TED Target reached: Increasing short positions.
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
A few words on the Economy from Christopher Probyn of SSGA
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
Volatility Index $VIX Is moving higher.
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
$TED Spread caught in an Ascending Channel Pattern
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.
$SPX Psychotic Line Resistance
It was a fun day today.
Market opened up and rallied 10 points by 10:45AM. It was all downhill from there but the big kicker came at 3:10-4PM when the market dropped 17 points.
I will let 2 charts and this link be the hint of what I think we are going to do in the next few days at least.
Chart 1 is a closeup of the past month with the trend lines drawn almost a month in advance. (Click to enlarge)
Chart 2 is a zoomed out view from where the rally began. (Click to enlarge)
That's all folks. These are the charts promised almost a week earlier.
Have a safe investing season this fall/winter it should be epic.
-K
A Week in Review: SPX 1035 Oct 1st Prediction Came True
I wanted to review a crazy wild week (7 market days or 9 days overall).
It all started with a twitter post on September 23, 2009 at 9:24PM
It then followed with a blog post about the prediction since twitter is known from moving very quickly and people can miss things at a blink of an eye.
This was on September 25th "S&P at 1035 by October 1st? I Believe it is doable." ( I misspelled doable on the original post.)
We were in a 3 day down move (23rd to 25th.) When I did my weekend analysis I saw a familiar pattern which was similar to a "Kicker Bullish".
That deserved its own post entitled "$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
The One Day Rally Is Over!
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
$SPX Stuck in a 9 point range..Which way will it Break?
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
Mini Correction, Mini Recovery Then Massive Correction?
As I posted a while back, (See the "Fake Correction Followed By Fake Rally?" article if you missed it) the $SPX (The S&P 500 Index) has nicely corrected to satisfy me that there will be another move up 20-40 points to shake off more bears and when they are nearly all out (If market makes a higher high it will be seen as very bullish) it will have a massive correction to trap bulls and make bears cry for getting out too quickly.
I will be revisiting the charts I drew in the previous article mentioned above. Let's start with the closer look in the past 3 days.
I was waiting for the SPX to break either the red or the green line and close below it. Well yesterday it did just that and that was the first clue as to where we were heading today.
The blue arrows are there to just demonstrate the Support line and where yesterday's close was. Grey line was my prediction for the next 2 weeks or so but it was defied by the market as it tanked lower and lower. (Click to Enlarge)
Second chart is the long term view of things and 2 possible outcomes that this investing freak sees realistic.
Scenario 1: (Orange Lines) Bounce back the next 5 days to reach possible 1040 (ADP Nonfarm Employment change tomorrow morning so this could happen if it "surprises") then drop back to 1000's and head lower going into October.
Scenario 2: (Green Lines) Go down further for the next day or to and reach 985-990 for a close (it could go down further and still close above 985 to be valid). Then hit ~1020 shake a few shorts that believe 1000 level has cracked and proceed into 950's.
Scenario 3: That's your opinion and I would like to know
Here comes the updated chart. (Click to Enlarge)
Good luck! and don't forget to follow me on:
Twitter ( http://twitter.com/investingfreak ) or Stocktwits ( http://www.stocktwits.com/u/investingfreak )
For the latest live commentary.
-K
Fake correction followed by a fake rally?
The past 4 days The S&P and many other markets have traded within a very narrow range.
There have been doji candles galore. trendlines, averages, bullishness ratios and even the Elliot Wave expert said rally is ending and a correction will come sooner or later that will surpass the march low.
I have taken the liberty to put up a few $SPX charts with possible short term outcomes.
The big picture is in the first image (Click to Enlarge)
I am looking for the S&P to go to 1010 to lure in bears and then bounce off the trendline and make a higher high to fool the bulls and shake the bears. Then lastly (not in these pictures) I am looking at 950's as a conservative bet.
Here is a closer look short term view. Upside target is 1040-1050.
I hope you enjoy my opinion and feel free to comment your own.
-K
Shooting Stars are everywhere. Is it time to turn into a growling Bear?
I noticed something strange today looking at my favorite timeframe. (half a day )
Stars were shooting everywhere.
Many symbols like $SPX $SPY $INDU $OEX $COMPX $QQQQ etc had the shooting star pattern to an extent.
I chose to include only 3 to keep it simple
Now before I insert the image I would like to explain what a shooting star pattern is thanks to Stockcharts.com
Shooting Star: A single day pattern that can appear in an uptrend. It opens higher, trades much higher, then closes near its open. It looks just like the Inverted Hammer except that it is bearish.
Here is a visual aid to go with the definition. (Click To Enlarge)
Now bear in mind this is my own opinion of what I see happening. My system has yet to give a sell signal but today I did receive a sell in GLD so if gold is losing value that means market is going down (most times that's the correlation I've seen.)
Now listen up you Goldman Sachs! Stop reading my blog and proving me wrong. Let the market go down like it wants to.
Thank you very much.
-K
8-20-2009.. another repeat of 7-13-2009 ?
If you have been following my current picks page you might have noticed that most of the symbols received buy signals on 7-13-2009 which is when the March rally was coming to a correction but then bounced. Will we have another case of this with 8-20-2009?
I was hoping we wouldn't that is why I posted those charts yesterday thinking we had topped. Well my automated strategy was saying otherwise and I completely Ignored it.
Normally I would just update the current picks page but this time around I have decided to make a blog post.
----------
Market Indices and other important Quotes
(Note: I understand you can’t purchase an index so bear with me these are just signals)
|
Symbol |
Buy Date |
Sell Date |
|
$SPX |
8-20-2009 |
|
|
$INDU |
8-20-2009 |
|
|
$COMPX |
8-20-2009 |
|
|
QQQQ |
8-20-2009 |
|
|
IWM |
8-20-2009 |
|
|
SPY |
8-20-2009 |
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Rest of the Symbols (More will be added per request)
|
Symbol |
Buy Date |
Sell Date |
|
IYR |
8-21-2009 |
|
|
AAPL |
8-20-2009 |
|
|
DRYS |
8-14-2009 |
|
|
SDS |
8-20-2009 |
|
|
SRS |
8-20-2009 |
|
|
SSO |
8-20-2009 |
|
|
SKF |
8-20-2009 |
|
|
UYG |
8-20-2009 |
|
|
URE |
8-21-2009 |
|
|
JNK |
8-21-2009 |
|
|
HYG |
8-7-2009 |
|
|
REW |
8-20-2009 |
|
|
QID |
|
8-20-2009 |
|
QLD |
8-20-2009 |
|
|
XLF |
8-20-2009 |
|
|
DIG |
8-20-2009 |
|
|
DUG |
8-20-2009 |
|
|
SMN |
|
8-20-2009 |
|
VXX |
|
8-19-2009 |
The VIX ETF signaled a sell before the rest of the signals came in the following day. That is interesting.
-K
Is the end (of this prolonged rally) Finally Here?
Whether you have been a bull or a bear since March you have to be worried about what will happen from here.
Bulls might lose if market goes down and corrects itself, Bears might keep losing money being short (unless they hedge then they are neutral players).
Here is a chart of the S&P futures that I found interesting how it topped around 3:31Pm at exactly the first Pivot Resistance (R1) or 1007.75. It's been downhill from there so far.
Have we finally reached the turning Point? (Click to Enlarge)
As I write this the ticker is heading towards 997.75 which is the first support for Friday.
UPDATE: WE HAVE HIT the first support line of 997.75 and might bounce or crash through.
Update #2: here I am 8 hours later and the futures have made a 360 degree turn. They now hit R1 (red line) of 1011.25.
What do you think? I am also long the Volatility Index (VIX) Via September 40 calls (got long today) because I think we are entering volatile markets again and that would be great.
-K
Sell Tech?
If you check the Current Picks Tab you will see I have updated it again.
After running my strategy... $COMPX , $QQQQ, $IWM, $IYR, $QLD, $URE are all on the SELL list.
I am wondering if the tech sector (COMPX, QQQQ, QLD) is the first one to lead the next correction or if it is just lagging the seemingly never-ending rally of the current market.
Stay tuned and keep checking my twitter for more info. (either on the right column under "Latest Updates" or at http://www.twitter.com/investingfreak )
-K
First Forward Testing of the system a Success [MOV]
Forward testing is when you use a strategy and instead of back-testing it with previous data you actually test it going forward and preferably with real money.
For my new system MOV became that victim stock to be tested.
I first got a buy signal on April 17 2009 (Bought on the 20th at market open), i got in at 7.67.
I got a sell signal on May 5th 2009 and I sold at 8.81 with a market order.
I got about 14% profit on a 19 day long trade.
I don't have a chart to post with this one but just wanted to say this first forward testing trade worked well.
Here's to more good trades.
-K
