Switching System Update

Before beginning to split this blog into several, I wished to post an update of the performance of the automated switching system. In the future, this information will be found in a new blog containing just trading notes. The 09/14/09 quote does not indicate a sale on that date but merely posting of the opening price to calculate system performance. The system actually continues to hold the TNA ETF.

Oh Say Can You C

C has broken out of a short-term pennant on its way to a targeted 4.40, which matches the neckline of an inverted head-&-shoulders pattern it failed to break out of previously. In this case, this identification is a day late, so would be chasing, a practice that should not be indulged. It should have been purchased at this time yesterday, when the price had jut broken out of the pennant and one's stop-loss point would have be under the upper pennant line.

FAS Blowoff?

FAS has exceeded the longer-term channel shown on the hourly graph (right). This may well indicate a pending blow off, where prices peak, then plummet, on tremendous volume. Point & Figure target is at 76, but that is now within a day's movement.

If one was already holding FAS, handling the blowoff is best done by setting a stop loss immediately under the previous day's low, thus taking advantage of continued upward momentum, yet not participating in the inevitable collapse. Moving the stop loss up during intraday trading could improve one's profits, but admittedly does increase the chance of getting stopped out early.

Keep in mind, that should FAS turn down, FAZ, its mirror, will go up.

Solar: STP Breaking Out

STP is breaking out of a pennant on the hourly chart (right). Note, too, it appears to be forming a cup, but without indication of a handle, yet. The target for the pennant break out is 25.

Longer-term charting (left), shows STP has been in a flat consolidation since early May, and appears to be attempting a breakout of this, more-powerful formation. Should this breakout occur, the target is 27.

Point & figure charting targets 34.50.

FAS On Target

Yesterday, FAS achieved its target of 61 (60 per the July 23rd post). This was projected from the sideways, rectangular movement between July 15-22, commonly known as a flag. Using the adage "the flag flies at half-mast," the target was projected. The Point & Figure target from the July 23rd breakout remains at 76.

Daily chart shows FAS is completing a cup, but has yet to form a handle. As it approaches the previous 66 high, the cup will probably start. This formation supports the 76 target from Point & Figure charting.

FAS Trading Range

FAS is in a trading range between 52.00 and 53.70. It allows an entry at the bottom for the expected resumption of climb, or as a short-term profit since it seems to touch both levels daily. The beauty of it is an entry at a known point, i.e., 52.00, with a nearby stop-loss point, thus generating an excellent reward-risk ratio. For example, if entry is 52.00, the stop loss is at 51.90, and the target at 53.70, the reward:risk ratio becomes (53.70-52.00):(52.00-51.90), or 1.70:0.10, or 17:1. Outstanding, considering an acceptable minimum is 3:1.

Here is another presentation dramatically illustrating the trading range of FAS--and its mirror twin, FAZ. One can more than imagine trading one, then switching to the other, as each peak and bottom alternately.
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07/30/09; 08:45: Pre-market action on FAS shows a breakout above the previous resistance line at 53.70. The short correction apparently lasted only four days rather than the expected week. This is bullish, as is the gap up in pre-market this morning. It should try to close the gap by retesting even down to the previous resistance 53.70, now support. That's the entry point. If the gap holds, support would be 54.14, which becomes the entry point. Stop loss would be under whichever becomes the bottom.

FAS and a Market Correction

The market has entered a correction of the last two weeks of upward movement. It should be mild, last only a week or so, then upward movement will resume. Look at it as an opportunity for better position.

Solars: JASO Positioning and Trend

JASO is positioned in the bottom portion of its channel, both on the daily (left) and hourly (right) graphs. It has broken out of a pennant and now appears heading for a higher channel position. The upside potential is indeed delightful.
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07/28/09; 16:25: Would appear the market is going into a correction for the last two weeks of upward movement. Illustrates the reason for stop losses, and will shortly provide a better entry. The correction should run for approximately one week. Today was the breakdown of the channels, with a retest this afternoon.

FAS Up and Away

FAS broke out of a flag in the form of a rectangle, today. Note the excursion to the bottom of the flag two days ago showing a divergence between the price making a lower low and stochastics making a higher low (see green lines). Until this downward excursion, prices were making a pennant, also a flag formation.

The rectangle also being a flag means the flag formation is still intact, allowing application of the adage "the flag flies at half-mast." Using the hourly graph on the right, the target calculates as (50-35)+45=60. That is the high point of the flag minus the start of the initial trend upward plus the low of the flag. Using the daily graph on the left, the target calculates as (66-12)+36=90. Point & figure target remains as 76 since July 23.

Any one or all should make one happy.

TNA Up

TNA is moving through a resistance level and appears to be ready to resume upward movement. Its Point & Figure target is 45. It has a couple of weaknesses, however. The On Balance Volume does not seem to fully support the move up, and the volume for the upward moves (see the P&F target graph) are less than volume on moves downward. As it moves up, it will retest the lower channel line around 32, and may retreat from there, so treat this one tenderly (that is, keep one's stop loss points close).

The End of FAS'ing Around

FAS is in a pennant after a 15-point move up. It has now pushed sideways until up against the lower channel line, and must now breakout or breakdown. Should it breakout of the pennant,the target calculates as 61 {(50-35)+46}. The Point & Figure target is 76.

The delightful characteristic of this pennant is the nearly flat top. It provides close positioning for a stop loss even should the price pull back to retest the top of the pennant after a breakout, and triangles usually breakout towards the flat side.

Seeking Balance

Originally, this blog was started to communicate with my children, but they long ago ceased reading it and I don’t blame them. It has become too concentrated on topics of little interest to them, and even abrasive since they are still in the years of learning a profession or skill to earn a living, not yet in the years of earnings, saving, and investing.

It has also become too concentrated even for me since I do have other interests, over concentrating for the moment perhaps to allow the pain of my mother’s passing to subside. Perhaps, it now has and I can return to a more balanced life, thus blogging with more balanced attention to other topics. There are more than a few that I wish to attend, but also will continue to follow ideas for trading and investment.

Although I’ve expended more time on investment and trading, I receive most hits on the spiritual topics, specifically the Eastern mantra “Om Brzee Namaha” and Lakota wisdom “Hoka Hey.” The mantra commonly appears fourth in international Google scans, indicating I’ve done something well. It is my mission to help others progress in life, and hits on these topics are those seeking wisdom.

There are also other topics that seem to receive either insufficient coverage, or rabid coverage from both sides, neither of which is complete, balanced, or even workable. For these areas, I wish to add a voice of balance, even if my voice is but a whisper in the hurricane. At least it will have been said. These will appear under the POV (Point of View) category.

To those few who do check in from time to time for investment and trading viewpoints, they will not go absent. It is still important in the spectrum of things, and the one avenue of escape for those who wish to leave the indentured financial status of normal society. That, too, is a topic of acute passion on my part.

Investment Switching

The Nasdaq New Highs vs New Lows ($NAHL) reversed direction this week, indicating a market shift to at least a bull-market correction. Investments should be switched from TNA to TZA.

The prices shown for 07/13/09 are opening prices for 07/13/09. This was originally posted with closing prices from Friday, 07/10/09, in order to allow those who wished to trade on market open Monday. Instructions for the system are listed in previous posts.

Year-to-day profits declined from the previous amount because the switching delay of a weekly system is not as efficient as desired, but it does profit handsomely in bear as well as bull markets.

Bear ETFs Breakout

Both of these bear-market ETFs show a breakout from a flag-formation. Based on the adage "the flag flies at half-mast," targets for these two are attractive, indeed. Point & Figure targets for the two are ERY: 39.5 and TZA 38.0.

ERY: Bullish on a Bearish ETF

ERY has approached a resistance level (blue line) and today should tell whether it will break through and continue following the upward channel (black lines). Point & Figure target for oil ($WTIC) shows a target in the low fifties, so ERY should go higher. The question is when. A backing off from the resistance level would be an entry opportunity. I blow through the resistance level would also. Not a bad choice. The resistance level will thereafter provide a good point for stop loss.

The left-hand graph is daily; the right, hourly. The resistance level on the hourly is the more accurate. Without much imagination one should e able to spot the reverse head-and-shoulders pattern on the daily. Its target calculates as 34.

The major threat to this scenario is presented in the Times story Sunday on Israel being green-lighted on striking Iran's nuclear facilities. That happening would dump the market and sky-rocket oil, especially if the attack included Iran's oil facilities to inhibit financial recovery of their nuclear ambitions--not to mention financing terrorist interests in the region--and worldwide. Iran's latest election scams may cost them in ways they have yet to imagine--and adds new meaning to "meddling."

Market Targets

TNA Head-&-Shoulders; TZA Double Bottom

TNA, as well as the markets, confirmed a head-and-shoulders pattern by closing below the neckline. Target price for the downward movement is six points below the neckline, or 18 (Head minus neckline subtracted from neckline at breakdown point).

TZA, TNA's mirror, confirmed a double-bottom pattern by closing above the middle peak in the W. Target for this pattern would be middle peak, minus the lowest dip, added to the breakout point, so approximately 32, or six points above the current price.

Market Head & Shoulders

The market, here represented by the Standard & Poor's 500 large Cap Index (SPX), seems making a head-and-shoulders topping pattern. Yesterday we violated the neckline intraday, but closed above it, officially not triggering or confirming the pattern. The neckline forms a significant resistance level, so penetrating it will not be easy. Should it happen, it marks the end of the first move up from the bear market bottom in early March, and the start of the first correction wave of the bull market.

Note the MACD shows a divergence between the left shoulder (LS) and the head (H). A divergence is when an indicator moves one direction while price continues its previous direction, and normal forecasts a pending price reversal. MACD continues down with the recent formation of the probable right shoulder (RS), telegraphing a probable violation of the neckline and commencement of the correction. A divergence in Stochastics confirms MACD.

This interpretation provides an opportunity to position in bear-market ETFs such as TZA, BGZ, FAZ, ERY, QID...
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07/07/09;16:01 EDT: SPX broke through the neckline confirming the head-and-shoulders pattern. Target low for this downward excursion should be in the 820s. It may well retest the neckline from the bottom side before moving to the 820s, which will give one an entry opportunity into TZA, ERY, etc.

Market Thoughts

The market, here represented by the S&P 500 index (SPX), has been meandering of late. This stems partially from end-of-quarter dressing up, where funds buy stocks they should have at the first of quarter, so the stocks will appear on their end-of-quarter statements. The Russell indices also undergo their annual reshuffling so the three more truly represent the big, small and smaller. Another factor is that it is a trade-shortened week because Friday is 4th-of-July holiday. A final factor is perhaps those who await the pending earnings releases.

The SPX also retests its 50-day and 200-day moving averages, happenings not unexpected in the world of technical analysis. On the bearish side, many large investors have long awaited a correction of the first move off the March bear-market bottom. A correction may indeed be coming, indicated by decreasing volume since the 930 peak in early May. Also, the index seems to be creating a head-and-shoulders top. The 930 peak is the left shoulder, 956 is the head, and we are currently shaping the right shoulder. However, a head-and-shoulders pattern is not complete or confirmed until price breaks the neckline, here drawn as the straight, red line across the 878 and 888 dips. It is slowly rising so would be crossed if the index drops below 898 or so. This should happen in within the next week, if it is to happen at all. Should it happen, downside targets are in the 820s area, but Point & Figure target has yet to go bearish, remaining at 1020.

We remain in a wait-and-see mode. The real advantage of technical analysis is not in projecting what will happen, but determining what is happening in a timely sufficient basis to trade it profitably.

Solar Positions

A number of solars are well down in their longer-term channel as shown on the lefthand-side, daily graphs. They appear to be breaking out as shown on the righthand-side, 60-minute graphs, but some are doing so on light volume. Also, the market may be entering a correction, so may thwart any upward move.

SOL

JASO

LDK

CSUN

Market Breakout?

The market broke out of its down trend this morning as shown on the left-hand hourly graph of the S&P 500 Index (SPX). However, looking at the longer term, it may be a dramatic retest of the longer-term uptrend lines before continuing its correction. Time will tell.

Pre-market Position

The Standard & Poor's 500 Large-Cap Index (SPX) nears the top of its channel, indicating an end to pause days. It may take a half-day excursion up to its longer-term, upper, darker channel line, but then the shorter-term channel runs out of room within the longer-term channel. SPX then should turn down. It is now below its 50-day and 200-day moving averages, and it would appear entering the long-awaited 10-15% correction.

This indicates the bear-market 3X ETFs (FAZ, TZA, ERY) should resume running, and the solars, who have enjoyed this pause, to correct some more. Many of the solars are near their bottom channel line, and, market permitting, would turn upward. LDK seems to be leading the others by a day, so is shown here.

The left-hand, daily graph shows LDK approaching its lower channel boundary, thus good to rise, again, market permitting. The right-hand, hourly graph shows a breakout, with the stock, again, at a low position in the shorter-term channel. If the market meanders sideways for the half-day left before its short-term channel runs out of room within the longer-term channel, LDK may rise, but when the market turns down in earnest, it will, too.

With the market in downtrend and near its upper channel, it is looking for excuse to turn down. It will find it. Be careful out there.
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Somewhere around 11:20, the market overcame the old longer-term trend line, and went higher in the short-term channel. So much for predictions.... [sheepish grin]