OptionsGeek

A little perspective on Equity Markets

2014-02-05T13:20:00.001-05:00

I wanted to put a few things into perspective as clients continue to ask me over the last couple of weeks if I think it's good time to pull out of equities. There is no question as to the great run we've had in the last 3 years in equities, fueled by unlimited liquidity. But, we're not here to discuss economics, or what I think the future might hold, but simply how you should approach the idea of asset-reallocation.

You have to ask yourself, did you hold onto your equities over the last 5 years through this bull market?
If you did, pat yourself on the back and look at the chart above and marvel at the bull run you've managed to capture. As great of a run this has been, the recent correction we've seen is hardly a big move at all. Looking at our Trend Periods indicator, (which is a great tool for helping you in times of panic) it has not budged since late 2012. This approximately 5% correction should not be causing you to pull your money out of equities, just yet. I know every financial news site your reading right now is talking about volatility picking up, emerging markets and China is falling apart, Fed's tapering, run on banks, and it seems like everything is going to hell; perfect timing for pulling out of equities and putting into something safer right?

If that is true, you probably would have missed most of this bull run and have pulled your money out in the middle of 2009, multiple times in 2010, and a few more times in 2011. So don't let a few new stories and a few bad weeks cause you to make any rash decisions. I see some major support around $172 (Volume Profile Low Volume Node), $169 (50 Week SMA), and $157 (23.6% fib level), if these levels were to be breached, then I would say you have a legitimate reason to consider pulling out of equities, as you can see we have a far way down to go if the markets do turn bearish.

I would also like to stress that I'm not advocating that you ignore what you're hearing in the news, but simply take it with a grain of salt for your long term portfolio. All the issues I've listed above are all great reasons that we may be looking at a market top here but, until the markets start to show prices that reflect that and break some support level, don't panic and go and sell your holdings just yet.

S&P Looking Heavy here

2012-08-06T16:19:00.001-04:00

S&P 500 Daily Chart. We just got a daily doji candle as we close right against that trendline resistance today. Notice also the divergence on CCI with price action along with ACC/DIST failing to make new high's. Looking for a pullback into the 1365 area from here.

EUR/USD Weekly Chart Update

2012-08-06T16:00:00.001-04:00

Update here to our Weekly Euro Chart I posted 2 weeks ago. We saw that bounce I was looking for from the 1.2060 low's where ACC/DIST showed us we were upon some Major support level. That week we closed with a bullish engulfing candle and we're in our 2nd week of follow through from that bounce. Here we're seeing some minor resistance on moves higher in the 1.2440 area which is a LVN (Low Volume Node) so expect that level to hold for perhaps this week. Longer term I'm still looking for a move higher into our final 1.2850 LVN Target. Retracements this week could test 1.2130-1.2250 support areas.

Weekly EUR/USD Chart finds Major Support

2012-07-24T15:51:00.002-04:00

Pardon the cartoon like drawing, just wanted to show this weekly EUR/USD Chart. We see the approach of a MAJOR support level here from our market breadth indicator ACC/DIST. Pretty self explantory. I'm looking for moves higher into the next LVN around 1.2860 and 1.3200 POC. Also note that looking at most longer term quantative models we've seen most models showing a Fair Value around 1.2900-1.3000.

If your interested in having me analyze charts for you, you can send your requests through my fiverr. CLICK HERE FOR MY FIVERR

Dollar Index Looking a bit Heavy up here

2012-07-24T14:48:00.001-04:00

We've a had a huge surge in Dollar Index over the last 2 days due to heavy EUR/USD selling and we see it pushing up against a major trendline resistance going back to early Jan, our first clue of possible selling area. Next we look at our ACC/DIST (market breadth indicator) and we see that it has failed to make new high's despite price posting yearly high's here. Based on this, I would be bearish on Dollar here and look for selling it into this 84.20-84.30 area. The only resistance I see above this is a LVN on a weekly chart's volume profile which stands at 85.20 (Only 1 point higher). For the downside I'd be looking at around 82.00-81.00 as targets for such a trade.

If your interested in having me analyze charts for you, you can send your requests through my fiverr. CLICK HERE FOR MY FIVERR

S&P 500 Chart Update

2012-07-23T11:34:00.005-04:00

Time to take a look at our Daily S&P chart. Firstly we should note that we've been in a very choppy and range-bound market for the last couple of months for the S&P(unlike other risk assets), in which case we should be focused on identifying major support/resistance levels and using oscillating indicators for clues for levels to trade. So I wanted to point out looking at the volume profile on a daily chart, we see 3 majors levels we should be looking at, and they are all low volume nodes on the profile. They stand at 1380, 1335, and 1290. Now if you notice that between 1335 and 1380 is what I consider no-man's land. This is where I would consider the trend to be neutral and using indicators like RSI, Stochastics, CCI's would be useful for range bound trading. Now since most people, including myself, have concerns of downside risk, we are always looking for breaks of any Support levels and in this case I would be looking for a break below 1335 and if we do, I'm expecting a move down to the 1290 level immediately which is our next level of support.

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Submit your Charts you want me to Analyze for $5

2012-07-17T15:03:00.001-04:00

I've had many requests from people asking if I can look at this chart or that chart and asking for my opinion. So I'm gonna try something new here. Hopefully your already familiar with Fiverr, the website where you can do things for $5. So I don't think I'm being unreasonable or greedy here, but $5 gets you chart analysis on any 5 stocks/currency/commodity, feel free to mix and match. I have no idea where this will go and how it'll work out, but hey, I'm giving it a shot. CLICK HERE FOR MY FIVERR

Looking at a GBP/JPY Short Setup

2012-07-10T17:06:00.003-04:00

Very simple GBP/JPY Short setup here. Watched this break multiple trendlines over the past couple of weeks, and now I'd just look for a break below that 123.00 support to take some shorts here. I would be looking for 119.00 to the downside with stops right above 124.50. Giving us a risk reward of about 3:1.

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Leg lower on S&P

2012-07-06T15:26:00.000-04:00

Looking at a Daily S&P Chart, we see a completed C wave and looking for a leg lower here. We missed the 1377 LVN by just 2 points and our ACC/DIST indicator shows a rejection from that resistance that was prior support. I'm looking for a move into that lower LVN in the 1292 area.

EUR/USD Possible move to 1.3020?

2012-06-29T16:45:00.004-04:00

Big day for risk assets today, looking at EUR/USD futures, we note that Low Volume Node (LVN) at around 1.2780 area which is a major resistance area. So from this we are definitely still bearish on Euro as long as we stay below that level, but we cannot rule out a move higher if we break above that considering the market has parred back significantly on Short positions. We would be looking for a move into the 1.3020 area which is our next LVN if we get a daily close above that 1.2780 area, but I would make sure ACC/DIST confirms a break of resistance area before taking long's.

Buying USD/JPY Sept 84 Calls

2012-06-22T11:50:00.000-04:00

Over the last few days I've been making a case for bullish USD and short risk plays. One of the ways I was looking to play this was through USD/JPY options. Just a quick and simple analysis here of the chart shows break higher above 21, 49, and 89 EMA's and clean break of this downtrend we've been in since mid-March and our 50 Period CCI reading just poking above 0. Also we see that 79.00 level playing a big role as support/resistance since Nov. that seems to be holding as support here. Thus, I'm looking for a move higher here back to the previous high's, so Sept 84 Calls trading at about 9.6% vol looks quite attractive giving us just over 3 months to see USD/JPY rally.

S&P Futures Chart

2012-06-21T11:58:00.000-04:00

Just a quick analysis on SP futures here. Looking at a daily chart, we have a nice rejection off the 61.8 fib level which comes in at 1354. This is in-line with our analysis on Dollar Index and EUR/USD from yesterday and today that is supportive of a bearish view on equities and risk overall, however notice the ACC/DIST indicator (market breadth) is still above its prior resistance which is now support. This is the only thing that's stopping me from outright taking a short position on risk, once that breaks lower, I would be more comfortable with the idea of outright short risk assets, whether it be commodities, currencies or equities.

Expect Dollar Higher and Risk Lower

2012-06-21T10:29:00.001-04:00

Today we look at a Daily Dollar Index Chart now that we have FED day over and there are some interesting developments. Just like the EUR/USD chart I put up yesterday, we see that Dollar Index spent the last few days under that major 81.80 resistance level, but as I pointed out in the EUR/USD anaylsis yesterday, that seems to be misleading. As we look at our ACC/DIST (market breadth indicator) we clearly see that recent price action has been decidedly above prior resistance despite price action telling us otherwise. With this in mind, it would be supportive of a bearish view on risk assets and I would be looking to continue fading moves lower on Dollar and considering selling risk assets against it (Commodities, EUR/USD, Equities).

Fake Risk Rally?

2012-06-20T11:18:00.000-04:00

From the FOMC meeting today, risk rallying on that anticipation of QE3,OT,etc..., commodities near yearly low's, to the inverted head & shoulder patterns on just about every risk asset I keep getting in my inbox, a market bottom sure seems possible here. So taking a look at Euro this morning. I noticed something interesting. Looking at Price action alone, it looks like we've pushed back higher above that 1.2620 prior resistance and would indicate a move higher into 1.3000 area (next major resistance area), perhaps even that 1.3170 HVN on daily charts. But looking at ACC/DIST we see a very different picture, we see that this move up higher isn't supported by any real volume and ACC/DIST remains below it's prior resistance level. This would lead me to believe that this rally is a false break (dead cat bounce, short squeeze, whatever you want to call it). I would be looking for that 1.2880 LVN area to bring in a fresh wave of sellers and Euro and other risk assets for another move lower towards yearly low's of 1.2300 area.

Dollar Index Update

2011-03-10T16:06:00.004-05:00

Today I was looking at Dollar Index and with the price action from the last couple of days, it's quite a bit to take in. We have a move down below that major support of 77.00 level with some Divergence from CCI on the move down which would have suggested a quick pop back up above that support level we broke, which we did get. The pop up was both quick and fierce, but significantly less volume on the pop up, then the break below, which is more apparent when we look at the ACC/DIST indicator which some of you might know I'm a huge fan of. Despite price action coming back above that 77.00 level (old support = new resistance) it almost seemed like we just had a false break of support and a quick pop back up. However, to keep an eye on the big picture using the ACC/DIST indicator, we see that we're still significantly below prior support level that we broke despite price telling us otherwise. I'm expecting this to move up towards at least the 50 day MA, which corresponds with a HVN at the 78.00 area to bring in more sellers for another wave down.

Long Term Analysis on YM and ES

2010-11-02T17:14:00.005-04:00

Above I have 2 daily Charts of YM(Mini Dow) and ES (Mini S&P 500) The one interesting thing I want to point out is the apparent divergence between price and acc/dist indicator. Based on price action alone, one would say we broke above the 1175 high's before the May crash, and is headed towards the 1216.75 high's of April. But once we take a look at the Acc/Dist, as many of you may know if one of my favorites, we see that it is at the same level as the May 1175 high's. This would suggest a possible reversal here at the 1193 area. This has also been coupled with some MACD divergence. The interesting thing is that, we see the EXACT same thing between the YM and ES charts that makes this so convincing. I personally would not jump short just yet, and wait for an actual reversal. Always look for price first, but this is an warning signal and I'm going to keep my eye on this. Also, considering that volatilities are so low, buying some put protection if your long equities might be a cheap and smart move to consider.

GBP/USD Short Setup

2010-10-08T11:28:00.002-04:00

This is a longer term swing trade setup. I've noticed over the last few weeks of dollar selling that there's been some exhaustion and divergence on moves up towards that 1.6000 resistance and psychological level. We can clearly see the divergence on both CCI and MACD. I would aim for the 1.5500 level as target on this short with a tight stop of around 70 pips, since any break above the 1.6000 level would just invalidate our trade. Making for about a 6:1 risk/reward ratio from the current price.

EUR/USD Long Setup

2010-09-29T16:54:00.003-04:00

Here's a trade setup I was thinking for a swing trader. Clearly we have a very bullish momentum in EUR but with such strong moves in the last few days, expect a pullback or at least some consolidation back to the new support level at 1.3285 level as both our CCI and MACD confirms overbought readings before a move upwards towards the 1.3900 61.8 fib level.

$ES_F Daily S&P 500 Analysis

2010-09-17T12:34:00.002-04:00

This is an update on the daily S&P 500 Chart. Last time I posted I used acc/dist to find the Aug top and now we're back near that level again, but we clearly see acc/dist seems to have broken that resistance level, which is a bullish indication. I'd hold off on doom and gloom analysis and taking shorts on equities for now and wait for moves higher before going long volatility.

S&P Daily Chart Analysis

2010-08-05T11:45:00.003-04:00

As some of you know by now, I'm a big fan of the Acc/Dist of volume indicator, and looking at it on a Daily chart gives us a pretty interesting level to keep an eye out for. From a price action prospective we're at a resistance level at the 1130. This typically we would keep an eye out for either a bounce lower or a break higher, and using the Acc/Dist, I can confirm that this level is a a significant level to keep an eye out for. Couple of things to consider as to which way this will play out: 1) volatility in the markets has been pretty low and we've seen back vol on S&P options significantly higher than front vol suggesting possible rise in Volatility. 2) We see divergence on this recent rally with MACD. Both these reasons does not mean this rally can't continue and shoot higher, but reasons why I'm looking for a potential move downside vs. upside.

Breaking uptrend on $ES

2010-07-29T14:49:00.002-04:00

Today, we saw the ES break a nice 2 week uptrend channel pretty definitively. This retrace back up to the 1100 level after the break should provide some great short opportunities. 1102.50 is the last 5 day weekly pivot.

GBPJPY Short

2010-07-28T10:28:00.003-04:00

A lot of interest in GBPJPY after it broke it's 3 month channel to the upside yesterday. However I point out that it's likely a false break and a move back to the bottom of the channel is more likely. CCI confirms divergence here and starting to make its move back into the channel. Also, I like the risk/reward on this trade. The 61.8 fib level above is going to provide my stop level. Shooting for middle of that range first, then bottom of the channel as 2nd target about 600 pips.

More importantly, this gives us a clearer picture of the potentially breakdown of equities in the coming week.

Using ACC/DIST to find true Support and Resistance

2010-07-15T12:12:00.003-04:00

Many times, simply looking at Price Action to find support and resistance can be deceiving, One way to spot these is to use the Accumulation/Distribution Indicator. I use a volume based acc/dist to better spot true support/resistance and keeping me out of false breakouts and false reversals. Attached is this morning's S&P Emini Futures chart. I've attached both 1600tick chart on the left, and 512 tick on the Right. One thing I noticed this morning in the first 15 mins of trading was what looked like a double bottom forming in the 1087 area. At the time, just looking at price action, on the 512 tick chart, it looks like a pretty standard double bottom forming, which would be a textbook Long Trade, however looking at ACC/DIST, we clearly see we broke that support from the o/n session lows and acc/dist even came back to test that resistance and was rejected. Based on this, I would have stayed out of taking a Long trade at the double bottom. Which turned out to be a false one.

Now looking at the 1600tick chart. This is a classic Textbook Support turns into resistance trade, HOWEVER, it would not have been clear on the price chart. If we only looked at charts, 1086 would have been the support and we would have been trying to wait for the 1086 area again to short. However, looking at acc/dist we see that as we approached 1083 level, that acc/dist was showing us that, that was the true resistance.

Selloff in Gold is NOT over

2010-07-01T16:13:00.004-04:00

We've seen some really ugly, and crystal clear divergence in GOLD for a few weeks now. Finally we broke the downside of accumulation/distribution that I was looking for to confirm the break downward. Initial targets on the downside is the Trendline support in the 1160-1175 area.

Interesting Divergence on S&P

2010-07-01T11:27:00.004-04:00

As you can see from this Chart, as prices move lower. there is no confirmation of a break of that 1050 support level from Accumulation/Distribution. Now this is not a BUY signal just yet, but this is definitely a level I'll be keeping my eyes out for. If we see a bounce up on the acc/dist, I would consider that to be a BUY signal. Otherwise, I would be uncomfortable holding equities in my portfolio if this acc/dist line breaks that support line. I'll keep everyone updated on this...