Jul 30, 2018 | EDS, EDS code, Stocks & Commodities Traders Tips
The WinWayCharts EDScode based on Markos Katsanos’ article in this issue, “A Technical Method For Rating Stocks,” is shown below.
Synopsis from Stocks & Commodities June 2018
I’s it possible to create a stock rating system using multiple indicators or other technical criteria? If so, how does it compare with analyst ratings? Investors around the world move billions of dollars every day on advice from Wall Street research analysts. Most retail investors do not have the time or can’t be bothered to read the full stock report and rely solely on the bottom line: the stock rating. They believe these ratings are reliable and base their investment decisions at least partly on the analyst buy/sell rating. But how reliable are those buy/sell ratings? In this article I will present a technical stock rating system based on five technical criteria and indicators, backtest it, and compare its performance to analyst ratings.
!A TECHNICAL METHOD FOR RATING STOCKS
!Author: Markos Katsanos, TASC June 2018
!Coded by: Richard Denning, 4/18/18
!www.TradersEdgeSystems.com
!INPUTS:
MAP is 63.
STIFFMAX is 7.
VFIPeriod is 130.
MASPY is 100.
MADL is 100.
SCORECRIT is 5.
W1 is 1.
W2 is 1.
W3 is 1.
W4 is 1.
W5 is 2.
!VFI FORMULA:
COEF is 0.2.
VCOEF is 2.5.
Avg is ([high]+[low]+[close])/3.
inter is ln( Avg ) - ln( Valresult( Avg, 1 ) ).
vinter is sqrt(variance(inter, 30 )).
cutoff is Coef * Vinter * [Close].
vave is Valresult(simpleavg([volume], VFIPeriod ), 1 ).
vmax is Vave * Vcoef.
vc is Min( [volume], VMax ).
mf is Avg - Valresult( Avg, 1 ).
vcp is iff(MF > Cutoff,VC,iff(MF < -Cutoff,-VC,0)).
vfitemp is Sum(VCP , VFIPeriod ) / Vave.
vfi is expavg(VFItemp, 3 ).
!STIFFNESS
ma100 is Avg.
CLMA if [close] < MA100.
STIFFNESS is countof(CLMA,MAP).
!CONDITIONS:
! MONEY FLOW:
COND1 is iff(VFI>0,1,0).
!SIMPLEAVG:
SMA is simpleavg([close],MADL).
COND2 is iff([close]>SMA,1,0).
!SIMPLEAVG DIRECTION:
COND3 is iff(SMA>valresult(SMA,4),1,0).
!STIFFNESS:
COND4 is iff(STIFFNESS<= STIFFMAX,1,0).
!MARKET DIRECTION:
SPY is TickerUDF("SPY",[close]).
COND5 is iff(EXPAVG(SPY,MASPY)>=
valresult(EXPAVG(SPY,MASPY),2),1,0).
SCORE is W1*COND1+W2*COND2+W3*COND3+
W4*COND4+W5*COND5.
buy if Score>=SCORECRIT and hasdatafor(300)>=268.
Figure 11 shows the summary results of a backtest using NASDAQ 100 stocks during a generally bullish period from April 2009 to April 2018. Figure 12 shows the backtest using the same list of NASDAQ 100 stocks during a period that had two bear markets (April 1999 to April 2009). The average results are similar except that there are fewer trades during the period that contained the two bear markets. Both backtests use a fixed 21-bar exit.
FIGURE 11: AIQ, BULL MARKET. Here are the summary results of a backtest using NASDAQ 100 stocks during a generally bullish period from April 2009 to April 2018.
FIGURE 12: AIQ, BEAR MARKET. Here are the summary results of a backtest using NASDAQ 100 stocks during a period from April 1999 to April 2009 that contained two bear markets.
Jul 13, 2018 | chart patterns, educational newsletters, ETFs, gold
This week it is the U.S. dollar and Gold taking their turns testing critical inflection points.
As you can see in Figure 1, on a seasonal basis the dollar is moving into a traditionally weaker time of year.
Figure 1 – U.S. Dollar seasonality (Courtesy Sentimentrader.com)
In Figure 2 you can see that traders have been and remain pretty optimistic. This is traditionally a bearish contrarian sign.
Figure 2 – U.S. Dollar trade sentiment (Courtesy Sentimentrader.com)
In Figure 3 we see the “line in the sand” for ticker UUP – an ETF that tracks the U.S. Dollar. Unless and until UUP punches through to the upside there is significant potential downside risk.
Figure 3 – U.S. Dollar w/resistance (Courtesy TradingExpert)
As you can see in Figure 4, on a seasonal basis the dollar is moving into a traditionally stronger time of year.
Figure 4 – Gold seasonality (Courtesy Sentimentrader.com)
In Figure 5 you can see that traders have been and remain pretty pessimistic. This is traditionally a bullish contrarian sign.
Figure 5 – Gold trader sentiment (Courtesy Sentimentrader.com)
In Figure 6 we see the “line(s) in the sand” for ticker GLD – an ETF that tracks gold bullion.
I would be hesitant about trying to “pick a bottom” as gold still looks pretty week. But if:
a) GLD does hold above the support area in Figure 6 and begins to perk up,
b) Ticker UUP fails to break out to the upside
Things could look a lot better for gold very quickly.
As usual I am not actually making any “predictions” here or calling for any particular action. I mainly just want to encourage gold and/or dollar traders to be paying close attention in the days and weeks ahead, as the potential for a major reversal in both markets appears possible.
Likewise, if no reversal does take place – and if the dollar breaks out to the upside and gold breaks down, both markets may be “off to the races.”
So dollar and gold traders – take a deep breath; focus your attention; and prepare for action…one way or the other.
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
Jul 5, 2018 | chart patterns, educational newsletters, ETFs, indexes, jay kaeppel, market timing
Here’s a number for you – 88%. Since 1948, over any 10-year period the Dow has showed a gain 88% of the time. That’s a pretty good number. It also explains why we should give bull markets the benefit of the doubt (for the record, if you only hold the Dow between the end of October and the end of May every year you would have a showed a 10-year gain 98% of the time! But this article is not about seasonality per se, so that’s a topic for another day).
Of course, there is a lot of variability along the way, and if you Google “current signs of a bear market” you come up with 4,280,000 articles to peruse. So, few investors ever feel “contented”. We’re always waiting for the “other shoe to drop.”
Some Warning Signs to Look For
#1. Major Indexes
Figure 1 displays the four major average – Dow, S&P 500, Nasdaq 100 and Russell 2000 with their respective 200-day moving averages. In the last few days the Dow slipped a little below its 200-day average, the other three remain above.
(click to enlarge)
Figure 1 – Four major market averages with 200-day moving averages (Courtesy TradingExpert)
Warning Sign to Watch For: If 3 or more of these averages drop below their 200-day moving average.
#2. Market Bellwethers
Figure 2 displays my four market “bellwhethers” – tickers SMH (semiconductors), TRAN (Dow Transports), ZIV (inverse VIX) and BID (Sotheby’s Holdings) with their respective 200-day moving averages. At the moment only ZIV is below it’s 200-day moving average but some of the others are close
(click to enlarge)
Figure 2 – Four market bellwethers with 200-dqy moving averages (Courtesy TradingExpert)
Warning Sign to Watch For: If 3 or more of these averages drop below their 200-day moving average.
#3. S&P 500 Monthly Method
In this article I detailed a simple timing method using S&P 500 Index monthly closing prices. Figure 3 show the S&P 500 Index with it’s “trigger warning” price of 2,532.69 highlighted.
(click to enlarge)
Figure 3 – S&P 500 Index Monthly Method Trigger Points (Courtesy TradingExpert)
Warning Sign to Watch For: If SPX closes below 2532.69 without first taking out the January high of 2872.87
#4. International Growth Stocks
When growth stocks around the world are performing well, things are good. When they top out, try to rebound and then fail, things are (typically) not so good. The last two major U.S. bear markets were presaged by a break in ticker VWIGX (Vanguard International Growth) as seen in Figure 4.
(click to enlarge)
Figure 4 – Dow Jones Industrials Average (top) and previous warnings from ticker VWIGX (bottom)(Courtesy TradingExpert)
Warning Sign to Watch For: Technically this one is currently flashing a warning sign. That warning will remain active unless and until VWIGX takes out the January high of 33.19.
#5. The 10-Year minus 2-Year Yield Spread
This is one of the most misrepresented indicators, so I will state it as plainly as possible:
*A narrowing yield curve IS NOT a bearish sign for the stock market
*An actual inverted yield curve IS a bearish sign for the stock market
Figure 5 displays the latest 10-year minus 2-year spread. Yes, it has narrowed quite a bit. This has launched a bazillion and one erroneously frightening articles. But remember the rules above.
(click to enlarge)
Figure 5 – 10-year treasury yield minus 2-year treasury yield (Courtesy: www.StockCharts.com)
Warning Sign to Watch For: If the 10-year yield minus the 2-year yield falls into negative territory it will flash a powerful warning sign for the stock market and the overall economy. Until then ignore all the hand-wringing about a “flattening” yield curve.
Summary
We are in a seasonally unfavorable period for the stock market and – as always – we are bombarded daily with a thousand and one reasons why the next bear market is imminent.
So my advice is to do the following:
1. Ignore it all and keep track of the items listed above
2. The more warning signs that appear – if any – the more defensive you should become
In the meantime, try to go ahead and enjoy your summer.
Jay Kaeppel
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
Jun 27, 2018 | chart patterns, educational newsletters, ETFs, indexes, jay kaeppel
If an investor were to sit down and peruse the Web looking for guidance regarding the stock market, there is a good chance they would come away bewildered and confused.
So, let’s try to simplify things a bit.
Jay’s Trading Maxim #14: When in doubt, usually the best question to ask is “What is the trend right now?”
There are always a million and one reasons why an investor may feel doubt. But answering that simple question can often lead to a much greater deal of clarity. Like now for instance.
In Figure 1 we see the Dow, Nasdaq 100, Russell 200 small-cap index and the S&P 500. The key thing to note is that all 4 of them are above their respective 200-day moving average, i.e., “right now” the trend is up.
Jay’s Trading Maxim #14a: If the trend right now is “Up”, act accordingly. At least until the answer changes.
Figure 1 – Major U.S. Indexes in Up Trends (Courtesy TradingExpert)
SPX Monthly Trend-Following
I wrote here and here about a simple monthly trend-following method using the S&P 500 Index.
This method gave an “alert” when the S&P 500 went 3 calendar months (Feb, March and April) without making a new high.
The “line in the sand” is the low during this period of 2532,69. As long as price holds above this level, this method deems the trend as still “Up”.
It will take a move above the January high 2872.87 to eliminate this line in the sand. Between here and there there is resistance at 2801.90.
Figure 2 – S&P 500 Index key support and resistance (Courtesy TradingExpert)
I am not speaking in any geopolitical sense here. And I don’t want to sound like the Ugly American. But while the U.S. stock market is “taking care of business” and moving higher, the stock markets of much of the rest of the world are not. And I am not sure if I should worry about this or not.
But for what it is worth, all 4 regional single country ETF indexes that I created (Americas, Asia/Pacific, Europe and Middle East) and follow are not looking terribly inspiring at the moment.
The trend “right now” is “Up”. So enjoy.
But maybe check back again soon. Just in case.
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
Jun 19, 2018 | educational newsletters, ETFs, gold, indexes, jay kaeppel
I suppose a more accurate title would be, “A Bunch of Single Country ETFs, Interrupted”, but, well, that just doesn’t have quite the same succinct simplicity.
I always (always, always) try to make an effort to focus on “the current trend” and to avoid focusing on things that “maybe might prove to be ominous signs in retrospect” or to imply that a certain tidbit of information is predictive when in reality it is mostly just anecdotal. Still, human nature is – unfortunately, in this case – a powerful force. Which reminds me to invoke:
Jay’s Trading Maxim #17: Human nature is a detriment to trading and investment success, and should be avoided as much as, well, humanly possible.
The bottom line is that despite my very own warnings and admonitions, sometimes that pesky human nature gets the best of me.
OK, rather than me telling you what I think, please simply peruse the charts in Figures 1, 2 and 3 and see if anything jumps out at you.
(click to enlarge)
Figure 1 – India, Sweden, Japan, Germany (clockwise); (Courtesy TradingExpert)
(click to enlarge)
Figure 2 – Switzerland, Netherlands, South Korea, Austria (clockwise); (Courtesy TradingExpert)
(click to enlarge)
Figure 3 – South Africa, China, Taiwan, Thailand (clockwise); (Courtesy TradingExpert)
Perhaps you noticed the same thing I did, i.e., a whole bunch of single country ETF’s hitting new highs or testing old resistance and getting rejected. In a number of cases, after appearing to break out to new highs for a period of weeks or month only to fall back below the “line in the sand.”
It’s sort of like the World Cup of Failed Breakouts.
Now here’s the thing. I have displayed a bunch of charts that anecdotally seem to imply something bearish. To spell it out, failed breakouts are often – though definitely not always – followed by something much worse.
So the line of reasoning goes like this, “If the stock market in umpteen countries is failing to advance then this must be a bad thing.”
But the reality is that all these markets have to do is rally and this whole sort of made up area of concern goes away.
Still, until that actually happens I think I will:
a) Enjoy the rally here in the U.S.
It seems like a reasonable plan.
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
Jun 8, 2018 | Charts, educational newsletters, ETFs, gold, group and sector, indexes, jay kaeppel
There are a lot of ways to play this game.
For the record, I am a big believer in trend-following. Picking tops and bottoms with any consistency is essentially impossible (at least in my opinion and/or experience). So from that perspective going with the trend makes a lot of sense. I am also a big believer in relative strength. Much evidence over the years suggests that buying what is “already moving” is a very viable approach to investing. Other studies have demonstrated pretty clearly that you are generally much more likely to succeed by buying stocks making new highs than by buying stocks making new lows.
These approaches make good sense and they work very well over time. Despite this many (most?) investors still feel those pangs to “buy low” in hopes of getting in early and riding a major trend. And the truth (I think) is that this can work too, if done correctly.
Like I said, there are a lot of ways to play this game. But there is a definite “right” way and “wrong” way when it comes to “buying low.”
Buying Low (The Wrong Way): Buy things are plummeting or that have recently plummeted.
The Right Way (The Right Way): Buy things that have, a) plummeted, b) stopped plummeting and, c) have since been moving sideways for some period of time.
Last year I wrote about a “Buy Low” portfolio that I had concocted at the time. Unfortunately, several of the ETFs involved have since ceased trading. So in this piece I will introduce my updated “Buy Low” portfolio. For the record – and as always – I am not “recommending” this portfolio. It is essentially an experiment in one alternative approach to investing.
The “Buy Low” Portfolio
The Buy Low Portfolio consists of the following ETF’s and ETN’s:
CANE – Tecrium Sugar
JJOFF – Coffee Subindex Total Return
DBA – PowerShares Agricultural
WEAT – Tecrium Wheat
GLD – StreetTracks Gold Trust
PPLT – ETFS Physical Platinum Shares
SLV – iShares Silver Trust
GDX – Market Vectors Gold Miners
UNG – United States Natural Gas
URA – Global X Uranium
Monthly charts for these tickers appear in Figures 1 through 3. A chart of the composite index I created by combining all of these appears in Figure 4 (Click any chart to enlarge).
Editors note: To create an index like Jay’s Trending Low, follow the instructions at the end of this article ‘Creating an index for a group of tickers in Data Manager’
Summary
Securities that have plummeted in price and then moved sideways for a period of time can (unfortunately) continue to move sideways for quite a while longer before (hopefully) breaking out to the upside. Even worst, they can also fail and breakdown through the previous low. But extended consolidation patterns are often followed by something good.
As you can see all of the tickers in the list above are commodity related. As I’ve written about
here and
here there is reason to believe that commodities will outperform in the years ahead. That being said, with the stock market rallying in the near-term and with the U.S. Dollar strong there is no compelling reason to think that this “Buy Low Portfolio” is going to make a lot of headway anytime soon.
The Index in Figure 4 is presently 8.2% above its January 2016 low. As long as that low holds I’ll give this experiment more time to work out.
Jay Kaeppel
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
Creating an index for a group of tickers in Data Manager
NOTE: tickers with X in list need to be added to the Data Manager as new tickers and downloaded from your data service
When you create an index for a group of tickers, you can display a chart of the index as well as the underlying tickers. A group index can be analyzed on charts using technical indicators, and Expert Ratings are generated for the group index (except for mutual fund
groups).
The procedure for creating an index for a group of tickers is as follows:
- First, create a group ticker for the index.
- Then create a list to insert the group ticker into.
- Add tickers to the group.
- Finally, create the index by executing the Compute Group/Sector Indices function.
To create an index for a group of tickers, follow the steps below.
First, create a group ticker:
1. First, add a new group ticker to your Master Ticker List. Select the
Ticker command on the menu bar. Then select New to display the
New Ticker dialog box.
2. Enter a ticker for the new group, then be sure to enter the proper
Type designation (group or mutual fund group).
3. Click OK, and the second dialog box for entering a new ticker
appears.
4. Type in a name (Description) and the First Date for data. The
remaining default settings on this second dialog box can remain the
same.
5. Click OK and the group ticker is added to your Master Ticker List.
Then, create a list to insert the group ticker into:
1. Select the List command on the menu bar.
2. Select New on the drop-down menu and a dialog box appears.
3. Type in a name (8 characters maximum) in the text box.
4. Click OK and the list name appears in the Selected List text box
located on the toolbar.
5. The list name is also displayed in the List window. Insert the group
ticker from your Master Ticker List under the list name. To insert a ticker directly under a list, do the following:
- Highlight (by clicking) the group ticker in the Master Ticker List.
- Click the list name in the List window.
- Click the Insert to List button on the toolbar (or select the Insert Ticker command from the List sub-menu).
- The group ticker will appear in the List window under the list name.
6. Next, insert tickers into the group. To insert tickers into a group:
Under the new group, insert all of the tickers that will make up the
group by doing the following:
- Select the group ticker in the List window by clicking on it.
- Select in your Master Ticker List the tickers that you want to add to the group. If you are inserting multiple tickers, hold down the Ctrl key while clicking each ticker.
- Click the Insert to List button on the toolbar (or select the Insert Ticker command from the List sub-menu).
- The tickers will appear in the List window under the group ticker.
7. Finally, compute the index for the new group. To compute a group index:
- Select Compute Group/Sector Indices from the Utilities sub-menu.
- In the Compute Group/Sector Indices dialog box, click the Compute List(s) option button.
- In the text box for Compute List(s), select the name of the list you created above.
- Under Range, choose Update from Last Date of Data and click OK.
May 30, 2018 | educational newsletters, ETFs, indexes, jay kaeppel
The energy sector – not just unloved, but pretty much reviled not that long ago – is suddenly everybody’s favorite sector. And why not, what with crude oil rallying steadily in the last year and pulling pretty much everything energy related higher with it?
Anecdotally, everything I read seems to be on board with a continuation of the energy rally. And that may well prove to be the case. But at least for the moment I am waiting for some confirmation.
The first – which I mentioned in this article – is the fact that the best time of year for energy is the February into early May period. See Figure 1.
With that period just about past it is possible that the energy sector may at least pause for a while.
The second concern is that a lot of “things” in the energy sector are presently “bumping their head” against resistance. Here is the point:
*This does not preclude a breakout and further run to higher ground.
*But until the breakout is confirmed a little bit of caution is in order.
I created an index comprised of a variety of energy related ETFs. As you can see in Figures 2 through 4 that index recently was turned away at a significant resistance level.
Figure 3 shows the same information on a weekly chart.
Figure 3 – Jay’s Energy ETF Index – Weekly (Courtesy TradingExpert)
Figure 4 zooms in to view the action on a daily basis.
Figure 4 – Jay’s Energy ETF Index – Daily (Courtesy TradingExpert)
As you can see in Figure 4, the index made an effort to break out above the January high then reversed and closed lower before declining a little bit more the next day.
The action displayed in the charts above may prove to be nothing more that “the pause that refreshes.” If price breaks out to the upside another bull leg may well ensue. But note also in Figure 5 that ticker XLE – the broad-based SPDR Energy ETF – demonstrated the same type of hesitation as the ETF Index in the previous charts.
It too faces it’s own significant resistance levels as seen in Figure 5.
Energies have showed great relative strength of late even in the context of a choppy stock market overall. So there is no reason to believe that the rally can’t continue. But two things to watch for:
1. If energy related assets clear their recent resistance levels a powerful new upleg may ensue.
2. Until those resistance levels are pierced, a bit of caution is in order. Energy has been the leading sector of late. Any time the leading sector runs into trouble it pays to “keep an eye out” for trouble in the broader market.
No predictions one way or the other – just some encouragement to pay close attention at a potentially critical juncture.
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
May 24, 2018 | chart patterns, educational newsletters, ETFs, group and sector, jay kaeppel
The question posed in the title is essentially, “does the fate of the stock market hinge on the action of Sotheby’s Holdings” (ticker BID)? Sotheby’s is the oldest stock on the NYSE and is the only publicly traded investment opportunity in the art market. As the art market is highly sensitive to the overall economy it has been argued that BID is a potential stock market “bellwether”.
Still, the most obvious answer to the question posed above is of course “No.” Of course the performance of the whole stock market does not come down to the performance of one stock. That’s the obvious answer.
The more curious answer is arrived at by first looking at Figure 1. Figure 1 displays a monthly bar chart for BID in the top clip and the S&P 500 Index in the bottom clip. What is interesting is that historically when BID tops out, bad things tend to follow for the broader stock market.
Figure 1 – BID tops often foreshadow SPX weakness (Courtesy WinWay
TradingExpert)
Consider:
*The bear market of 2000-2002 was presaged by a dramatic top for BID in 1999, and confirmed again in late 2000.
*The great bear market of 2008 was also preceded by a top and breakdown in BID.
*The 2011 top in BID was followed by a quick but sharp -21% SPX decline.
*The 2013-2014 BID top was followed by roughly 2 years of sideways SPX price action.
*More recently the top in 2017-2018 top has been accompanied by much volatility and consternation in the broader market.
Figure 2 “zooms in” to recent years using weekly data.
In Figure 2 we can see how poor performance for BID presaged an extended period of sideways trading for the SPX. At the far right we can also see that BID is at something of a critical juncture. If it punches through to the upside and moves higher it could be something of an “All Clear” sign for the market. On the other hand, if BID fails here and forms a clear multiple top, well, history suggests that that might be an ominous sign for the broader market.
Other Bellwethers
BID is one of four market “bellwethers” that I like to monitor. The other 3 are SMH (semiconductor index), TRAN (Dow Transports) and ZIV (inverse VIX). You can see the status of each in Figure 3.
Figure 3 – Four stock market “Bellwethers” (Courtesy WinWay
TradingExpert)
To sum up the current status of these bellwethers:
*All 4 (including ZIV as of the latest close) are above their respective 200-day moving average. So technically, they are all in “up trends.”
*All 4 are also threatening to create some sort of topping formation.
In sum, as long as all four of these bellwethers continue to trend higher, “Life is Good” in the stock market. At the same time, if some or all of these fail to break through and begin to top out, the broader market may experience more trouble.
Bottom line: Now is a good time to pay close attention to the stock market for “tells”.
Jay Kaeppel
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
May 10, 2018 | chart patterns, educational newsletters, jay kaeppel
Gold, gold stocks and commodities in general are starting to get a lot of notice lately. And not without good reason. Consider the bullish implications for all things precious metal in the articles below – one from Tom McClellan of the McClellan Report and one from the Felder Report.
I have also previously touched on these themes time or two (or four) of late.
Where We Are Now
So on the one hand, it can be argued that gold, mining stocks and commodities in general are poised for a significant move to the upside.
Consider the “coiling” action displayed in Figure 1, which is a monthly chart for a mining index that I track that I’ve labeled GLDSLVJK.
Figure 1 – Jay’s Gold Stock (GLDSLV) Index (Courtesy
TradingExpert)
I look at the coiling action displayed in Figure 1 – in conjunction with the information contained in the articles linked above – and I can’t help but to think that a big upside breakout in gold stocks is imminent.
The “Fly in the Ointment”
When it comes to all of this metals/miners/commodities bullishness there’s just one “fly in the ointment” – the U.S. Dollar. Let’s be succinct here and invoke:
Jay’s Trading Maxim #102: Whichever way the dollar goes, a lot of things go the other way.
To wit, see Figure 2, which highlights the inverse nature of, well, a lot of things to the U.S. Dollar (a value of 1000 means 100% correlation and a value of -1000 means a 100% inverse correlation.
Figure 2 – Things that trade inversely to the U.S. Dollar (Courtesy
TradingExpert)
In other words, when the U.S. dollar goes up, the things listed on the right hand side of Figure 2
Now consider Figure 3 – which appears to be showing a potential upside breakout for the U.S. dollar.
Which brings us back to the title – Dollar or Miners, it’s One or the Other.
If the U.S. Dollar is truly staging an upside breakout, chances are gold miners will not.
Stay tuned….and keep a close on the buck.
Jay Kaeppel
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
Apr 30, 2018 | Charts, EDS code, indexes, indicators, jay kaeppel
Last week I wrote an article purporting to highlight significant levels of support and resistance across a variety of financial markets. Well, it turns out there are more.
More Notes on “Lines”
I certainly look at the markets more from the “technical” side than the “fundamental” side (not even a conscious choice really – I just never really had much success buying things based on fundamentals. That doesn’t mean I think fundamentals are useless or that they don’t “work” – they just didn’t work for me).
Once I settled on the technical side of things, I started reading books about technical analysis. All the classics. I learned about chart patterns and trend lines. By definition, a trend line is a line drawn on a price chart that connects two or more successive lows or highs.
And then I got to work looking through charts and applying everything that I thought I had learned. And like a lot of “newbie” technicians – and a surprising number of seasoned ones – I typically ended up drawing “lines on charts” that would resemble something like what you see in Figure 1.
Figure 1 – “Important” trend lines (or not?) (Courtesy
TradingExpert)
For a technical analyst this is sort of the equivalent of “throwing up” on a chart (and the real pisser was that back in the day a fresh updated booklet of charts would show up in the mail each week – so you had to “throw up’ all over all the charts again and redraw every #$^& “important” line!!).
At some point I realized that perhaps every “important” line that I was drawing on a multitude of charts was perhaps maybe not so “important” after all. This revelation led me to establish the following maxim (as much to force me to “fight the urge” as anything:
Jay’s Trading Maxim #18: If you draw enough lines on a bar chart, price will eventually hit one or more of them.
True Confession Time
There are certain dirty little secrets that no respectable technician should ever utter. But just to “get a little crazy” (OK, at last by my standards – which are quite low, apparently) I’m going to put it down in print:
I hate trend lines
There, I said it. Now for the record, up sloping and down sloping trend lines are a perfectly viable trading tool if used properly. I personally know plenty of people trading successfully using trend lines drawn on a price chart. Sadly, I’m just not one of them.
So remember the lesson I learned the hard way – “There is no defense for user error.”
The full truth is that I have nothing against trend lines, and yes I understand that there are “objective” methods out there detailing the “correct” method for choosing which two points to connect to draw a proper trend line (DeMark, Magee, I think Pring to name a few). But I somehow seem to have failed that lesson.
One Line I Do Like
I still draw slanting trend lines from time to time. But the only lines I really like are lines that are drawn horizontally across a bar chart – i.e., “support” and “resistance” lines. A multiple top or a multiple bottom marks a level where the bulls or the bears made a run and could not break through. Now that’s an “important” price level. If that price level ultimately holds it means the charge failed and that a significant reversal is imminent. If it ultimately fails to hold it means a breakout and a possible new charge to ever further new highs or lows as the case may be (for the record, it could also mean that a false breakout followed by a whipsaw is about to occur. But, hey, that’s the price of admission).
I also like horizontal lines because even if very single horizontal line does not prove to be useful as a trading tool, it can still serve a purpose as a “perspective tool”. Rather than explaining that theory let’s just “go to the charts.”
More “Lines in the Sand”
Figure 2 displays an index of bond and income related ETFs that I created. Roughly half of the ETFs have a higher correlation to treasury bonds and the other half to the S&P 500 Index (i.e., CWB – convertible bonds, JNK – high yield corporate, PFF – preferred stock and XLU – utilities all react to interest rates but are more correlated to the stock market than to treasury bonds).
Figure 2 – Bond and Income Related ETF Index (Courtesy
TradingExpert)
This monthly chart clearly illustrates the struggle going on in the interest rate related sector. Interest rates mostly bottomed out in 2013 and have been grinding sideways to higher since. As you can see, interest rate related securities have been trapped in a sort of large trading range for years. Eventually, if the long-term trend in rates turns higher this chart should be expected to break through the lower (support) line Figure 2.
Still focusing on interest rate related sectors, Figure 3 displays a monthly index comprised of 3 REITs. Talk about a market sector trapped in a range.
For what it is worth, Figure 4 displays a weekly chart of the same index with an indicator I call Vixfixaverage (code for this indicator appears at the end of the article). Typically, when this indicator exceeds 60 and then tops out, a decent rally often ensues (one word of warning, there is also often some further downside before that rally ensues to caution is in order).
Speaking of oversold “things”, Figure 5 displays an index of Master Limited Partnerships (MLP’s). As you can see in Figure 5, a) divergences between price and the 4-month RSI are often followed by significant rallies, and b) a new such divergence has just been established. Does this mean that MLP’s are destined to rally higher? Not necessarily, but given the information in Figure 5 and the fact that everybody hates MLP’s right now, it’s something to think about.
AIQ TradingExpert Code for Vixfixaverage
hivalclose is hival([close],22).
vixfix is (((hivalclose-[low])/hivalclose)*100)+50.
vixfixaverage is Expavg(vixfix,3).
Jay Kaeppel
Disclaimer: The data presented herein were obtained from various third-party sources. While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.
English