Is it time to buy, or sell, or what?

Some article or three back, Serioso was complaining that I’d not made a spread sheet of every single buy / sell call I’d made so he could decide how stupid I was. (I suggested he go do that work, as I had it all open and public… but I didn’t point out that when I was regularly doing the WSW articles I’d review my performance from the prior article in the next one of them…)

So here as a bit of a “Well, what have you done for me lately?” is a review of my last “time to buy” call, and some speculation about the future. Folks who are regulars will remember we were all intently watching the election. In that thread, in comments (once we had an idea what was happening) I’d stated:

E.M.Smith says:
9 November 2016 at 4:04 am
The time to buy will be in the next day or two…I’ll post graphs tomorrow…

Then didn’t get the time to post graphs, so put up a hurried comment:

E.M.Smith says:
9 November 2016 at 8:18 am
About 10 pm pdt is when to buy stocks IMHO. The market futures are down. That ought to hold through the open, then about 10 pdt it ought to reverse.

A bit unclear as I had PM instead of AM on the first mention (about futures so actually talking about that night, then), then nothing on the second, but in fact at about 10 PM in the futures market was the best buy moment, then when markets were open, at about 10 AM in the general market was a good time too. Which was what I was thinking when my AM and PM collided… Though 10 “market time” is what I ought to have said. By 1 PM market time (10 AM PT) we were already rising.

But for anyone but a day trader, that level of precision to the hour is not very important. Here’s the hourly chart for that week:

SPY vs Mix of Tickers, Election 2016 hourly

SPY vs Mix of Tickers, Election 2016 hourly

Gee, at 10 Eastern PM in the futures market was the best time to buy, but 10 AM ET ( or 7 PDT ) wasn’t too bad either.

There was a drop in bonds (TLT) and gold (GLD) with a rise in equities. Looks like a whale was positioned for “bad things” and needed to cover stock shorts fast (Mr. Soros perhaps?).

And what has happened since then?

SPY vs Mix of Tickers Feb 2017 6 month daily

SPY vs Mix of Tickers Feb 2017 6 month daily

Well, gee, the market (SPY) was drifting down right up to November day after the election, then has been in a nice uptrend since.

OK, I blew it on the “exact hour” call as I couldn’t keep my AM / PM / ET / PT etc. swapping straight. Fair enough on that. But on the “what day” it was spot on, and I doubt many of you are day trading based on hourly information from a web page you read once a day or so… (IF you are, you need to start doing your own charts and with 15 minute ticker updates…)

So is calling the market turn to the day good enough? I hope so…

Note the huge volume spike (black bar, so on a rising market day) on the day after the election.

The Market Now

Well, reading that last chart there’s a bunch of interesting things on it. Copper (JJC) has rocketed up. That means the miners will be making more money AND it is a general indication of expected economic upturn. Think Daddy Warbucks saying “Copper! Copper! Buy more Copper!”… the movie and story have that right. DIA (Dow Jones Industrial 30) and QQQQ (NASDAQ 100) both rising faster than SPY is also bullish. Even EEM Emerging Markets has started to climb in the last couple of months as the idea we might need more of their stuff sinks in (and as the $US has softened some). Bonds TLT laying on the bottom, as you would expect facing rate hikes from The Fed.

Yet there are some little worries. Volume is fading in the last week, while volatility compresses (those price bars getting shorter and more like a dash than a box). That happens at local tops and more so at major tops, but can happen anytime the market isn’t decided on which way to head. It can just indicate a battle of buyers and sellers and not indicate who will win.

The MACD shows a beautiful crossover ‘below zero’ and rise to above zero on the rocket ride, then settles into a sideways weave above zero which is a stable steady rising market. (Do note the mid December to mid January red-on-top ‘be out for the holidays’ that is typical).

ADX / DMI is still “blue on top – be in”, but that black ADX line is showing weaker trend strength. At 10 to 12 it is saying “not going to move up very fast, if at all, until news causes a new trend”.

Now look back at the price bars. Notice the little red PSAR dots? They are saying to put a stop loss order about there, but expect continued uptrend for now.

Overall, it is a bull market trend taking a pause. I would speculate that the run up will resume, if more slowly, after more good news out of the White House (and when the Dimocrats {the most Dim of the Democrats} in Congress decide they would rather help to govern and create prosperity, than be marginalized as pants wetting tantrum tossers…)

So overall, I’d speculate that this is saying “Stay in, but start adding some caution and expect dips”. That then argues for a “buy the dips” general rule (until such time as some horrid news, like a war or economic collapse somewhere, shifts bias).

OK, with that general context, I need to make more specific charts on selected indexes, ETFs, and tickers. Time to start being more selective.

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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 and tagged , , , . Bookmark the permalink.

3 Responses to Is it time to buy, or sell, or what?

  1. Tony Hansen says:

    Thankyou EM.

  2. E.M.Smith says:

    @Tony:

    You are welcome! I just wish I’d had the time to keep the graphs going in the last few months. I’d been swallowed by a tech sink hole of operating system development / upgrade what with the finding that the Debian 7 kernel was hacker friendly and the Debian 8 was SystemD infested… so needed to suddenly do a lot of OS work on my collection of systems… But that’s pretty much worked out now.

    I saw a comment, I think from Larry here:
    https://chiefio.wordpress.com/2017/02/01/tips-february-2017/#comment-79081

    about volatility that I think was meant for this posting about stock volatility. Larry, it’s just an observation of the facts. At market buy times, volume and volatility spike. At low volatility and low volume, it is time to take protection measures as that is NOT the time to buy and it IS the condition just before markets drop.

    Just print out that chart and draw a line through the price spikes down and the volume and volatility spikes up. Then note, while harder to see, those buy points are preceeded by a low volume low volatility period (often a price plateau for a week to a month). This has held true since I first observed it in about 1985 or so. It also has interesting implications for option trades. Since you “pay up for volatility”, you want to be selling options at the market bottoms and buying them at the tops, so you are selling volatility when it is high (so pricey) and buying it when cheap. This means “buy puts” at tops. It would also imply selling calls at bottoms, but you want to be buying stock then, not having it called from you. So I’d buy stocks at high volume/volatility and buy puts at low volatility/volume…

  3. pg sharrow says:

    I think that the next few years of chaos will create many opportunities to profit. The fast rising tide that follows the early days of the Beast and his evolution to the wise old man will create quite a boom for those that pay attention. Perhaps I need to set up a brokerage account for my family’s future needs…pg

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