One sector that seems to be defying all odds is real estate. DRN – the triple-bullish real estate ETF – looks ready to rock and roll. I bought some earlier today with good results. Anyone care to explain why real estate is doing so well?
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Well, today stinks for me so far – – I guess One Day is all the Powers That Be are going to give us, eh? Disgusting.
There was one bright spot early on, though – AMLN. I've been watching this chart for a long time, and I really like its long-term pattern for a short setup. Take note of the circled area where it retraced a part of its big fall.
Its behavior on its ascending trendline the past couple of years had recently grown quite "fuzzy" (e.g. having difficulty staying cleanly above it), and I entered a small short on it yesterday (similar in size to yesterday's wreck, INFN). I was surprised this morning to see it was down 50% pre-market, but I assumed a data provider had simply missed a 2-for-1 stock split.
Looking at the volume, however, made it clear this was a true plunge in the stock.
I covered this position, and that was pretty much the high point of my day (Euro strength wrecked it after that).
At least fundamental analysts were as helpful as ever on AMLN – 11 "Buy" and "Strong Buy", 9 "Hold", 1 "Underperform", and – as is the law on Wall Street – 0 "Sells".
The rising channel on SPX was broken yesterday and SPX closed well below it. At the least that is signalling to me that a topping process has started, for an intermediate top if not a major one. Looking at the charts yesterday night and this morning I'm leaning towards our seeing some follow through today, and I have some lines in the sand that I wouldn't expect to see breached if we're going to see that.
On the SPX 60min chart you can see the broken channel and the much larger rising channel where we have reversed at the top trendline is also well worth noting. We've reached similar trendlines on quite a number of charts worldwide and while there's not much in terms of patterns to suggest that we've just made a major intermediate top, the possibility is worth bearing in mind. The lower trendline of that big rising channel is in the 1065 SPX area of course:
Short term I have a declining channel on ES. The upper trendline is in the 1172 area at the moment and if we make it up to that declining resistance trendline, I'd expect to see a reversal there if we're going to see more downside today. The tip from the GapGuy today is that since 2000, fading gaps that follow unfilled down gaps has delivered 245 winners of 319 (77%), with shorts and longs performing equally well. If we do reach that declining resistance trendline the odds therefore look pretty good for a gap fill:
In terms of a target, if we see more downside today the rectangle target is 1145 ES, and I have a rising support trendline that you can see on the top chart at 1148 SPX. That's the same target of course so I'd be looking for a move to there.
I'm not particularly happy with the level that we've seen USD bounce at, as it looks to me as though there is unfinished business to the downside. That being the case I'm slightly doubtful about seeing a big five wave move here, and on both EURUSD and GBPUSD we can see three clear waves already. Having said that both of them have had two waves down of almost equal length and this is therefore looking as though that may well have been the first two drives of a three drives pattern. Here it is on EURUSD:
If it is a three drives pattern then I've marked the likely reversal areas and third drive targets on the charts and would add that if the third drive plays out, then that will strongly imply that both will then correct before continuing down. Here's the GBPUSD chart:
I'll leave you with a very thought-provoking chart today. I've talked about some charts showing the recent high at a major resistance area, and there are quite a few of those. Here's one that is telling a different story, and it is the MSWORLD chart for non-US stocks, which really looks very bullish indeed: