Market Analysis

Euro to reach 1.17 versus Dollar in 2012 ($EURUSD)

Posted by K on May 29, 2012
Market Analysis / Comments Off on Euro to reach 1.17 versus Dollar in 2012 ($EURUSD)

With the current re-ignition of market turmoil in Europe and their unifying currency, the Euro is in trouble again in part due to fears of Greek default an exit from the Euro, the Spanish bank bailouts and many other issues currently facing European countries (as well as US).

News are absorbed in the market faster than you can blink with today’s technological tools and robot trading programs so its time to exploit my perceived strength which is long term technical analysis.

The charts you will see below are very simple charts of the Euro as far back as I could get data for and the conclusion I came to is that $EURUSD will reach the 1.17 mark again within months in 2012.

Note: The Bigger and longer term version of the chart can be found by clicking on the image below.


Would love to hear your opinion and take on this so feel free to comment or tweet and include @investingfreak

-K

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More Coolaid: Market is getting thirsty ($AAPL , $SPY)

Posted by K on March 21, 2012
Market Analysis / Comments Off on More Coolaid: Market is getting thirsty ($AAPL , $SPY)

The following chart is the ratio of $SPX and AAPL and the pattern they formed which has retraced nicely into an almost perfect harmonic pattern.

I’ll leave it up to you for further research but here is a chart I’m studying and to me either uncle Benny provides more liquid or we’ll get thirsty soon.  Europe is already dehydrated.   If you don’t like analogies or can’t understand them… what I’m saying is that we don’t have much upside left so I’ll be Fearful now that everyone is greedy and regretful that they didn’t invest more.  The big boys got the sheeple where they want them and slaughtering will begin.

I’m lightening up at this point on positions, not all but a bit of a hedge is good too.

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Back in the red zone!

Posted by K on October 14, 2011
Market Analysis / Comments Off on Back in the red zone!

 

It has been nearly 6 weeks since my last update and as promised I have kept an eye on the weekly chart vs the ever so noisy daily chart. What has happened the past 6 weeks is the market moving down for a fake out on the daily yet closing right on the green area i had highlighted and then lifting to the red zone.

Will they score this time or will they turn it over to the bears again for another move down? You be the judge 🙂

 

Good Night

-K

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Noise Noise and more Noise!

Posted by K on September 06, 2011
Market Analysis / 1 Comment

The news have been going on and on about how the US economy is back to disappointing data, European countries are all in trouble as Italy is now getting thrown around just like Greece, Ireland, Portugal & Spain.

If you think the market action of the past 4-6 weeks has been on the data then please stop reading and save yourself five minutes which you can use to watch Jim Cramer over at CNBC.

On the July 28th post titled “Deal or No Deal -Debt Ceiling Edition- $SPY” I talked about how the market had been setting up and that no “Debt Ceiling” deals would matter. It was obvious a debt “downgrade” was coming but that should have been no reason for the market to really go skydiving as it did.  If you were an great A+ student and partied a bit too hard, if your next grade was an A nobody would treat you with less respect especially when they’re getting grades from B+ and lower, (the analogy here being US credit rating vs ratings of many countries in the world).

The market was simply setting up for a technical Head & Shoulders pattern and there was a great chance of it playing out (which it did). Click chart below to enlarge.

 

The chart above is an updated chart of the previous post. The light yellow represents all the time It took since my last submission to the blog. The Fibonacci retracements drawn on the monthly chart really have helped see that we were about to enter a rangebound market (the area between the Red and Green boxes).

The “crash” from 1300 to 1170’s surprised me in terms of the velocity in which happened.  I expected it to trickle down for a few weeks but when the dam broke there simply wasn’t enough incentive to stay short the weeks following as there was a great possibility for a short cover.

The suggestions I made was to buy some SH shares or SPY puts.  I did both and got out with enough profits to allow me to break away from the markets for a few weeks.  Now I am back and so are many professional traders and when they fire up their charts they will see what I am showing above. They will wait out this rangebound trade until either a break above 1235 or a break and close on Weekly chart below 1120 which could set up for another 80 point slide.

Right now we are mid range and since Daily is too noisy I’ll keep checking the Weekly every few weeks and report the progress.

 

Hope some of you made money or at least the posts have been helpful to give you a second view from a Freak’s viewpoint.]

Till next time,

K

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Deal or No Deal -Debt Ceiling Edition- $SPY

Posted by K on July 28, 2011
Market Analysis / 2 Comments

     The US Debt ceiling could get hit on August 2nd which is 3 business days away. While everyone is struggling to make ends meet, Wall street and Pennsylvania Avenue are business as usual. Wall Street wipes out retirement investments and retail investors while our Elected majesties play games with each other like they are in kindergarten and whoever wins the argument gets a prize.

     Wake up because the time to act has passed. Instead of throwing money to bail out banks, and prop the markets for the past 2-3 years (Bubble 2.0) we should have let the “economic collapse” happen and now we’d be either in a hot burning inferno or on a better stage to recovery Worldwide.

Deal of No Deal

     A week ago S&P rating agency warned that the USA could lose it’s AAA debt rating if things weren’t solved for a better fiscally sound future, just today S&P said that it will not likely downgrade US debt rating. BULL$h!t we know full and well that with or without a debt resolution in the next few days that our rating will be cut one way or another. If it’s not S&P it will be Moody’s etc, these rating agencies are the ones that allowed things to get here when they rated the Credit Default Swaps & junk bonds safe and apparently it was blamed on a “programming code mistake” of sorts.

     If we do not reach an agreement on the debt ceiling the economy will go in a tailspin. Stock market will head to the south pole for the economic ice age, USD $ will be worth less, imported goods (Yes Chinese lead painted toys, middle eastern oil and the goodies in between) would become more expensive, US consumer spending would halt, US workers, contractors, aid for people, road work etc would be at a stand still and no money would be moving much if any at all. Unemployment would rise higher, banks would loan no money as they seek to avoid risk and stay liquid. And with a downgrade in our rating which is a no-brainer that would mean we’d have to pay higher interest on future debt we incur (Look at Greece interest rates on debt spike at downgrades, that will be the same here).  Anyways that is the doomsday scenario but right now we can do nothing but stick a fork into each politician and have them for dinner when we can’t afford food.

Take a look at how all this money came to become the $14 trillion+ debt.-Click to Enlarge– or go to NYT article

Whats in it for me?

     Lets take a quick look at how the market might be affected by this uncertainty,  but the obvious thing is most of the stocks will head down because on the 10-K SEC filing of every company one Risk factor is “Economic Uncertainty”.  Two weeks ago I posted the chart of /ES saying that it looked like a head and shoulders formation. This time the chart has the fib retracements that were drawn on a Monthly chart spanning back 20 years and drawn from major peaks to major troughs.  The ratios are hard to see but you will immediately notice where a lot converge.

So here we have a market that wants to hit 1250-1268 area in initially but ideally the 1225 in the very near term is last resort for support and thats 70 points below as of this writing.  Lets see what our knuckleheads do today, most likely nothing as always.

 

Possible downside trades would be SPY put options or buy SH shares for a hedge (SPY inverse)

Happy Trading,

K

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$SPY $/ES – Head & Shoulders (Knees & Toes) Pattern emerging

Posted by K on July 12, 2011
Market Analysis / 2 Comments

The past week or so we expected an oversold bounce and now that it has come and gone more contagion fears have emerged, this time in Mario & Luigi land that makes pasta, pizza and tomato sauce along with the cheeses.

This latest fear-mongering along with recent economic data in the US and worldwide( which have been less than expected) and also the upcoming U.S. debt limit crisis which will get resolved (just not until it has hurt a good chunk of the economy) but not in a timely manner because like their waistlines, Americans cant/don’t like to curb their spending.

 

I was looking at my favorite time frame, the Weekly and on the futures I noticed an early stage but possible H&S pattern. Here it is simplified for your enjoyment, voice in your ideas in the comment box.

Positions: Rolled a July put into a September put.

I was right just not satisfied after the 8 day rally which reignited at the green moving averages above (risk reward wasn’t there anymore but I was high on “hopium”)

 

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Market Analysis: Quick look at potential $/ES price target

Posted by K on July 02, 2011
Market Analysis / Comments Off on Market Analysis: Quick look at potential $/ES price target

Quick Trivia, what $/ES price target has been touched two dozen times in 5 years?

Answer comes right after a brief chartology interruption.

 

Let’s Have a look at $/ES on weekly chart from 2006-2009 and count how many times we touch a certain area (I should have initially hid the price on the chart to make it more fun).

I have even made it easier for you by placing bright green dots on it. The answer is 19 times. Ok so big deal… why does this matter? Follow me on a journey below this chart.

The last time this number was tagged or gotten close enough to was in April of 2011 at 1373.50 high which led to the correction of over 100 points (of which we have now regained 70 of them again). And so ladies and gentlemen If you checked out the comment in the previous post where I wrote that any shorts should have covered at $131 latest before the melt-up really heated up then you are either sidelined or took a small long position as not to miss the action.  This leaves us to tonight’s Trivia Target answer which is (rounded) $1375 for possible resistance and last refueling station for future space explorations.  Click to Enlarge as the preview looks blurry.

If that oil runs out then Houston to earth Houston to earth do you copy? we are coming down right over the Mediterranean sea. Yeah the European debt crisis is what I meant, I feel the need to explain it because I think faster than I type (who doesn’t) and don’t want readers to get confused.

So there we have it. Should be some light trading weeks coming up volume wise and the 1375 might not be out of the question if not more. I’d take off some longs near that level and let part ride.

 

Have a Happy 4Th of July weekend to those that celebrate it (Americans) and good night to the rest of my world readers.

 

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Market Analysis: A technical look at the $SPY

Posted by K on June 28, 2011
Market Analysis / 3 Comments

Nearly six months ago I was wired to around 200 news feeds constantly receiving mixed news both from bearish and bullish camps and I sided with one side after doing my own “biased” research. I decided that the market was nearing a top. Ha!! Uncle Bennie wouldn’t let the party die down would he? Everybody loves the cool-aid and the party hats on CNBC keep coming back and making weird noises (yes Jim Cramer I’m talking to you haha).

Fast forward to what happened during those 6 months is summed up in one sentence. “Life happened in ever aspect, got very busy and also stopped the information flow to clear my mind”.

Now that I got that out of the way I will point out that while I took a break from financial news and focused on life I also shared informal emails with a few InvestingFreak readers.

Lets have a look at a few charts I sent out in early May, keep in mind that I like to mainly focus on the weekly for trends while trading on the daily with an eye on the hourly. I will explain why these are the only 3 time-frames I watch in an Investing School video coming soon.

The SPY on a weekly chart dated May 9th 2011. It shows an uptrend channel with the market at the very top of it poised for a correction. The green lines moving up are EMA’s which act as support.

The chart as of today shows the progress for the past 7-8 weeks where a correction did occur and it is bouncing just on top of the Exponential moving averages. There is a bit of “resistance” at 130-130.50 and plenty of support (remember this is weekly and a lot can happen within the week so remember that) at 120-125 area.

Lets have a closer look at how its doing in the daily chart to see what we should look for temporarily.  On the daily the Moving averages are hovering right above in the 129.83-130.57 range and causing the SPY to stay range-bound in this box like formation. Notice an added support line on here and its thinner than the others? That is because its drawn on the daily chart and its a way for me to distinguish importance. The past two days the market has bounced nicely but be wary of the impending resistance on top.

Going long two days ago would have been a good risk reward with a stop below 126 but at this stage going short on the daily $SPY is a better risk reward ratio with a stop right above 131.
Whatever your play is just be cautious, do your own research and feel free to use these charts and my numbers (which aren’t perfect science) to make better trades. Stops are important to being liquid and getting out when you are wrong, do not move stops if the trade isn’t going against you and until we break Pandora’s box there might be more sideways action to play with.

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The Freak’ing Market Nears The Top ($SPX, $SPY, $USD, $UUP)

Posted by K on January 07, 2011
Market Analysis / Comments Off on The Freak’ing Market Nears The Top ($SPX, $SPY, $USD, $UUP)

Every day we see the market swing higher and higher and higher and then one day it swings lower we tend to get fooled into the belief that the market has topped. If you have never felt that way you either must work for Gold in Sachs (they seem to have a golden goose) or are some genius and my hats off to you!

The charts I will be presenting to you further down I have kept a close eye on for months (yeah months!) but only recently has there been an urge to share the potential move that’s coming. Weekly charts will be used because I am not timing the market by the minute but merely where its heading based on my observations. There is no one way to play the market or so use this in conjunction with your own research and observations. An old saying comes to mind:  “Ask 7 or 8 opinions but make your own decision.”

To keep me motivated into watching the following charts I decided to purchase an UUP option call expiring January 2012 with a strike of 23 a good while back. That position is up more than 30% but having it on my position screen has kept me aware on moves that the dollar has made.

In the UUP weekly chart there seems to be a Descending Triangle Pattern in the works which is a bearish formation. That being said this is the weekly chart so I don’t expect UUP to break below $22 range for months and years to come. Short Term UUP has resistance at the 50 week moving average (23.43) and if it is able to break through it has a better chance for a swing to the expected 25 area.
(Click Chart to Enlarge)

Wait! So does this mean the dollar is destined for doomsday in a few years due to this pattern? I will not give an answer to that mainly because on this next chart of the US Dollar Index ($USD) the opposite pattern seems to emerge. The Ascending Triangle is a bullish formation and this points to a break to the upside (suggesting dollar appreciates more in few years). One thing to keep in mind while reading this blog is that lines are drawn differently by different people and if a daily, monthly or yearly chart was used the patterns might point elsewhere but weekly is my choice. As with the UUP short term view, $USD also is stuck just below its 50 week moving average of 80.42 and a break and hold (of the weekly) over that resistance would put the dollar index on a better position of heading back to the top of the pattern which is around 88 area.
(Click Chart to Enlarge)

So far I’ve talked about the dollar and yet the title claimed to be calling a market top. I will not disappoint my fellow readers that easily. On the last of the trio charts I have drawn plenty of lines and will attempt to describe with words what dollar strength and breaking over its resistance would mean for the market ($SPX).

The top part of the chart has $USD again showing its price performance (irrelevant since I’m just looking at the pattern). The top red line has been drawn to indicate an important area where when the USD breaks below (weakens) it tends to send the market into “party” mode and when the opposite is true things go into “doomsday” mode (for the most part).  The top green lines are a more reserved prediction just in case the red line acts as resistance and dollar would go sideways for some time but eventually break up since the pattern is the aforementioned Ascending Triangle bullish pattern.  If we break out of the resistance zone more rapidly (blue dashed line) then I call a market top late January-February 2011. It could come at the current highs or the market could make one last push for $1300 (since the moves aren’t 100% mirrors of each other).
(Click Chart to Enlarge)

So there you have it! I have called a Freak’ing Market top 700 words and 3 charts later (and many months of patiently observing the weeklies). My conservative guess if I was forced to make one would be a correction to 1030-1075 area.  That’s around 16-19% correction from the current highs.

There you have it! I hope you all had a Happy New Year and enjoyed reading this post and many others before it (although they’ve been sparse due to realities of the busy life).

Remember to chant the InvestingFreak phrase whenever in doubt “See it, Call it, Trade it, Buy it” 😀

Happy trading and money making!

-K

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S&P 500 SPDR ($SPY) weekly puts trade completed.

Posted by K on January 07, 2011
Market Analysis / Comments Off on S&P 500 SPDR ($SPY) weekly puts trade completed.

For those new to options, a call is a bet that a certain stock will go up and a put is a bet that it will go down. So by buying a put option in this post I was looking for a move lower.

At the time of this writing I have taken a 56% profit after commission on some weekly SPY 127 puts that expire today. Entered in at 0.16/contract and exited at 0.28.

As you will see in the chart included, I have placed my entry and exits with yellow stars and my ideal target exit with a green star. The yellow dots in between some of the candles are times where I created an order to exit the trade and cancelled. I wanted to exit twice when I had generated 20% profit and once when I had over 25% loss.

(Click Chart to Enlarge)

My Entry (first yellow star) was just where I wanted it (below the daily pivot). I am still working on my exit execution and controlling of emotions. I usually write out how I feel about the market action or trade via either sharing with another trader via text, chat, twitter etc. When those aren’t my preferred choice I write it down on a notebook. It’s not foolproof but it helps me personally stick to my strategy and most of the time a trade.

I will provide more info about the chart for the curious ones… The purple dots represent the daily pivot point. The red dots represent resistance levels and the grey dots are support levels. The two red lines represent yesterday’s highs and lows so I would have an idea when that tight trend that developed yesterday would be broken. Also the chart is 5 minute to show the entries better but I prefer to use 15 minutes when day trading.

This is mainly on here for me to reflect on as an online public journal, they say when you publicly share something you are more committed to keeping it (in this case sticking to my strategy that works for me and just working on getting better at exits and emotions).

Update: As of 11:35AM Eastern it looks like my ideal exit has been hit and the put options were worth 0.49 a contract. Had I executed that the profits would have been 187% after commission but that’s in an ideal world. Another influencer in my premature exit (pun intended) was that Obama was set to speak around 11:35AM and I wanted to avoid any spikes that would ruin my trade.

As of 12:50PM SPY hit lower than the second support line in my chart.  Emotions got the best of me and I did exit too early indeed (would have been 400% since my entry). Its hard to think of it that way. If i had exited at -25% loss (as mentioned earlier) I would be devastated for the day.

As the new InvestingFreak tag says:  See it, Call it, Trade it, Bank it.
I Saw the potential for a down day, Called it by texting a fellow trader (will work on tweeting realtime to share ideas), Traded it, and well… Banked it.

Make some moneyyy!! 😀

-K

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