ETF - tag category postings

For months on end there has been lots of bashing and negativity on the financial stocks.  Uncertainty and fear and anger over the unjust billions lost and sloshing around in that sector has turned a lot of mainstream opinion quite negative on this sector.

From many trader’s perspectives I believe this was also the case.  For every positive story I read or heard on the financials stocks it seems there were at least 4 that were negative in terms of fundamentals or technicals.  I must admit I also have had a bearish take on the large and somewhat lengthy broadening topping pattern in the XLF financials ETF. 

It was hard to get bullish on this large pattern because it seemed to be  not only a rounding topping pattern but also a very bearish broadening topping pattern.  I tried shorting the XLF a couple times towards the end of 2009 with very meager results.  I remember sitting in those trades all excited about a huge expected break down.  But then I also remember total frustration at how the XLF time and time again just would not break support or get enough selling power to cause some real trend breaking type moves.

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Today was a pretty wild day in the gold market.  Gold was up pretty good going into the FOMC meeting, then it sold off hard right on the FOMC decision and the US Dollar as represented by the the UUP ETF started rallying big time and was starting to create a very bullish looking hammer with price moving to the top of the bar.

By end of day, gold as represented by the GLD ETF was able to get some footing and settle for a mid range close.  The UUP also got a mid range close.  It is nice to see that the GLD ETF got a little bit of bounce going on the blue channel line I had mentioned several times before.  But it is still too close to call on whether the channel support holds for the GLD.  Perhaps the next two trading days will tell the tale.

I would absolutely love to see the GLD ETF hold this blue channel line and get a move going back UP again and towards the top portion of the channel.  That would be exciting because it could imply another possible (and maybe final ?) breakout attempt of the top portion of the symmetrical triangle.

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Today was a significant day on two fronts.  For starters we did see the SPY ETF break upward and through the down trending channel that I was talking about yesterday.  Secondly, we had volume come in a bit stronger on this move of 210 million shares.  Certainly not blockbuster volume, but we will take what we can get during these slow summer months.

So the market has elected to give a positive indication here instead of continuing the bearish down trending channel trend I was talking about before.  I really thought we would more likely trade sideways for a day or two the rest of this week before a break out attempt would occur.  Well that proved to be incorrect advice.

Interesting that the breakout occurred on the THIRD attempt.  Often times you will see breakouts occur on the third attempt.  I cannot tell you exactly why, but I can tell you that I have seen it enough times to know that it is what the market likes to do.  The great trader Tim Ord is the one that taught me that.

What Does the Market Have in Store for us Next?

Well now we find ourselves almost exactly right at the resistance level of the first horizontal channel that started from early May 2009.  This is still a significant resistance area regardless of the fact that we broke out north today from the down trending channel.  There was a gap up opening today if my chart data is correct so I would not be surprised to see a test of that opening gap the rest of this week and that opening gap may serve as short term support.

That opening gap will also be useful for short term analysis when we compare how volume pushes into that gap.

So what can I conclude right about now?

I can conclude that we have some initial bullish tendencies and the market is telling us or at least hinting to us that it wants to get a move going north.  This is very significant especially in light of the fact that we have NOT even had a 38.2 percent Fibonacci retracement since the early March 2009 lows.  We almost did a .382 but not quite.  So the market is telling us something. It is telling us that it has internal strength for a move higher, perhaps a dramatic move higher.  This is consistent with my longer term forecast that we are not suffering a 1929 type bear market, but instead a mid 1970’s style massive rebound inflationary market.

US Dollar Gets Clobbered

Is it any surprise that the US dollar index got slammed today? No! Of course not… This appears to be official policy now.  The US dollar gets crushed and the market booms higher.  So the market’s bullish moves appear prosperous, but it is under disguise and Trojan horse of a collapsing inflationary dollar.  That is the order of business these days, nothing we can do to stop it. I better stop now before this turns into a Glenn Beck style rant.

Ok I think I summed up the critical points for today.

Just yesterday I was talking about how on the emini futures there was a possible chance or setup for a breakout type price action.  Later on that evening as I was looking at the final numbers for the day and looking at the volume numbers for the SPY ETF I came to the exact opposite conclusion.

It seems like that is the most difficult thing to do in the field of trading and technical analysis, to change one’s opinion quickly if necessary and take a complete opposite stance on the market.  Maybe it is not the most difficult aspect of trading but I would say honestly that it probably ranks near the top as far as skills to master when trying to time the market.

So you see yesterday I had the idea that the price was still constructive on the emini futures and that we appeared to be trending up in a somewhat ascending triangle pattern. I made the point that price had not given up that much ground since early May and could be indicative of internal market strength.

Well my news analysis now suggests that we probably made a pretty important top as of yesterday.  By important top I mean that it may be a while before prices start trending up strongly again and resume the uptrend we have been in since March.

There are a few reasons why I am thinking this way.

The first reason is that we may have a head and shoulders topping formation here.  I drew in the left shoulder, head and then part of the right shoulder.  A lot of times the right shoulder can be equivalent in terms of time to the left shoulder, but not always.

The second reason why this could be a top is the fibonacci factor.  If you calculate the fibonacci retracement levels from the 15th of June to the 23rd of June you get a 61% retracement of the decline that was almost nailed exactly yesterday to the tick.  The fact that we failed up there at that level is not good in terms of keeping the uptrend going, and you will see what I mean in my third reason.

The third reason why we are likely in down mode now has to do with the volumes and the swing points. If you look at the chart and see where I labeled swing point ‘a’ and then swing point ‘b’.  Swing point ‘b’ tested swing point ‘a’ on 40% LESS volume and then closed under that level.  That is the classic definition of a sell signal when you are working with price swing points and volume.  The ‘b’ swing point tested point ‘a’ only with one tick which is pretty amazing. The high of swing point ‘b’ was 93.23 and the high of swing point ‘a’ was 93.22.  Sometimes they get tested on just a fraction of a point, but those are still valid tests.

So I can tell you the fact that we tested swing point ‘a’ on 40% LESS volume, and also turned around right at the fibonacci 61% retracement level is a sign to me that we are going downtown and we will probably break support for a deeper correction.

The two highest volume swings on the lower end of this trading range are 244 million and 182 million.  The June 23rd level is the first upcoming test.

Right now it is 3:30 PM and we have yet to see what the downside volume is today on the SPY ETF.  But so far it looks like a pretty bad sign of weakness and more downside to come…

The market is still looking quite constructive to me given the recent price action. From the chart above you can see that the market at least as represented by the SPY ETF is still contained within a long down trending bear market type channel despite the positive last 2 weeks or so positive price action.  There are a few different ways of looking at this however as you can see from the next chart.

The dashed blue line in both of the charts above is quite a significant level of price resistance (supply).  We do seem to be bumping our head on this level right now.  However in contrast to the first SPY ETF chart, you can see from the second chart that the SPY has managed to break through the more near term down trend line with a sign of strength (SOS).  In addition one can make the case that a small head and shoulders bottom formation has formed or is forming which could have price projection to slightly under the mid 90’s area.  So it seems we have a market that is trying to works its way higher but still with the challenge or overcoming the dashed blue resistance level.

If price simple is able to hold sideways to slightly down from these levels, it could keep the case going for a break through of the resistance level.  The near term down trend line in chart two may act as minor support here.

We will just have to see how it shakes out from here.  My take for now is that we will be able to build enough energy to break through the blue resistance line and power higher.  This result could be from the benefit of the inverse head and shoulders bottom formation.

Also, on other thing to keep in mind at this point is that we have only have 5 days left in the month of March.  That will give us our monthly closing price bar and quarterly closing price bar.  This is important because if we can get a close in the next 5 days that is near these levels or higher, based on the monthly chart it could point to explosive upside price implications for April, 2009.  The other factor is that we have end of month and end of quarter window dressing effects during the next 5 days.

This is just a quick update.  I sold the DXO ETF that I was talking about a few times before.  My average price on this sale was 3.14 and my average buy was 2.32.  So the gain on this trade was about 35.4%.  Not bad for an ETF.  I did not want to be a pig on this one.  I believe the DXO ETF will go a lot higher and probably eventually will pop all the way up to 6, roughly corresponding to a move of 70 dollars in the crude oil price.  We are talking a minimum retracement from the literal crash that occurred in the crude oil price since last year.

So why did I sell today?  We are coming up into the top range of a resistance channel.  It is possible we could blast right through it, but you know what? I don’t care because 35.4% is quite acceptable and again… I just don’t want to be a pig.

By the way, I don’t know how many actually follow along here, but if anyone is actually following my trades or looking for signals keep in mind that it is very important for you to do your own due diligence on any potential trades.  But I have to say flat out that sometimes there may be slight delays between the time I actually execute a trade (either a buy or sell) and the actual time that I write about it on here. Actually, sometimes it may be much more than just a slight delay.  Perhaps at some point this will change but for now that is the protocol.

It is pretty amazing how things have changed in only about a couple of weeks.  Before 2 weeks ago it seemed like the end of the world.  But now it looks like a massive global reflation is taking place and commodities are leading the way.  It seems that commodities will lead the way up in this reflation and then stocks will follow, that seems to be the pattern right now and crude oil is no exception.

Right now the SPY ETF continues to show near term strength and follow through on the day of the fed announcement later on today.  This has been quite a persistent rally and I suspect has caught many off guard considering how bearish and bleak things were looking only a couple weeks ago.

I have to admit it absolutely fascinates me how at one point the market can be projecting a total end of the world scenario but then only a week later it seems like we are all in heaven and nothing but optimistic about the future.

Anyway, we do seem to be coming up on a crucial juncture at least with respect to the SPY ETF, the proxy for the S&P500 index.  You can see in the chart to the  left that we have a respectable down trend line that has its formation based on the January 6, 2009 swing high and then the February 9th, 2009 swing high.  We are only a couple points away from touching this down trend line again, this time for the third time.

The relative strength index is in an area that in bull markets is still somewhat modest, about the 50 to 55 level.  But if we are still in a persistent bear trending market then this RSI level reflects an area that would be a typical turning point before moving down again.

So what do I expect next?  Well I think we have a good shot at making it up to the 80.5 area on the SPY ETF.  That would put us right under this down trend line resistance point.  At that point I would expect us to enter some sort of retracement phase perhaps down to the 75 area?  the nature of that retracement will have to be watched carefully to see if price can hold ground and volume stay light.  If it manages to do that then it opens the door to another attack on this down trend line and possible eventual break through it.

At this point I would not be surprised to see us break through it.  Oh, and by the way we need to pay attention to the last 2 weeks of March because that is going to give us the MONTHLY closing price bar.  So far it looks as though the March monthly closing price bar could look very bullish which would bode well for April.  I will keep track of this and do an update post on it later.

I would not be surprised to see us break through it based on a long term article I wrote on the Dow Jones Industrial Average.  But anyway for now lets not chew on too much and just focus on this down trend line and the behavior around that area.  It is best to take this market one small battle at a time, otherwise a bit too much brain damage starts to kick in!

The TBT Ultra Short Long Bond ETF looks pretty good right here. It looks to me like it wants to break out of this trading range which I marked on the chart to the left.

Do I even need to explain why from a fundamental perspective this may be a good trade? Probably not.  As long as you have watched just a little bit of news over the last few months you know that our government is asking for trillions and foreigners do not want to pay for it.  That just about sums up the sentiment.  But of course there is a difference between a long term fundametal concept like that and simple trade.  Right now this looks like a simple trade.  The TBT ETF has been trading sideways and range bound between just under 45 and just above 48.  It looks to me like it wants to break out now or is pretty close.

ProShares UltraShort 20+ Year Treasury seeks daily investment results, before fees and expenses and interest income earned on cash and financial instruments, that correspond to twice (200%) the inverse (opposite) of the daily performance of the Barclays Capital 20+ Year U.S. Treasury Index

Perhaps the fed news tomorrow is the trigger for this breakout? I can only speculate on that part.  But from a technical point of view the setup looks pretty good.  Sign of strength initially beginning in January 2009 and then going into early February 2009.  But then sideways CAUSE building in trading range fashion building steam for the next move.

The risk reward here looks pretty good because a stop could be set just under this trading rang support on a further advance.

Somebody has to pay America’s bills but at this point I don’t know who it might be anymore!!!

I was stopped out of the DXO ETF position I told you about a few days ago. I re entered today however at 2.32 and will be more flexible about how much downside I can take here.

The problem with these double and triple type ETFs is the enormous volatility.  Timing really needs to be razor sharp and the amount of noise that goes on before the ETF actually goes in the direction you want it to can be costly.  However I am still bullish on the DXO ETF and believe a new more sustainable uptrend will be soon starting.

As I mentioned before, crude oil is sitting on a very long term support line and the risk seems less and less to the downside.  Now if we can get the general equity markets to recover a bit it  will go a long way towards bouncing crude oil back up to 70 dollars.  The 70 dollar area is actually where I am looking for the bounce to lead to as a first stop.  That would put the DXO ETF somewhere near the 6 level. 

My tendency is to sit tight and be right with this one.  The next major battle is at the 3.7 area where it failed the last time. If we can take out 3.7 then it opens the door eventually to 6.

Certainly a warmer spring and summer season could help us along in the DXO.  I sure would not mind that either since even now in March it is still very cold up here!

I just went long the Direxion 3X small cap bull ETF shares at 12.70 about 20 minutes ago.  Stop is at 12.04. You just have to try going long here. The market is extremely oversold and it seems like we are coming to the end of the world.

As I indicated in my previous post about how extremely oversold the broad market is, we are overdue for a huge bounce if not a multi month rally.  The risk in going long here does not seem very large.  I have my stop in, so what do I have to lose? Maybe 5 percent but that is fine by me.

The Direxion 3X small cap bull ETF shares are leveraged 3 to 1 to the upside. Simply astounding that you can get that kind of leverage with an ETF.  But it is true.

We will have to see how this one pans out.  I also mentioned before that Larry Pesavento has pointed out that there is a very positive astro signature that will start coming into play this Thursday.  So the strategy would be to go long in preparation sometime before this Thursday.  Perhaps I am a bit early, we will have to see, but again the risk reward seems to be good right here.