Technically Speaking, Market Analysis and Theory

The End of the Beginning?

noreply@blogger.com (Ron Sen, MD, FCCP) — Tue, 07 Apr 2020 00:12:00 +0000

"Don't fight the Fed." Is that the answer. Let's look at some charts.

SP500 (daily) with multiple moving averages...Dave Landry style. Stocks fell sharply with "daylight" between price and the descending averages. The ETF made a "bow tie" cross down in late February with a recent bounce.

The declining MA50 (not shown) is about 292.

When we look at the "Gann 3 day charts" we see that most recently there were three days of higher lows and higher highs, a gap down and then another three day positive run.

The SPY peaked around 338 and fell to about 218...120 points. We're at about the .382 retracement off the lows and the fifty percent retrace would be about 278.

Ergo, recent action is constructive by multiple metrics, including a higher low at about 244 and a higher high. Is that enough to convince traders to come back?

The Square of 9 chart 360 degree turn off the highs rounds out at about 269.

The .382 retracement and potential resistance at 269 present interesting battlegrounds, challenging the recent bear rally.

Good trading and great risk management to all. Educational use only, never intended as investment advice.

Dow Theory

noreply@blogger.com (Ron Sen, MD, FCCP) — Wed, 04 Dec 2019 21:49:00 +0000

The Dow Industrials recently made new highs.

Yet, the Dow Transports aren't playing in the same sandbox.

Never intended as investment advice.

The Acronym of CORE Values

noreply@blogger.com (Ron Sen, MD, FCCP) — Mon, 18 Feb 2019 20:53:00 +0000

"The game isn't supposed to be easy" and Howard Marks' new book, Mastering the Market Cycle, doesn't claim it is.

What the book does is lay out the forces that drive prices higher (or lower) and suggest we maintain vigilant about the reality of cycles.

He notes that asset prices would be less volatile if viewed from the prism of fundamentals (cash flow and earnings) and are vulnerable to our human frailty viewing optimism and risk. Thus the CORE acronym:

C - cash flow
O - optimism
R - risk
E - earnings

Marks emphasizes that few individuals excel at predicting the future but a hearty few profit by understanding the complex interplay of risk and optimism (sentiment). The book's value lies in the clarity of Marks' presentation.

Of course, he doesn't forget the role of the credit cycle (including interest rates) or 'events' as potentially confounding data points.

First, I digress. For the "intermediate-term" speculator, here's the SPY with the Dave Landry moving averages (SMA10, EMA20, EMA30) attached. Note how in mid-January, the clean "bow tie" cross occurs, there's an ever-so-slight pullback, and price shoots up from about 258 to 277 in sixteen sessions. The retrospectiscope has unusual clarity.

The same SPY with Bollinger Bands, and 50 and 150 day simple moving averages (above). After the election, price rolled over, both lagging averages turned over and now are flat to slightly rising. Fear 'struck out' and bulls laugh their way to the bank.

The SPY reached a peak at almost 294 and fell to 237 (57 points), recovering 40 points. For Gann followers, the square root of 294 is 17 and changes, and 3 "90 degree turns" would have dropped the SPY about 52 points to 242. Two "90 degree turns" up bring us back to (voila) 277.

What does any of that have to do with optimism or risk?

The "Buffett Indicator" examining Market Cap to GDP projects low returns.

The VIX Futures term structure sees nothing worrisome on the short-term horizon.

The VIX itself has retested multi-month lows but is not extended short-term.

So once again, we're at an inflection point...a major rally off lows, low volatility, markets opening up again and again overnight, and a possible inflection point using Gann waving arguments.

What could go right or wrong?

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Falling Knives

noreply@blogger.com (Ron Sen, MD, FCCP) — Mon, 24 Dec 2018 19:29:00 +0000

There's no joy in markets recently.

SPY, weekly...price peaked at about 292
- Defining series of lower highs and lower lows
- Declining multiple moving averages
- RSI14 getting toward potential extreme

Gann Square of Nine. Four turns (360 degrees from the high) brings us to a potential decision point (228).

Year-to-date the SPY is down 12 percent.

Point-and-figure charts illustrate the distance from price breakdown.

Bullish percent NYSE stocks. Bear confirmed.

The three day TRIN is minimally lower than in early December.

New lows continue to expand.

The technical damage is done. We don't know what happens at the hard right edge of the chart. I'll resurrect the bull-bear continuum soon looking for extremes.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

If Nothing Is Wrong, Is Everything OK?

noreply@blogger.com (Ron Sen, MD, FCCP) — Wed, 12 Sep 2018 00:07:00 +0000

"A man distracted is a man defeated." - David Mamet, in Redbelt

Our job hasn't changed. Control risk. See the market as it is. Do what it does.

The 'quick look' shows key elements above the MA200, little in the way of contraction (NR7) and the Ten-year on the rise with resulting response in rate sensitive stocks (e.g. XHB).

SPY broke through the declining MA5 (top right panel), breaking the hearts of the bearishly inclined.

The TNX broke the down trendline. One hit wonder or something more?

The SPDR Bank ETF (KBE) in the midst of a symmetrical triangle. Indecisive.

The Buffett indicator of Market Cap to GDP is at long-term highs which historically portends lower returns.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

A Tale of Two Markets (Today) as Small Fry Underachieve

noreply@blogger.com (Ron Sen, MD, FCCP) — Wed, 25 Jul 2018 02:22:00 +0000

Michael Useem's The Leadership Moment asks four questions:

What went well?
What went poorly?
What can we do better?
What enduring lessons emerge?

SPY continues to do nothing wrong. Today, it gapped up but didn't run. Price remains above well-watched, upsloping averages.

It wasn't as sanguine for the four-letter words as the Russell 2000 fell over a percent on increasing volume. The "worst case" July lows wouldn't exactly be catastrophic.

The VIX isn't far from the MA10 and even with the Fed's creeping incrementalism on rising rates, volatility says MEH.

Volatility traders and bears haven't had a lot to crow about.

Utilities are above price in the recent past, another historically positive sign.

The SPDR bank index (KBE) was something of a party pooper today...does one day matter?

The Insurance Index hasn't been good, but recently made a "Landry Bow Tie" cross up (SMA10 > EMA20 > EMA30).

PRU, AFL, and CB all show some turnaround charts. No positions in above.

I've been too busy with work to have much time to study this...not an excuse, just reality.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice

Ennui Is not an Excuse

noreply@blogger.com (Ron Sen, MD, FCCP) — Mon, 25 Jun 2018 00:04:00 +0000

Inadequate preparation is never an excuse. Ultimately, we decide based on our process, the blend of fundamentals, technicals, psychology, and asset allocation.

The SPY PnF chart shows price back near resistance.

The Dow Industrials PnF chart showed a recent rally off the double-bottom breakdown at 24600.

If we start with a Ciovacco weekly chart, price is sandwiched between the rising MA3 and MA5 weekly charts.

The intermediate-term shows lower highs and lower lows with price below the declining MA5. But the "never short a dull market" adage echoes.

The VIX sits mildly above the MA10 but not extreme in either direction.

The yield on the ten-year bond is below declining MA10 and MA30. Nobody sings "Anchors Aweigh" with this chart.

The US 2-10 rate curve shows ongoing flattening. That hasn't precluded markets from rising for years.

Staples, Utilities, and Healthcare (defensives) have led recently. Financials recently have languished below the 20 and 50 period averages.

Nothing says that the market 'has to' go in either direction.

Wage trends continue to drift upward...

Elevated levels of the "Buffett Indicator" (US Market Cap to GDP ratio) show markets to be expensive. Again, this is not a 'timing' device but Kentucky windage on possible price arcs.

We have an infinite number of choices in the markets among many vehicles. I'm not very moved by the sum of the findings.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Why Ask Why? Beware of This Tool...

noreply@blogger.com (Ron Sen, MD, FCCP) — Tue, 29 May 2018 11:22:00 +0000

Posts have been few and far between. Why?

SPY weekly chart with Ciovacco moving averages. We seek tools that will bulletproof our portfolios. Valuation doesn't provide short-term answers. Technical tools tell a mixed story (again) with lower highs and higher lows.

If you bounced in off the April lows, then you feel smart. If January's strength sucked you in, then you aren't 'whole' just hopeful.

This market frustrates both longs and shorts...who wants to write about that? Of all your tools, the 'whipsaw' provides the most damage.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Mixed Signals

noreply@blogger.com (Ron Sen, MD, FCCP) — Thu, 17 May 2018 02:25:00 +0000

Markets haven't been as much negative as indifferent.

Look at a few Ciovacco weekly charts...with 3 and 5 period averages, examining the price structure.

SPY price > MA3 > MA5 (bullish). Should we care about distribution volume? Do rising rates and rising dollar matter?

Ten-year yield. Price > MA3 > MA5, positive MACD. Rising rates.

US dollar, price > MA3 > MA5. MACD positive. No dollar squalor.

HMMJ (Horizons Medical Marijuana), price > MA3 > MA5. Does weak volume matter?

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

noreply@blogger.com (Ron Sen, MD, FCCP) — Mon, 23 Apr 2018 03:57:00 +0000

"It's not supposed to be easy."

SPY weekly, Ciovacco Chart. Price leading MA3 leading MA5, but with a reversal candle. Caution but hardly proven reversal.

VIX only mildly below MA10

Mamis-Meisler breadth oscillator. No downcross.

Horizons Medical Marijuana Life Sciences, a marker for marijuana stock trading. Price right around the MA20, but nothing 'easy'. MACD zero cross. Long selected medical marijuana equities.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Losing Interest?

noreply@blogger.com (Ron Sen, MD, FCCP) — Fri, 13 Apr 2018 02:00:00 +0000

Will there be a 'threshold' interest rate where markets relent?

The "Ciovacco Chart" showed a steady ten-year rate rally eclipsing 2.5 percent and are consolidating between 2.75 and 2.9 percent.

Like the ten-year, SPX has rallied back above the short-term averages, although the MA3 remains below the MA5.

The VIX has dropped below the MA20, RSI14 moves below 50, and the MACD has gone negative. The sum of those findings argue for volatility dampening for now. Tariffs, political turbulence, and trumpets be damned.

USCI has moved above resistance circa 43. Will that be support? Position in USCI

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Testing

noreply@blogger.com (Ron Sen, MD, FCCP) — Thu, 05 Apr 2018 02:00:00 +0000

Frustrating? It's about the MA200...or not. Time will tell.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Volatility Watch

noreply@blogger.com (Ron Sen, MD, FCCP) — Wed, 28 Mar 2018 00:30:00 +0000

It's not our job to identify what causes markets to fluctuate.

SPY remains above the 200 day average (top, right), below the declining MA50 and 20, and below the declining MA5 (bottom, right). The hard rally off a short-term bottom got sold. Score one for Mr. Bear. We'll see how the next rally performs.

The oversold column has filled up.

Housing, XHB. Also still above the MA200 but similarly below the declining MA50, MA20, and MA5.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Black and Blue Are the Colors of the Day

noreply@blogger.com (Ron Sen, MD, FCCP) — Fri, 23 Mar 2018 10:24:00 +0000

Kentucky fans go home sad after the Wildcats (K-State) defeated their Kentucky Wildcats in the Year of the Underdog. FSU and LUC also wore the glass slippers into the Elite Eight.

With traders heavily long, Friday early prices suggest some disappointment on Wall Street, too.

The Gold point-and-figure chart shows more range trading (1300-1360) recently.

We'll see whether SPY makes a double bottom break. (No position)

The Ciovacco chart shows price leading the MA3 and MA5 averages down in wide-range trading. The seers who forecast a retest of February lows may not be exactly right but as it's said, "it is better to be generally right than exactly wrong."

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Dead Ahead of the Fed

noreply@blogger.com (Ron Sen, MD, FCCP) — Wed, 21 Mar 2018 00:35:00 +0000

With the Federal Reserve announcing policy tomorrow, markets wait.

SPY lower highs and lower lows below the declining MA5 (right)...unfavorable

XLE early rally but still below key averages

Still most items above the MA200

Bullish percent NYSE in correction mode

The Fed strategy may be to raise rates and talk accommodation. We'll see what the market reads.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Recalibrating

noreply@blogger.com (Ron Sen, MD, FCCP) — Sun, 11 Mar 2018 22:57:00 +0000

Nothing matters until it does.

The Ciovacco Chart shows price leading the MA3 which leads the MA5...a bullish configuration.

XLE bullishly moved above the EMA10 (black line, bottom left) and has higher lows and higher highs above the rising MA5 (right panel).

SPY is above the rising MAs (bottom, left) and has the rising MA5 and similarly higher lows and higher highs on the intermediate-term time frame.

The ten-year yield has flirted with three percent yield. Will 2.85% be the higher low that holds?

The VIX pulled back sharply from the "tails up" and is extended from the MA10. It's a fly in the ointment, not necessarily a signal.

XLE, XLP, and XLU are below the MA50...

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Cohn, Baby, Cohn

noreply@blogger.com (Ron Sen, MD, FCCP) — Wed, 07 Mar 2018 03:09:00 +0000

We do what the market does. It isn't our job to know why, just to do what it does.

So much for the NR7 column.

SPY...lower highs and lower lows with price below the declining MA5 (right).

With day old data for SPY and at-the-money implied volatility, one standard deviation of volatility is 1.99 SPY points. In other words, a 4 point move is "only" two standard deviations of price.

It's a messy market. Prognostication is not a winner's game.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Silly Season

noreply@blogger.com (Ron Sen, MD, FCCP) — Thu, 22 Feb 2018 14:01:00 +0000

The market has to do this or do that. Says who?

Plenty of items above the MA200 and not so many at extremes. There's market chatter about retesting the lows and Todd Harrison's worldly wisdom about buyers above and sellers below.

SPY with the rising MA5 (right), the VWAP from highs near 270 and lower highs on the daily chart (bottom, left). That and a couple of bucks buys you a coffee, although coffee futures plunge.

Market mavens remind us, "it's not supposed to be easy." We identify a range of possibilities, inputs, and make our choices.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Levels

noreply@blogger.com (Ron Sen, MD, FCCP) — Wed, 14 Feb 2018 12:28:00 +0000

The 'correction' sits comfortably in the rearview mirror...or does it?

The 'highlight' du jour is the amazing cornucopia of NR7 (narrowest range of 7 sessions) setups which almost fills the column. The "trading" strategy is buying movement above the high (or selling below) with a stop at the other end of the range. The caveat, of course, is that the "second mouse gets the cheese" and the first catches the trap.

SPY shows the 50% retracement at about the round number (270) where the VWAP (blue line, right panel) also conveniently sits. What a web we spin...

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Market Sayings Only Matter When Executed

noreply@blogger.com (Ron Sen, MD, FCCP) — Fri, 09 Feb 2018 01:07:00 +0000

Tom DeMark has a saying, "you can't do size at highs." Recent history affirms that, but that denies the extended rise.

We don't know whether the Berraism, "it ain't over 'til it's over" applies, the impact of bitcoin, or the implosion of the short volatility trade. The SPY has given back over ten percent in two weeks. As J.P. Morgan responded when asked about the market, "it will fluctuate."

"Overbought" stochastics includes TBT and $TNX. Free money ended and money-free began.

The SPY dropped below the EMA10 (Marty Schwartz's marker) and then raced below the MA20, EMA30, and MA50 (bottom, left). A day and change technical bounce got reversed quickly. I've been thinking about the Gann Square of 9, and the back-of-the-envelope calculations off the 286 high (286-17-17 =) 252 and the round number 250. That represents a potential "decision zone" and nothing more. On the right, the downsloping MA5 with lower highs and lower lows. Bad juju.

Control what we can control...which is our attitude, choices, and effort. Thoughts echo in traders' minds.

"Life is about the management of risk."

"Remember the 'stock trader's breakfast, egg on the face."

"It's better to be out of the market wishing you were in, than in the market wishing you were out."

“The game did not beat them. They beat themselves, because though they had brains they couldn’t sit tight." - Reminiscences of a Stock Operator

Bullish percentage NYSE stocks (bear confirmed)

Bullish percentage energy stocks (bear confirmed)

SPX stocks oversold by stochastics - 57% (high)

SPX stocks above MA3, MA5, MA10, and MA20 (4, < 1%) - extremely low

VIX hasn't reversed yet from profoundly extended.

The breadth oscillator has cratered beyond any 'recent' levels.

That's all well and good, but it's not tomorrow's newspaper. Right now, it's a falling knife and the dip buyers are on holiday. "Life is about the management of risk."

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Retracement

noreply@blogger.com (Ron Sen, MD, FCCP) — Wed, 07 Feb 2018 02:16:00 +0000

Nobody knows where the next move is...gradual recovery or retracement to VWAP, downsloping MA, or the Gann Square of 9 retracement (humor me).

SPY...retraces to the .382 mark on the 30 minute chart (right). Several VWAPs and the downsloping MA5 cluster near the 275-276 mark.

As a small part of my overall investment strategy, I follow commodities futures markets for extreme positions by commercial hedgers.

I have small positions in sugar and coffee markets.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Control What You Can Control

noreply@blogger.com (Ron Sen, MD, FCCP) — Tue, 06 Feb 2018 14:32:00 +0000

Control what you can. We can't control volatility, news, manipulation, interest rates. We control our attitude, choices, and effort (including preparation).

I'm not going to tell you my portfolio rose yesterday (minus 61 bps). Or that it will rise today. But I can stick to my principles of looking at quality, growth (potential), and value with eyes on ROE, free cash flow, and big picture 'themes' (e.g 10 year horizon, medical marijuana).

The path of least resistance is DOWN, although a "technical" bounce seems likely. Stuff to think about. SPY peak about 286, with the square root of about 17. That would make one "Gann" Square of 9 turn about 269 and two turns (180 degrees) of 252. Yeah, that's magical thinking, and also close to the round number 250, so that's something to think about while watching price action. No position.

I don't watch Tout TV so I don't care what they say or don't say.

Here's a digression (basketball) that applies. Shot selection.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Yellow Caution Flag Comes Out

noreply@blogger.com (Ron Sen, MD, FCCP) — Mon, 05 Feb 2018 00:23:00 +0000

Friday's action changed field position.

The 'Ciovacco Chart' isn't totally reversed as MA3 (weekly) still exceeds MA5.

A lot of red on the daily column Friday...

SPY moved below the MA20 and MA30 (bottom, left) and on the thirty minute chart, we see the negative - lower highs and lower lows below the declining MA5 (orange)

Interest rates are still low, but the yield on the ten-year broke out convincingly last week (top, left). We'll have to keep an eye on that.

The VIX futures term structure shows minimal angst moving forward, now in backwardation to VIX.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Bulls Unmoved by Today's Action

noreply@blogger.com (Ron Sen, MD, FCCP) — Wed, 31 Jan 2018 02:56:00 +0000

Ignore the noise.

Current VIX futures term structure unperturbed.

Price above VWAP off mini-lows.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.

Wind Speed and Direction

noreply@blogger.com (Ron Sen, MD, FCCP) — Tue, 30 Jan 2018 14:18:00 +0000

The wind doesn't blow the same direction with the same velocity every day. How profound! The markets won't either, but they pay us to put up our sail in alignment.

The trade universe show most everything over the MA200, little in "coiled spring" configuration, and a lot of extended RSI14 values, especially RTH (dominated by WMT).

SPY made an "inside day" yesterday, which doesn't signal anything. It's continued its (unsustainable?) ascent, but hasn't even made a lower low on the 30 minute chart (right), with 'theoretical' (in the Yogi Berra sense) eyeball price support at 280 (round number, prior resistance, nearby VWAP).

VIX has become 'extended' (over ten percent) short-term from the MA10, so before putting on Todd Harrison's metaphorical bear suit, beware the snapback.

Combine last week's GDP data and expectations of the SOTU address (every President's self-aggrandizing opportunity) and volatility could fly around.

Long-term (ten years) my favorite idea is the medical marijuana space. Remember, derivatives like cannabidiol, are used for WELLNESS and DO NOT PRODUCE euphoria or altered states. That is the BIG LIE about which politicians either are confused or are ignorant. Position in several medical marijuana stocks (and neither a user nor prescriber). Do your own due diligence.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.