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I have been watching Apple Inc. ( $AAPL ) form a symmetrical triangle for the past two months. This is a Continuation Pattern, which means that the triangle is used as a way to head higher if the trend has been upwards and with AAPL it has been.

A symmetrical triangle is generally regarded as a period of consolidation before the price moves beyond one of the identified trendlines.The sharp price movement that often follows a breakout of this formation can be captured by traders who are able to identify the pattern early enough.

The Symmetrical triangle pattern needs to have a few things working for it and we will check them off here.

1. Trend Should be at least a few months old:  Check !AAPL is from march to december.

2. Duration of pattern should be at least 3 weeks old: Check! This pattern is 6 weeks old.

3. Breakout occurs between 1/2 to 3/4 of the way through the pattern: Check! It’s about 3/4 of the way.

So now that we checked a few major points off let’s look at a price target.  We take the distance from the widest end of the triangle and in this case is around $20.

From the breakout at around $200, this being a bullish trend apple has been in we add $20 to the upside and put it at ~$220 for a potential breakout target.

There are a few hurdles here for AAPL though the $207-208 area is major resistance so if it can break that $220 is well in sight.

I bought a January $230 Call option at 0.23 to prepare for the move instead of putting major capital in the stock

Here is the chart (Click to Enlarge)

Update: I tried posting it last night but my host was down so i gave up.  $AAPL is currently at ~$207.50 (in between the resistance I mentioned)
I have also sold my Call options for a hefty 140% Profit from yesterday’s buy-in price, if Apple breaks above 208 I might be re-buying some.

Merry Christmas!!

Here we go again.
On September 28 I stated the following:

The TED Spread which measures the general risk in the economy has been rising the last couple of weeks. today alone it rose 5.42% which means interbank loans are now riskier.  This is still not significant enough and I would like to see another 33% increase in the TED before I really put a lot of my sidelined money on the short side.

On the 28th TED was at around 0.195  so a 33% move would put the TED at around 0.26 and today TED closed at 0.262 which satisfies my reasoning for going short.

On October 27th TED was in an Ascending Channel and also stated that a higher TED spread would mean that a major market correction is underway as banks are raising loan rates between eachother. Rising rates means there will be some major trouble in at least the financial sector which allocates 15% of the S&P Index.

Here is the latest Chart of the TED showing the channel that has been broken.  (Click To Enlarge)

Another Blogger has picked up on the TED and here is Daneric’s TED Chart.
Finally keep in mind that the current TED is still far below the average TED which is at around 0.50 (50 basis points).  We’re halfway there and its good to catch onto this risk indicator before CNBC does.

I will add shorts via options and inverse ETF’s very soon but always use my opinions as a viewpoint and not investment advice. Everyone has different risk tolerances.

Happy Trading,  K

I was fortunate to attend a presentation by Christopher Probyn of SSGA

“The Financial Crisis: Causes, Consequences and the Prospects for Recovery.”

I spent more time listening than writing things down so pardon me for just providing an outline of what he mentioned that interested me.

• Headwinds to the economy: Weakness Abroad, Deteriorating Commercial Real Estate Markets.
• V Shaped recoveries usually follow deep recessions, Mr. Probyn is looking for a U shaped recovery to play out.
• Unemployment will reach at least 10% (It’s close enough now and we shall see Friday if it happens already)
• Inflation will come way down from the current 1.5% due to the higher unemployment rate.
• There is a good chance CPI will break below 0% (It already has in Japan and Europe) Deflation Alert!
• Do need to worry about inflation until capacity utilization rate goes to at least 80% (Currently in the 60’s)

That’s all Folks. I hope you found it interesting to say the least.

-K

On Friday The VIX went up 23.95%  while the market fell well over 2.5%.

VIX is a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index, it represents one measure of the market’s expectation of volatility over the next 30 day period.

With the upward movement in the past 2 weeks the VIX has successfully broken a trend line going back to November 2008
See Attached Image (Click To Enlarge)

The VIX also had a bullish candlestick pattern on the 2D frame (2 days per candlestick)
Defeniton of this candlestick pattern is quoted below from Candlesticker:

Bullish Three White Soldiers Pattern is indicative of a strong reversal in the market. It is characterized by three long candlesticks stepping upward like a staircase.

The following are two charts; one showing the Three White Soldiers pattern on the 2D chart the other showing it on the hourly.
2Day Chart (Click To Enlarge)

And finally the Hourly chart (Click to Enlarge)

What does the bullish Vix momentum mean? Well by itself it means nothing to me. But when combining it with the increasing TED Spread, Broken S&P trendline, Numerous bank failings each weekend and many more indicators then it all signals that things are not well and the jobless recovery is not going to last much longer.

As always use caution as these are my observations and I do not make decisions for anyone other than myself.
Happy Halloween!
-K

Let’s start off with once more defining the TED Spread.

The TED Spread which measures the general risk in the economy.  TED increase – is a sign that lenders believe the risk of default on interbank loans is increasing.

I first mentioned TED Spread around September 28 and what occurred was a decline in the markets the following week.

Here we are a month later and the TED spread hasn’t lost steam and in fact it is now in an Ascending Channel (Bullish Pattern)
Price Channels usually show trends, With the moves in the TED from Sept 14 till now we are seeing unrest in interbank loans.

I won’t keep the TED out of my radar but wanted to document the current possible move upwards. (Which would signal a major market correction underway.)

In the attached image I realized the lowest trend line isn’t parallel to the other two but it’s close enough to be valid for my benefit. (Click Image to Enlarge)

Happy Investing from K the Investing Freak.

It was a fun day today.
Market opened up and rallied 10 points by 10:45AM.  It was all downhill from there but the big kicker came at 3:10-4PM when the market dropped 17 points.

I will let 2 charts and this link be the hint of what I think we are going to do in the next few days at least.

Chart 1 is a closeup of the past month with the trend lines drawn almost a month in advance. (Click to enlarge)

Chart 2 is a zoomed out view from where the rally began. (Click to enlarge)

That’s all folks. These are the charts promised almost a week earlier.
Have a safe investing season this fall/winter it should be epic.

-K

The SPY made a hanging man candle today and so did a few other stocks like C (reporting tomorrow before open)

It happened on a bullish trend so it is defenetly a bad sign.

It is late but I will update tomorrow with more writing and of course my favorite thing; charts!

-K

I wanted to review a crazy wild week (7 market days or 9 days overall).
It all started with a twitter post  on September 23, 2009 at 9:24PM

It then followed with a blog post about the prediction since twitter is known from moving very quickly and people can miss things at a blink of an eye.
This was on September 25th  ”S&P at 1035 by October 1st? I Believe it is doable.” ( I misspelled doable on the original post.)

We were in a 3 day down move (23rd to 25th.)  When I did my weekend analysis I saw a familiar pattern which was similar to a “Kicker Bullish“.
That deserved its own post entitled “$SPX Stuck in a 9 Point range… which way will it Break?” Well next day we moved up 20 points.
I was not satisfied with the way the pattern was set up because S&P needed to open up at least 10 points above Instead it started at about the same price as the previous day.

The final blog post was written and titled “The One Day Rally Is Over” In brief, I stated that the pattern wasn’t satisfactory to be a real Kicker Bullish and also the TED Spread had been going higher for the past 2 weeks.  The TED spread measures the risk in the general economy.  With Risk going higher & the pattern looking weak, all I needed was some negative news and got it when S&P began cutting company ratings.

On October 1st I checked back on the market late in the day and to my surprise we had fallen 27 points.  the 1035 prediction was reached and breached right on the day I called.
So that is the week in review and the image below summarizes it even more visually.
(Click Image to Enlarge)

Have a good one,
-K

Last night I posted about the S&P possibly having a Kicker Bullish Setup.
Well  The S&P Rallied 18.60 points to 1062.98.
The Setup was not executed perfectly (market would have had to gap higher today then go the distance)

All bets are off on an extended rally that needs to go higher than 1080.15 to be worthy of anything.

While the market rallied the S&P only traded at half its normal volume.
Stocks like Citigroup which had traded over a billion shares a day, are lately trading at less than 500 million.

The TED Spread which measures the general risk in the economy has been rising the last couple of weeks. today alone it rose 5.42% which means interbank loans are now riskier.  This is still not significant enough and I would like to see another 33% increase in the TED before I really put a lot of my sidelined money on the short side.

We had MBIA (MBI) stock trade up  11.38% today only to be down over 7% in after hours.. why?

Standard & Poor’s on Monday cut its ratings on MBIA Inc and its structured finance insurance arm, MBIA Insurance Corp, citing an expectation the company will continue to take significant losses from insuring risky loans. … The outlook for both companies is negative

Well if that wasn’t enough the dollar has began to show some strength as well despite the almost 20 point one day rally.

Bottom Line:  Be very careful if going long from here on out. The false optimism game has been played for far too long and you might get stuck holding a worthless institutional stock come October.  It’s also end of month markup so for the next few days prices might be kept afloat by institutions.

Have a good one.

-K

The S&P 500 index is stuck in a 9 point price box.
1051 is resistance from October 2008.
1042 is support from  the last 3 days and also the 18SMA.

We need to see 2 or more days of market closing either above or below one of these 2 points before there is  any significant breakout or breakdown.
For the moment  we have a setup for almost a Kicker Bullish setup but the 3rd red candle that was put in on Friday doesn’t make this a perfect pattern.

If on Monday we follow the Kicker setup, we might have a move to higher highs (above 1080).
The setup is not exactly a Kicker but it fits the bill very well.  If $SPX closes below 1042 for 2 or more days then next support is 1030 which would be the defining moment of this “Bull Market”.

Here is the attached Daily and Hourly chart  (Click to Enlarge)

Look for an update by next weekend if the setup plays out.

-K