A Very Useful One Stop Investment Chart

For what it’s worth, I usually start any one day with a look at this chart.

It has a broad swath of “things” on it. A bit of oil, some grains, gold, stocks, bonds, copper, etc.

In one look you get a quick “feel” for what’s moving and which way. So for the last week or two I’ve not said much about investments. Why? Well, other than just being busy trying to knock out the GHCN v1 vs v3 comparison (and a surprise drug reaction to Ibuprofen) the simple fact is that I said to “hide out in bonds” a while ago and nothing has changed. I look at this chart and, well, it’s just not got anything to get excited about (unless you like to short things).

The Chart at BigCharts.com where you can customize the settings

A live version:

Broad Markets on One Chart from BigCharts.com

Broad Markets on One Chart from BigCharts.com

It is possible, in Windows, to set that chart as your “Wallpaper” and have it automatically update every so often. ( I had mine set to about 10 am each day, once opening volatility was out of the way and a reasonable ‘trend’ indicate was possible). Then if you see something interesting, hop over to BigCharts.com and explore related tickers.

SPY  - S&P 500 - the Benchmark for all other tickers
GLD  - Gold ETF - Fear and Inflation index
RUT  - Russel 2000 index ETF - Broad market and small caps
EEM  - Emerging Markets ETF basket
JJC  - Copper ETN -  Broad manufacturing indicator
TIP  - Treasury Inflation Protected bonds - Benchmark safe haven.
USO  - US Oil ETN - energy sector AND broad economic indicator
QQQQ - NASDAQ 100 - Tech indicator - more consumer sensitive less financials
JJG  - Grain ETN - Ag proxy and weather sensitive
TLT  - US Treasuries long duration - "Flight to safety" indicator and moves more than TIP

In one quick look you can see that TLT / bonds as a safe haven continue to run. TIP is in a gentle steady rise. Everything else pretty much dropping.

GLD has a general downtrend and has done a little “pop” to the 50 day moving average line. That’s a very risky time to make an entry, so I’m sitting out, but it might well be that gold is starting a new run. My “rules” include buying at the crossover / start of such a run, then either selling at the “middle of the SMA stack touch” which is about the 50 day, or at minimum buying Put Options behind the position. In a general downtrend, most SMA Touch moments are followed by a resumption of trend downward. In a ‘flat roller’ it will oscillate each side but not by much. Only about 1 in 3 or 1:4 will it “punch through” to a new run higher. Better to protect than leverage up at this point, then buy more at the next dip back to the SMA stack from the topside once a new rising trend is confirmed.

Here’s the same chart with GLD as the main ticker (so I clicked on the Bigcharts link, then just changed the main ticker to GLD as it looked interesting on the basic chart):

One Stop Chart with GLD as main ticker

One Stop Chart with GLD as main ticker

You can see how RSI has been at 20 and now has ‘higher lows’ while MACD has had a crossover (but is below zero so still a down trend). DMI is still ‘red on top’ but threatening a crossover to blue on top. Price had a quick pop, but is at the 50 day SMA line.

That’s what the start of a new run higher looks like. It is also what “surfing down” looks like when it pops to the SMA stack and fails to advance… The way to choose between them is what happens next. Does price just “fall away to the downside” again? Or does it “punch through and hold”?

There are a couple of ways to manage the bet at this point, but first, notice just how FAST gold moved; from falling, to the SMA line. Basically it opened AT the line 2 days back. As gold is ‘fixed’ in Europe and trades a lot in Asia, they get ‘first bite at the apple’ and US prices are often a jump. Not a lot of time to ‘trend follow’… A “buy if touched” order floating just above last close would have bought you in AT the line. Not good… So I trade gold very sporadically and very carefully being aware of that “step function” behaviour. Here, we wait. If it falls away back to the dropping trend, no big loss. If it spikes up, typically in a few days it comes back to the SMA line from above and pauses. That’s when to buy (provided there is no news flow indicating stability, peace and economic growth breaking out in the world… a rare event…)

Tea Leaves

So looking at the individual tickers tells a lot. Is oil plunging? Longer term that’s good for the global economy, but usually means the economy is tanking right now. Has oil taken a spike? Maybe a war breaking out somewhere or news of economic growth starting.

Is copper falling? Not much stuff being sold / manufactured.

Are grains rising or falling? Drives food costs, drives Ag Industry sales, even impacts restaurants and meat prices.

How do Emerging Markets, RUT 2000, Nasdaq 100 and SPY compare to each other? Emerging markets often move first and furthest, RUT right behind. If they are below the more staid SPY, likely a bear market. If they spike up, we’re likely starting a nice run up. QQQQ has been beating them all, and rolled over last. It will likely roll up near the middle (or perhaps earlier than most) and run faster up when it does. But not all trends last forever, so don’t get wedded to QQQQ; it can have a “Tech Bubble” moment…

GLD TLT and TIP make a “Flight to Safety” and “Relative Fear” indication. TIP vs TLT is also a bit of an inflation indication. TIP has an inflation index ticker so rises when inflation erodes TLT. TLT bounces up more on fear moments and Federal Reserve Bank actions. Gold is largely driven by Central Bank buying and selling, but with about 25% being gold sales into India. When India is in recession, that’s a problem. When Central Banks are scared, they buy gold, and that props up the price. Right now it’s mixed.

So you can look at this one graph, and get a quick feel for fear in the market, fundamental inflation in real terms, Oil Shocks and what they might be doing – or oil glut in recessions as they approach, food pressures and Ag status, along with general demand for manufactured goods and a broad economic indication. Then compare the stock indexes ( SPY, RUT, QQQQ, EEM ) and see if the more volatile / sensitive ones are leading in a direction you like… or are they approaching an inflection point? Also these things together indicate: is it time to go “Risk Off” into a “Flight to safety” asset, or “Risk On” into stocks and other risk assets.

One quick look and you are rapidly “oriented” to the situational awareness of the global markets.

In Conclusion

So that’s why I’ll often just look at this One Stop Chart and figure there isn’t much to do…

With that said, many of these have been dropping long enough that RSI is at or near 20. That’s typically bottom fishing time and a rise, even just back to the SMA stack, is likely. I’ll trade those movements on a 10 day hourly chart until a new rising trend is confirmed. These are going to be “counter trend rallies” until then, so short fast trades up to the SMA stack, then out for the fall (or buy puts behind them).

Advanced style trades are to buy the puts AND put stop loss sell orders behind the stock. If prices fall, you are stopped out of the ‘long stocks position’ and make money on the puts. If prices rise, you stay long the stock (making money) and the relatively cheap insurance of Puts expires worthless; but you dramatically reduced your risk profile and were positioned to make money with either directional move. That’s the kind of thing you need to do if ‘going long’ in a ‘counter trend rally’. Not just “buy the stock and hope”.

“Hope is not a strategy. -E.M.Smith”

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
This entry was posted in Economics, Trading, and Money, Stock Charts and tagged , , , , , . Bookmark the permalink.

13 Responses to A Very Useful One Stop Investment Chart

  1. adolfogiurfa says:

    What about actual prices?

  2. DirkH says:

    I got out of stocks on May 2nd. I expect continuing declines until end of september. Will probably not buy anything before October.

  3. SteveS says:

    To invest in themes, what do you think of Motif Investing. It went live today and appears to me that Motif may be a game changer for smaller investors. All for one trade price we can create a basket of 20 to 30 stocks – our custom ETF and Mutual Fund, but without the management fees. Any thought?

  4. E.M.Smith says:

    @Adolfo:

    To compare things, you want relative percentages. If you want graphs with the actual share price on them, just remove the comparison tickers. The chart will automatically change from percentage change to absolute dollar price. But actual share price isn’t very important or useful. Especially for comparisons. For that you really need percentage changes.

    @Dirk H:

    Other than selected swing trades I’ve been mostly cash and bonds too. “Sell in May and go away”… I did a ‘step out, back in, out at the SMA stack’ back on the posting about a ‘warning of a drop’. Now we’re in a confirmed downtrend so the “Rules” are “be short or out” and only do a counter trend rally trade on very fast charts, with exit at the SMA stack.

    Watch for RSI having “higher lows” off of a “near 20″, then with MACD “blue on top” and headed for above zero. That’s the usual look of an early entry point. It’s a confirmed “be in” after a cross of the SMA stack and return from above that does not penetrate the SMA stack.

  5. E.M.Smith says:

    @Pascvaks:

    Make it a 2 year chart and you can see the context of the prior “blow off top”. That September fall was after a failed attempt at a rally. They often follow a blow off top. Prices spike up. True Believers buy in in droves (and staunchly defend The Story, whatever it is for that ticker – we saw that here with folks nearly frothing about the inevitable excess demand for silver and consumption of global supply guaranteed…) then, when the parabolic spike collapses back to the trend lines, there is an attempt to continue that trend. “Sure it got ahead of itself, but look at The Story!”…

    That, then leads to a second rally that typically ends in a tangle of the SMA lines. ( I’ve put 3 simple moving averages on this graph so you can see how price gets to them – even a little bit through them – then pauses. A battle between True Believers (who by then have all already bought) and the Hangers On, who bought into the parabolic spike) develops. A load of folks are just trying to get out close to what they put in. Other folks who were just along for the ride, but got in early, are also thinking “time to book some profits”. This excess of selling pressure over buying halts the advance. It’s no longer the rocket ride, more of “flat roller” (Aug and Sept highs not significantly different from each other. Then notice that QQQQ the Nasdaq starts a rise just in that July – Sept range. A “New Shiny Thing” shows up on traders screens…

    That’s when the “fast money” starts leaving silver and heading to the new Theme Of The Quarter (often after Goldman Sachs leadership has promoted to their sales guys to dump A and push B ). As soon as the main players have their money out, then the collapse comes.

    While silver is more volatile than most, so has more dramatic plunges at times like this, you can see this same pattern in a thousand other “Bubble and Drop” charts. Whatever is the Current Darling and Momentary Fad, will end in a chart similar to this one.

    If you look at JJC, Copper, you can see how it “disconnects” from Silver in Feb Mar of 2011. That was part of what caused me to start saying that silver was in a bubble as that spike developed. It continues on down from there, indicating continued weakness in global economic growth. Notice, too, that when silver is having that “dead cat bounce” attempt to recover from the spike collapse, JJC has two peaks with “lower highs” while silver has two with “about flat by slightly higher high”. The economic news is getting worse. Commodity traders are looking at The Story and saying “Fine, but if the demand for everything is tanking, so what?!” That’s the point where commodity professional traders would likely short silver hard. Thus the plunge start, which then panics all the tepid hangers on out of their positions… and you get that dramatic plunge in a few days.

    They are seeing a dramatic disconnect between the two metals (and probably other commodities too) and with the manufacturing demand. They see a failed spike, and a DCB just looking to be stomped. They also see a potential new run in QQQQ to put the money they get from shorting silver.

    The rest is just the natural progression of professional traders with Fat Wallets…

    That’s how I see it.

    SLV still has DMI with red on top, MAC barely blue on top but of shallow trend and below zero. RSI has touched 20, so if we see a ‘higher low’ in a week or two it would indicate a small rally possible. To me, it looks like a “relief rally” is possible back to the SMA lines.(and if you look back, you can see that SLV tends to rally just a bit beyond this line set. Looks like price bounces off of about the 150 day SMA line) The “news flow” is about “QE-3″ so if The Fed pumps more paper out, commodities rise.

    Given all that, I’d expect a small rally in silver for a couple of weeks, until new flow turns against it or The Fed takes action (so whatever that ‘catalyst’ would do is all done…) That’s a hard trade to make, but more likely to work than fail. Just “at the SMA stack” or about that 100 to 150 day SMA line, step out to see if the drop continues from there. You can get back in if the rally resumes AFTER a downtick that fails to punch through the SMA stack.

    Or, the short form of your answer: “No, I don’t think it’s just an end of year market correction” ;-)

  6. Pascvaks says:

    EM-
    When you have the time, you take the time,thanks! It’ll take me a little time to chew and digest all you’ve given me;-)

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