The TSI Trader

Sold USSID @ $2.40

noreply@blogger.com (John Townsend, The TSI Trader) — Wed, 22 Feb 2012 18:40:00 +0000

I sold my shares of US Silver Corp (USSID) today at $2.40 and am now entirely in cash. I continue to be wary of a stock market correction that will bring mining shares down with it and have patiently sold each miner I owned at a small profit and left the playing table.

My retirement account, which is another matter altogether, will continue to hold both Claude Resources (CGR) and US Silver (USSID) until something closer to their fair value is recognized by the market.

My TSI Trading record has been updated.

Click on the chart to ENLARGE

VIX - How Low Can You Go?

noreply@blogger.com (John Townsend, The TSI Trader) — Tue, 21 Feb 2012 04:41:00 +0000

Since I've had a little success trading VelocityShares 2X VIX ETN (TVIX) I thought a little homework on the subject of the volatility index VIX may help me grasp some fresh perspective. I decided to see if I could get a sense of the degree to which the VIX has been able to stray below its 100 and 200 dma over the past 20 years. And while I was looking at the VIX, I figured I may as well investigate how high the ES - E-mini S&P futures contract has been able to soar above these same moving averages during the same time period.

This project is a good example of the 'reversion to the mean' trading concept that says that price is usually only able to stray just so far from a moving average (mean) before it is pulled back towards the moving average. And in extreme cases, it can also illustrate the rubber band concept that says if price gets too far from the mean, when it finally can only be stretched so far in one direction and that is it, price releases its energy with a very sharp and swift reversal of direction.

For my assignment I chose to use an indicator I created several weeks ago for the ThinkorSwim platform. The indicator is flexible in allowing me to choose any ticker symbol and any moving average length of its price movement, then display the relationship between price and that moving average.

This first chart is of the VIX on the top, ES on the bottom, both as viewed on a 20 year weekly with a 20 wma which roughly equates to the 100 dma, and with my indicator below price. The black horizontal line measures 1 on the far right and this represents the 100 dma. A reading of 1.25 is 25% above the 100 dma, and so on.

Notable in this first chart is the VIX reaching highs of 185 and 230% above its 100 dma 3 times in the past 4 years. And what I was most curious to see was how much below this mean was possible. We can see that in the past 20 years the VIX has only a few times reached 25% below the mean (0.75). And using this metric, the VIX attained a 20 year low just the other week.

The lower portion of this chart has the ES and its 100 dma data. Apparently a stretch of 10% above the 100 dma (1.10) has been accomplished 4 times, with 8% (1.08) usually about the max. We are currently reading around 6% (1.06) above the 100 dma.

Now what follows is a 20 year weekly chart with the VIX, ES and similar considerations using the 40 wma as a proxy for the 200 dma.

I suppose one could make the case that the VIX and ES are not as fully stretched beyond the mean on this 200 dma chart as the preceding 100 dma chart. In any event, the rubber band is looking plenty stretched and likely getting near to the point of saying 'no more'.

Have a great week of trading!

Sold TVIX @ $17.50 pre-market

noreply@blogger.com (John Townsend, The TSI Trader) — Fri, 17 Feb 2012 13:31:00 +0000

With the stock market breaking out unexpectedly to new highs yesterday I have become wary of what will come next. I sold my position in VelocityShares 2X VIX ETN (TVIX) in the pre-market this morning for $17.50. At this point I plan to just sit back and watch the incredible show until I can find an edge to re-enter TVIX again.

My TSI Trading record has been updated.

Click on the chart to ENLARGE

Fibonacci SPX

noreply@blogger.com (John Townsend, The TSI Trader) — Thu, 16 Feb 2012 01:42:00 +0000

Last April I wrote an article titled Fibonacci Gold and to tell you the truth, I have always been very proud of that analysis and particularly so regarding the beauty and elegance of the charts. Today's post - Fibonacci SPX - will not compare with my previous inspiration, but I do think it has a relevant message that should give one something to think about. Even better if it helps my reader be prepared for investing/trading a stock market that I suspect is about to change rather dramatically.

Before we get to the Fibonacci stuff, how about we take a simple look at the SP-500 daily chart and observe the report being given from the True Strength Index (TSI) indicator.

Click on any chart to ENLARGE

This chart goes back about a year and a half and details the major TSI sell signals in that time period. Of particular note is the trend line break SELL signal that was generated just today. Generally speaking, the most statistically favorable sell signals generated by a trend line break occur at or very near the ZERO crossover. Today the SPX daily TSI closed at +0.18 and while not entirely ideal, it is a clear warning to SELL or be very cautious with long positions, at the least.

The US Dollar Index has been rallying for days now off what appears to have become an intermediate cycle bottom. Why it has taken the stock market this many days to start falling apart, in reciprocal fashion, is a bit of a mystery to me.....but anyway, we had all kinds of news today, including a read of the FED previous meeting minutes, so perhaps that is what the market was waiting to hear. Who knows?

My point of view at this point is that the long anticipated stock market, gold and precious metals correction should be on the verge of beginning (or already has).

Now, onto Fibonacci SPX.

This chart is a weekly going back to March 2009 when the SPX bottomed at 666. The data I notated on the chart below was actually derived from a daily chart (yielding accurate measurements) then transferred to this less 'busy' weekly chart.

My research was to discover whether there is a Fibonacci time relationship between the significant peaks and valleys of the past 3 years, and if so, can we see any evidence that our current time frame possibly implicates a significant top as being ready to occur right now.

I found it challenging to present this material so that it was easily understandable. Sometimes a significant price low is followed by a significant Fibonacci measurement that targets a significant price high, and visa versa. My best solution, for now, uses a line to identify the length of the 0 - 100% time frame then identify the Fibonacci measurement (%) corresponding to the significant high or low that can be seen vertically above.

If nothing else the interesting discovery for me was to observe how truly intertwined the movement of the S&P 500 price is to Fibonacci measurement in terms of time. Perhaps another day I can do a study of the Fibonacci relationships of price itself, as opposed to time.

Also, the very beginning of the S&P's 666 low is directly Fibonacci time related to price this week (bottom red line). Also, the March 2010 intermediate cycle low (Japan tsunami time frame) and the major intermediate cycle low this past October are correlated to price this week (purple line). And finally, the recent October high, November low and December low are in Fibonacci relationship with this week (light blue line).

As I have often mentioned, there are NO CERTAINTIES in the stock market, only probabilities. For myself, anyway, I regard today's TSI trend line break SELL signal and the Fibonacci time measurements targeting this week as favorably supporting the probability that the SPX top is in.

Wishing you good trading!

John
tsiTrader@gmail.com

Bought and Sold TVIX - $17.00 / $17.50

noreply@blogger.com (John Townsend, The TSI Trader) — Wed, 15 Feb 2012 01:26:00 +0000

I took an additional half position in VelocityShares 2X VIX ETN (TVIX) yesterday at $17.00 and sold that position today at $17.50. This amounted to a very modest gain of 2.9% but for a one day trade, hey, I think that's just fine.

I made a quick chart near the time of this purchase, and another one close to the time of my sale.

My TSI Trading record has been updated.

Debrief: 20 Sells/Short Sales This Past Week

noreply@blogger.com (John Townsend, The TSI Trader) — Sat, 11 Feb 2012 00:05:00 +0000

I have concluded my tabulations for the change in price this week of the 20 Sells/Short Sales I presented last weekend on the basis of their daily chart negative divergence SELL signal each possessed at that time. I used the closing price going into last weekend as the constant by which each day's closing price this week was compared.

My stated hypothesis was: "My expectation is that the majority of these ticker symbols will indeed be lower this week. And I think there is a fairly good chance that nearly ALL of them will be lower".

I have reproduced the chart with detailed data from this week's activity below.

The SP-500 closed last Friday at $1,344.90 - and today (5 trading days later) at $1,342.64. This amounted to a decline in price of $2.26 for the week, or 0.17%.

As the stock market was essentially flat this week, one could reasonably expect that a random selection of 20 stocks would also be roughly even in the winner and loser columns.

I'll be the first to point out that a study of just 20 stocks and their price movement in a period of one week is nothing to take very seriously, if at all. In a single week 20 stocks could do absolutely anything - including all close green or all close red. I make no pretense that these results are somehow conclusive, as that would be incredibly naive. And I will suggest the likelihood that institutional size investors have access to this kind of data based on years of data, not a single week, and are far more aware of the odds/probabilities of price movement based on momentum than I ever will be.

Having said that, and having personally looked at this kind of stuff for many years using the True Strength Index (TSI) indicator, this data is very consistent with my expectations.

First, I expected the majority, if not nearly all of the 20, would be lower at the end of this week. 15/20 (75%) were indeed lower. This, in a market that - remember - fell only 0.17%. If the market had not been flat in the past 5 days I would have expected the blood to exceed 75% significantly.

Second, it did not surprise me that the SP-500 index stocks have not yet reacted to the TSI negative divergence because the index has sustained them. My hunch is that these 20 stocks will be among the hardest hit when the SP-500 really starts to drop.

Third, the significant movers in the group (XIV, INDL, YINN, PLTM, SWC, DRN and COPX) were all to the downside. There were no significant movers in the group to the upside. The largest upside move was less than 1% - nothing that would devastate a short trader using this strategy.

Fourth, the movers were the very issues that have a higher volatility than average - the leveraged ETFs and the miners. The upshot I take from this is that the negative divergence signal pays handsomely when the issue involved is volatile to start with.

Fifth and finally, I do not regard the TSI divergence signal - positive or negative - as an equal with the TSI trend line break BUY/SELL signal. In this context it does not surprise me that 5/20 stocks drove right up through their negative divergence signal in a flat market and closed higher this week than last.

There is no magic indicator or signal that works all the time. But one can learn how to use the TSI to put the odds in their favor - accept the losses that inevitably will occur either due to inexperience, poor judgement or dumb luck, while properly managing position size and risk - and beat the market very consistently over time.

20 Shorts/SELLS for the Week of February 6 - 10
	Ticker Symbol	Friday’s Close	Monday	Tuesday	Wednesday	Thursday	Friday	Change this Week
1.	ALL	$30.69	$30.63	$30.84	$31.00	$30.91	$30.97	0.91%
2.	AMD	$7.08	$6.92	$7.13	$7.25	$7.24	$7.05	0.42%
3.	AZO	$353.18	$350.76	$350.48	$349.15	$354.04	$354.10	0.26%
4.	BAX	$57.04	$57.11	$57.02	$57.07	$56.80	$56.84	0.35%
5.	BEN	$116.41	$116.22	$116.74	$116.70	$116.85	$116.10	0.27%
6.	BIG	$43.59	$43.48	$43.91	$43.98	$43.84	$44.00	0.94%
7.	BXP	$107.57	$107.25	$106.30	$106.00	$104.74	$103.78	3.52%
8.	COPX	$15.78	$15.59	$15.28	$15.30	$15.47	$14.98	5.01%
9.	DBC	$28.32	$28.46	$28.44	$28.57	$28.72	$28.45	0.46%
10.	DRN	$66.64	$65.89	$65.58	$65.92	$64.36	$62.48	6.24%
11.	ICF	$76.36	$76.02	$76.00	$76.05	$75.40	$74.69	2.19%
12.	INDL	$31.53	$30.59	$29.46	$29.66	$30.32	$28.61	9.26%
13.	MFN	$14.91	$14.83	$14.82	$14.71	$14.83	$14.91	0.00%
14.	NCMGY	$36.83	$36.29	$36.42	$35.80	$36.11	$35.80	2.80%
15.	PLTM	$21.33	$21.05	$20.90	$20.75	$20.67	$19.82	7.08%
16.	SEA	$17.51	$17.60	$17.64	$17.66	$17.53	$17.29	1.26%
17.	SWC	$14.37	$14.07	$13.82	$13.95	$13.95	$13.36	7.03%
18.	URE	$60.68	$60.11	$59.98	$59.95	$59.15	$58.21	3.41%
19.	XIV	$9.50	$9.61	$9.50	$9.28	$8.82	$8.08	14.95%
20.	YINN	$24.97	$25.20	$23.56	$24.80	$25.40	$23.81	8.65%
			15/20 = 75% NYSE 57%	13/20 = 65% NYSE 42%	13/20 = 65% NYSE 41%	15/20 = 75% NYSE 50%	15/20 = 75% NYSE 73%

Have a great weekend!

Sold LSG - $1.51

noreply@blogger.com (John Townsend, The TSI Trader) — Thu, 09 Feb 2012 16:51:00 +0000

Due to my general paranoia that the stock market and gold are about to leave the party as the US Dollar makes a conclusive intermediate cycle bottom, I set a limit order sell before the market opened today to sell my shares in Lake Shore Gold (LSG) at $1.51 - 4 cents above my purchase price. I took my eye off this ball and was not aware of the favorable news that was announced after the market closed yesterday. LSG is, at this moment trading up 15% for the day at around $1.63.

My TSI Trader record has been updated.

BUY TVIX @ $14.79

noreply@blogger.com (John Townsend, The TSI Trader) — Thu, 09 Feb 2012 12:43:00 +0000

Towards the end of yesterday's session I took the plunge and loaded up on VelocityShares 2X VIX ETN (TVIX) @ $14.79. As the following daily chart shows, there is a smidge of a True Strength Index (TSI) indicator trend line break BUY signal as well as a strongly favorable positive divergence BUY signal in place. On reflection last evening I am fairly confident I took this position too soon and I will show you why on the third chart below - the US Dollar Index (DX).

I will also add that the TSI is reading -0.56 and that is much less than ideal. A far more promising setup would have the TSI much closer to the ZERO crossover - say at -0.20 or higher.

One of the details I forgot to include on the chart of TVIX (above) is the daily volume, which I take as providing a bullish clue. I made the following chart to show my thinking on this issue of volume.

The 'fly in the ointment' for me is the probable behavior of the US Dollar Index (DX) in the next few days. The previous intermediate cycle conclusion in late October seems to have provided a cookie cutter pattern for our current situation. That pattern includes a sharp drop, multi- day consolidation, a single day sharp drop, 3 days sideways, then a final terrorizing drop. We appear to fit this pattern to a tee at the moment and today is day 2 of the final 3 days sideways before the concluding terrorizing drop (i.e. next Monday).

You know, I wish it were this simple to figure these things out and believe one knows the future, but we all know that is impossible. I certainly do not have a crystal ball and anything, beginning the next 5 minutes from now, is possible. But these are my thoughts and I'm going to play whatever odds I surmise are in my favor (lol). Wish us all good luck.

My TSI Trading record has been updated.

BUY VALV @ $1.18 - SOLD VALV @ $1.24

noreply@blogger.com (John Townsend, The TSI Trader) — Wed, 08 Feb 2012 19:04:00 +0000

A reader by the name of Guy wrote a comment that I was able to read before the beginning bell this morning to ask what I thought of a stock called Shengkai Innovations Inc (VALV). It looked like a momentum play I could manage between everything thing else I do at work (yeah, right) so I bought some shares at $1.15, but most were at $1.18. Just minutes ago I sold my entire position at $1.24.

Some of the VALV's incredible 'fundamental' data that I was able to glean before attempting the flip are detailed on the chart using various colors.

I simply do not have time right now to decide just how legit this stock and its pricing, so I took a little 5% profit and politely said "thank you". And I would also like to say "thank you" to Guy.

Heck, if half of those numbers are real I should have held this thing until it reached $5.

My TSI trading record has been updated.

TSI Trend Line Break Mathematics - XGLD

noreply@blogger.com (John Townsend, The TSI Trader) — Wed, 08 Feb 2012 01:10:00 +0000

I have updated the chart with the 20 short/SELL ticker symbols with today's closing prices. Today 13 of the 20 stocks (65%) closed lower than their close of last Friday. Also, today was a fairly positive day with only 42% of NYSE closing in the red.

Some readers have sought some clarification on how I define a trend line break and I hope this post will provide the relevant details. I will show a couple of charts - one demonstrating the trend line break BUY signal, the other demonstrating the SELL signal - then conclude with a chart that is in serious jeopardy of yielding a Negative Divergence SELL signal (XGLD).

This past fall I took quite a few weeks off from writing this blog to work intensively on my skill to program the True Strength Index (TSI) indicator BUY/SELL signals using the Think or Swim platform. One of the techniques I successfully mastered was an algorithm for having the computer accurately identify the trend line breaks of the TSI indicator.

Our first chart is Alexco Resources (AXU) and demonstrates the mathematical calculations I used to get the computer to tell me when there was a trend line break BUY signal.

The technique I used was to have the computer recognize when the TSI had made a reversal in direction that resulted in a 'high point' - such as we can observe on Days 1, 16 and 21.

The next step was to calculate how far the TSI had fallen in the interim periods then divide that calculation by the number of periods. That gave me the slope of the trend line.

Finally, the computer kept track of the TSI reading for each day and compared that with the reading expected that day if the TSI continued at or below the established slope. Once the computer got a reading (such as occurred on Day 25) that was ABOVE the expected reading, a trend line break had finally occurred.

Here is a second look at this technique - this time the SELL signal. The algorithm is the same, of course. Find at least two points that define a slope then wait until the mouse crosses down through the radar zone to generate a trend line break SELL signal.

I hope this post makes clear that I need to have at least two points to define the slope of a trend line break. It really cannot be defined without at least two points.

But I have also written earlier my belief that the trend line break trumps the divergence signal. If there are two points from which I can define a slope and the TSI moves such that the slope is violated - I recognize that as a trend line break and do not look at the situation as possibly capable of generating a divergence BUY/SELL signal.

We'll conclude this discussion with an example of a stock that - at the moment - does not have a trend line break anywhere in sight...... and therefore is likely to yield a negative divergence SELL signal very soon.

This is a daily chart of our good friend XGLD. Should price continue higher, the TSI will go higher. But I suspect that if price makes a new high the TSI will NOT make a new high.

Also, the closer the TSI gravitates towards ZERO, the more likely a SELL signal will have a powerful effect. That is because of the absolute TSI certainty that if the TSI is falling below ZERO, price is also falling. The same cannot be said when the TSI is above ZERO.

And, notice that XGLD's TSI reading is about as low to ZERO as when it's rally began over a month ago. Every hot air balloon lands sooner or later - and so will this one.

Sold CGR - $1.47 - Short List Update

noreply@blogger.com (John Townsend, The TSI Trader) — Mon, 06 Feb 2012 23:19:00 +0000

This morning I became more skeptical of the rise in the S&P 500 while watching gold take a $60 nosedive, so I decided to sell my largest position - which also had a modest gain - and head towards the sidelines. This is a daily chart of Claude Resources Inc (CGR) which I sold for $1.47. I will continue to hold a substantial position of CGR in my retirement account as I am very persuaded, for now, that this company has both excellent earnings prospects and long term value.

My TSI trading record has been updated.

The list of 20 short/SELL trades, based on the True Strength Index (TSI) indicator's negative divergence SELL signal has been updated to include today's closing trade. It turns out that 57% of the NYSE stocks closed lower today, while 75% of those stocks I listed also closed lower. If you would like to review that data, click here, then scroll down the page a bit to reach the data table.

A couple of readers have written me to inquire about the possible short sale of particular stocks that seem to meet the TSI negative divergence SELL signal criteria I imposed upon myself. I would like to share those with you now and try to clarify why these two stocks were not viable candidates of the negative divergence rules I applied to my selection.

This first chart is a daily of Autodesk Inc (ADSK). This is an excellent example of the trend line break BUY signal trumping the otherwise obvious negative divergence SELL signal.

And the next chart is a daily of Salesforce.com Inc (CRM) - also an excellent example of a trend line break messing up an otherwise legitimate negative divergence.

20 Shorts/SELLS for This Week - The TSI Negative Divergence

noreply@blogger.com (John Townsend, The TSI Trader) — Mon, 06 Feb 2012 01:55:00 +0000

Just for a change, I'm writing this post about using the True Strength Index (TSI) indicator and the Negative Divergence SELL signal it generates. I'll show you 20 stock charts that say SELL loud and clear on their daily charts using the TSI Negative Divergence SELL signal. And I'm going to pretend that I sold short each of these stock symbols at the close on Friday, document the closing price of each throughout this week in the chart below, and recap the results next weekend.

My particular definition of a negative divergence is as follows: the TSI indicator has previously made a high which it has not surpassed as of last Friday. And, price on Friday was higher than the day of the previous TSI high. In simpler terms, Friday's price made a higher high while the TSI made a lower high.

The other part of my negative divergence definition is that the TSI can not have yielded a trend line break BUY signal between these two dates used for the negative divergence comparison. Another way of saying this is that the trend line break BUY signal trumps the negative divergence SELL signal.

For my 20 specimens I have selected a handful of ETFs, another handful of mining stocks and a third handful of randomly selected members of the S&P 500 index. They are presented here in alphabetical order.

Stocks go up and stocks go down. Using simple odds, about 10 of any 20 stocks would be higher a week later and the other 10 stocks lower. Considering that the market has been moving sharply and consistently higher, common sense suggests that maybe 15 stocks will be higher in a week and only 5 lower.

My expectation, however, is that the majority of these ticker symbols will indeed be lower this week. And I think there is a fairly good chance that nearly ALL of them will be lower.

It's going to be fun to see how this turns out.

OK - here is the table I will update each day. If the closing price on any day is higher than last Friday's close I will color it green. Alternatively, any day that a stock closes lower than last Friday's closing price I will color that closing price in red. My expectation is that most of the chart will be colored red.

The charts of each ticker symbol follows below so you can examine the TSI negative divergence that caught my attention.

20 Shorts/SELLS for the Week of February 6 - 10
	Ticker Symbol	Friday’s Close	Monday	Tuesday	Wednesday	Thursday	Friday	Change this Week
1.	ALL	$30.69	$30.63	$30.84	$31.00	$30.91	$30.97	0.91%
2.	AMD	$7.08	$6.92	$7.13	$7.25	$7.24	$7.05	0.42%
3.	AZO	$353.18	$350.76	$350.48	$349.15	$354.04	$354.10	0.26%
4.	BAX	$57.04	$57.11	$57.02	$57.07	$56.80	$56.84	0.35%
5.	BEN	$116.41	$116.22	$116.74	$116.70	$116.85	$116.10	0.27%
6.	BIG	$43.59	$43.48	$43.91	$43.98	$43.84	$44.00	0.94%
7.	BXP	$107.57	$107.25	$106.30	$106.00	$104.74	$103.78	3.52%
8.	COPX	$15.78	$15.59	$15.28	$15.30	$15.47	$14.98	5.01%
9.	DBC	$28.32	$28.46	$28.44	$28.57	$28.72	$28.45	0.46%
10.	DRN	$66.64	$65.89	$65.58	$65.92	$64.36	$62.48	6.24%
11.	ICF	$76.36	$76.02	$76.00	$76.05	$75.40	$74.69	2.19%
12.	INDL	$31.53	$30.59	$29.46	$29.66	$30.32	$28.61	9.26%
13.	MFN	$14.91	$14.83	$14.82	$14.71	$14.83	$14.91	0.00%
14.	NCMGY	$36.83	$36.29	$36.42	$35.80	$36.11	$35.80	2.80%
15.	PLTM	$21.33	$21.05	$20.90	$20.75	$20.67	$19.82	7.08%
16.	SEA	$17.51	$17.60	$17.64	$17.66	$17.53	$17.29	1.26%
17.	SWC	$14.37	$14.07	$13.82	$13.95	$13.95	$13.36	7.03%
18.	URE	$60.68	$60.11	$59.98	$59.95	$59.15	$58.21	3.41%
19.	XIV	$9.50	$9.61	$9.50	$9.28	$8.82	$8.08	14.95%
20.	YINN	$24.97	$25.20	$23.56	$24.80	$25.40	$23.81	8.65%
			15/20 = 75% NYSE 57%	13/20 = 65% NYSE 42%	13/20 = 65% NYSE 41%	15/20 = 75% NYSE 50%	15/20 = 75% NYSE 73%

Click on any chart to ENLARGE

1. ALL

Allstate Corp

$30.69

2. AMD

Advanced Micro Devices

$7.08

3. AZO

Autozone Inc

$353.13

4. BAX

Baxter Intl Inc

$57.04

5. BEN

Franklin Resources

$116.41

6. BIG

Big Lots Inc

$43.59

7. BXP

Boston Properties

$107.57

8. COPX

Copper Miners ETF

$15.78

9. DBC

Commodity Index ETF

$28.32

10. DRN

Real Estate Bull ETF

$66.64

11. ICF

Realty Index ETF

$76.36

12. INDL

India Bull ETF

$31.53

13. MFN

Minefinders

$14.91

14. NCMGY

Newcrest Mining Ltd

$36.83

15. PLTM

Platinum Index Fund

$21.33

16. SEA

Guggenheim Shipping ETF

$17.51

17. SWC

Stillwater Mining Co

$14.37

18. URE

Real Estate ETF

$60.68

19. XIV

Inverse VIX ETF

$9.50

20. YINN

China Bull ETF

$24.97

BUY US Silver @ $2.38

noreply@blogger.com (John Townsend, The TSI Trader) — Wed, 01 Feb 2012 13:35:00 +0000

Near the end of yesterday's session I decided to buy shares of US Silver (USSID) for $2.38. I have followed this company fairly closely for the past 4 years. I was looking for a silver miner to compliment my gold miner positions and as events are now strongly favoring this company's stock, I think this is a good time to buy and hold.

There is quite a bit about US Silver I would like to write about but unfortunately this post will have to be short.

The company has just done a 5 for 1 reverse split. This condensed the shares outstanding to just 61.8M, while boosting the share price from the 45 cent area to $2.40. Also, the company is in an advanced stage of receiving a listing on the AMEX exchange.

Its silver mines are in northern Idaho.

2011E per share earnings are .06, 2012E .09.
PE 7.9 and 5.3 respectively.

Gross Margin (TTM) 40.19%.
Net Profit Margin (TTM) 18.73%.
1.7X tangible Book Value

Debt = 0
Cash per share = .44

Return on Assets (TTM) 21.87%
Return on Investments (TTM) 23.30%
Return on Equity (TTM) 25.82%

BUY CGR @ $1.41

noreply@blogger.com (John Townsend, The TSI Trader) — Tue, 31 Jan 2012 16:45:00 +0000

Yesterday I decided to quadruple my position in Claude Resources Inc (CGR) at $1.41 per share. Selling volume, though persistent, appears to be nearly extinguished.

Click on the chart to ENLARGE

My TSI Trading record has been updated.

Bought LSG @ $1.47

noreply@blogger.com (John Townsend, The TSI Trader) — Sat, 28 Jan 2012 16:32:00 +0000

I bought shares in another Canadian gold miner yesterday. This one is Lake Shore Gold Corp (LSG) which trades on the AMEX exchange. My purchase price was $1.47.

This first chart is a weekly of LSG and uses the slower 'trending' setting of the True Strength Index (TSI) indicator set at (25,13). The TSI rendered three BUY signals which I regard as strong confirmation this stock has turned the corner on its downward momentum and should see better days ahead soon.

Click on any chart to ENLARGE

The next chart is a daily and compares the price performance of Lake Shore Gold (LSG) with gold (XGLD) and the Junior Miners ETF (GDXJ). Here we see the familiar TSI BUY signals, as on the weekly chart above - trend line break, positive divergence and ZERO crossover - and note that this stock has severely underperformed both XGLD and GDXJ beginning last May, 2011. We also note that Lake Shore Gold now trades at just 60 cents on the dollar with respect to its book value.

I have done several hours of due diligence to learn what explains the sky dive from $4.50 per share to $1.05 in the past 9 months. The company has several mines in Canada with one that went into production beginning January 2011. The expectations for the amount of gold they could process were lowered by the company at about this time and that triggered several analyst downgrades. Add to that the general swoon one can easily see in the GDXJ beginning last May and the recipe for price to move to the opposite extreme was put into action.

My interest in this stock begins with its ridiculously under priced stock market valuation and is sustained by the technicals (TSI) that suggest it is a candidate for price appreciation in the near future. Also, the current book value of Lake Shore Gold is $1 Billion and it began trading on the AMEX exchange last August.

Price projections are usually tough to get real excited about because they are often overly optimistic, or so my experience has led me to believe. But, for what its worth, here is what the 11 analysts who follow this company think about its prospects for future price appreciation (Jan. 26, 2012).

Bought CGR @ $1.46 - CDY Update

noreply@blogger.com (John Townsend, The TSI Trader) — Fri, 27 Jan 2012 04:28:00 +0000

First a brief update on Cardero Resources (CDY). I introduced this stock to readers on December 26 when it was trading for 95 cents. Though I did not purchase CDY (I set a limit price that was never hit) I am very pleased that many readers did buy the stock, as it closed today at $1.53. This daily chart updates the stock's subsequent performance and highlights what can happen when the overhead resistance of the 50 dma and 200 dma are overcome.

Click on any chart to ENLARGE

Today I purchased Claude Resources (CGR) for $1.46 per share. Having missed the strong run of CDY I decided to just get on board Claude Resources and be patient. Let's begin with a look at the weekly chart.

I've looked over a couple hundred miner charts to find this one. I was impressed with the cup with handle pattern and the recent/current retest of the handle. In a really ideal environment, such as I think is now developing in the mining stocks, the retest that pulled price down from $3.00 to nearly $1.00 in the space of a single year could act like a sling shot - energizing upward price movement when selling pressure is finally exhausted.

This chart of daily price movement shows that CGR currently has some of the same challenges as CDY had when I brought it to your attention. That is, overhead 50 dma and 200 dma resistance.

The stock has made it up through an initial price trend line of resistance just this week, but there are a couple others waiting overhead. The True Strength Index (TSI) indicator shows that sometime before the end of February we should have a break out of significance, up or down. Should price be able to navigate through the next 50 cents of landmines - up past $1.90 - there will be little if any resistance from there on, whatsoever.

If we take a look at a closer view of the daily chart we can see that CGR has some positives going for it at the moment. Two BUY signals have been given by the TSI - a trend line break and a ZERO crossover. Additionally a stealth positive divergence has been building for a number of weeks as price seems to be consolidating and at last dissipating the last of the downward momentum of the past year. Today we had our first test of the 50 dma and it's not surprising to see it fail on the first try. But I am quite sure there will be more attempts.

You may have noticed the earnings projections for Claude Resources that I put on a couple of the earlier charts. I found it nearly impossible to find another stock with more explosive projections: 2010 2 cents, 2011E 10 cents, 2012E 21 cents and 2013E 30 cents.

CGR has a smallish number of shares outstanding, with 164M. It is a Canadian company with all of it's mining operation in Canada. And best of all, for me anyway, is that it is currently priced at just 1.4X book value. That's cheap. There are a several other AMEX miners that trade with a lower price to book value ratio - CDY, KGC, AUMN, GSS, GBG, BRD - but the estimated earnings of these did not impress me as favorably as CGR.

In closing, here are a couple tidbits from my study. The first is from The Motley Fool (11-17-2011) and provides an overview of Claude's business/operation. The second tidbit shows that despite the stock's continual slide over the past six months, large institutional buyers have continued to load up on CGR.

Go get 'em!

The MouES Bit Too Hard - Covered ES @ $1322.50

noreply@blogger.com (John Townsend, The TSI Trader) — Wed, 25 Jan 2012 23:26:00 +0000

I have a certain tolerance for pain when trading and when it is reached I get out of the position and move on. Today the MouES (E-mini S&P 500 Index Futures ES) bit me repeatedly - until it reached my tolerance level. Then I covered my two sold futures contracts with a buy at $1322.50.

I had a number of very excellent trades earlier in the month and decided to define my tolerance level such that it would not allow those trades to go entirely for naught. So, if this should be my final trade of January (unlikely) I will conclude with a very modest 3% gain in my account value for the month of January 2012.

Here is the daily chart of ES as of a short while ago.

Click on the chart to ENLARGE

Yesterday I spent a few hours studying the S&P 500 price movement since the March 2009 low. The takeaway for me is the similarity of this rally with the fall 2010 rally. In that case, rather than the daily cycle bottoming on Day 35-40, it bottomed on Day 59 - clearly stretched in response to QE2.

But we don't have QE3 to account for current price action. Or, do we?

Is the FED printing money to 'loan' to the European Central Bank (ECB) at 0% and we don't know about it? Maybe Saudi Arabia is selling oil to China for Chinese currency - rather than US Dollar currency? Maybe there is huge liquidation of accounts in Europe that is being first converted into US Dollars (which would be US Dollar bullish) but then invested in our or other stock markets (which would be US Dollar bearish)? Or something else having to do with credit default swaps (CDS) between the US and Europe?

Or maybe I am just being paranoid and the overdue daily cycle for the S&P 500 is just a little late arriving this time. At this moment that explanation seems (to me) about as likely as Santa Claus visiting my chimney on December 25 or 26 and saying he forgot what day it was, but I guess it is possible.

In any event, the TSI is now sky high, price is at the very top of the 3 week price channel and the downtrend line from 2007 is still overhead. The FED meeting is over and I would think that the ES will go into a profit-taking correction soon.

The Mother of All Trend Line Breaks (?)

noreply@blogger.com (John Townsend, The TSI Trader) — Sun, 22 Jan 2012 22:04:00 +0000

With the Sunday overnight trade about to begin in the Asian futures market, how about we take a look at what could be the mother of all trend line breaks this week. Yes, I'm talking about the Standard & Poors 500 (SPX). We'll look at a couple of daily charts that should frame exactly what is at stake and take a guess as to how this intriguing question will soon be resolved.

I created a new indicator this weekend and it is shown in the lower indicator panel of the SPX daily price charts. The output of this indicator shows us the relationship between the daily price of the SPX and its 50 day moving average (dma). A reading of ZERO means that the SPX and its 50 dma are the same. Positive readings are the percentage the SPX is above the 50 dma while negative readings are the percentage the SPX is below its 50 dma. Also, positive readings differ in color as the SPX rises above its 50 dma.

This first chart covers the past 3 years and begins just before the historic 666.79 March 2009 bottom. Additionally, I have identified the daily cycle lows (DCL) which are typically 35 - 40 trading days apart and the intermediate (weekly) cycle lows (ICL) which are generally 5-6 months in duration.

Click on any chart to ENLARGE

The things I note about this chart is that a daily cycle low (DCL) is now due. Also, it's fairly unusual for the SPX to exceed its 50 dma by 3% (magenta), quite unusual for a reading greater than 4% (dark blue) and 5% has been a very rare reading for the past 2.5 years - in fact, in the most recent 2.5 year time frame I can count only 3 such occurrences and each lasted a matter of a single day.

By the way, we nearly reached the 5% mark this past Thursday with a SPX close 4.76% above its 50 dma.

So, here is the trend line that all eyes are on. It is derived by connecting the 1576.09 high achieved on October 11, 2007 with the highs achieved in April and July of last year, 2011.

We are very close to reaching that trend line. Something in the neighborhood of 1330 would be a break out. Heck, that's only 15 buck higher than last Friday's close of 1315.38. That does not sound like much, does it?

So we slice right through 1330 and keep heading to 1400, maybe to all-time highs and rival 1576.09 by summer. Kewl!

NOT.

I think all the profit taking that stopped the SPX in April and July of 2011 is about to repeat, leaving the daily cycle to top and go into its timely sky dive. Additionally, those two runaway rallies since 2009 went by the name of QE1 and QE2. My hunch is that we need a QE3 to inflate the stock market so it will blast up through the line of resistance overhead. I have not heard that QE3 will be announced, nor do I think it will be announced at this Tuesday's Ben speech.

But 4sure - if Ben does announce something like QE3 I have no doubt we will see the mother of all trend line breaks.

Have a great week!

4 Hour Dollar Chart Reveals Imminent SP-500 Correction

noreply@blogger.com (John Townsend, The TSI Trader) — Thu, 19 Jan 2012 03:24:00 +0000

I was looking at the US Dollar Index ($DXY) 4 hour chart this evening with my favorite True Strength Index (TSI) indicator set to (7,4) and I began to notice the occasional but very severe down spikes in the TSI over the past 8-9 months. These unusually severe readings are, of course, temporary periods in time when the US Dollar Index has come under extreme selling pressure and downward momentum is incredibly and unsustainably intense.

But just looking at this chart really did not tell me much more.

Then I got to wondering. How do these down spikes compare with a chart of the S&P 500? I mean, is there any correlation between the two? Could these extreme and unusual selling episodes in the US Dollar Index possibly tell us something about the movement of the stock market?

So, being the researcher type that I am, I dutifully wrote down the meanest looking down spikes noting their dates, hour and TSI reading. Then I began to locate these dates on a daily chart of the SP-500 - then I recalculated the stock market's daily cycles.

Somewhat to my amazement, there it all was in one easy to grasp picture. The down spikes were not random after all.

Each daily cycle had just two of these critters, with the second one coinciding within days, if not hours, of the beginning phase of the journey into the final cycle low.

Click on the chart to ENLARGE

The most severe reading was recorded on July 26, 2011 at -0.86 (far left daily cycle rectangle). The second most severe reading occurred today with a measurement of -0.81 (far right daily cycle rectangle).

As we are on something like Day 35 of the current daily cycle and with the TSI reading of an unusually severe sell-off in the US Dollar Index occurring today I have no doubt the stock market is about to take a nice nose dive.

The other thing I would mention is the size of these daily cycle finales. I don't see one on the chart any less that 100 S&P points. Do you?

UPDATE:
Thurs. Jan 19
2:30 pm est

The current reading is not -0.81 as last evening, but -0.89. This is incredible selling pressure.
I think if the US Dollar's sellers put any more logs in the fire the iron pot belly will begin to melt.

ES, GC + SI - Riding the TSI Teeter-Totter

noreply@blogger.com (John Townsend, The TSI Trader) — Wed, 18 Jan 2012 13:35:00 +0000

You can probably remember those good old days when you and your friends would head down to the local park and play on the teeter-totter. I sure do. And my memories of watching my children discover the joy of riding a teeter-totter, remembering their laughter and their screaming back and forth at one another is very precious to me as well.

The topping process in the stock market is much like the teeter-totter, it seems to me. Using the True Strength Index (TSI) indicator to observe the up and down swings of momentum as price begins a new rally, continues to rally then reaches an expiration or temporary peak, can be seen as an easily understood and familiar teeter-totter ride.

This post will look at three of our favorites - S&P 500 Emini Futures Index (ES), gold futures (GC) and silver futures (SI) - and use the TSI to examine the teeter-totter experience of a rally that, as always, needs to take a break before beginning anew.

Let's begin with this 4 hour chart of ES. Notice the up and down swings of the TSI - much like a teeter-totter - as this current rally has unfolded.

The teeter-totter is great fun but also requires lots of energy to be expended. The TSI indicator shows us that at some point - like the point where we are right now, as a matter of fact - fatigue begins to set in. The highs in the TSI indicator begin to not reach as high and the indicator drifts lower and lower, like a hot air balloon running out of umph, towards the ground. The ground, in this case, is the trend line break (green line) and the ZERO crossover (red line).

Another observation of this teeter-totter characteristic can be seen in this 4 hour chart of GC. Here we observe that as this rally has continued, the length (measured in terms of time) of each upswing shortens. It is indeed like watching children play on a teeter-totter. The initial burst of excitement yields a lengthy and robust time of play, but as time goes on fatigue begins to set in and each following burst of enjoyment becomes shorter and shorter - until the kids just get off the thing and take a rest.

And how about a third and final look with a 4 hour chart of SI?

I hope you enjoyed your time at the park today!

Oh Wow! I Just Caught Another MouES ($1300.0)

noreply@blogger.com (John Townsend, The TSI Trader) — Tue, 17 Jan 2012 13:23:00 +0000

I had my trap set to try and catch another mouES overnight and surprise, surprise - I caught one. Not another mouse like the kind with a long tail and cute little ears. No, this one is the kind that is spelled ES - as in E-mini S&P 500 Futures Index. Actually, as soon as the mouES was captured I sold him to someone else for $1300.0 with a promise to buy the cute critter back at a later date.

Here is a daily chart of the ES futures index.

Click on any chart to ENLARGE

It kinda looks like this mouES is never going to stop running higher and higher. Well, I agree.

But all mouES have to stop for a drink of fresh water and a nap sooner or later ......

Next, a 4 hour chart.

Still looks good for the mouES, wouldn't you say?

I guess if I have a card up my sleeve, besides knowing today is Day 35 of a daily cycle that usually bottoms somewhere between Day 35 - 40, it is this next chart.

This is a 4 hour chart of the SP-500 and it shows the True Strength Index (TSI) indicator's closing whereabouts from last Friday afternoon's session. If the mouES continues to run another couple hours until the NYSE opens we will get an impressive gap opening in the SPX. And no doubt the TSI indicator will take a healthy pop higher, as well.

But how high will it jump? From 0.07 clear past 0.35?

Obviously, I am skeptical. And besides eye-balling the possibilities, I have seen this drill before. The futures get run up over a (long) weekend, the SPX opens with an impressive gap higher, creating a negative divergence SELL signal on the TSI, then price gets (for some reason or another) clobbered.

We shall see.

Gold: Next Direction

noreply@blogger.com (John Townsend, The TSI Trader) — Sun, 15 Jan 2012 19:43:00 +0000

With overnight Sunday trading of gold futures set to begin in a matter of hours I offer this post to lay out some of the parameters of the precious metal's current technical situation. We will look at gold through a variety of time frames beginning with a monthly and weekly chart, then progress to the daily and four hour cycle charts.

It would be gratifying for me to jump to the conclusion that gold has finished its multi-month correction but I cannot do so in good conscience considering the particular set of technical tools I use. A few brave souls (Hubert Moolman, Alf Field and Rick Ackerman), however, have a different skill set than I and have recently suggested gold's low is probably, if not definitely, in the bag. Could be - but I am just not quite so sure.

Our first chart to contemplate is the monthly of the World Gold Index (XGLD). We see that the price of gold has continued on a nice trend line and is presently contained by a descending line of resistance originating from the September high. The True Strength Index (TSI) indicator has been declining for the past 5 months - yielding no clue of an end in sight....yet.

Click on any chart to ENLARGE

Next up is the weekly chart of XGLD which does hint that there may be an end in sight. None of the TSI BUY signals have been triggered decisively, but it sure is looking promising.

Well, the TSI on the daily chart just made me smile. Not so much because it tells us where gold is going next, but because it did another incredible job of perfectly nailing the recent December 28 low with not one or two, but three BUY signals.

Anyway, I also threw the trending TSI (25,13) magnification on this chart to give us a clue whether this rally was the definitive start of something new - think 'A-wave'.

Here again, we are close to having confirmation but nothing decisive. If gold were to now immediately turn lower the TSI (25,13), as it is still below ZERO, would also turn lower (perhaps with the lag of a day or two at most). Should this happen it would spring load the slower TSI with a lot of energy that, when unleashed, would launch gold into orbit.

Now for a look at the 4 hour cycles chart of gold. We will begin with a broader view of the last several months then zoom in even closer with a final chart that includes the True Strength Index.

The observations that catch my eye are the top on Day 9 of this daily cycle, the top on Bar 21 of the current four hour cycle and the price trend line break of the daily cycle.

These cycle count readings put us just barely on the 'not so safe side' of left translated cycles. If these tops are not taken out soon I would have to wonder if the $1605.7 level of this four hour cycle will hold. If that does not hold, then possibly the $1523.90 level of this daily cycle will not hold either. And that of course would mean that the D-wave is continuing and the A-wave has not begun.

And as promised, here is the final chart with the TSI having the last word.

The week ending trade of last Friday saw the True Strength Index yield two accurate trend line break SELL signals (purple dots). The trending TSI (25,25) began to roll over suggesting a possible change in trend direction from up to down. This would be considerably more ominous if the TSI were below ZERO - but as the (25,25) is above ZERO this little bull flag could just be a breather before an advance in price higher.

So the next direction for gold is ...... you got it! I really do not know. But heck, I already told you that in the second paragraph.

Anyway, if you read this far perhaps you have a few new things to keep your eye on this week as you decide for yourself how you will trade the gold bull.

Have a great week!

TVIX: The Sentimental Dinosaur - RSI and P/C Data

noreply@blogger.com (John Townsend, The TSI Trader) — Thu, 12 Jan 2012 19:23:00 +0000

I'd like to introduce you to an acquaintance of mine. I call him the Dinosaur of Sentiment, the Sentimental Dinosaur and just plain T-Rex for short. His real name, however, sounds like T-Rex, but is actually spelled TVIX. And TVIX is actually short for his full family heritage and description which is VelocityShares Daily 2X VIX Short Term ETN (and I thought the names at school were tough to remember).

Anyway, TVIX is a volatile fellow. He falls in price when people are happy about the stock market - when their 'sentiment' is happy and confident. But when investors get scared and start running for the exits, TVIX gets his toes stepped on by investors - hard - and he jumps skyward like a cat climbs a tree when chased by a big mean barking dog.

Right now TVIX is taking a nap. Shhhh...... please don't disturb him. Let's tip-toe to a 4 Hour chart of TVIX and see him asleep, but also observe what happened to him the last time investors decided to awake him rudely.

We see he is fast asleep - resting comfortably around the $24 price range. But a day or two before Halloween last fall, when the S&P 500 daily cycle last topped, poor TVIX jumped 67.5% in two days. I heard he had his feet in a bucket of ice for days afterward, trying to get the stampede induced swelling to abate.

And right now it kinda looks like some investors are starting to nudge him and see if he would like to wake up now. That TSI is just daring him to come out of his slumber. One little slip across that green line may be all it takes to wake him up immediately.

This Daily Chart of TVIX tells us he may have a few more days to slumber. If he is really lucky he may even get to sleep in this Saturday and Sunday. But after that I doubt he will get much rest.

Pleasant dreams T-Rex..... while they last.

What follows are a couple of charts from www.IndexIndicators.com The top portion of the chart looks at the RSI (10) of the SP-500 and yields a standard deviation calculation of the number of stocks reading over 70. The bottom portion of the chart looks at the Total Put/Call volume ratio and also calculates a standard deviation figure to assess the relative degree of bullish/bearish sentiment.

In both charts we see, mathematically, just what we would expect to see near the conclusion of a SP-500 daily cycle. That is, a high degree of its stocks reading in excess of 70 on their RSI (10) and an unusually low amount of interest in buying puts as compared to interest in buying calls. I mean, if the stock market is going to go up forever you would buy calls, right?

Oh-oh - Two Horses Just Got Out of the Barn (SI + PL)

noreply@blogger.com (John Townsend, The TSI Trader) — Thu, 12 Jan 2012 13:33:00 +0000

OK - this is getting interesting. Silver (SI) and Platinum (PL) have opened the barn door and started to run to freedom. The farmer will, without a doubt, start to give chase - with rope in hand - but I think it's too late. It's just a matter of time now until Gold (GC) and Palladium (PA) hear all the commotion and decide to add to the excitement with their own burst to the great outdoors.

What follows are three charts of Silver Futures (SI). A daily, 4 hour and 1 hour.

Then a chart of daily Platinum Futures (PL).

The farmer has a big fence around his farm and so the animals are still contained. He'll catch up with them and do his best to pull them to the ground. And at times he will probably succeed. But most likely this is the start of "Something New" and things will never be the same again.

Long live gold's secular bull (and the horses).

Sold ES - $1287.25 - S&P 500 Update

noreply@blogger.com (John Townsend, The TSI Trader) — Thu, 12 Jan 2012 00:29:00 +0000

About an hour ago I decided to sell a single contract of the E-mini S&P 500 Index Futures (ES) at $1,287.25. I have made a couple of charts to show us where the S&P 500 index is sitting going into this evening's overnight session.

This first chart is simply a daily chart of the ES continuous contract. Of particular interest is the length of the past two daily cycles - 39 and 38 days respectively. The current daily cycle is beginning Day 33 this evening.

Also, and not shown in this chart, is the fact that in the last 12 months the daily True Strength Index (TSI) indicator (7,4) has reached and then peaked at +0.75 only three times. Each of these occurrences marked the absolute top for price. At this moment the TSI (7,4) is reading 74.24.

This second chart is a four hour look at the ES futures contract. It is normal to expect a daily cycle to break its price trend line before its cycle conclusion is reached. That being the case I would think the S&P would trade down to at least $1250 to meet this expectation.

For those readers interested in learning some of the bare bones basics of futures trading, this ES contract has a leverage of 50:1. For each single point the S&P 500 moves, the value of my position either increases or decreases by $50.

If I have mistimed this entry and the index rises overnight from $1287 to $1297, I will wake up in the morning under water by $500 (and regrettably, it has been known to happen). Worse yet if I awake and the S&P is trading at $1307 - then I will be $1000 under water (yes, I know about that one first hand, as well. And some others, now that I think about it).

On the flip side, if I have timed this pretty well and hold on long enough to see the S&P take out it's daily cycle trend line around $1247, then I would make $2000.

A last basic: a person "sells" a futures contract if they think price will fall and they can "buy" it back at a lower price. It is very similar to shorting a stock in that regard.

Good trading to you for the rest of this week!