WSW – sunday, 20 March 2011

General Comment

We now have a full blown war in Libya, and Japan got walloped with the quake, tsunami, and nuke failures. Collateral damage to industry is rippling out to places that depend on parts from Japan. This will be with us for a while. Uranium and uranium miners are out of favor, and anything that depends on Japanese car parts or semiconductors is starting to slow or in some cases stop production. Oil is an ongoing major concern.

The Yen shot UP in value (it seems the Whale-sized traders decided that Japan would need to repatriate a few dozen $Billion from the USA so bid the dollar down and yen up). Japan denied this. Then a large group of central banks all agreed to take action to sell yen and buy dollars. Now it’s a pissing match between the large hedge funds and the central bankers. Time not to be a mouse under the feet of dancing elephants…

Pointer To Other Topics

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:

Posts with some relevance to trades, but not in the format of a full WSW analysis, are available under this category:

The Nature of the Charts Here

The charts in this posting are 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. 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

Wall Street Week – Sunday, 20 March, 2011

The Dollar Lately

Time to measure our Rubber Ruler.

One Year Daily of UUP Dollar UP, with TBT and selected currencies

One Year Daily of UUP Dollar UP, with TBT and selected currencies

The dollar is dropping against everything else. XAU is an interesting ticker. It is the “Gold and Silver Index” and it is looking like a topping roll start to me, but we’ll take a close up look below. The chart right now says “be out”, but we need to compare it to Gold, Silver, and others to get an idea exactly which parts are moving. For now it’s just bouncing up and down, not making a trend. I suspect the central bankers, in addition to fooling around with the Yen, may be trading some things against gold, or the stocks in that index are “having issues”. At any rate, it’s a ‘worry point’ to check on.

Last time I’d said:

We’ve got RSI not too close to 20, and both MACD and DMI are “red on top”. This is for the UUP “dollar UP” fund, so that says owning dollars is a losing idea right now.

Still looks the same to me. A “steady trending downward” with occasional rolls, but just not a very interesting place to bet. Even the central bank intervention has not done much.

TBT has had a “failure to advance change of trend”. No joy there, either. Fear trade drives folks into bonds, so the bond short is not a place to be (and right now there is a lot of fear about the Arab / Muslim wars, oil, and Japan).

What I said last time:

At this point it’s what is called “The Fear Trade”. Gold, Yen, Swiss Francs, Oil. Perhaps some other ‘commodity currencies’ like the Canadian and Australian dollar, but that is more tied to what China buys.

Still holds. Though if you’ve made some money on this you would likely want to take some “off the table”… though that raises the question of “where to put it”… and you end up back at “The Fear Trade”… Looks to me like Swiss Francs have been winning, and the Yen move is a bit unexpected (but once bankers and hedge funds are dancing who knows what will happen). I’d stay out of yen right now, and out of gold, that sort of leaves Swiss Francs (which may be what everyone else has done too…)

This chart has the “UDN” dollar DOWN bet fund as the main ticker. You can see it’s right in the middle of all the other currency bets. On this time scale, you can see clearly that TBT has “rolled over” and we’ve stepped out.

6 Month Currencies and TBT the US Treasury "Bond Short" fund

6 Month Currencies and TBT the US Treasury "Bond Short" fund

What happens if we zoom in on the last 2 weeks? Anything we can see happening “now”?

And here is the 10 day Euro chart, with BZF the Brazilian Real added.

Well, you can clearly see the combined central bankers action where the Yen takes a tumble on Thursday last. Only currency that was a good bet was the Swiss Franc and a little bit the Euro. So short trend trades were counter to the longer term dollar down trend. That’s a bit of a worry. (As it means turbulent difficult trading days… well Duh… nukes blowing up and wars and bombs and all…)

Currencies - 10 Day Hourly Interval chart vs US Dollar

Currencies - 10 Day Hourly Interval chart vs US Dollar

Base Metals

Silver looks like it’s had a pronounced “dip” in its rocket ride. Glad I wasn’t buying in at that moment… The other base metals look like a nice “entry” setting up after a pronounced sell off. Folks will be dumping and shorting industrial metals on the Japan industrial impact. Time to make a shopping list. Tin had good action before, so ought to have it again. Copper too. SLV has “MacD red on top with crossover downside” and is pulled away from the upper Bollinger band. RSI has touched “near 80” too. Be out. The copper chart is not yet calling an “in” but does have the look of something stalled in an up run, maybe going for another hurrah. I’d watch it, but be careful. The tin JJT chart looks very much like it did last Dec at that run up. Probably good for a fast trade on the return of good news in Japan.

Metals 6 month chart

Metals 6 month chart

If you look at the various ways of buying gold and silver, there is an odd disconnect:

Gold vs Gold Miners vs Silver vs "Gold and Sliver Index"

Gold vs Gold Miners vs Silver vs "Gold and Sliver Index"

We’ve got a clear “Silver Bubble” in progress. Gold and Silver Index includes silver miners with gold miners. GDX is gold miners. GLD is just gold. GLD is coming off an RSI near 80 (but not had a retrace / retest) and with MACD Red on top with DMI “unenthusiastic”. I’m seeing much the same in the miners.

Why are the miners NOT going up when the silver ETF is?

PAAS is Pan American Silver, a silver miner

PAAS is Pan American Silver, a silver miner

While SLW Silver Wheaton, a trader, is going up, this actual miner is not. Just smells like hedge funds gone wild and speculative bubble. If folks thought the price would hold, they would be bidding up the folks with silver in the ground, instead they are bidding up the trader company.

Ag Commodities

Looks like everything took a hit when Japan and Libya both rumbled.

Ag Commodities 6 month chart

Ag Commodities 6 month chart

That BAL biases the chart (squashes down the other tickers) so here is the same thing minus cotton (the colors will have changed):

Commodties Basket minus Cotton - BAL

Commodties Basket minus Cotton - BAL

Last time I’d said:

JO (coffee) and NIB (cocoa) have the best look to them (those ITCZ floods and “issues” in Ivory Coast) while sugar looks like a ‘failure to advance’ as does FUD (food basket) and WOOD. FUE (bio-Fuels Index) looks toppy too. The “basket” fund DBA has RSI “surfing down” with MACD looking like it might “cross over upside” but also that same pattern can be “chopping down” or “stairsteps down” with Down Flat Down Flat showing loss of momentum. That ADX is at 22 or so and falling looks like it’s “Late in the trade time to start easing out”.

Well, that was a pretty good call. Yes, Jo held up ok, but NIB tumbled along with the “failure to advance” ones listed. I didn’t put on a NIB trade, even though I thought about it. Now I’m glad for my sloth…

My comment last time still holds, but you could possibly get a ‘return to the mean’ bounce trade on a very fast chart. More chaotic than I like, though…

So, my take on it, is this: It was a nice cold run. Spring is coming. It’s going to be a “Whole New Season” soon, and it’s time to start edging to the exits. IFF you want to continue in this space, I’d move to “what the farmers buy in spring”. Fertilizers companies, seed companies, tractor makers and maybe those JO and NIB funds as long as the ITCZ is dumping floods on them.

I hope you did not buy NIB (Cocoa) as it got whacked hard. I’m also glad I had a “maybe” on it… Looking at MON, MOS, POT, DE (stuff farmers buy) it’s not yet ready for an entry. Watch for now, but wait.

Monthly Running Stocks

So what “won” and “lost” over the last months? (though remember, they may not be the winners next month… it’s just to provide ‘context’).

One Month

10 Best Performing Industries
DJ US Pipelines Index	3.82%
DJ US Coal Index	2.34%
DJ US Tobacco Index	2.07%
DJ US Real Estate Services Index	1.25%
DJ US Mortgage REITs Index	1.08%
DJ US Residential REITs Index	0.87%
DJ US Food Products Index	0.87%
DJ US Exploration & Production Index	0.59%
DJ US Oil & Gas Producers Index	-0.03%
DJ US Food Producers Index	-0.27%

Still with the pipelines… plus coal and tobacco. I note that 2 of the “top ten” had losses… Not a time to be in the market. I was mostly sitting out (but not sitting in Francs… dang it…) Real Estate holding up implies folks are gearing for inflation. This is just not a list to bring joy.

How about the losers?

10 Worst Performing industries
DJ US Gambling Index	-16.64%
DJ US Platinum & Precious Metals Index	-16.52%
DJ US Full Line Insurance Index	-14.15%
DJ US Recreational Services Index	-12.80%
DJ US Business Training & Employment Agencies Index	-11.18%
DJ US Forestry & Paper Index	-10.27%
DJ US Paper Index	-10.27%
DJ US Automobiles Index	-10.09%
DJ US Internet Index	-10.06%
DJ US Semiconductors Index	-10.06%

Things that US folks do with “spare money”, and things businesses use when business picks up (paper goods). Insurance takes a hit on Japan (folks risk share…) and Platinum is down as it’s used in cat converters in cars and car production is taking a hit on Japanese parts shortages.

OK, the up/down ratio is also against you. 10% down risks to 1% upside gains. Is it shorting time again so soon? It’s not even May yet…

Weekly Running Stocks

The best and worst of the week? Do they tell a different story on the short term trade?

10 Best Performing Industries
Industry Name	Percent Change (over time selected)
DJ US Coal Index	7.85%
DJ US Mining Index	3.89%
DJ US Nonferrous Metals Index	3.42%
DJ US Commercial Vehicles & Trucks Index	2.77%
DJ US Specialty Chemicals Index	2.08%
DJ US Basic Resources Index	2.02%
DJ US Exploration & Production Index	1.97%
DJ US Paper Index	1.74%
DJ US Forestry & Paper Index	1.74%
DJ US Industrial Engineering Index	1.54%

Things we export and sell to China… Coal (the only real alternative to nukes), metals and mining, chemicals. A little bump in “Industrial Engineering” as I suspect someone thinks Japan will be buying some of those services soon… Paper goods showing a bit of a turn. Still, meagre gains.

Not much different from last time:

More mining and gold mining and Heavy Construction. The “China buys from Banana Republic” trade ;-)

10 Worst Performing Industries
Industry Name	Percent Change (over time selected)
DJ US Footwear Index	-9.72%
DJ US Clothing & Accessories Index	-7.90%
DJ US Platinum & Precious Metals Index	-7.33%
DJ US Full Line Insurance Index	-6.38%
DJ US Gambling Index	-6.07%
DJ US Personal Goods Index	-5.33%
DJ US Airlines Index	-5.22%
DJ US Conventional Electricity Index	-4.43%
DJ US Electricity Index	-4.41%
DJ US Computer Hardware Index	-4.32%

There are times I’m happy to have been lazy and missed a market move… ‘The consumer is dead’ trade seems to be back in force. Added to that is the “If it takes oil it’s hosed” trade and the Japan collateral damage trade. Also, US electrical producers with Nuke plants can expect an ObamaProctoscopy Real Soon Now, so “Conventional Electricity” takes a hit along with general “Electricity”.

If you want some long term utilities with dividends, now would be the time to go shopping. I usually just buy my local utility (on the theory that if they screw me on rates it will show up in my dividend… a natural hedge). Right now you can probably get nuke rich utilities on the cheap; but you will be rolling the dice on Soverign Risk that Obama and the EPA will shut down all GE Mark I reactors on a political whim.

Personally, I’d stick with more western companies with lower Soveriegn Risk profiles. Texas is probably a good place to go shopping ;-)

What Is Our Asset Class Context?

Let’s look at the S&P 500 largest stocks in America compared with some other kinds of assets; a 20 year+ maturity bond fund, oil, gold, Yen.

Asset Class Races

Asset Class Recent Race

SPY       The S&P 500 ETF
GLD       Gold ETF
USO       Oil ETF
FXY       Japanese Yen currency fund
TLT       20 Year U.S. Treasury Bond fund
FXE       Euro currency ETF
SLV       Silver fund
BZF       Brazilian currency ETF
EWA       Australia ETF
WOOD      A wood and paper products fund

Oil, Gold, Euros, and the Silver Bubble. OK, we already knew that. TLT is rising, someone is buying bonds. (I think they are silly… but that’s just me). The Brazilian Real seems to have stablized and is now mostly reflecting the dollar drop. Brazil might have some interest. We’ll check it too.

WOOD looks to have become an S&P Match so not much reason to ‘go there’. Not much home building, so prices can’t hold high, but perhaps a future bounce on inflation and Japan demand. Nibbling into PCL over time to build a long term “inflation adjusting” holding would be a nice long term investment.

10 Day Hourly Fast Trader Chart

The “Index Shorts” tickers are what’s rising. The SPY main ticker is ‘pausing’ but looks to be setting up a ‘stairsteps down’ pattern. Might be a rally on Monday, but I’d not expect it to hold. Looks like just a ‘close shorts and go home on Friday” and if things are still bad, I’d expect the traders to reenter shorts this coming week. Watch the news flow. Bad news it will be shorts heaven. On good news: If it rises, we’re starting a new run, if it’s flat and ignores the good news, it’s a “head fake” before another short.

Trader Chart - Longs and Shorts of Index Funds  10 day hourly interval

Trader Chart - Longs and Shorts of Index Funds 10 day hourly interval

What about Brazil? Also India and China.

Brazil the EWZ ETF vs the BZF currency ETF

Brazil ETF vs Currency Race

EWZ  - Brazil
BZF  - Brazilian Real currency
FXI  - China
EWA  - Australia
EPI  - India - WIsdom Tree fund
EWC  - Canada
EWW  - Mexico
GUR  - Middle East Fund

Everything looks pretty sick to me. India might be making a bottom. Watch EPI / IIF / IFN as they have a ‘failure to advance to the downside’. Maybe setting up for a reentry.

EWC has made a nice dip, it has not yet had a ‘failure to advance’ so the rules say to ‘buy the dip’. I’d only buy a tiny, though. With everything going wobbly, I can’t see it climbing a whole lot. Oil is already over $100, so the trade is nearer to the end than the beginning.

Even the tar sands stocks like SU and IMO have pulled away from the Bollinger Band and are showing exit indicators. I’m not liking what I’m seeing… Unless you really love those Canadian Oils, I think the trade in them is ending, for now. (I hold some for long term dividends and as a ‘natural hedge’ against my oil use most of the time, but if oil drops, their price will drop too).

Closeup on Gold

Gold 1 year daily chart

Gold 1 year daily chart

Having trouble with that $1400 line. MACD red on top, DMI too and ADX weak, so the trend is over.

Just not seeing a reason to be holding gold right now.

VIX the Volatility Index

Volatility Index and Related

Volatility Index and Related

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

Same as last time:

After a drop of volatility, it’s risen lately. Gee, war breaks out in oil land and stocks get more volatile… no surprise there. The chart is looking to me, though, like there is a slight “kink” downward in the stock funds right as the volatility rises a bit. This is hard to see as that big spike in the start of the cart dampens it too much, but it’s there. If we tighten in to a 6 month view it’s easier to see:

Here is a 6 month chart. Volatility rising as stocks roll off a top is “not good”.

Volatility Index and Related

Volatility Index and Related

Same thing as last time:

To me that says “Caution” And “edge toward the exits on US Stocks”.

Though by now you ought to be pretty much out the door…

Ideas of the Week

Well, the two week ago idea was a pretty good one:

“None other than putting some more money into Swiss Francs and running some automated reminder programs.”

Except I didn’t get the Unix box running again as some family issues demanded my time. “This time for sure!”…

I would only add that I’ll likely trade some “short index funds” on a 10 day hourly chart.

Oil And Fuels?

Looks like coal has topped, and even UGA Gasoline looks to have hit a lid. I’d say Nat Gas was looking like a bottom, but it also looks like it’s just laying on a bottom. There is a reasonable chance that if Obama and Soverign Risk start whacking Nukes Nat Gas would take a big bump, and your downside is pretty slim. I’d be willing to just park some money in it (rather than dropping dollars…) between other idea. You could wake up to news that our GE Mark I reactors were all shut down and find a nice bonanza for a week as all the gas turbines spin up for base load…

USO Oil, KOL coal, UNG Nat Gas, UGA Gasoline with a Golden ruler

USO Oil, KOL coal, UNG Nat Gas, UGA Gasoline with a Golden ruler

On the 10 day chart, it shows a plunge in UGA that must be a data error artifact. It doesn’t show up on the one month chart. In a couple of days it will ‘roll off the edge’.

USO Oil vs KOL Coal, UNG Natural Gas, and UGA Gasoline

USO Oil vs KOL Coal, UNG Natural Gas, and UGA Gasoline

So what happened in the Tech Market relative to world markets?

Last time I’d said:

They were running, now they’ve paused. We’ve got DMI “Red on top” and MACD “Red on top’ … time to be out.

And they have dutifully rolled over to play dead… Gotta love a call like that… If they run up to touch the SMA stack from the bottom side, it’s time for “short, out, short, out” surfing down. If they punch through the SMA stack, cover the shorts and reevaluate based on news flow. Looks like a news and event driven market to me right now.

Tech vs Other Markets

Tech vs Other Markets

QQQQ  Nasdaq 100 mostly Tech companies
DIA  Dow Jones 30 Industrials
SPY  S & P 500 largest companies in the U.S.A.
MDY  Midcap  (Middle sized in terms of market capitalization)
RUT  Russel 2000 - a collection of 2000 companies from small to large.
EWZ  Brazil fund
EWA  Australia fund
EWO  Austria fund
EWW  Mexico fund

Were Bonds a good idea?

OK, lets take a peak at the Bonds Race but with TBT (the “long term bonds” short sell ETN – that is, the thing that “shorts bonds”) as the main ticker symbol:

Bonds - TBT to Short Them

Bonds - TBT to Short Them

OK, the “Flight To Safety Fear Trade” is back. Bonds made some money. This will fade as the Libya war winds down and Japan gets back on it’s feet. Don’t expect this to hold in the face of rampant money printing. It is a chance to ‘set up’ for the next short opportunity and / or exit bonds if you were not able to get out before.

With the same exceptions as last time:

TIP the “inflation protected US bond fund” has preserved value, but not made a bundle. It’s an OK and reasonably safe investment for folks who just want to put some money away and not worry much. But the more interesting one here is WIP the “World Inflation Protected” securities. Rising nicely as the dollar loses some value. For a real “no think, sleep well” basket, I’d put my ‘bond money’ 1/2 and 1/2 in TIP and WIP…

“Safety” with inflation protection.

What About Oils?

Some Selected Global Oils:

The Oil Majors Race

The Oil Majors Race

XOM  Exxon Mobil - Largest, U.S. / Global
COP  Conoco Philips - U.S.  with Russian exposure
CVX  Chevron Texaco - U.S.
PBR  Petrobras - Brazil
BP   British Petroleum
STO  Norway
E    Eni Italy
TOT  Total - France
RDSA Royal Dutch Shell
IMO  Imperial Oil - Canada Oil and Oil Sands
SU   Suncor - Canadian Oil Sands
SSL  Sasol - South African Synthetic Oil Company

The oils have rolled over with the general stock market. Not as much, but still, XOM has “DMI Red On Top” and it’s just not a good idea to try to fight a sinking market. For very long term investing, putting a ‘buy if touched’ order above present prices, then ratcheting it down until the market turns up, will get some nice oils at a recent discount. Personally, I’d wait to see if oil heads back down to $80 as folks just say “to hell with it” and stop driving places with $4 gas.

Some Near Oil and Oil Related Comparisions

What about oil service companies and Brazilian sugar / alcohol?

Oil Services and Oil Related

Oil Services and Oil Related

Looks like a ‘failure to advance’ setting up and with DMI “Red on top”, momentum fading, and on a chart not stuck in here, RSI dropping from “near 80″ and MACD ‘red on top” I’d make that time to leave the drillers and support companies, allong with the related stuff.

Ag and Ag support / Input companies

Ag Trade 6 Month Daily Interval Mixed Players

Ag Trade 6 Month Daily Interval Mixed Players

From last time:

Very volatile movements. Right now, POT, MON, and MOS all show “be out” on their individual charts. DMI with “red on top”, MACD headed down ‘red on top’ etc. Could that trade be over already? Or is it just a RTFM moment as they are a ways above the SMA stack.

If you want to trade this space I think you need to pick one target company and watch the chart very closely.

It’s looking a lot more like “be out” than anything else…

SEE the SEA!

Last time I’d said:

But VLCCF is rising nicely and with almost an 8% dividend too. They ship crude oil. I’ve liked them for quite a while and own them on and off. I think I put some in the spousal account for ‘long term investment’ IIRC. My NAT is just being “dead money” though…

NAT is technically calling an ‘entry’ but it’s not got much play to it. I’m watching VLCCF for a chance to pick up very fat dividends on the cheap. At present, the chart is saying that the trade ‘run’ is over, but if this puppy drops in a general market sell off, you can pick up some nice dividends…

Shipping Comparison

Shipping Comparison

Here is the RCL / CCL cruise lines chart. You can see how these have much more range (or “beta”) that the S&P 500 SPY fund.

Royal Caribbean Cruise Lines, Carnival C.L., and SPY S&P 500

Royal Caribbean Cruise Lines, Carnival C.L., and SPY S&P 500

Continuing to lead the market down. They will likely call any upturn in advance, too.

The REITS race – Real Estate Investment Trusts

Looking a bit “topped” at the moment. If it doesn’t have a large, protected, dividend and good, secure properties, I’d not buy it right now. These will sell down with a general market fall, buy them then.



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 

Conclusions and Likely Actions

Swiss Francs. Watch the news. Some TIP & WIP. Not much… maybe some day trades on the short side in ETF Index funds.

The Long Term Context

This is a very long duration chart (5 years) of NYSE and one of the S&P 500 (SPY). They will not change much from week to week (just one tick mark) so guides longer term attitude. I’ve moved it to the bottom as you really don’t need to look at it often.

5 Years, NYSE

5 years, NYSE

Incipient “Red On Top” for DMI and Slow Stochastic clearly saying “be out right now” with it headed down. When it turns up again from near the bottom, then the market will be good for a few weeks again. MACD looks like a ‘crossover to red on top’ SOON, and prices are way far from the center of the SMA stack. I smell a ‘correction’ in progress. Not waiting for “sell in May and go away”…

Spiders (S&P 500) looks very similar. Again, the indicators are “be out”.

SPY 5 year weekly tick, RSI, Williams %R, ROC

SPY 5 year weekly tick, RSI, Williams %R, ROC

Last time I’d said:

OK, keeping in mind that this IS a very slow chart, those are things you see just before a “correction”. It’s still a “bull market” with “blue on top” for MACD and DMI, but it’s not time to toss a lot of new money in. That happens on a pull back to the SMA lines like you see last August. For long term investors, I’d be looking at selling stocks now, not buying, and putting that money in Swiss Francs or WIP / TIP until the next stock buying opportunity. For traders, it’s a different world, though. But is this exactly the moment? Given that the 1 year chart is also looking “toppy”, it’s ‘close enough’, but there is always the simple choice of putting a stop loss behind your positions and letting the market decide when to sell… Being “upward sticky” and moving it up from time to time, but never down, is all it really takes.

I’m very happy I said that… At this point, I think our “just before” has become a “right now”.

We’ve got a market set for a tumble longer term, and we’ve got really bad news flow. Not feeling the love from the long side… Short Stocks / Long Francs&Wip look best to me for a while.

Automated Stock Screens

OK, nobody ever said anything one way or the other about the software based stock ticker selection, so I deleting it. Now I’m figuring I can use it as part of an “investors corner” so I’m off to tune it up and bring it back up to speed…

Stock Indicators – what and how

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.

Click for Disclaimers, Disclosures, and Where To Get Charts

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.

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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...
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10 Responses to WSW – sunday, 20 March 2011

  1. Francisco says:

    I would not call this a “full blown war”. There is a few nations bombing another nation. One side throws bombs, the other side has no option but to receive them, and hope maybe they will tire of it.

    These are supposed to be humanitarian bombs, so maybe they are not so destructive. We’ll see.

    It’s tough not to be disgusted with the BS reasons for this. States put out rebellions and protests, often violently, that’s what they do, the world over. As Robert Fisk put it the other day: “Of course, if this revolution was being violently suppressed in, say, Mauritania, I don’t think we would be demanding no-fly zones. Nor in Ivory Coast, come to think of it. Nor anywhere else in Africa that didn’t have oil, gas or mineral deposits”

    Humanitarian bombing is amazingly easy to legalize these days. You have these three governments, US, UK and France, who feel very much like bombing Libya. They go to the Security Council and vote for bombing, using vaguer language of course. To the three nations that would have voted against it, they offer something (that will remain forever unknown) to get them to abstain. So they get 3 votes (theirs) and the 3 shrugs that they bought. They call it 3-0 for bombing and they walk out with their bombing legalized. Nobody has been consulted, no congresses, no parliaments, no people (god forbid!) anywhere. But our bombs are meant to bring humannness and “democracy”. And they are legalized. Now the fun begins. Let’s start blowing up things. Lots of contractors salivating in many places. First, we’ll blow the weapons we sold them, so they will have to buy them again when this is over. Our bombs will also have to be replaced. We’ll also make sure their infrastructure needs a lot of rebuilding when this is over. Let’s blow up all the bridges, highways, power plants, important buildings, maybe even a hospital or two, why not,…. After all, it’s all humanitarian. In order to construct, you have to destruct first. Humanitarily, of course.
    Ah, we are so democratic and so civilized. Aren’t we beautiful? I am looking in the mirror right now. My teeth are clean. My smile shines. And am dressed to kill.

  2. E.M.Smith says:


    Your points are well made about the “outside war”. I was thinking more along the lines of including the internal civil war too (so two sides on the ground going at it). That’s why I called it a ‘full blown’ war…

    And yes, the way “we” and the UN have ignored Somalia, Sudan, Ivory Coast, Papua Indonesia, and a few dozen others is “sinful” at a minimum and evil at a more accurate level…

    But for the purposes of this posting, a trading oriented one, it doesn’t matter much what the “ethics” of the event might be. What matters is the impact on markets. The “Fear Trade”.

    I do notice that the markets went up today. I’ll be doing a small “up vs down volume” look at the last 10 days and IFF I find anything interesting, making a comment / posting about it…

    For now, it just looks like a “relief rally” back to the SMA stack. The “Last Hurrah!” chance to get out after the long run up. As the “long term chart” can take a long time to turn, this could easily take weeks, rather than days, to finish the process… Right now is a ‘turmoil time’, and those are very mixed and bouncy.

    If the professional shorts dominate, they can also drop out from under you, fast (as in The Crash of a couple of years ago). Thus the need for a volume analysis, to measure the degree of “force” behind the movement…

  3. R. Shearer says:

    Too much volatility for me to make any headway. It’s like being on an elevator going up and down but getting off on the same floor or one above or below it. I put on some shorts, they’re going well and then a week later I’m back to where I started. No way did I think the markets would be up today.

    I overthought EWJ, and let it go. I still think long term rates may decline into June, but I wouldn’t bet much on it. I’m up a little in TLT and happy if it would stay where it is for the dividend. Gold looks like it’s topped for a while. I did make some money on SLV and am doing well on oil stocks, especially MRO.

    I like the idea of nibbling on some uranium stocks, such as CCJ.

    What do you think of CREE here? Short term to me looks like it could break down and confirm a downtrend or move up to 55. Stop at 48?

  4. E.M.Smith says:

    shows CREE in a long term downtrend. I like buying established up trends more. However:

    It has a history of fast jumps up off a flattish bottom. Reasonable risk / reward point…

    It has “RSI near 20 then step up a bit higher”. RSI Stepping up is usually a bottom…

    MACD is “Blue on top” so it’s likely a reversal ‘upside’ for a while. MACD is still below zero, so trend still down for now, but as a fast bet? Could work. Then watch for positive MACD to hold longer.

    DMI is still ‘red on top’ so not an uptrend. You would be making a counter trend bet. ADX has “inflected” and is running near 30, so when it moves it’s having some force and the present “Red On Top” is likely swapping (that inflection thing…).

    Bollenger band narrowing (it’s getting ‘low volatility bottom’) and price pulled away from bottom band.

    I’d give it a shot as a trade.

    Only real bad thing I see is that the market itself is “long term chart due to correct” so you may be swimming against the tide going long. You’ve got about $5 each way to the most local support / resistance, so a symetrical bet profile. I’d be more comfortable buying on a ‘retest’ of 45 or a breakout of 55 (swing vs new trend trades) but with a longer time horizon I could see it retesting the upper trend line which a “visual fit” through the tops hits about 65.

    Connecting the bottoms shows a ’rounding bottom’ so downside limited longer term…

    I think you’ve got a decent bet on a 2 month time horizon.

    STOP at 48 would be for a day-trade short hop up from here to 55. Also a ‘reasonable bet’ but you are rolling 50/50 dice (45 / 55 range) and depending entirely on the stop to give the hysteresis… Yeah, it ought to work (if you can find enough bets of that class for a statistical average to have impact) So 1.5 – 2 downside, 5-5.5 upside. On even dice that’s a decent bet.

    The problem will be ‘execution’. Avoiding the “slipage” killing you. It hits 55, you don’t sell, next day opens at 51, fades over 2 days down to 48, stop. So ‘trailing stop loss’ or daily watch. Odds it would “open gap down” to 45 are minimal right now.

    OK, not my typical style, but “workable”.

    I can see either trade working out.

    With the low volatility, you might consider “Long stock / long put at 45”.

  5. NZ Willy says:

    Great presentation. However, I think the chart-only analysis misses the point of what’s happening with silver. Silver has swung between being a currency and just a commodity, and is now returning to “currency” status. As such, it’s working its way back to the historic 15-1 ratio to gold. This isn’t a chart-neutral process. The point is that the population at large *want* silver to be a currency, because it personifies the alternative to the banks and governments. Silver is rising because people want it to, and I expect the process to follow the S-curve with the steepest part yet to come, likely this year. So we are seeing something unique happening here, one for the books.

  6. E.M.Smith says:

    @NZ Willy:

    I’ve heard that explanation. And I’m not saying “it isn’t so”. I’m just not convinced enough of it to claim, in print, that it is true so folks ought to bet on it.

    Basically, I’m more conservative in what I say, than what I may do with some “mad money”; as some folks (friends I’ve told ‘look here for pointers’) are not all that savy about ‘fast trades’ and I’d not want them getting burned on “risky advice”.

    My major complaint with the thesis is two fold:

    1) A currency, by definition, is used in trading and commerce. Silver isn’t. So to call it a move back to being a currency doesn’t fit the facts. This could easily be me being too “rule bound” and folks treating it as money (“Store of value”) that does not need ‘used in exchange’ as a feature.

    2) The quantity of silver produced each year depends in large part on copper production. It is basically a by product of copper electrorefining. This is a change from “historic costs” and breaks the 15:1 “cost basis” from back in the 1800s… With film use no longer sucking it up by the ton, and “sliverware” mostly stainless steel, there is excess natural supply that does not go away when prices drop, as copper is driving the production. Thus the drop down to a very much lower value and higher ratio vs gold a few years back. (100:1 or so at one point I remember). So right now copper production is down (housing down so pipes and wiring with it, cars, etc.) and with it silver. What happens when copper production ramps up?

    So as soon as this starts to drop, it’s going to simply plunge. Folks who think they have bought a permanent store of value will panic out. There will be no “natural buyer” to support the supply.

    That’s very high downside risk…

    If Silver starts another run from this “dip”, by all means, I’d join the run. BUT with a tight stop loss.

    Great for traders, very bad advice for “mom and pop and the guy next door” who want some safe investments.

    So I try for “some trader talk, and conservative careful commentary”.

    Maybe I’ll leave some money on the table from time to time. Sometimes even big money. And all bubbles run far longer than anyone ever expects them to run. I could easily see another double out of silver from here just based on the hype factor.

    But it’s also true that you want to be “late in, early out” and capture the sweet spot in the middle with minimal risk.

    Given how silver is acting in complete isolation compared to all the other metals, It’s not being driven by fundamental issues, but by human emotions. That trade can snap on you litterally overnight. I’d not want to wake up tomorrow and find silver was opened at 1/2 the price of the day before. (Don’t think that can happen? Look at the Hunt Brothers…)

    Once the silver market was cornered, outsiders joined the chase but a combination of changed trading rules on the New York Metals Market (COMEX) and the intervention of the Federal Reserve put an end to the game. The price began to slide, culminating in a 50% one-day decline on March 27, 1980 as the price plummeted from $21.62 to $10.80.

    I was watching that day…

    So maybe I’m a cat that has seen a whole lot of other cats burned black on that particular stove so I’m not going to get onto it just now, even though it may be it’s only a nice warm temp right now and lots of time left for the wood to finish burning.

    I’m “OK” with that and I’m just going to mosey on over to the easy chair and curl up on the comforter and pick up some much more reliable, if less spectacular, warmth…

    But if the US Govt starts coining silver circulating money again, yeah, I could see the “currency” story working…

  7. pyromancer76 says:

    Since son has connections to Japan, this summary by James Quinn caught my eye: Tsunami accelerates Japan’s economic meltdown driven by debt and demographics, Forgot where I got the link. Any thoughts re global financial future?

    You mentioned the democraphic bomb in another post. Yes, it is important, but what is never included is that almost all productivity has been technologically driven and has shed workers. Many more service workers. Why can’t this process accelerate in this way. Everyone receiving government money (tax dollars) returns a certain number of hours of work — SS, unemployment ins, welfare. If the hours are shorter and the choices are many, might not be too onerous. Many community-necessary jobs could be covered in this way. Leave that “harder” work for the young ones. At the same time, many 65-75 year olds can outwork many younger ones. The biggest problem is “supporting” all the feeble/ill older ones. At some point society will have to give us the personal choice to lengthen or end our own lives.

  8. George says:

    Now they want to tax toilet paper.

    How long before “air” is next?

  9. E.M.Smith says:


    Now that’s hitting below the belt!

    (Oh stop groaning… you knew someone had to do it ;-)

  10. E.M.Smith says:


    OK, had time to read that article.

    I put it in the class of “Things where all the bits are correct but the amplification factor is too high”.

    So yes, Japan has it’s own “Demographic Bomb” that will go off. When that happens, they will be net sellers of bonds, not buyers. But that does not mean the BoJ goes under. First off, they would have that almost a $Trillion of USD debt to sell…

    Then there are the “red flag” things. Like in Table 2.2 where the year scale starts off by 5s, then shifts in 2000 to a 4 step to 2004, then goes by ones to 2010, then shifts to 10’s …

    I don’t like folks who employ “rubber rulers” and don’t point it out… They are “un-tidy”… where else might they have been same?

    OK, Japan has a disaster. So Yen wobble in days based on expenditures that will happen over decades to come. You don’t build a new ship overnight, nor a new harbor, nor a whole new town. IF they ever rebuild…

    We’ve got a declining population in Japan. That means EXTRA homes available and EXTRA cars each year. So why do I need to “rebuild” a 10,000 person city that has been scraped off the face of the earth when folks could just move to the empty homes in other areas? The “sentimental” value of the “old homestead” is all gone…

    For many of the towns, the people are gone too.

    Yes, they will need to “clean up the rubble” and some places with imporant factories or harbors will be ‘fixed up’, but not all of it.

    So the Yen move is a “story stock” type of thing and will be undone just about as fast. (Days, not decades)

    This also needs to be put in the perspective of where most of Japanese industry is located. That’s not on the coastline near that place where the mountains get close to the sea… So substantially all their economy is intact.

    Yeah, some stuff got whacked and it’s had long and large impacts (global slicon production down 25%) but even there, a lot of that is from the precautionary shutdown of perfectly good nuclear plants. All it takes is turning them back on again.

    A year from now will the world even notice that there were fewer cars made in one month and more in the following months?

    All in all I find the thesis that Japan is going to auger in as a result of the quake just as silly as the thesis that it’s going to have a new boom as a result of the quake. The more likely is just that it will slowly clean up and get back to business as usual.

    Back on demographics:

    Japan is not the only country with “demographics issues”. It’s common through out the world. Europe has the same problem. In some 3rd world countries, they’ve got too many kids (Muslim countries in particular have a huge oversupply of young folks with nothing to do).

    BOTH the Democrats and the Republicans (and their European counterparts) want to let those surplus kids flood in to their aging countries so they can support the welfare state that has been built. (and provide new cheap workers…) Never mind that it means the destruction of the culture. (Any time you replace a population with folks who speak a different language, the culture is destroyed and a new one emerges… just like when Eurpeans moved into the Americas or the Japanese moved from Manchuria into the Ainu islands way back when…)

    So in the USA they bleat about letting Mexicans come in while in the EU it’s “Admit Turkey”…

    And what does that article note about Japan? That they don’t allow a lot of foreigners to move in and takeover the country.

    So the “Population Control” folks want to have countries go to a ‘replacement level of children’; then when a country DOES do that, they want those folks that had 4 or 8 kids each in the countries that told them to “go stuff yourself” to move in. Like that’s going to help? Just nutty.

    So Japan is going to become a “model” of what happens with about ‘replacement level’ as a population ages (and China an example of 1/2 replacement…) This is then painted as a catastrophe. Yet it’s the “Goal State” of population control movements… I’d like them to “pick on”. It’s either the right thing to do, or not. Good, or bad.

    At any rate, yes, it will be an issue, but not the issue that article paints it to be.

    One example:

    It talks a lot about the people needed to cash in all those Japanese bonds to pay for their retirement. Yet many of those bonds are held as “reserves” by banks. They will not be cashing them in, as then they would not have any “reserves”. Same thing for insurance companies. So they cash a few to pay some claims NOW, but raise insurance rates a bit all over Japan to cover the “losses” and that goes right back into those bonds…

    So until Japan gets out of the business of funding factories in places like China and the USA (think Honda and Toyota made in the USA) and insuring them, those bonds need to stay as “reserves”.

    There’s a lot more I could say on it, but not in a short comment.

    Basically, yes, Japan has some economic and demographic issues, but I think we’ll still be buying Honda cars and Nikon cameras for decades to come… even if the “young workers” behind those products are living in China and the USA, and only the “old worker” part is still in Japan…

    The biggest point I’d make, though, is that things have onset over decades. Not years. All it would take is for the present generation of “kids” to decide to have a few extra and the whole demographic thing starts to swing the other way. Also, over decades, we have factors like new diseases evolving and wars happen. Trying to predict what will happen to a given country 40 years from now is mostly a farce of linear projection in a non-linear world.

    What happens to Japan if North Korea decides to start tossing nukes around? What happens if Taiwan has a mainland China invasion? Think some industries in Japan might find a ‘pick up in business’? Or that nuclear fallout might kill off some old folks if the wind from Korea was right? So they can “linearly project” but that doesn’t tell you what’s really going to happen…

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