Daily Archives: September 3, 2010

The One Number I Want

By -

I have been thinking a lot this week about what I can do to help preserve profits/prevent losses better, and I now have my wish list: it’s one item long.

What I want may seem naive, although I hope not. But all I’m after is a number, ranging from -1 to +1, indicating the target amount of bearishness/bullishness for my portfolio.

For example, if such a number was 0.5, it would mean that I should have 1 bearish position for 3 bullish ones (assuming they are all equal). A number of 0 would mean 1 for 1. A figure of -1 would mean totally bearish. And so forth.

I already have the resulting number in my spreadsheet, which is based on all my positions, but what I need is something to drive that number. That is – – a target. Because bullish and bearish charts I have no trouble finding. It’s targeting the right “mix” day to day where I am having issues.

Now, I’m not that knowledgeable when it comes to indicators, but I went through every single indicator in ProphetCharts today, using the S&P 500 index as my price data, and I didn’t come up with any answers. There were some oscillators that were somewhat intriguing, like the Slow Stochastic, but there were two big problems I had with even the best of them:

(1) They were all lagging – – sometimes severely – – which pretty much neuters their usefulness.

(2) Even if they didn’t lag, it seems to me these are only useful during the rangebound market like we’ve had the past year. Using them, for example, during the meltdown of late 2008 would have been a total disaster, because most of them kept signaling the market had bottomed way, way too soon.

There may be no answer to this, given the complexities of the market, but there are a lot of smart people here, and I plan to leave this post up a good 18 hours or so to see what kind of comments it gets. Please “Like” any suggestions that you, umm, like, so they can bubble to the top.

Oh, and please, I’m after something not very complicated. Whenever I throw a question about indicators like this out there, it seems the answer is really, really complex. I’m a simple soul, and like I say, I’m just after one simple number. I would pay tens of thousands of dollars per year to the provider of such a number, if I knew it was reliable.

Ribbon Study and the S&P

By -

I was going through all the technical indicators in ProphetCharts today, and I found something rather interesting about the Ribbon Study. Looking at the daily chart, the ribbons (which are made up of sixteen different moving averages) tend to "harden" to show broad turning points, creating strong support or resistances for the price action. I don't latch on to many technical indicators, but I confess that I found this was thought-provoking:

0903-ribbons

Chart on Oil (Mike Paulenoff)

By -

My pattern work is warning me that all of the action in crude oil off of the Aug 25 low at $70.76 is a digestion period of the major downleg from the Aug 4 high at $82.97 to the Aug 25 low at $70.76.

If that proves to be an accurate description of the price movement, then it should be labeled as a "Bear Flag" type of formation, which when complete will resolve itself to the downside with the initiation of a new downleg. The downleg should break both the Aug low ($70.76) and the longer-term support line from the Jan 2009 low, which cuts across the price axis around $71.15.

Such a violation of support should trigger serious long liquidation in crude oil.

FJSbxP5rL
Originally published on MPTrader.com.

Possible Short-Term Swing High Today (by Springheel Jack)

By -

I've been looking carefully at various charts and I would be sugarcoating it to suggest that the bears aren't in significant trouble here. This move up from 1037 ES has been very powerful and there is every reason to think it may go higher.

Looking at my SPX:VIX daily chart we failed to break the broadening ascending wedge from the May low, and the obvious next wedge target would take us to the 1130 – 1150 area on SPX, which would be little short of disaster for the bear case as the main declining channel from the April high would be convincingly broken:

100903 SPX_VIX Daily Wedges

Here's the main declining channel on SPX. I'm seeing the upper trendline in the 1106 SPX area today and that is close enough that it could be tested today:

100903 SPX Daily Main Declining Channel

In the short term I was saying yesterday morning that I was expecting sideways to up chop yesterday and today. We had that yesterday and a small broadening ascending wedge formed on the ES 5min over the last day that could take us up to test that main declining trendline today:

100903_ES_5min_BA_Wedge

I'm still favoring more upside on ES and downside on USD today. EURUSD has been slowly rising towards my target in the 1.292 area, though there is an argument for a reversal at 1.29:

100903_EURUSD_60min_Possible_IHS_Forming

The bears aren't entirely out of the game yet though, at least not while the flight to safety trades are still looking bullish. We've seen some pullbacks in long treasuries and yen this week, but they're both building rectangles which despite being called rectangle tops or bottoms are generally continuation patterns. Here's the rectangle on USDJPY:

100903_USDJPY_60min_Rectangle

Precious metals are also looking very strong and silver looks as though it may be making a major breakout. If yesterday's gains are sustained then we will have a major break up and once silver rises past $20, the obvious target is $30:

100903_Silver_Weekly_Triangle_or_IHS

I'm expecting to see a short term swing high today, though looking at the spike up while I've been writing I may of course be mistaken. If I'm right though, we're close to the high today which I'd expect to see in the 1104.5 to 1107.5 ES area. After that I'm expecting to see a retracement early next week into the 1070 area.