2011 was a very busy year that really took time away from blogging. The learning never stopped though and this will be reflected in 2012 with the blog focusing mostly on making investing decisions and research and less getting involved in news and politics.

There is too much noise in the world and it is good to have an idea about the current situation in (for example) Iran and how it might affect oil prices if there is a disruption, but we all have our opinions about a certain topic and I'm no expert.

Although I do not have a sneak peek of what's to come I hope you all have a Happy New Year and see you back here next year.

K

Update: As of July 2011 Brad is back at shadowtrader after taking a break so go listen to him daily if you have thinkorswim.
I initially came to learn about these core sectors and market internals while on ShadowTrader chat that was moderated by Brad Augunas before he was replaced.  The ShadowTrader core index can be accessed to those of you that have a thinkorswim account and have the desktop software installed. Once that is taken care of you can click on “Market Watch” tab, then click on “Watch” and finally Scroll through the “Public” section until you reach “ShadowTrader Core Sectors”. If you have done it correctly you should see a screen like the one below.

Before I move on to the core sectors I want to point out the top right corner of the screen above. This is where the Advancing and Declining sectors are summarized.  So far I have only used this for the benefits of intraday but I will test out the theory that it can also help with long term market prediction. How Brad would summarize this is “The Sectors are 12-4 negative”

The volume shows how much volume goes into the advancing sectors and how much is going into declining sectors. 12,567,261 shares were going into Advancing sectors and 158,799,054 were going into declining sectors. With some quick division we are “12.6 to 1 negative” meaning 12.6 times more volume is going to the downside.

Finally the capital flow is also fairly important in seeing where the money is flowing and when, here we have $37,931,394 on the Advancing issues and $367,886,885 on the Declining issues, therefore another quick division leads us to the “9.7 to 1 negative” which means almost 10x more money is going to the downside.

By gauging these internals you wouldn’t want to get in front of the Bear train unless you saw a change in internals right? Here is an example in the chart below.

As you can see from 1:30-4pm the Sectors moved from 12-4 (or 3-1) negative to neutral (1-1), the volume went from 12.6 negative to 7.3 negative (an improvement) and the capital flow which was almost 10-1 for the bears dropped to about 2.5-1 negative (more money was being thrown to the upside) so if you were day trading it would have been wise to reverse or exit your short positions.

At 12:45pm on Friday there was the most picture perfect Bull Hammer Candlestick pattern which should have been plenty to signal a trend reversal, but the internals helped confirm it.

If you don’t have access to thinkorswim I cannot find another way for you to gouge the market internals but I will link the16 core sectors chosen by ShadowTrader. They can be used intraday to gauge the strong or weak sectors or they can be used to view the long term direction of a certain sector by being graphed into daily or weekly charts.  All the links below point to StockCharts.com

1. $DJUSHB (Dow Jones US Home Construction Index)
2. $DJUSIT (Dow Jones US Industrial Transportation Index)
3. $DJUSNS (Dow Jones US Internet Index)
4. $DJUSSW (Dow Jones US Software Index)
5. $BKX (Bank Index – Philadelphia)
6. $BTK (Biotechnology Index)
7. $DRG (Pharmaceutical Index)
8. $GOX (CBOE Gold Index)
9. $HCX (S&P Healthcare Index)
10. $IUX (S&P Insurance Index)
11. $OSX (Oil Services Index – Philadelphia)
12. $RLX (S&P Retail Index)
13. $SOX (Semiconductor Index – Philadelphia)
14. $UTY (Utility Index – Philadelphia)
15. $XBD (Broker/Dealer Index – AMEX)
16. $XOI (Oil Index – AMEX)

I am attaching a final chart here which includes all 16 minicharts and I hope you don’t get too dizzy staring at it. Click the Image to Enlarge.

I wish you all the best in using these indicators and I always welcome questions and new ideas so don’t be shy to plop them down on the comment box below.

Happy & Profitable Trading,

-K

You can check out Investingfreaks' Investimonial page and leave a review for others to see so we can get more visibility.

There are currently two 5 star reviews and one email from a reader that found us through investimonials as well.

Here are what is being said about this blog.

Danny:  "funny, sharp, witty blog and really timely notifications"

the creator of this blog warned his subscribers to be extra careful a couple days before the flash crash! check it out. go to the website and go back to may 6th and before! its a really funny blog too.

theres a nice little community of sharp traders at investingfreak. they share their trades and other speculations. really cool site, i love it

Tommy: "I bookmarked this site!"

This blog is great. The few traders that write for this thing are on point and comedic. That really helps keep the reading light and interesting. I wish they updated the blog more, but with all the market action that has been going on since the start of September. I can't blame them for that. When you find guys that are willing to share great information, take advantage of it.

Fetcher (via email)

You have to know that I truly enjoy using your blog. it's very useful and really effective tool for everyone! Actually I found it via investimonials.com, according to it your blog has few reviews but I think your blog deserves to be rated higher. So it would be a big step to ask your readers/visitors to leave reviews in investimonials.com.

Again I appreciate the voiced opinions because as much as I ask for comments in order to improve the site and content many just don't want to be bothered and pitch in.

One last thing is an update and apology. The last blog post before this was back in October and that is unacceptable but as Tommy mentioned about the market he is correct. (By the way I am long Blockbuster $BLOAQ, a January 165 Netflix $NFLX put which I acquired when Netflix was up at the $205 area a few days back)

I should begin posting more in the next few weeks. But if you are a reader you are urged to go to investimonials.com and write a review if you have something good to say.

-K

Basically ETF's are usually set up to mimic indices that we cannot directly buy. That is a great way to stay invested and diversified if you believe the stock market in general will do good or bad. The number of Enron Task Forces is now reaching the gazillions and "investors" are so drawn into them that they are getting bigger and bigger and bigger (can you guess already?).

Here is SPY ETF compared to the index that it tries to replicate. (Click To Enlarge)

As you can see the mirroring effect is almost so perfect that by owning SPY shares you will make nearly the same percentage as how the S&P 500 has performed.  Thats GREAT! It takes pain away from doing individual stock research. Of course if you still want to invest in specific stocks with minimal effort and AMAZING returns I would recommend Bear Sterns.  After you have made millions in Bear Sterns get your attention back to this useless post.

Hey I have an Idea! I believe Volatility will increase and VIX index will keep going higher again. Hmm "Google Google on the wall whats the best ETF of them All?" Google: VXX for the win!   So there you have it, if you want volatility there is an ETF for that.  Alright time to cut to the chase because its nearing midnight. Click Below to Enlarge the Comparison between VIX and VXX.

Notice a Difference between the SPY comparison and the the VXX comparison? Gosh I hope so or get the FREAK out of here!  They don't mirror each other AT ALL. They Barely did before last august and from then on its a whole different story. Speaking of stories... Thanks Dan for the heads up in the comments about the "VXX Reverse Split 1:4" story.
For those that are new to stock splits a quick search can yield a lot of information but I will spare that for you by explaining in my own words what will happen here.
When VXX reverse splits in the first week of November (lets assume its at $13 on that day) it will start showing up as a $52 instead. How can they just change the price? Well If you owned 4 shares of VXX now you will own just 1 later thats how.

Ok finally getting to the finish.  A reverse split is bad because instead of increasing the amount of shares outstanding, the company is making this move to make the stock look like it has more value when in fact is the same crappy thing.  I will not be playing VXX but seeing the "oh so perfect" mirroring effect it has done so far I congratulate those who will keep shorting it via whatever method works for them and reaping profits until VXX slashes in half once again.

Thats it for now and I hope that helped clear your question Dan.  Volatility will not get a spark just because Barclays "Enron Task Force" will have a "higher price". If you're still confused or stumble upon other interesting things that you would like to share, the boxes are right below the post most of the time.

Happy Trading all and to all a good night!

-K

People have begun losing their jobs once again after a few months of lowering unemployment claims. How do I back this up? No data other than I now have more than one close acquaintance that within the next 2-3 weeks will receive a pink slip. They survived during the worst of it all and now employers are deciding its time to let go. Thats amazing! Keep your profits because you wont be making as much money in the future with 15% of the american workforce unable to afford staples such as bread without a food stamp.

On the currency front according to ZeroHedge

And once again, all of Europe is dumping its deposits in Switzerland, running away from domestic banking centers, and making the lives of Hungarian CHF-denominated debtors a living hell. The EURCHF just hit an all time low of 1.3066. The Bank intervention sonar just went apeshit as both the BoJ and the SNB are fully expected to intervene at any moment.

Technically Speaking? See for yourself how the market has acted recently especially since I officially returned from break August 6th.

K- August 6th, 2010
vacation just ended today so it will take me at least a week to slowly get the groove back. be patient this time...

Euro/Usd and SPX have been in a water slide since.  Its hard getting from Information overload mode to 2 month no internet and back to information overload so I tire out by all the information I once processed in a usual day so the recovery process puts me on tract to return trading right after labor day and the Special chart that hasn't been posted here in a bit as well. (Click to Enlarge)

Happy Trading and make money trading not listening to baldies at CNBC unless he entertains you and the advice isnt followed.

-K

It will be a week or two until I get my trading groove on but for now i've updated the Current Pick's page on top.
here are the main indices.

Market Indices

Hope its been a profitable 100 point market move for my fellow readers and here's to more fun swings to come.

-K

Next up was the much neglected Current Picks page that wasn't updated since May 15th. That is now checked off the list and also an improvement in the look of the current picks page was done. Here is a before and after shot.

Next up on that page is to have a visual chart for at least the main indices but don't expect it anytime soon.

Getting away from general information and into market talk. It seems like 6-10-2010 was a turning date for the majority of the symbols that my system tracks. The S&P is up 31 points (nearly 3%) since then. One thing i noticed is that 1139 is strong resistance if it the market gets that high.

Seeing this i decided to have some fun by plugging in BP stock into the system and i'll let the chart speak for itself. Keep in mind BP rig exploded April 20th.

The Futures are up 13 points (1%). Only scheduled news is for Bennies counterpart Trichet to speak at 12:30pm.  Unscheduled news? well the US navy moving around in the Red Sea and the Israeli crafting a new "do not bring into Gaza" list.

Update: Oh and what's this? Far offshore, crews drill into Gulf to stop oil (AP) Relief well? Ay Dios Mio!! The only little people left after this will be BP shareholders and pension funds. They dont know how much oil is underneath there... oh wait one relief well might not be enough because the aim has to be precise so lets drill about 50 and deplete the oil ASAP and when the bottom of the gulf becomes an empty cavity without the oil and collapses on itself it'll look like a humongous version of  the Guatemalan Sinkhole and lets not mention the Mega Earthquake a crashing of the seafloor would create but wait lets add some tsunami for a topping . I realize i'm being a bit unrealistic as this takes time but lets put it this way,I might still be alive when it happens and it will not be pretty.

Make Money!!

-K

I always felt that the speed at which the TARP money was getting repaid was extreme for such a crisis. Major players paid big bucks back in order to possibly restore confidence in their institutions and the economy (of course so they could use more money to pay their CEO's bonuses as well which was forbidden under TARP).  The latest headline didn't shock me one bit.

After a string of profitable paybacks from Goldman Sachs, JPMorgan and 59 others, the list of deadbeats is growing. In May, 91 banks missed their dividend payments to taxpayers. Two big banks already look like serious zombies. Pacific Capital Bancorp , with $7.4 billion of assets, and Anchor Bancorp Wisconsin with $4.5 billion, have each missed five dividend payments and appear incapable of surviving without taxpayer cash.

This is so awesome and so unworthy of mentioning (since we know news always gets factored in before its published) but since my Celtics lost I had to create a new blog post.

Make money tomorrow and be careful if you're messing with options as its options ex day.

-K

BP plc (ADR) has concluded that its “top-kill” attempt to seal its broken well in the Gulf of Mexico may have failed due to a malfunctioning disk inside the well about 1,000 feet below the ocean floor. If the casing is compromised the well is that much more difficult to shut down, including the risk that the relief wells may not be enough. If the relief wells do not result in stopping the flow, the next and drastic step is to implode the well on top of itself, which carries other risks as well. The real doomsday scenario here… is if that casing gives up, and it does come through the other strings of pipe. Remember, it is concentric pipe that holds this well together. If it comes into the formation, basically, you‘ve got uncontrolled [oil] flow to the sea floor. And that is the doomsday scenario. -Naked Capitalism

The U.S. Coast Guard gave BP Plc 48 hours to find more capacity to contain its leaking oil well in the Gulf of Mexico after scientists and researchers doubled their estimates of the spill’s size.Based on government estimates, the drillship isn’t capturing as much of the spill as BP predicted earlier this month. In a June 4 interview with CBS, Suttles said the system would be capable of capturing as much as 90 percent of the flow.

If BP does not comply with this order, and cannot give a satisfactory reason why, this will put them further on the back foot in their meeting with Obama next week. Readers are correctly cynical as to whether the Administration will live up to its tough words, but the groundwork is being laid, which would make failure to follow through even harder to defend.

Separately, BP said its board will meet June 14 to discuss whether to cut or defer its second-quarter dividend payment following the spill. This is causing BP's Major British Shareholders to Ditch The Company While American Ones Are Staying. Major UK institutions including Legal & General, M&G, Scottish Widows, Threadneedle and Axa have all trimmed their holdings since the Deepwater Horizon rig sank. US pension funds – including Calpers, the Teacher Retirement System of Texas and Ohio Public Employees Retirement System – have held their stakes in the company despite the dramatic fall in the share price.

If you think BP is a good buy right now check out this article: The Ultimate Contrarian Bet: BP

Lets see what today has in store for BP and the rest of the market.

Happy Trading

Update 1pm : - Senate Majority Leader Harry Reid (D, Nev.) and members of the Democratic caucus on Monday asked BP Plc (BP) to set aside $20 billion in a special account to be used to pay for economic damages and clean-up costs of an ongoing oil spill in the Gulf Coast.

Update 3:30pm: To demonstrate that it’s responsibly taking care of the oil spill and listening to public complaints, BP has touted the fact that it has set up call centers to handle the response. However, one of the operators at the BP Call Center in West Houston has revealed that she and the other 100 employees are just PR props; BP isn’t actually doing anything with the thousands of calls it receives: "“We’re a diversion to stop them from really getting to the corporate office, to the big people,” said Janice. … Because the operators believe the calls never get past them, some don’t even bother taking notes."

The Data is out and during Q1 household debt contracted 2.2% annually while State and local government debt expanded at 4.25% annually. The financial sector "shed" ~$1.3 trillion in debt (on an annualized basis) in Q1. Is anyone surprised the federal government added almost that same amount? -EconomPic

From 8:30 to 10 am some exciting news come out such as the retail sales data and consumer sentiment. You can check up on them at the Economic Calendar.
Retail Sales Fall, But Not As Bad As Reported Demand plunged at building-material stores, reflecting the end of a government appliance rebate, and sales fell at auto dealers, in contrast to industry figures which showed a gain.  Subtracting those outliers we still have a decline, which shows weakness. Just not as weak as early reports would indicate.

The BP Oil Disaster has become large enough at the moment to cover Albania which now makes Albania the New Frontier for Oil Investors.

Keep in touch using the comment box and even make your pick for the World Cup Champion to be crowned July 11th.
I hope you like the new speed of the website thanks to our seamless move to a new host.

Make some money and think before you hold into the weekend.

-K