Thursday Wraps

These are the times that try men's souls. A good morning dropping into a bad afternoon. As usual there are a couple of neat things to look at today - but first - business.

The KNOT is untied - I just became so frustrated with the fact that the traders in this stock want it to go down rather than up that I said to hell with it and dumped 'em all at cost. Lost a couple of commissions but it was well worth the cost. The time to sell, naturally, was several days ago at that huge red candle on the 16th - I, of course, was on vacation at that time and couldn't be bothered - and once again this piece of crap cost me money.


And, as normal with this bucket of dog blend, absolutely no news or anything else to cause the sell off. The traders made their money and that's it. But I'm taking a solemn vow here and now - I will KNOT trade in this stock again (until next time).

The trading portfolio now contains AKS, GGB and AMAT. As I mentioned this morning, barring some change of mind which I am capable of doing in an instant, I'm going to hold AKS through earnings.

Now for today's lesson. Here are the Q's -


Note how there was a gap down this morning, a drop below S1 and then a major rebound all in the first 15 minutes. Seeing that I thought to myself - going to go up and close the gap. And it did all the way to R1. Of course another piece of information that I have is that Thursday is the day of the week with the highest percentage of gap fills of the entire week. I won't tell you what that percentage is - you have to get the book - Mastering The Trade by John Carter to find out for yourself.

Now here is the SPY -


And if you notice any similarities between SPY and Q's you are absolutely correct. Bounce off S1 and rebound to close the gap.

Now here is AMAT -


Look familiar? That's because the major indices as replicated by the Q's and SPY don't move on their own - they move because their components move. But the point is when you see the major move you can be pretty sure that the components are moving so it is time to trade.

Finally - XLNX - another breakout stock -


This isn't rocket science or even very hard - it's just a matter of observing the market and taking what it is giving you over and over and over again.

BREAKING NEWS!!!! - GOOG beats! Up a few after hours. And that has to be troubling - 8 - 10 dollars on the huge number they reported is chump change. I don't know what people expected - there is no way this company can support its price.

Meanwhile the other two amigos, MSFT and AAPL trade in their range bound manner. AAPL dropped 13 cents and MSFT went up 9. To put that in perspective AKS, one of my holdings that I added to this morning on a drop of 39 cents went up a buck (1.39 from the low). Maybe I should sell AKS and buy MSFT.

I don't know why AKS went up a buck (there was some news of takeover rumors of other steel companies which is as dumb as it gets) and to be honest it scares me no end that it did because of earnings coming up. This stock traded a half million shares in the last 15 minutes of the day.

The model portfolio lost a little more ground to 12.76 and the benchmark dropped a tad to 4.87%.

The trend on the INDU ATR reversed and it is now printing 89 and change. That's a good sign actually because we want it to stay above 80. If history is our guide - 80 is the volatility (real volatility) break point.

Dow broke another record today but the NewMoMo started down. Remember momentum is related to pace of the market and not absolute price. And pace makes the race.



The VIX remains neutral relative to the 10-period moving average and the up/down ratio (which I thought was going to bring the market up today) is printing 30% and there is no way that the fund managers can let tomorrow go by without adding to all of their depressed holdings.

I'm calling tomorrow up.

The coin is calling tomorrow ... heads - also up.

I'm giving today to the coin because it was more down than up so the score stands at Marlyn 24 - 26 and 10 and the coin is 28 - 22 and 10.

Philips Set-Up

Good Grief! Thank you Philip - Take a look gang - first QQQQ


The little green widget at 10:45 signals Philips set-up.

Now AKS -



And now - DNDN -


I didn't buy it off the set-up but had I done so it would have returned a buck 75 in 45 minutes. Wow!

I'm sure there are more but I only have a few charts up today.

I posted the code for this set-up here.

As always not an invitation to try your hand at a little trading - you may lose your shirt and then want to blame me when it would truly be - nobody's fault. (Listen to Buffet's - Margarita Ville and you will know who's fault it is).

Philip's Set-Up

I wrote in yesterday's Wrap about Philip and the neat set-up he designed and gave to me - and this is a beauty. I will tell you though on a daily basis, while it works and works well, it back tests poorly. I haven't worked that out yet so you'll just have to take my word for its efficiency on an anecdotal basis - for now. Anyway I put together a few charts for you to look at and wonder at and especially wonder why you didn't notice something this simple (I know that's what I'm doing). And I've provided the code for the paintbar on the first chart below and those of you who want to work with it in stockfetcher can derive the SF code from the paintbar code. (Instead of using "[3]" use "3 days ago" for example).

Chart 1 is a daily chart to show the basic parameters of the set-up.


You can see that it is a 4-rule test that takes into consideration four volume bars and two closes. Can't get any easier than this and if you pull up a bunch of charts you will start seeing this everywhere.

But the place where this seems to really work is on the minute based charts. Here is GGB for example on the 15-minute charts. The "green diamond" is the signal device.


I selected this chart because I wanted to show that the indicator didn't fire every day. In this case there were no signals of this type on this stock on Wednesday. Only a couple of tweezer bottoms and only one actually meant anything.

Here are the Q's also on the 15-minute chart -


On this one you can see that unlike GGB there was no gap down on the open and the previous day's signal carried over to the next day (from Wednesday to Thursday).

It also works on the 30-minute charts - here is GRA with the 30-minute version -


That purple bar in the initial slot is signaling an RSI(2) < 2. But mid-day the green diamond appears. That would suggest if you are already in the stock to load up some more for a day trade. Or don't you day trade stocks in your portfolio? If you don't you are missing a great bet.

And finally, on the 3 minute charts which I like to use to play cheap stocks (I use 4-minute on higher priced stocks and then only to watch for turns).


This shows how the signal when occurring around a pivot point is extremely powerful. It also shows that there are no signals on the down leg of the run. I don't know if that is a coincidence but it seems mighty suspicious.

Tech Forecast

Here are several charts that show the daily, weekly and monthly positioning of tech stocks as represented by the Q's.







What I see on all three of these charts is a market that is turning up and positioning itself for a rally. As you know I like using weekly charts to try to guess the future because the daily charts are too noisy and the monthly are too slow.

What I am seeing on the weekly is what we have just experienced over the previous quarter - a market that went nowhere. Currently I see what I believe to be a breakout. I think it is a breakout because of the divergence between the red line and the black line and the fact that the black line is not pointing down and indeed seems to be pointing up.

If you go back to around week 35-36 you will see this same pattern emerging and it is possible that will happen again even without a tremendous decline. The flattening effect of the market over the past 20 weeks or so has acted as a damper that has allowed the moving averages to catch up with each other and any regression to the mean has occurred without a steep down trend being required.

And of course we could have what happened 6 weeks ago happen again at any time but I don't think it will and the further we get into this rally the better we're going to be for it.

Keep An Eye On The General Market

I found DEI on the BOB set-up filter Sunday Night and had I been around on Monday I could have played it.



First there is the BOB at 10:30 and even though the previous two candles don't appear to fit the software is set-up to output a BOB when one is found and that's what it did here.

If that wasn't enough then the candle at 10:15 being the second bounce on S1 would have informed your trade. In other words you could have taken this as an S1 trade because two candles had already tried to pierce S1 and had failed. As it turned out 4 candles attempted and failed - so the candle at 11:00 would have said to you "I'm going up - buy me."

If that failed then the crossover at 11:30 might have given one a clue that this was a good buy.

For an exit - we have the DOJI just before R1 followed by a spinner that touched R1 - that's your clue to take the profit and run.

If that wasn't enough then you could have blindly bought DEI based on QQQQ action. In other words seeing it bouncing along S1 at 10:15 you can be fairly confident that it is going up. Then, a quick glance at your QQQQ chart would convince you that the market is turning.



When you trade - keep your eye on the general market for excellent signals of what to do next. And try not to trade against the market - it seldom works. Of course - sometimes the market continues and your trade collapses - also be ready to read the topping signals.

NewMoMo - All Indices

The only thing I'm missing is the mid-cap. Mid-cap is the best performing class of stocks this year to date - why is that? I don't know - no one knows - it's just a fact.


What this shows is that three of the four have rolled over the top and are now heading back down which is why I'm calling for a down day on Monday. But I think because this is end of the quarter and the last week at the end of the quarter is usually pretty good (about 60 - 40 up) barring catastrophe this could be an up week overall. Friday is, after all, hedge fund manager bonus day and vacation season is upon us and 90 percent of the hedge funds out there are simple stock funds with a couple of options thrown in and so the market must go up. But first - it must go down.

You Ain’t Gonna See This On CNBC

Here is the USDJPY chart coupled with the FXY chart. The first chart of course is a FOREX based chart provided by FXStreet and the second is an ETF provided by Rydex of the Rydex funds fame.



The difference between these two charts is that the USDJPY reflects the movement of the Yen in relation to the dollar and the FXY chart reflects the movement of the dollar in relation to the Yen. Consequently they are almost mirror images of one another. Why Rydex chose to do it that way is beyond me but they did and that's what we have to live with. Note that they are not perfect but they are pretty close.

Want to see another mirror image of the FXY? Here it is -



Wow – the Q’s mirror the FXY. How can that be? What part of “global” in ‘global economy’ don’t you suppose CNBC understands? Again, not perfect, but pretty close.

The Past is Prologue

One thing I hate to hear is “this time it’s different” because no - it isn’t. It might not be exactly the same at the detail level but in the larger sense it will be the same.

Here is the DIA, the replica of the Dow Industrials -



Start at the bottom. Notice how the ATR increases and then decreases and how this somehow relates to what is going on with the prices. Expect that to happen – the ATR will increase some more and then eventually roll over and begin to decrease. Now move to the RSI – it will be extremely volatile – expect it to suggest a bottom several times in the next several weeks. But until the ATR rolls over and starts to decrease they are just head fakes. Notice that the volume will return to normal very quickly – the amount of volume we had last week is unsustainable – eventually no one is willing to sell their shares in the quantities required for such a volume spike. Note how any up weeks (a) will have longer tails than normal and when the all-clear is sounded you should have something that looks like (b) – I.E. going up right out of the box. And notice how the price should come all the way to the 90-EMA before turning back up. This last mini-correction took 11 weeks to sort out. In that 10 weeks there were three clear-cut up weeks and two DOJI weeks before it was cleared. The SPY/SPX looked pretty much the same.

Here is the IWM -



You see how it is very much like the DIA. It also hit the EMA-90 before it cleared. The elements marked “a” and “b” were exactly the same.

And finally the Q’s -



The tech took an extra week to clear and actually went down through the EMA-90 but it started from a much closer point. At any rate the same basic principles apply – low RSI several times and then an ATR roll-over. I’ve also annotated on this chart that period from November to the present where the tech market was flat - I posted about that back in December and mentioned that I was looking for a break out. What we got was a breakdown.

I’d expect another down day on Monday and then a little bit of relief for the rest of the week. The retail trade is shell shocked and not fearless so don’t expect a lot of action. But the 401K money comes in beginning Monday and it has to be put somewhere. That’s the law. Then we could have a couple of down weeks and then who knows.

Take your trading a day at a time and try not to keep one eye on the screen all the time. And if we do get an up week don’t start breathing easy until you see that ATR roll-over and start back down.

Wednesday Wraps

As dumb as it gets. Bernake, in an effort to appear a lot smarter than he is, said, "there is no one cause for yesterday's meltdown" and the market responded nicely and went up a hundred points to finish up 52 or so. Marlyn, in an effort to keep from blowing the coffee that he just drank out of his nose, gargled out a strangled, "Bull Snot"! Which caused his Bride to ask if he were OK. Marlyn then attempted to explain what an idiot Bernake is and his Bride just patted him on the head and said, there, there dear - go make us some money. Leave it to the Bride to keep things in perspective - that's why I love her so.

Girls and boys I hope you were all elbows deep today - I know I was - this was truly amazing especially the last hour or so. Everything just turned glorious and life doesn't get any better than this.

I grabbed up a couple of stocks I've been waiting for a pullback to buy - RIO and AKS first thing out of the box this morning. I got into RIO a little early but AKS came along just fine. Both in the green in my account now but it was touch and go for awhile there with RIO. I didn't mind since I'm pretty sure it is going to continue to climb for the next whatever. I'm planning on holding these two for awhile - if they continue to go up.

Also picked up GGB and that was just because it was on my list of 12 candidates. At the end of the day I added TIE to my trading portfolio.

The model portfolio that I spoke about in this morning's post gained 3.18% and SPY (the benchmark) gained 1.48%.

I didn't do any day trading today although it would have been a perfect day for it. I wanted to concentrate on getting some things in place going forward - this kind of opportunity doesn't happen only so often (according to Dr. Brett 5 times going back to '98) and you have to take advantage of the good fortune when you stumble on to it or it stumbles on to you.

I did watch the market though and I tried to learn everything I could about the day after chaos that was possible to learn. That's how you stay prepared learn something new every day. Another thing I did was to build a Proshares inverse ETF list for use in Quote Tracker. Next time the market starts to fall I'll bring that out and watch those charts for day trades.

The three pals (GOOG, MSFT, AAPL) all went up, of course, but GOOG only made 68 cents. If that doesn't throw some warning signs up I don't know what will. AAPL was only a cent behind at 67 cents and MSFT did the best of all with 30 cents (based on percentage gained). I'm not sure if I were holding GOOG that I'd wait much longer for it to hit 520. It probably will but you wasted a lot of trading capital today on a stock that may or may not go anywhere. Now that's not a recommendation to sell GOOG just something to consider when you are making your decision.

I saw a bunch of this today -



That little DOJI suggests caution. And after the smack down yesterday one would expect traders to be a bit cautious. Of course I also saw a lot of this -



- which reader's of this BLOG will quickly identify as a BOB!. The part I like about this BOB is the volume. That suggests some conviction in the move. So we have caution and conviction - I wonder which way it's going to go tomorrow.

The four indices that we follow - DIA, IWM, SPY, and Q's all printed a black/red candle in the last hour. GS printed a DOJI. That is good - shows traders taking a breath. Of course the VIX began its trek back to low-number-land but remains more than 10% greater than its 10-period moving average. And this indicator continues to go down.



That's expected of course because all indicators based on price take a little while to work - if the market goes up again tomorrow - and I don't know why it wouldn't - we will see it turn at that time. And that will be the major indicator to begin buying stocks.

Of course the up/down ratio recovered too and output a 54% or neutral reading.

Given all of the positives I'm calling tomorrow for the bulls - an up day.

The coin meanwhile, fresh off an amazing win today calls tomorrow ... tails - bear coming. Dumb coin, bad coin, stupid coin.

Having nailed today, and who couldn't, the score now stands at Marlyn 16 - 12 and 5 and the coin is 13 - 15 and 5.

I think this is the last post for February - I just noticed that it will be number 113. There are entire BLOGs out there that don't have 113 posts in their entire existence. At any rate that is a record for me and it is unintentional I just have a lot to say. But as long as I continue to enjoy doing this I will continue to attempt to amuse, confuse, but never abuse, you my dear readers. See ya's tomorrow.

Wrapping Tuesday

Wow! Well I've been saying that we needed a blow-out and I think we got one. Now, of course, the question is what's going to happen tomorrow?

Given my aversion to losses I sold everything off except for LQDT. I doubled up on it this morning and managed to make up a lot of my losses when it peaked out around 20.80 or so. I sold shortly thereafter and doubled up again this afternoon at 19.98. I reacquired WLT on the bounce for tomorrow. I need 12 cents from it to get a break even on today. I need about 30 cents from LQDT to cover everything else for good.

What happened? Well what always happens - an oversold market started falling and the hedge funds panicked and like a herd of crazy steers just stampeded it down. Why the hedge funds? Because that wasn't retail traders. They sit around and wait. Funds move quickly and program trades start the avalanche.

But this is the view you need to see -

I first started showing this view in December and at that time I said it looked like we were getting too far away from the EMA 90 and a correction was needed. Since then it's only become worse.

It's also pretty obvious that we're still oversold and we could go down quite a few hundred points more. I don't know if that's what will happen but you can see from this chart that we are overdue a visit to the 90 EMA and it might take a couple of weeks to get there. Now that can happen just as a matter of "swup" (sideways-up) but I think a couple of more blow-offs are needed. Once there it will be time to start making some real money once more.

And while this indicator looks pretty oversold -

You can see here from last year that it can go a bit further down -


Point 155 is in August and 177 is in June. If you look at the chart above you can see what was going on at that time. So it can go a bit more - but not much. The key is the rollover - when it changes direction again we will go up for awhile again.

The important thing to remember about markets like this - if you don't short - your best effort is to take a break and let it sort things out on its own. Normally such a large drop happens over days to weeks - not in one day. But the fact that it did is not unprecedented. I'm going to watch WLT and LQDT and if we get the bounce tomorrow well and good - if not I'll sell off - go flat and wait for NewMoMo to turn around.

I've been doing the up/down ratio for many months now and it is at 9% which is the lowest I've seen it. The VIX went up 7+ points today to 18.31 which puts it at 39% over its 10-period moving average. Last July it spiked to 14.9% which is less than half of today's by a bunch. All 4 indices that we follow and GS - the proxy for the market forever - finished the last hour with deep red/black candles. These are all excellent indicators for tomorrow. Along with these the INDU ATR is an amazing 126 and the RSI(2) is 0.31. Severe drops in the market are always accompanied by huge ATR and an ATR of that level is unsustainable.

I am forecasting an up day tomorrow.

The magic coin is saying ... heads - also calling for an up day.

Having missed today by a country mile or two the score now stands Marlyn 15 - 12 and 5 and the coin is 12 - 15 and 5.

Small Caps Rising

My new rendition of Marlyn's Curve shows exactly what the old one shows - small caps as represented by the IWM ETF are once more taking the lead. The tired old Dow Industrials on the other hand, despite making new all-time record highs day after day after day, are kind of flat - in other words, for as strong as they appear to be in the newspaper or on TV they are actually pretty not doing well at all.



As you can see the small caps took a hard turn back about January 24th or so. Again Marlyn's amazing Curve doesn't concern itself with the mundane of price but rather the excitement of return so we can see that you would have been better off putting your money in IWM rather than DIA.

The Q's have turned down again which reflects the problems that tech is having finding a champion now that GOOG and MSFT and AAPL have all abandoned ship. SPY is looping up a bit and the dodgy old Dow just stays flat to down. Was there ever a time to play long caps in the past year of so - maybe back last Spring when the small caps turned over and the Dow took a bit of a jog up. But since that brief time - no - unless you want to call being in big caps during the run down into August was a good thing (you were losing less on a percentage basis at that time). And then there was another brief period - but you get the point.

Small caps rule.

Monday's Wraps

Well I sat and watched for awhile then went out with my bride - didn't miss much. About 3:30 I reloaded with LQDT and maybe I'll get another bump up tomorrow. It would be nice. Other than that I'm flat, dumb, and happy to coin a phrase. As of the close LQDT was already profitable. We'll see.

Last week I read that the market went down because oil went down (!) and there was too much talk of raising interest rates. Interest rates of course are always a one-day story so today it had to be something new - and that was investor disappointment with a number of collapsed deals. I was always taught that there is always going to be inflation in an economic system based on smoke and mirrors and the way to combat inflation would be to --- wait for it --- invest in stocks. Apparently we can't invest in stocks when there is inflation because inflation gathers interest rate hikes and interest rate hikes cause the market to - you guessed it - go down. And you wonder why I gave up all that mumbo jumbo and do silly things like buy at 3:30 and sell at 9:45. Self preservation is the real reason behind rule 1.

Just read an interesting article on Seeking Alpha by John Hussman regarding "selling too early." It is an interesting commentary on today using a historical figure. Worth your time to read, IMO.

I spoke about the historical basis for stock movement this morning and its relationship to the EMA 90. I hope everyone got a chance to look that over. Same theme as always - buy low and sell high. It truly is an easy game in a market that refuses to come down. Although the last couple of days have been a good start.

Unfortunately while we could use a bit more downside I'm thinking that we are in a perfect dip buyers crease and that tomorrow will be an up day as a result.

The following figure is something I've been working on for a few weeks and it looks as if it might have promise.



I call it the "Newmomo" because it, unlike every other indicator known to civilized man is built on EMA's. It is the variance of the EMA 4 vs the EMA 21 of the 20-period normalized DIA. Or the difference between the green line and the red line as shown on this chart.



If you are looking for the routine you've come to the wrong place. Anyway this indicator (for which I have hundreds of samples not just the few shown here) suggests that whenever it went below -.005 that a market turn around should occur in the next day or so. If we couple that with my usual rap I think that turn around could start tomorrow.

The up/down ratio printed 34% which was actually up 6 points from Friday but the new 20-day high/low ratio printed 40% which is 10+ points down. The VIX is sitting at 9% over the 10-period moving average and that probably is enough - maybe a spike up in the morning to take it over the 10% mark and then a slow decline through the day into the close. Goldie (GS) and the Q's printed DOJI while SPY, DIA, and IWM all put out white candles in the last hour. The mix is good - shows that the market isn't sure what it wants to do.

My forecast for tomorrow - rain, sleet, snow and an upward moving market (weather report gratis).

The magic coin agrees - bull market tomorrow.

Neither the coin nor I got today correct so the race is now Marlyn 10 - 8 and 4 and the coin is 7 - 11 and 4.

Best Friends Forever (or Until Dawn)

Bought LQDT last Friday at 3:40 for 22.63 - sold this morning at 9:45 for 23.40 +77 cents for a trade I held about 35 business minutes.

A couple of years ago I found that the only way I could make any money consistently was to buy at 3:45 and sell at 9:45. Given the looks of the market lately we might be entering that sort of time period again.

Everything just looks way overbought or way oversold - there is no happy medium. When you have a stock such as LQDT that is just lollygagging along you can make what I call a "spike" trade and get some quick profits out of it.

Another stock that went up abruptly this morning was CIEN. I had considered taking this one as well on Friday afternoon but didn't - oh well - there's always tomorrow.

I might buy LQDT back again this mornng for a day trade if it keeps doing what it is doing - tagging the EMA 4 and going up. But for now I've made a good profit on the day and I'm happy and I may just take the rest of the day off. Less stress - happy Marlyn.

Looks like the market is going to take the rest of the day off too. SPY is down, Q is down and DIA is folding. Goldie (GS) is down, oil is down and VIX is up. A good day to just watch - I think.

QQQQ and QID

In our never ending search for an automated let me sit back and watch and make money method, Dogwood and I are trying a number of approaches to using the Proshares ultra-short funds along with the Q's to see if we can find a market timing system that makes sense. Dogwood is right now studying the effect of TICK on the process and I'm looking at several other methods.

Including buy both and let one fail and one succeed. The best way to do that is to buy one or the other the night before depending on your feel for the market on the next day. If you believe the market is going up the next morning buy the Q's and set a stop close below them. If you believe the market is going down buy QID and set a stop below it. Usually at 3:45 EST you shouldn't have a lot of trouble getting filled because the day traders have all gone home for the day. (Except for a few hard core who play after hours). Then the next morning at the open you buy the other automatically also with a close stop and hope that the whipsaw of the market place doesn't take them both out. It happens. I've tried it a couple of times with success each time but I don't like the suspense.

Yesterday morning provided a great opportunity to try out a pivot point based approach because the Q's opened up and QID opened down. If you want to be prepared for the next day you have to generate the pivot points before the market opens - we've discussed how pivot points are generated so I won't cover that again.

Once you have generated the pivot points for the two stocks as soon as the market opens and you can get a one day chart you should bring it up and annotate it with the pivot point, MPH, MPL, R1, S1 or as much as will fit. Some systems provide this capability built in - mine doesn't but that's OK - I would continue to annotate them by hand as I have been doing all along. I enjoy doing it and it helps me concentrate on the task at hand.

Here is what the two stocks looked like at the end of the day.





You can see how they are an exact mirror image of one another and that they hit the pivot points at the same times. Note how you could have used the pivot point (1) of both stocks to inform your purchase. Then when the QID pulled back away from R3 and the Q's pulled away from S3 you sell QID and buy the Q's.

Thus in one day you make a buck and a half on QID and another 30 cents on the Q's. Dogwood suggests that we use QLD but I don't think it has enough volume yet to make it reasonable. But if you could have got a fill in QLD around 12:15 or so you would have made about a buck on the transaction.

I'll stick with the Q's for the counter trade in this instance until QLD becomes more popular.

A little memory trick so that you won't be buying the wrong ETF - QLD - "Long Double Q's", QID - "Inverse Double Q's".

Wrapping Tuesday

Bernake speaks - he says - don't worry - education and training will help narrow income inequality. That is - education for those who can afford it - which means parents who can afford it because you don't get through school jerking sodas anymore - not at 5.25 an hour or even 7.25 an hour. Which means - we're screwed. But you all knew that already.

But that's not what I'm here to talk about today - I'm here to talk about this amazing new stock market of the new intertube century - it slices - it dices - it cures every ailment known to man and a couple not even discovered yet - it goes up and down like a psychotic yo-yo - watch the shells boy and try to pick the walnut with pea under it - I'll give you two chances for one money ... would you like to try again?

Wow! Will this ever end? There were so many set-ups coming about mid-day I didn't know what to do. Here's several that you can look up for yourselves (all 15-minute charts) - at 11:45 JNPR printed a dummy spot followed by clear confirmation that also formed a tweezer bottom at 12:00. It took off from there. At 12:45 to 1:15 MSFT formed a classic blow-off bottom (sorry Jim) and took off from there. At 11:30 SYX formed a classic blow-off bottom with a confirmation 15 minutes later. It took off from there. SPY printed a tweezer bottom at the 11:45 - 12:15 on the 15-minute bars. In the 11:45 to 12 time period on the 1-minute bars you can see a huge 2.5-3 million share sell in SPY that was probably one transaction. After that the market reversed.

I took a bit on SYX - a stock I'd never played before. And got out at the dummy spot at 1:30.

Still holding CRVL even though it gave up a buck and a half today - probably get it back and then some tomorrow. Also holding DHI and it is only 20 cents away from where I bought it despite the best efforts of thestreet.com's loyal 10 subscribers. Still holding JNPR - it is in a nice chart formation and I think it is going to continue to go up - I'm looking at 18.90 as a target. I did sell the Q's this morning just as they jumped up at the open because I thought that they were going to go down from there hard. They did, then recovered most of it. Holding KKD too - although the next time it goes profitable I'm out because I think it is done for now. I'll wait for another set-up in the future.

I knew ahead of time that this was going to be a strange day because around noon I took a look at the up/down ratio and there were more stocks up than yesterday and the market was crashing all morning. How can stocks go up with the indices down - damifino but they do and they did.

CSCO beat - that probably means a 20 point day on the NAS tomorrow. GOOG went up today - it too had a classical blow-off bottom 11:30-12:15. Remember the BOB is characterized by a minimum of two down bars (Red) with elevated volume on the second down bar. This is followed by a Green/White bar with a higher low than the last Red bar or an absolutely equal low (tweezer bottom) with the last red bar. That is all it takes and if you see this formation you buy it and put your stop someplace below the low of the Green/White bar. You choose the spot but some multiple of the 15-minute ATR would probably be appropriate. For GOOG at that moment it was about 2 bucks which seems about right. Who in their right mind is going to day trade GOOG? Here is an example of BOB on the hour charts (yes you see it on all time scales). Of course the longer the time scale the longer the run (generally) so if MSFT goes up tomorrow too - don't say I didn't try to warn you.



Nuff of that. The up/down ratio went up today to 43% which is neutral. The new 20-day high/low ratio is 77% which still means an overbought market ahead of us. Four of the five majors finished with white candles in the final hour, only the Q's were down and the VIX remains neutral - if I were the VIX I'd probably want to stay out of it too.

I'm forecasting tomorrow as an up day. I want a downer so bad that I'm calling for an up day (although I'd take one like today but that just doesn't happen that often). It probably will be mixed again, but we'll see.

Meanwhile old magic coin says --- tails - bear market again. The coin just never learns.

Having missed today by the barest of margins, the score is now Marlyn 8 - 6 and 4 and the coin is 6 - 8 and 4. Marlyn is just barely better than lucky (which puts him head and shoulders ahead of Jimmy Crack You Know Who).

Forgot to mention - I absolutely love this stuff - every boring minute of every boring day and I hope that my absolute passion for it plays through in my writing. Have a good evening.

Wrapping Monday

I'm not feeling too well - I guess I picked up a bug last week when I was on the road. Probably not too difficult when you observe how many people cough without covering their mouths with their hands at least. Anyway I have a miserable head cold so I'm mostly watching today and thinking.

I saw an opportunity to grab some DHI on a minor pullback so I took it. I bought it on a blow-off bottom around the noon hour that was also a tweezer bottom on the 15-minute charts. Then at 4 minutes to the close I bought a load of JNPR based on a report I read in Notable Calls and the fact that it too was forming a bottom in the final hour of trading. I will probably sell this one tomorrow.

That makes the load CRVL, KKD, still holding the Q's even though they are profitable and I swore I'd sell them, and now DHI and JNPR.

I was going to buy FNF but it just didn't look good to me. It will probably report good earnings and go to the moon tomorrow morning. But maybe not. I don't have a feel for it and I still don't like holding stocks through earnings unless I do have a feel for them. Of course at about 2:30 it started catching a bid and it went up 60 cents in the last hour and a half. I don't trust after hours so we'll see tomorrow but the earnings were down.

I did notice that GOOG had another "long squeeze" today. A "long squeeze" is when the retail traders sell all their many millions of ... wait, retail traders don't sell millions of shares ... well who's selling then? I don't know but there are a lot of 200 - 1000 lots coming across plus quite a few larger than that. I can guess that most of these are not retail traders because the time and sales window is color coded and most of the trades are in cyan - that means the trade is not at either the bid or the ask. Contrast that to a GM for instance where most of the trades are in red or green (for bid or ask). I don't know why GOOG is losing ground - I think it is possible that people are taking profits to pay for Christmas now that the bills are coming in. Yeah - sure.

Speaking of GM - back in early December Carl Icahn sold off his holdings because as he said, and I'll paraphrase - dumbass company won't listen to me so its stock is going to go down. He managed to beat it down to 28 and change in a couple of days and since then it has gained back about 5 bucks - 3 higher than where Carl sold. So much for Carl as stock picker - see just because you have barrels of money doesn't mean you're smart.

But I'd like to do another object lesson on this same theme. Let's say that on Jan 14th or so Jimmy Crack Corn Pone said that GOOG was going to 513 and from there a short squeeze would take it to 520. Let's say that you believed him and with 10K of your hard earned money you bought GOOG on 1/16 at 507 (approx the open) and you got 19 shares. Today your 19 shares are worth 8971. If you had gotten the 19 shares to 520 you would have a 247 dollar gain. If on the same day you had used the same 10K to buy 324 shares of GM it would be worth 10692 today or 692 dollars in profit or nearly 3 times the profit you might have gained with GOOG but didn't.

The point of this exercise is not to ridicule Jimmy Crack Corn Pone (although I can't help myself I really can't) but to show you that you have choices where to put your money - or as your mother used to say - if everyone was jumping off the bridge would you jump too? Sometimes it just makes good sense to buy an old sticks and bricks company like GM. From a traders perspective GM is a great day trade up or down - just watch the Dow and go with the flow.

Broker A over at Fly on Wall Street has a rant up regarding the fact that GOOG should split - and it probably should about 5 to 1 if not more. If it were anywhere near BIDU you'd be able to make direct and realistic comparisons.

Unless you have Marlyn's Curve. I'll do a post later today or tomorrow showing GOOG, BIDU, and YHOO as you've never seen them before - it's pretty neat.

MSFT and AAPL were both down today but MSFT looked to me like it might go back up again tomorrow. AAPL just looks tired and I have a feeling it will be taking a long rest. SMH looked like it put in a maximum top today - three gaps up and a DOJI star. I wouldn't be surprised to see it drop a bit tomorrow. Of course volume is drying up in just about everything. I'm not sure what everyone is waiting for but I don't like this quiet - it's too quiet.

The up/down ratio has pulled way back to 38% and the new 20-day high/low ratio also pulled back to 74% which isn't great and still reflects an overbought market but some relief is in sight. The last hour was mixed with a couple up and a couple down. And that story is getting to be real old too. The VIX has pulled back into neutral territory which is OK but I'm calling tomorrow a down day. And that is based on the tweezer top that formed on the SPY and IWM today and Friday. They weren't perfect but they were within 2 cents of one another and that's close enough for me. Between that and the absolute minimal volume across the board and I think we need a few days of downward movement just to get the pressure off.

Meanwhile in magic land the coin calls tomorrow --- tails - also down.

Let's call today what it deserves to be called and that is another mixed day or what I'm calling a tie. I lost money on my several investments today but they are all green from where I bought them.

The score is now Marlyn 8 - 5 and 4 and the coin is 6 - 7 and 4.

Wrap It Up Friday

Late for Friday's wrap - had some important things to do. Anyway as you may have noticed it was a kind of up and down day but the one thing that stood out was the low volume.

After peaking on Wednesday at 2 million over the average the DIA was 2 million down for Friday. The SPY, Q's and IWM showed the same pattern with IWM coming in at only about half of the average volume.

I think this shows a reluctance on the part of the funds to sell their winners and that probably supports the belief that the bull has some run left. Of course earnings in general have been not too bad and there haven't been any outright misses - yet. But we are getting close to the end of the earnings season and it appears as if everyone is breathing a sigh of relief that things aren't as bad as the anecdotes would have it.

I didn't do much today because I was busy with other things but I did reacquire KKD. I took it at the daily pivot point (12.29) after it had gone below and touched the mid-point low. I was going to sell it at R2 but it never made it that far so I decided to hang on for another day.

An update on CRVL - the other day I said I'd either double or sell and I opted to double. Problem was I was only able to get half my order filled before the price ran away (I won't "market" buy this one) so I only went up another quarter. I'm going to hold a while longer as it made my week this past week and I see no reason to sell at this time.

Monday is looking like a down day even though the cycle should have us going up. This will be the first (full) week of the month and it normally is an up week because of the influx of the retirement fund money. There are mixed signals however because the up/down ratio withdrew to 53% but the new 20-day high/low ratio stayed in the high 80's (88%). The VIX went back into the yellow zone low (-5-10 below 10 day moving average) and 3 of the 4 indices finished the week with stong white final hour candles. Only IWM finished in the red. I think that there is just not enough out there to buy and that the stress on the system caused by the huge number of new 20-day highs is going to be enough to knock the market down a little on Monday.

Meanwhile the coin says - - - tails - bear market. We agree again.

Nothing to be said about Friday except another mixed day. The score is now Marlyn 8 - 5 and 3 and the coin is 6 - 7 and 3. I wonder what all of these mixed days are going to mean? Six months last year we had 1 so far we've had 3. Stay tuned.

Thursday's Wrap

Well I mis-called that one. The indicators all pointed solidly down and the market followed the indicators. After my epiphany this morning regarding EBAY's profits I was not surprised. I'm working on a new indicator that looks like it might be better than the old up/down ratio - I have to watch it for awhile and if it proves to be valid I'll include it in the mix.

Bought some KKD just above midpoint low (MPL) and it didn't do anything all day except bounce around the MPL. I'm holding it overnight because the indicators are all solidly up for tomorrow and this time I'll follow the indicators. We'll get to those presently.

One that I missed was BKUNA - I had it on my daily watch list and for some reason or other didn't believe what I was seeing. But it came out of S2 this morning like a shot and went to R1 at the close - my mistake. Here is what that looked like.



You see how you can combine your process (wait for a bottom indicator) with the pivot points in order to make decisions. This one was pretty clear and I really don't know why I missed it except maybe I dozed off for a bit when it was developing.

Day 7 and the dumb traders started shorting GOOG again. Don't they know that Jimmy called for a short squeeze? But in all seriousness - at least as serious as one can be in this business there are some interesting developments in GOOGle-land. One of the sites I frequent, whispernumber.com, is suggesting that the "whisper number" is lower than the analyst estimate for GOOG - by 6 cents. Now we know what kind of havoc 4 cents can bring. If the whisper number (the non-publicised but hardly a secret number) turns out to be correct - look out below on January 31st.

OIH was off again today - some market some inventory a lot of hot air - most of it on the East Coast of the USA. Have no fear oil bulls - summer is coming and I can pretty much guarantee we are going to need a lot of air conditioning and all these old oil fired electric plants are going to be working overtime supplying the juice.

Seeing some chatter about the housing market depression being over and I really think it is. The reason why is because the other day in my morning paper (yes I still get a newspaper - how living in the 50's is that?) in the primary spot (upper right front page) big headline regarding the slump in the housing market. I contend that by the time reality reaches the mainstream media change is already underway. Barry Ritholz disagrees but he said we having a lousy Christmas season and we didn't. Remember rule 1 - nobody knows nothing - including me - and especially in this case since I agreed with Barry.

The up/down ratio is rock bottom at 24% which is more than half of yesterday. The new 20-day high/low ratio is at 39% which is also more than half of yesterday's number. The VIX actually leaped over its 10 day moving average and is now in the yellow zone of oversold territory (+5 - 10%). The DIA, Q'S and IWM all printed white candles in the last hour. GS printed a dummy spot (Doji) and SPY printed a gravestone Doji. Everything signals a bottom. So I'm forecasting an up day tomorrow.

The magic coin having listened to all of the evidence says ... heads - agrees with me.

Marlyn is now 7-5 and 1 and the coin is 5-7 and 1. See you tomorrow.

Wrapping Wednesday

Continued day trading as I said I would and was very successful. Hard not to be on a day like this.

Took KKD early at the midpoint high (see Pivot Points) and held it through R3. In numbers that is 12.54 - 13.47. Did a similar with TRID except was out at R1 - a slower developing trade with a slower moving line. Still a 28 cent profit is OK. I'm feeling a lot better now that I'm not losing money on stocks such as Glass (up 2 and change today) and CTXS up a buck 77 on the day. Of course they might give it back and then some tomorrow. I just didn't want to hold either one of these into earnings. I'm still not sure how GLW managed to "beat by a penny."

Still holding CRVL and it went serious-profitable for me today but I decided I didn't have a good reason to sell it. I'm pretty sure that it's going to continue to go up - at least past 46 bucks. Maybe I'll sell then. Sprint also went up some more and I still can't find a good reason to sell that one. Not as sweet as CRVL but I have a lot more exposure too. And Q's are really turning profitable. The weekly indicator is green. I hope it can hold through Friday - I don't think I'll keep the Q's over the weekend. Meanwhile I intend to continue day trading using the Pivot Points as my entry and exits. It's kind of neat not having to make any real decisions except hit the line and buy - hit the other line and sell.

Was today the long awaited GOOG short squeeze? Nah - just normal activity for an abnormal stock. How can you tell? The volume forms a bowl - high for the first hour and a half - tapers into noon - begins to climb again through 4 P.M. Still a nice 4% bump and I'm sure everyone who bought at 513 in front of Jimmy's short squeeze breathed a sigh of relief.

But you have to figure that any day that SUNW shows a profit is a day when everyone should show a profit. They have the best warranty in the business - you pay for it but don't dare go without it 'cause you're going to need it. (You don't read that in their brochures).

For tomorrow first I'll give the data points and they all point to a down day. The up/down ratio went up a paltry 2 percent to 60 but the new 20-day high/low ratio hit 84% and that is hugre. The last time it was this high we had a sustained three day loss. The VIX is back in the overbought zone between 5 and 10 and all 4 major indices plus GS printed strong white candles in the final hour. That in itself should bring the market down a bit tomorrow. But - in the after hours EBAY reported massive earnings and even as we speak there is a feeding frenzy going on in all of the internet stocks. If that carries through to tomorrow and it should we're going to have another up day. I'm forecasting an up day tomorrow.

The magic coin meanwhile sits and sulks having miscalled yet another one today. But for tomorrow the coin says ... tails - bear market - can't convince the coin that sentiment beats luck.

Marlyn is now 7 - 4 and 1 and the coin is 4 - 7 and 1 maybe skill beats luck after all. We'll see.

I'm giving Jimmy Crack Corn Pone a break today. But we'll be watching tomorrow - day 7 of the GOOG short squeeze vigil - get your candles at the door.

Pivot Points - More Examples

These examples are for swing trading purposes. A swing trade is a trade that is normally taken over a period of days. Pivot point calculations can assist the swing trader in determining entry and exit points for the trade.

Step one – select a list of stocks you believe you would like to trade. In other words you don’t normally use the pivot point to find the stock – you use the pivot point to assist you in trading the stock.

Step two – calculate a set of pivot points for each stock selected in step one. Use the previous week’s high/low/close data for this purpose.

Step three – wait until one of your selected stocks crosses a support pivot point level – either S1 or S2 or midpoint low.

Example 1 – BIG. This is a stock that I identified in a post the other day from an article I read in Notable Calls. Here is how it behaved on Monday and Tuesday.



You can see that it opened and dropped right to S1 where it printed two Doji one of which being a higher low. A little while later it rebound from S1 and went over the course of the next two days to nearly R1 where, what else, it printed two Doji.

Example 2 – BLG. An old friend – and you can see it more or less did what BIG did.



Example 3 – MDRX. A stock I played last week and dropped out of after a small gain. Should have had it on the radar this week. Not quite all the way to S2 but to the midpoint between S1 and S2 which is just as good. You can, of course, wait till it crosses S1 (and note how it lingered there waiting for the traders to catch up. Then it went to the PP where it lingered some more and then it went to MPH. Will it go higher? I don’t know – today will tell.



Example 4 – QQQQ. I’m currently holding some from just above MPL which is where it is right now. I think it rebounds today and goes to MPH at least.



Example 5 – AMD. Some readers are talking about this – here is how it looks in Pivot Point View. S1 to MPH + already this week and on its way back. If it crosses MPH again this week it is probably going to R2 which is 17.93. If it goes back to S1 - then it starts all over again. Such is the swing trade world.



There you have it – five crisp and recent examples of possible swing trades using pivot points. The one thing you have to notice is the small amounts most stocks move from S1 to R1. This, of course, is a function of the initial price of the stock. The less costly the stock the smaller the expected move all things considered. And the word is “expected” there are no guarantees in this business.

And as a last word - you couldn't help but notice how all of the stocks up there, selected more or less at random, have a similar chart pattern. What that means to you is that if you pick a stock to watch and it starts hitting S1 and moving up there is good reason to believe that your other stocks are also hitting S1 and moving up. Then your only problem is picking the ones to play. And how do we do that? ATR is Volatility.

Now for your pleasure here are two sites that will help you calculate pivot points. Since you still have to enter the initial HLC values and then transcribe the results somewhere else you are probably better off doing it with an Excel spreadsheet.

pivotpointcalculator.com

Stepney Futures