SELL signals (purple dots). The trending TSI (25,25) began to roll over suggesting a possible change in trend direction from up to down. This would be considerably more ominous if the TSI were below ZERO - but as the (25,25) is above ZERO this little bull flag could just be a breather before an advance in price higher.

So the next direction for gold is ...... you got it! I really do not know. But heck, I already told you that in the second paragraph.

Anyway, if you read this far perhaps you have a few new things to keep your eye on this week as you decide for yourself how you will trade the gold bull.

Have a great week!

Thursday, January 12, 2012

TVIX: The Sentimental Dinosaur - RSI and P/C Data

I'd like to introduce you to an acquaintance of mine. I call him the Dinosaur of Sentiment, the Sentimental Dinosaur and just plain T-Rex for short. His real name, however, sounds like T-Rex, but is actually spelled TVIX. And TVIX is actually short for his full family heritage and description which is VelocityShares Daily 2X VIX Short Term ETN (and I thought the names at school were tough to remember). 

Anyway, TVIX is a volatile fellow. He falls in price when people are happy about the stock market - when their 'sentiment' is happy and confident. But when investors get scared and start running for the exits, TVIX gets his toes stepped on by investors - hard - and he jumps skyward like a cat climbs a tree when chased by a big mean barking dog.

Right now TVIX is taking a nap.  Shhhh...... please don't disturb him. Let's tip-toe to a 4 Hour chart of TVIX and see him asleep, but also observe what happened to him the last time investors decided to awake him rudely.

We see he is fast asleep - resting comfortably around the $24 price range. But a day or two before Halloween last fall, when the S&P 500 daily cycle last topped, poor TVIX jumped 67.5% in two days. I heard he had his feet in a bucket of ice for days afterward, trying to get the stampede induced swelling to abate. 

And right now it kinda looks like some investors are starting to nudge him and see if he would like to wake up now. That TSI is just daring him to come out of his slumber. One little slip across that green line may be all it takes to wake him up immediately.

This Daily Chart of TVIX tells us he may have a few more days to slumber. If he is really lucky he may even get to sleep in this Saturday and Sunday. But after that I doubt he will get much rest.

Pleasant dreams T-Rex..... while they last.

What follows are a couple of charts from www.IndexIndicators.com  The top portion of the chart looks at the RSI (10) of the SP-500 and yields a standard deviation calculation of the number of stocks reading over 70. The bottom portion of the chart looks at the Total Put/Call volume ratio and also calculates a standard deviation figure to assess the relative degree of bullish/bearish sentiment.

In both charts we see, mathematically, just what we would expect to see near the conclusion of a SP-500 daily cycle. That is, a high degree of its stocks reading in excess of 70 on their RSI (10) and an unusually low amount of interest in buying puts as compared to interest in buying calls. I mean, if the stock market is going to go up forever you would buy calls, right?

Oh-oh - Two Horses Just Got Out of the Barn (SI + PL)

OK - this is getting interesting. Silver (SI) and Platinum (PL) have opened the barn door and started to run to freedom. The farmer will, without a doubt, start to give chase - with rope in hand - but I think it's too late. It's just a matter of time now until Gold (GC) and Palladium (PA) hear all the commotion and decide to add to the excitement with their own burst to the great outdoors.

What follows are three charts of Silver Futures (SI). A daily, 4 hour and 1 hour. 

Then a chart of daily Platinum Futures (PL). 

The farmer has a big fence around his farm and so the animals are still contained. He'll catch up with them and do his best to pull them to the ground. And at times he will probably succeed. But most likely this is the start of "Something New" and things will never be the same again.

Long live gold's secular bull (and the horses).

Wednesday, January 11, 2012

Sold ES - $1287.25 - S&P 500 Update

About an hour ago I decided to sell a single contract of the E-mini S&P 500 Index Futures (ES) at $1,287.25. I have made a couple of charts to show us where the S&P 500 index is sitting going into this evening's overnight session.

This first chart is simply a daily chart of the ES continuous contract. Of particular interest is the length of the past two daily cycles - 39 and 38 days respectively. The current daily cycle is beginning Day 33 this evening. 

Also, and not shown in this chart, is the fact that in the last 12 months the daily True Strength Index (TSI) indicator (7,4) has reached and then peaked at +0.75 only three times. Each of these occurrences marked the absolute top for price. At this moment the TSI (7,4) is reading 74.24.

This second chart is a four hour look at the ES futures contract. It is normal to expect a daily cycle to break its price trend line before its cycle conclusion is reached. That being the case I would think the S&P would trade down to at least $1250 to meet this expectation.

For those readers interested in learning some of the bare bones basics of futures trading, this ES contract has a leverage of 50:1. For each single point the S&P 500 moves, the value of my position either increases or decreases by $50. 

If I have mistimed this entry and the index rises overnight from $1287 to $1297, I will wake up in the morning under water by $500 (and regrettably, it has been known to happen). Worse yet if I awake and the S&P is trading at $1307 - then I will be $1000 under water (yes, I know about that one first hand, as well. And some others, now that I think about it).

On the flip side, if I have timed this pretty well and hold on long enough to see the S&P take out it's daily cycle trend line around $1247, then I would make $2000.

A last basic: a person "sells" a futures contract if they think price will fall and they can "buy" it back at a lower price. It is very similar to shorting a stock in that regard.

Good trading to you for the rest of this week!

Sold DUST @ $35.99

I was pleasantly surprised to see my position in Direxion's Gold Miner Bear 3X ETF (DUST) rising in the pre-market and after the opening bell. But I had to make the responsible decision to not try and serve two masters - my trade and my class. So I sold.... @ $35.99 ..... and got on with teaching my students. 

My TSI Trading Record has been updated.

A more current look at DUST on this 4 Hour Chart (below) shows some strong BUY signals in place.  Not shown is a chart of the S&P 500 which looks like it is holding up by a prayer - or so says the TSI. Should the stock market begin its daily cycle ending correction soon I imagine DUST could do well, and I may re buy it at some point.

Tuesday, January 10, 2012

Buy DUST @ $35.19

I decided to buy Direxion's Gold Miner Bear 3X ETF at $35.19.   I am playing this on the hunch that this second 4 hour cycle is going to be left translated (already topped at $1641.4) and thus the entire daily cycle will be left translated, as well. This is consistent with my concern that gold may not have concluded its D-wave correction. However, as we are on the fourth daily cycle (if December 29th was not the weekly (intermediate) cycle low), gold is running out of time to fall from the sky - as best I can tell, anyway.

If gold is now able to best the last daily cycle high of $1643.7 it has an excellent chance of making a run to the downward line of resistance drawn from the September 2011 All-Time high through the mid-November and early December highs. That location comes it at around $1695.

My TSI Trading Record has been updated.

Sold NUGT @ $23.40 Pre-market

I sold my position in Direxion Gold Miner Bull 3X ETF (NUGT) at $23.40 in the pre-market.

My TSI Trading Record has been updated.

Monday, January 9, 2012

BUY NUGT @ $21.90

Late in today's trading session I saw enough evidence that gold's current 4 hour cycle was finished and likely to lead to a rally - however short term. With that assumption in place, I purchased shares of Direxion Gold Miners Bull 3X ETF (NUGT) at $21.90.

What follows are three charts:
NUGT at the time of my purchase
GC 4 hour cycles overview
GC 4 hour cycles closeup

My TSI Trading Record has been updated.

Sunday, January 8, 2012

The Triple True Strength Index (TSI) Indicator

This weekend I was musing through my litany of programming experiments that include numerous indicators and all sorts of concoctions and I came across this one - the Triple True Strength Index (TSI) indicator - and as I had forgotten how well it appears to work I thought we could look at it today.

First off, and I have said this many times previously, there is no indicator that is the panacea for getting rich. At least, none of my indicators, anyway. ☺ I do, however, think that indicators can be helpful at putting the odds in one's favor and from that point, risk management is what ultimately separates the winners on Wall Street from the losers.

Anyway, my favored TSI magnification is TSI (7,4). But for a successful trend trading outcome it plays a pretty fast game of tennis. The TSI (25,13) is much better suited for trading trends, but with the caveat that it will give the BUY/SELL signals a bit late. The middle ground, of course, would be the TSI (13,7). And for several years I would have all three of these TSI magnifications separately displayed below price in three separate indicator panels, as I attempted to understand how each worked in relation to each other and with respect to price momentum movement.

More recently, as I have developed my programming skills using the Think or Swim platform, I got the bright idea ☼ of a way to combine all three TSI settings into one indicator. 

And this is how it works: when all three TSI magnifications are rising - simultaneously - the indicator displays a blue ball. When all three are falling - simultaneously - the indicator displays a red ball. And when the three different TSI settings are not moving in the same direction a cyan colored ball is displayed. To add a little contour to the indicator's movement I threw a 7 period moving average on the Triple TSI indicator. And that's it.

So let's see what this looks like. I arbitrarily chose a ticker symbol that I have been watching lately - Direxion's Gold Miner Bull 3X ETF (NUGT) - and made four charts. This first chart is of daily NUGT price movement over the past 10 months.

The indicator seems to work really well for the slower paced swing trader - someone who likes to make a single swing trade every month or so.

Click on any chart to ENLARGE

The next time frame to test the Triple TSI is the 4 hour.

This seems to work well, also. 

The novice TSI user would likely have been confused on the indicator's movement in the latter half of December - mistaking the crossover of the moving average and the indicator's rise as a BUY signal. But it would not have fooled me. HA! That is because I understand that when the TSI is below ZERO, it does not necessarily rise because price is rising. In fact, it rises because the downward momentum is being dissipated as price consolidates sideways. The positive divergence - below ZERO and just after Christmas  - THAT was the signal to pay attention to.

OK - let's look at a 60 minute chart now.

Again, understanding how the TSI works is really important. And I have reviewed the basic "rules" on the chart itself. 

Just for grins, how about we see what the Triple TSI can do with a 1 minute chart. 

For starters, it's obvious that NUGT is not the most liquid ETF on the NYSE. That price action looks like a girl's frizzy hair that has not been brushed for a week. Yowzer!

But seriously, the Triple TSI does a good job for the guy with a fast finger on the trigger. There were somewhat sustained periods where the TSI was above ZERO (red horizontal line). At these times a guy would BUY when the indicator began to rise and SELL when it peaked. And there were other somewhat sustained periods where the TSI was below ZERO. The strategy in this case was to short (or BUY DUST)  as the indicator fell and cover the trade when the indicator began to rebound. 

So there you have it. Another of my many TSI Trader programming concoctions in the never ending pursuit of making sense of the senseless and irrational price movement of stocks. I hope you enjoyed reading this post as much as I enjoyed writing it.

And good luck trading this week!

Friday, January 6, 2012

Sold DUST @ $37.76 - Gold Leaves a New Clue

Click on any chart to ENLARGE
With just minutes left on today's week concluding session I took a look at my position in Direxion Gold Miners Bear 3X ETF (DUST) and hit the sell button. Nothing in particular was wrong with the chart technically, I just felt like taking my marbles and going home for the weekend.

While studying the weekly charts of the World Gold Index (XGLD) and looking at the placement of each ABCD wave, I began to notice something I had not seen before. Ever.

I'll show you what caught my eye with the following three charts of the Gold Index. My training/tinkering with gold's cycles, whether they be the four hour, daily or weekly (intermediate) variety, has included an appreciation for the violation of a cycle's price trend line before its conclusion. This trend line break is not a certainty I guess, but a virtual certainty.

So I got to wondering if the ABCD pattern of gold's secular bull market also exhibited this characteristic. That is, has price in every instance broken the trend line of the ABCD pattern before beginning a new ABCD pattern?

Our first weekly chart is the Gold Index from 2002 - 2005. As you can see, there were three complete ABCD patterns in this time frame and indeed, the trend line of each was broken by price before beginning a new ABCD pattern.

The 2003 pattern saw price come down and touch the trend line during the D-wave. But as we will see in other examples, apparently just touching the trend line is not the characteristic of a completed ABCD pattern. 

Our second chart looks at the late 2004 C-wave top and continues with the 2006 and 2008 specimens. The introductory price movement of the 2006 example was so flat there was virtually no trend line. That is, the A-wave bottom ($410.10) and C-wave bottom ($413.50) were unable to give an accounting of the ABCD pattern's price trend. 

An up sloping price trend line did finally emerge and surprise, surprise ..... it was finally violated by the 2006 D-wave the very week that defined the beginning of the 2008 ABCD pattern.

Also, the late 2004 example, like the 2003 ABCD, found price reach the up ward trend line, but it was not until this trend line was breached a couple of weeks later that the D-wave concluded and an A-wave begun anew.

Finally, let's have a look at the most recent ABCD activities. 

On the far left of the chart is the conclusion of the 2008 example - and again note that price tagged the trend line near the conclusion of the D-wave, but it was not until the trend line was clearly penetrated that this D-wave came, mercifully, to a final conclusion. 

And on the far right of the chart is the parabolic top of 2011 and we note that the trend line of this ABCD pattern has already been touched by price - but not penetrated.....yet

My TSI Trading Record has been updated.