The one consistent theme I’m reading about these days……..and I’m certainly inclined to agree with it……..is the puzzlement about the complacency with respect to a forthcoming change in Fed policy. In other words, the “great unwind” of $4.5 trillion in assets the Fed has gorged upon during the past eight years. Tomorrow is the big day, and as I suggested yesterday, things are going to be boring until then (as we collectively observed the changes of a few hundredths of a point across our computer monitors).
Anyway, in an effort to make a silk purse out of a sow’s ear, I offer you the chart below (which, as always, you can click for a bigger version). It offers up a parallel, or analog, if you like, with respect to financial stocks. I’ve got November puts against the XLF. It will be interesting, to say the least, to see what effect the Fed’s big announcement on Wednesday at 2 p.m. has on equities in general and financials in particular.
Anyone else feeling the summer doldrums? I am. It can vary from day to day. Yesterday, for instance, seemed like kind of a kick. Today was three letters: M, E, and H. Oh, well. There’s just not much going on. Earnings season hasn’t started, and the political scene just has boring nonsense like this Trump/Russia thing, whose bombshell news today rocked the market for about seven minutes.
In spite of all the ho-hum, I’d like to offer up one chart that kind of grabbed me: the financials ETF. As you can see below, there’s quite a compelling analog happening (click the chart to see a bigger, easier-to-read version). Hopefully the simple colored lines and arrows on this SlopeChart speak for themselves………
I have mentioned Finish Line (FINL) again and again and……….again!………as a short candidate, both here on Slope and on tastytrade. Well, the analog I’ve pointed out ad nauseum is really kicking in, dropping nearly 20% on Friday alone.
As is so often the case, my charting was brilliant and my trading was idiotic. I covered this thing earlier in the week for reasons I cannot fathom or even remember. I guess I’m simply the ghey. But in spite of my personal idiocy, I am pleased to have offered up another terrific plunger. Much lower prices to come.
I’ve mentioned Abercrombie & Fitch repeatedly in years past as a great long-term short candidate, and it’s unfolded beautifully. Take a look at how, almost incredibly, the stock has come full circle to its financial crisis lows. Given the extraordinarily lofty state of the market in general, however, I think this stock isn’t done falling.
This is not a top call. My target was Dow 21,000 and this pig blew through it and flew to 21,115. This is a comparison of one bubble to
another a potential other.
In 2011 silver put on an amazing run. First, it dropped and crashed the SMA 50 at the beginning of the year. Then it rebounded, became over bought by RSI (and distance from the SMA 50), tested the short-term EMA 20 and then went all Sky Lab, making a 2nd strenuously overbought reading on RSI. Then… kerplunk.
Note from Tim: I wanted to preface this thoughtful post from Rev with something that happens very rarely……..a coupon to Slope Plus for those of you considering it. I am offering a free month for you to try the service by clicking on this link. When you do, enter the coupon code winter2017 and it will give you the first month for free. (This coupon is only going to be working for a few days, so don’t lollygag). Please note this discount works for ANNUAL subscriptions as well, so you’ll save the most by going for an annual, since you get two months free already.
Besides all the normal extras you get as a Slope Plus subscriber, you’ll also be getting the very best ideas I’ve got (many of which have been doing really well, even in this market, as you’ll see once you have access). I hope you’ll give it a try. On with the regular post now…………
Happy weekend Slopers! It has been over a year since I have offered a header post, so let’s take a look at the interesting point markets are currently at.
Starting with SPX, shown below, the markets have been in a slow building parabolic rise since the Brexit lows, continuing their rise off the November election last year, followed by another leg higher to start 2017. Have we arrived at the short term top, or is there more to come?
The bears certainly had a shot at the end of this past week to end the short term uptrend. ATR’s short term sell reversal going into next week would be a close under 2353.80. For those that have been riding the trend higher this year, the next short term sell reversal would be the time to take trading profits. Until then, using ATR reversals to ride the trend as long as it last is enormously profitable in long lasting short term trends.