A while back we had a ‘worry notice':
Some folks took that to mean ‘crash coming’, and in comments I noted that it meant ‘dip coming’ that could be traded. Then when that dip returned to the prior high, trade out and see which way it resolves. About 3 in 4 it resolves to the prior trend, upward. About one in four it resolves down. This one was like due to head ‘down’, and it generally has done just that. The question now is: 10% to 20% “correction” or something worse coming? Basically, you wait until a clear ‘buy’ indicate to get back in.
News flow has been ‘not so good’. China reported slowing. The EU continuing to talk about Spain and Portugal and maybe even Italy as being problematic. Unemployment in Spain is horrid and Spanish bond yields are jumping up (meaning bond prices are plunging) as folks worry that a country with a load of unemployed folks will not be able to pay its bills.
In the USA, the administration continues to pursue a ‘tax and hobble’ strategy. Republicans look set to send up Romney and women are embracing Obama. So it looks like the “Daddy will give his favorite kids lots of stuff” has a decent shot at a second term.
The idea of higher taxes on dividends has taken some of the enthusiasm away from high dividend paying stocks, and even though corporate earnings have been reporting higher numbers, folks are questioning how well that will hold up with the political and economic winds blowing to the cold side. So on a Price / Earnings ratio basis, stocks are very cheap. On a ‘compared to bonds’ basis they have great yields. But in a dicey world, folks are building in a very large risk premium for buying anything.
Meanwhile, oil has dipped on lower economic growth, but not too much, while coal is just being hammered by a double whammy of the EPA passing rules to shut down coal use while natural gas is under $2 / unit ( ‘has a 1 handle’ so prices like $1.98 ).
Has one guy saying it might even fall below $1 / 1000 cubic feet. ( A Therm is about the same energy as 100 cubic feet and has about 100,000 BTU in it, so is close to a gallon of gas. A more exact number is 1.15 therm / GGE. So at those prices, Natural Gas is running about 20 CENTS per gallon of gas equivalent. A few years back it was running about $12 to $15 / 1000 cubic feet, so was about $1.50 / GGE, which was a modest advantage compared to the $1.80 gasoline then, but now it’s just crazy cheap compared to $5 / gallon gasoline. Thank you fracking!
For those who are inconvenienced by not having these nice shortcut comparisons due to using SI units, a comparison chart is here: http://www.tulsagastech.com/measure.html There’s a nice chart showing equal price / energy from different heating fuels here: http://www.nh.gov/staywarm/fuelprices.htm that has therms priced at about $1.50 to be comparable to $2/gallon kerosene or 6 cent / kW-hr electricity. Makes it pretty clear just how much natural gas has plunged.
So all sorts of folks are looking for ways to run vehicles on it, convert electric generation to it, and ship it over to Europe where prices are much higher. “Watch this space”. Various pipelines, ships, and vehicle conversion companies are going to make money off this (unless Obama and the EPA succeed in shutting down pipeline construction and fracking…)
In the long run, this will give a great energy advantage to the USA. Were we smart, we’d be building ‘Gas to Liquids’ plants at a prodigious rate and telling OPEC to enjoy pounding their sand. Being as we’re not so smart, we’re sinking $Billions into defending the Persian Gulf when we get 1/10 th of the oil that comes out of there ( the rest going to Europe, Asia, etc…) All we would need to do is displace 1/10 of the net Middle East production and we could simply leave the middle east. But don’t worry, we’re firmly in the hip pocket of the EU and Israel, so we are the low cost cop on the beat… Sigh.
Back at news flow:
The US latest employment data was ‘not good’. Fewer new hires than expected, more folks let go, some of the prior numbers (that had been good) revised a bit worse. Businesses not putting a lot of money into expansion with an unknown tax axe hanging over their head as Obama wants to raise our already high rates even higher. In the mean time, Europe is not buying much as they try to figure out what money they will use and what countries will leave the Euro Zone. China is slowing so much they are actually admitting it, and Korea is trying to launch a missile that just happens to be the right size to carry a nuke to the USA. Oh, and Japan has a higher debt to GDP ratio than Greece with Sony announcing layoffs of 10,000 or so folks. All of which makes demand for energy and metals low, so Australia and Brazil not doing so well. It’s looking like a ‘risk off’ world right now as folks are not seeing the sunshine.
Conclusions and Likely Actions
Very fast trades into longs at bottoms of dips and sells at return to the moving average of price lines. Perhaps some shorting then. Waiting for a new trend to develop. Expecting more drop, and especially if the EU and China continue having a ‘low buying so little selling’ profile, watch out for a major drop. Watch for opportunities to enter very cheap metals and shipping positions for long term value buys.
Some short trades on prices touching the simple moving average (SMA) lines from below. Start of some bottom fishing. Selected momentum stocks that are beating the trends.
Pointer To Other Topics
Some general comments on how long term investing differs from trading and my thoughts on things to do for the long term investor, start with this page:
If you are expecting global warming stuff, it’s under the “AGW” categories in the right hand margin. Things specific to the NCDC data and GIStemp are under categories with those in their names.
This posting is about the other thing I do, looking at investment markets. Prior postings in this series are available here: http://chiefio.wordpress.com/category/wall-street-week/
Posts with some relevance to trades, but not in the format of a full WSW analysis, are available under this category:
The “Infrastructure Charts” for stocks, bonds, commodities, etc are in the Stock Charts category:
That is a bit of a play on words as “stock” can mean stock in a company, stock of goods, or as in photography, a set of standard images. To that extent, a chart of ‘the usual bond ETFs’ is something like a stock of goods, and a stock picture… ;-)
The Nature of the Charts Here
The charts in this posting, or the linked infrastructure postings, are usually live charts, so my comments will describe how it is now, but in a week it will be showing new data and a new week. If I capture a “static image” I usually label it as such. You can tell by looking at the date bars on the bottom of a graph.
I typically use the live charts since I think it is more important to be in touch with what the market is doing NOW than to preserve the historical chart, this is, IMHO, a reasonable choice. Just don’t be surprised if the chart I describe is not the one you see a few weeks from now! If you would like to see the historical chart, you may enter custom date ranges on the charting tool at:
Or change the particular indicators or tickers of interest. I strongly recommend learning to make your own charts for your particular holdings.
Wall Street Week -
Saturday, 14 April, 2012
Long Term Context
I’m promoting this chart to the top for a while, as it is now in control. Look closely at what it’s saying.
This is a very long duration chart (5 years) of NYSE. It will not change much from week to week (just one tick mark) so guides longer term attitude. During a new bull market, it can lag so much that you miss the best bits, so a ‘trend trade’ positive can be done until this one confirms. During a new bear market, it can lag so much that you get hurt if you hold stocks, so a ‘trend trade’ negative can be done until this one confirms. Basically, shift to shorter term (one year / daily tick mark) charts for trades near inflections of the Slow Stochastic here.
(Oddly, the NYSE ticker symbol stopped working, but using this saved link with the SecurityID in it does still work. I’ve added other USA Indexs for comparison)
Remember that you can click on the chart to get a much larger more readable version.
Right now, the chart has “be out”. At the bottom, DMI / ADX has the black ADX line at 15 or so. That says weak trend, use Slow Stochastic. It also has the Red DMI- just crossing the blue DMI+, giving a confirmed downtrend. Next up is MACD, that’s been in a ‘stay in’ configuration with blue on top, but now looking like a ‘crossover soon’. As ADX said move to the faster Slow Stochastic, it called the exit much earlier. (When it reaches the bottom and crosses back over, there can be a trade to the upside on a bounce). For now, Slow Stochastic is “red on top” be out of the NYSE. You can also see that the other market indexes have also started down. Even the Nasdaq QQQQ is rolling over. It was driven ‘crazy high’ on Apple Mania, but even Apple has now dropped some.
Overall, it’s not a time to be in stocks (but we already called that one a while back) other than fast trades / shorts.
We do still have price over the SMA lines, but they are ‘weaving sideways’ so not a lot of trend to the upside. Time to pick individual stocks or sectors, not the broad market.
Bonds vs Stocks
This next chart is TLT vs SPY, as the S&P 500 is the basic investment vehicle for most folks (unless you really want to pick sectors or individual stocks, you ought to start with a “SPY / Bond” oscillator, as on this long term chart. TLT is long term US Treasuries, so gives a good view of the major alternative where cash runs during times of doubt. If you plotted a line 1/2 between those two, you would get the performance of a portfolio that was 1/2 in each. A pretty good basic strategy for times that are hard to judge. They form a natural hedge pair during spikes, for example. This is a very long term chart where each tick mark is one week.
Last time I’d said:
OK given this bonds chart, I’d be getting out of them. No upward momentum. The Fed can’t cut rates much or at all from here, if the economy DOES pick up, and rates start to rise, bonds will tank, hard. Only thing left is the “Fear Trade” and if the Euro looks like it might survive, expect money to start flowing back that direction (or to other currencies). Indicators are for a ‘dip’ with RSI making ‘lower highs’ after a ‘near 80′ and MACD ‘red on top’ (though still above zero, so not a time to short, yet…) and DMI / ADX+ have inflected as well (though still ‘blue on top’ so again not a time to short – yet).
And we’ve had a pretty nice dip in that bond price. Just wish I’d been more willing to short them.
At this point we have price back at the SMA stack from above, so the ‘short’ is over until prices firmly cross under. RSI has dropped from ‘near 80′ to the middle and MACD has ‘red on top’ so saying stay out. (ADX is over 25, so says ‘trending, use MACD not slow stochastic’). We’ve got MACD near zero, and with it looking a bit like a crossover or pause is developing (blue line slope going flattish). So at this point we could see a small rise in bonds on a ‘fear trade’, but as soon as The Fed starts raising rates, bonds will tank. Until then, it’s likely to be a ‘flat roller’, so swing trade in and out on the roll (that looks like it has about a 6 month swing).
Note, too, that this last week bonds jumped up on a ‘risk off’ swing. As long as folks are dumping risk assets, bonds will be on a rising run, so it is likely there will be a swing trade upside for a while in bonds.
General Stock Markets Overview
The broad stock markets charts are here:
Last time I’d said:
The SPY, in particular, has a configuration that CAN be a slow steady uptrend. MACD sideways weaving. RSI can ‘roll’ between ‘near 80 and near 50′ in a persistent rise. Until a DMI crossover, you can just have blue on top wobbling closer and further from red. So it’s not YET a “Get Out”, so much as it’s a “worry and prepare”.
That was a good call, and we did have a SPY rise for a bit, flatten, then fall. I ought to have done a WSW sooner and specifically called out that exit, but I did give the ‘worry’ posting and caught that dip trade and warned off overstaying that trade. Still, for folks not trading such ripples, I ought to have done a WSW that said “Exit called for now” about 2 weeks ago.
Right now, all the stock indexes have rolled off, so it been time to be out of them. SPY is holding on the 50 day SMA line. DMI is ‘red on top’ but inflected toward a potential crossover to blue on top (meaning it might call a ‘be in’ soon). But the ADX line is headed down below 25, so trend is leaving and Slow Stochastic is calling trades. Looking at Slow Stochastic, it’s headed up. All of that says most likely a time to enter for a short fast trade to the upside, but don’t stay long. Volume in the drop was low, and Williams %R is still saying be out. Volatility has also stayed low in the drop. Mixed signals… So while a ‘trade in’ ought to work, I’m inclined to sit in cash or only make a small trade. It could just as easily be pausing on the 50 SMA line before it breaks through to the downside on bad new.
I really don’t like it when the indicators are mixed. But as SPY and QQQQ are doing way better than the other tickers, it says mostly be out of those other markets (emerging markets and European) and be in lower risk trades.
EWU - UK ETF QQQQ - NASDAQ 100 ETF SPY - S&P 500 Benchmark ETF EWJ - Japan ETF EWL - Swiss ETF
Last time I’d said:
EWJ and EWL are trending nicely and not yet at RSI near 80… Japan has had “some issues” and the currency had a recent sudden drop, yet in USD the stocks are rising. Hmmm… Folks who had run to Yen, selling them to buy… something. I’d guess Japanese stocks, from the chart. A partial holding in Japan is likely worth it.
All well and good, but again that ‘not making a WSW’ posting toward the end of last month left it unsaid that they had gone flat then and it was time to exit. I think I need to be more timely in making these postings and not depend so much on an intermediate “warn” posting…
Right now, for EWU, we have MACD at ‘red on top’ and below the zero line, with RSI having ‘lower highs’ off a near 80 point. Time to be out of the UK for a while. The rest of the European indexes (in the link) look pretty dismal too. That European news is biting those markets hard. SPY is beating the emerging markets too, so we have ‘risk off’ there, too. Further down the link, IDX Indonesia, EWA Australia and ENZL New Zealand have done a ‘go flat’ while the others have fallen. Possibly some good resource stocks there holding value in an inflationary world as folks know demand will return eventually.
10 Day Hourly Fast Trader Chart
Eventually I’ll put this in a linked chart as well.
The Dollar Lately
Time to measure our Rubber Ruler.
The currency charts are now on the Bonds and Currencies chart here:
Currencies are a bit of a mess. Mostly all just flat. I think everyone has tried gaming their currencies and now it’s time to give it a rest. Looks like Yen might be over sold a bit on the bad news. Gold is ‘ringing down’ from the overpriced top, looking for stability in all the wrong places. Euro looks like it’s flatted into a floor of sorts. Not seeing any trade I like in it though.
Were Bonds a good idea?
The bonds charts are now on the Bonds and Currencies chart here:
On the stock sell off, bonds have ticked up. TIPS in particular have a nice gentle rise to them. IBND the International Corporate Bonds are in a nice rising trend and even Emerging Markets bonds EBND is looking nice, though coming off it’s high a bit more than I like. Perhaps folks are running away from sovereign debt? WIP has gone a bit flat, but still has that large yield. TIP Treasury Inflation Protected securities look to be holding up the best. But there is tradeable ‘ripple’ in WIP using Slow Stochastic.
Base Metals vs. Precious Metals
The precious metals all looking a bit flat to drifting down. Last time I’d said it looked like a reasonable diversification, and then GLD got whacked a couple of days later. Not feeling so good about gold now, but in a ‘risk off’ context it usually rises; but watch out for those air pockets…
Base Metals infrastructure chart posting is here:
Base metals, too, had a fall on the China Slowing and Europe not buying news. Back to waiting on them for a possible entry ‘in a bit’.
What about Brazil? Also India and China.
Well, while the China news blew the metals call last time, this one was pretty much spot on:
Brazil (and some of the others) has had a nice run up. Right now, the price bars are very short (compressed) and the price is about the same as the last top. I’d reduce risk and move out. It’s higher beta than other countries, so when it’s “risk on” be in, but when it’s “risk off” or even “risk worry” I slide out.
And we can see how they rolled right over:
EWZ - Brazil GLD - Gold fund BZF - Brazilian Real currency IDX - Indonesia FXI - China EWA - Australia EPI - India - WIsdom Tree fund EWC - Canada EWW - Mexico GUR - Middle East Fund
But with RSI headed to 20 and with MACD looking ready for a crossover to blue on top, time to watch for a buy signal.
ETFs with Dividends
With Obama pushing to raise taxes on dividends, all of thse took a bit of a hit in the last week.
Ag Commodities & Ag Related Companies
Grains look like a decent trade. Hmmm….
Not a dramatic trade, but workable.
CZZ looks like it’s topped out for a while. TNH has just had a rocket ride up. Going somewhat parabolic. I’d cut any holding in half and wait for a pull back. TSCO Tractor Supply continues to do well. Guess we know who’s getting that added grain money…
Only Canadian Rail and a couple of ships look interesting, and not all that much… Mostly the ‘shipping stuff to China’ trade. RCL Royal Caribbean has a nice rolling rise, tradable and with a trend. CCL Carnival getting sold off based on their having a couple of stupid and expensive accidents.
Oil And Fuels?
The charts are here:
The Obama Tax The Oil Companies story has turned these into dropping trades.
RTK is having a run (probably due to their fertilizer business) but CCJ has had a ‘pop and drop’. Nuclear not moving anymore.
As predicted, these have gone flat. Still nice dividends, but not rising.
PEI Pennsylvania Real Estate - Mall REIT (REMOVED to make better graph) VTR Ventas - sr. care, nursing homes, hospitals PSA Public Storage - junk storage units BXP Boston Properties - office REIT on BosWash corridor HCN Health Care REIT - extended care, senior care, medical offices HCP Health Care Properties - ex. care, senior living, Dr. offices PCL Plum Creek Timber - lumber and trees REIT SPY S & P 500 broad stock market benchmark RPT Ramco Mall REIT PLD Prologis - logistics
Monthly Running Stocks
Well, the “up / down ratio” is pretty grim. More risk than reward.
So what “won” and “lost” over the last month? (though remember, they may not be the winners next month… it’s just to provide ‘context’).
10 Best Performing IndustriesIndustry Dow Jones U.S. Travel & Tourism Index 10.12% Dow Jones U.S. Full Line Insurance Index 7.65% Dow Jones U.S. Computer Hardware Index 6.53% Dow Jones U.S. Internet Index 4.93% Dow Jones U.S. Airlines Index 4.70% Dow Jones U.S. Pipelines Index 4.11% Dow Jones U.S. Restaurants & Bars Index 4.02% Dow Jones U.S. Gambling Index 3.84% Dow Jones U.S. Travel & Leisure Index 3.77% Dow Jones U.S. Consumer Finance Index 3.67%
Some residual vacation plays, insurance, some tech stuff, and things that move oil and gas.
How about the losers?
10 Worst Performing IndustriesIndustry Dow Jones U.S. Tires Index -10.40% Dow Jones U.S. Platinum & Precious Metals Index -9.94% Dow Jones U.S. Gold Mining Index -9.06% Dow Jones U.S. Exploration & Production Index -8.81% Dow Jones U.S. Paper Index -8.00% Dow Jones U.S. Forestry & Paper Index -8.00% Dow Jones U.S. Real Estate Services Index -7.31% Dow Jones U.S. Oil & Gas Producers Index -6.63% Dow Jones U.S. Oil Equipment & Services Index -6.38% Dow Jones U.S. Oil & Gas Index -6.26%
Things Obama wants to penalize. Energy production, mining, forestry; plus tires and real estate as we keep our wallets shut.
Weekly Wining and Losing Sectors
The best and worst of the week? Do they tell a different story on the short term trade?
Up/Down ratio is about flat on the week, just as the market wobbled, but stayed flatish overall for the week.
10 Best Performing IndustriesIndustry Name Dow Jones U.S. Coal Index 5.89% Dow Jones U.S. Aluminum Index 5.37% Dow Jones U.S. Mining Index 4.35% Dow Jones U.S. Gold Mining Index 3.92% Dow Jones U.S. Home Construction Index 3.48% Dow Jones U.S. Steel Index 3.21% Dow Jones U.S. Internet Index 2.72% Dow Jones U.S. Basic Resources Index 2.42% Dow Jones U.S. Industrial Metals Index 2.41% Dow Jones U.S. Gambling Index 1.65%
Alcoa put up good earnings numbers, thus the aluminums. The rest looks a bit like a short cover to me.
10 Worst Performing IndustriesIndustry Name Dow Jones U.S. Industrial Suppliers Index -4.69% Dow Jones U.S. Paper Index -4.05% Dow Jones U.S. Forestry & Paper Index -4.05% Dow Jones U.S. Furnishings Index -2.81% Dow Jones U.S. Biotechnology Index -2.67% Dow Jones U.S. Clothing & Accessories Index -2.52% Dow Jones U.S. Business Training & Employment Agencies Index -2.49% Dow Jones U.S. Auto Manufacturers Index -2.45% Dow Jones U.S. Gas Distribution Index -2.41% Dow Jones U.S. Consumer Electronics Index -2.37%
Just not speaking to me. Some forest products and some personal items, a bit of weak consumer?
First off, the caveat page. Know how to exit before you enter a momentum trade:
This is NOT buy and hold investing, OK?
The general approach is to find lists of stocks going up, then look at their chart for ‘what is in a good configuration and likely to continue’, then wait for an entry. That last part can be particularly frustrating in stocks with a strong momentum as the ‘dips’ either never come, or come at the eventual blow off top of an exhausted big momentum run. So sometimes I’ll just ‘scale in’ to momentum stocks. Buy some each dip, and exit all of it on a topping indication.
This posting gives an overview of the method of picking:
A trial using the default days length setting didn’t return much of benefit. A nearly random result over a month or two. I’m working on the 6 month and 1 month screens now.
These were picked a couple of months ago, and we’re going to stick with the same list to see how well it holds up. At some point I’ll re-visit the selection for a new batch, but for now this ‘pick’ looks like it’s still running OK.
FINVIZ 6 month Bubbles chart provides a list of stocks that moved up over a 6 month period. I’ve selected some of them, randomly selecting from the top group and tossing out those with a big step up and flat or otherwise looking more ‘news driven’ to the chart.
Generally this set has held up well. A roll down at the end in keeping with the market, and some separation developing, so you could sell the worst half and add to the best half and deal with that. Looks like a working system. I’d look to carefully ‘buy the dip’ on some of the strong names, but be ready to dump them if they can’t swim against a sinking tide.
ARG - AirGas VZ - Verizon GOOG - GOOGLE ISRG - Intuitive Surgical FAST - Fastenal Corp KLAC - KLA - Tencor BMY - Bristol Meyers Squib AAPL - Apple Computers WMT - WalMart XOM - Exxon Mobile
I also tended to pick larger bubbles (as size does matter) and those on top of a pile. We’ll keep this chart here for a few postings and see how the 6 month screen does.
How did the 3 month version do?
I’m going to leave this chart up a while so we can watch how the 3 month chart did. These were picked about November(ish) so we’ll watch them for a few more months and see if a 3 month screen was predictive. Two of these tickers have the “shoot up mostly flat” of “merger news” and I’d screen those out if doing it again. Looks like a couple of weak stocks showed on earnings reports, so prune them.
GR - Goodrich Corp FFIV - F5 Networks SNDK - Sandisk RHT - Red Hat TSO - Tesoro EP - El Paso GWW - WW Granger KLAC - KLA Tencor ORLY - O'Reilly Automotive Parts FAST - Fastenal
One Month Screen
Well, a somewhat more interesting set. Finding those quick off the bottom lately.
Last time I’d said:
Oddly, it is more ‘steady’ than the 3 month screen. At this point, I’ll likely drop to a 6 month / 1 month set in future selections. Still, the “method” is holding up nicely. It will be interesting to see if they do better or worse than the broader market if we have a pause of dip. ( i.e. did we find “High Beta” or “High Alpha” – tendency to volatility up and down, or tendency to upward sticky…)
It’s looking more like ‘upward sticky’, but with some that would need pruning on hitting a flat spot. They did take a dip with the broad market, but not worse than it.
GCI - Gannet Company VMC - Vulcan Materials CTAS - Cintas Corp (Uniforms and entrance mats and such) GE - General Electric AMP - Ameriprise Financial BBT - BB&T Corp (Branch Banking & Trust) MAS - Masco JPM - J.P.Morgan Chase Bank WFC - Wells Fargo Bank TAP - Molsen Coors Beer
Barchart Top 100 did?
How about the Barchart Top 100?
The top of their list last November, selected to a few and charted:
Looks like we got about 2 months out of it, then a roll-off. OK, so better for fast trades, not so good for finding once a quarter buys… The “early rollover” could be a useful indicator of market weakness “soon” though… Need to watch some more for that.
From the mid-December list, I selected 10 stocks. I started with the top, and took every tenth name, but skipping those that were already charted (two on the prior chart and FTK that we already picked on the Oils chart). They look to have held up a bit better. Perhaps what’s needed is an ‘age on chart’ or ‘time in grade’ metric? Hmmm…
Sym Name Weighted Alpha Last Change Percent High Low Time QCOR Questcor Pharmaceuti +176.54 43.33 -1.28 -2.87% 45.51 42.84 12/21/11 PZZI Pizza Inn +149.30 5.62 +0.26 +4.85% 5.74 5.39 12/21/11 DPZ Domino's Pizza Inc +107.70 33.60 +0.12 +0.36% 33.72 33.05 12/21/11 SPSC Sps Commerce +97.10 26.86 +0.62 +2.36% 27.89 26.39 12/21/11 CONN Conn's +81.60 10.26 -0.93 -8.31% 11.12 10.23 12/21/11 SURG Synergetics Usa +76.00 7.24 +0.12 +1.69% 7.27 6.68 12/21/11 STMP Stamps.Com Inc. +68.80 25.63 -0.75 -2.84% 26.42 24.95 12/21/11 ULTA Ulta Salon Cosmetics +64.00 65.87 -1.10 -1.64% 67.64 65.04 12/21/11 USLM United States Lime +59.30 59.63 -0.44 -0.73% 60.30 59.30 12/21/11 FEIC Fei Company +52.60 40.86 -0.18 -0.44% 41.26 39.40 12/21/11
OK, that’s all the Mo’-MO I can do in this posting. Folks ought to mine the lists at those sites and chart up the candidates, then ‘vet’ them for things like, oh, over $2 price and not having flaky financials. Basically start with the bigger names that you know and avoid the strange names with penny stock pump and plunge behaviours. In any case, it does look like a good way to find individual names with some momentum behind them, and for the FINVIZ daily to find some bottoming reversals.
The Long Term Context
Here is another interesting chart where you can see how volatility spikes at market bottoms and drops lower during times of topping actions. It also has “momentum” on it which can act as a reminder of how much force a trend has, and which way. Slow Stochastic is better for a faster trade behaviour when ADX (of the DMI / ADX indicator above) is below 20 or so.
If this all looks like “too much”, just remember that you don’t need to look at more than the one basic chart. The rest of these indicators give more depth of insight into “why”, but not better answers as to when to be in stocks vs bonds.
Momentum saying to be ‘traded in’, while volatility is dropping low enough to be a worry and Slow Stochastic has inflected so saying to exit.
VIX the Volatility Index
Last time I’d said:
Volatility continues to drop off. Good in general, but can happen at market tops. We’re so low now that it is a worry that we have a short term top. Using options will be getting cheaper, but ETFs that hold options will be losing ‘volatility premium’.
And we took a dip more or less on queue, with volatility rising during that.
VIX - Volatility Index (not a ticker, you can't trade it) VXX - Short term VIX futures ETN (a ticker you can trade) VXZ - Medium term VIX futures ETN (a ticker you can trade) FXY - Japanese Yen SH - "Short" sell of SPY SPY - S&P 500 benchmark IYT - Transports, a leading sector XHB - Homebuilders, a leading sector and "canary" XRT - Retail
You could make some money on volatility trades, but it’s a dicey fast trade. A 6 month ‘close up’ shows recent trends.
When the long duration charts say “maybe making a top, but perhaps a ‘buy the dip’ moment”, I look at the faster charts and faster indicators and move to a faster time scale with faster trades. But I’m a trader.
For long term investors, you just ride the ride until the chart says “top is definitely in” and “buy the dip” until proven otherwise by a confirmed roll over (price below SMA stack). In general, I’d put very long term bias as “be in”. Trend is up, dip happened. Be in. But you just can’t ignore that the price plot looks very “rolled flat” at least… and we’re all waiting for DC and Germany to “make their moves”… So you must WATCH the chart each week, even if not acting to be out of the market yet.
If all this talk of indicators is leaving you wondering what the heck I’m talking about, hit the link in the heading of this paragraph and there is a bit of an explanation.
Remember that on any stock or ticker I say I’m looking at, you don’t just go buy it. You wait for a stock entry indication to get the best possible entry into the position.