Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Blood in the Water or Getting Greedy?

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Hope you are all enjoying the fireworks.  I'm here to throw some cold water on that. 

We broke the descending trendline in December of 2009 on the 10 Year Treasury Note and now we are finally testing that trendline.  We are also closing a gap from 6 months ago.  At these yields, investors may start to rotate out of government-backed fixed income securities and back into risky assets.  A look at the $SPXEW is proof that zero technical damage has been done to the broad market.

Clearly there are concerns with international markets…. but please, take a look at the McClellan Oscillator and the Put/Call ratio – then tell me with a straight face we're not due for any kind of mean reversion. It looks like the money that went into gold is going to look for a new home while it consolidates.  Where do you think it's going to go? Ultra-bearish ETFs or buying equities on weakness to resume the cyclical bull?

Risk management is the name of the game.


Kick the bear

Everyone Loves Gold

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I'm typing this from the waiting room of an auto mechanic, so it will be brief and to-the-point.

The world has gone ga-ga for gold, and with good reason. It has, over about the past decade, climbed many hundreds of percent. Recently, it has been just about the only bull market on the planet, and – let's face it – it's pretty, useful, and always feels nice to jingle a few gold eagles in your pocket.

But sentiment has become so wildly bullish, it seems like a good time for gold to take a breather. The folks over at Elliott Wave International included a chart of gold versus its sentiment this evening, and it's an eye-opener:

Goldsentiment

I took on a not-too-big position in DZZ (the double-bearish ETF on gold) late today. I've had a lot of success day-trading GLD lately too, although I didn't hang on to any overnight position of it.

I've put my time to use in the aforementioned waiting room by going through the nearly 800 stocks in which I don't have positions, and I've smoked out 18 bearish possibilities and 16 bullish ones. The bullish ones are almost all short-term bounce plays, although the fact I was able to find anything bullish tells me to chill a bit on the bear side, because until today I saw nothing that I liked.

It's been a busy day, so I'll probably hold off on any final post for a few hours. I hope everyone was able to surf the waves today successfully.

Percentage Of NYSE Stocks Above Their 10-Day Moving Average

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% Of Stocks Above Their 10-day MA

Above is a chart of the percentage of NYSE stocks trading above their 10-day moving average (DMA). I like to use this chart to gauge potential short term bounces. The yellow arrow points to the most recent reading, and as we can see, it's nearing the oversold area. It's possible for the market to bounce when reaching the 10-20 area. A poke into the 0-10 range is a strong signal of an oversold market.

A few aspects of this chart to note:

  • Oversold and overbought can remain in such states for long periods of time.
  • This is not a timing chart and thus does not produce strict "buy" or "sell" signals.
  • Overbought can stay overbought longer (way longer actually) than oversold. Oversold is typically a sharp jab up whereas overbought lingers as the bull trend expands.
  • The best signals are when price diverges from the current reading. Example: price moves lower, but the number of stocks trading above their 10 DMA remains the same or moves higher.
  • At best, charts are wind socks.

This post first appeared on my Tumblr blog.

Market Sickology

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Let me start by saying how pleased I am that my conjecture yesterday about the market's near-term direction has been correct so far. As a reminder, here was my prediction (drawn in green)…….

0429-es

…..and here's what we've seen since then………………

0430-sofar

Ahem. Pretty stunning, huh? How did I do it? With the KnightVision system, which I'm selling immediately for the low, low price of $49 per day! Operators are standing by! 1-800-TIM-RULZ

No, that's not it. My method was simple enough. I look at 5,000 charts every stinking week. I've been doing this for twenty years. Look at enough charts, and you get good at it after a while. I have looked at literally hundreds of thousands (God help me…………) of charts in my trading lifetime. So my brain is full of this crap.

Now, listen, I've made plenty of "bold predictions" which were worth less than Lloyd Blankfein's good name. I declared in October, I think it was, that the S&P had topped out. Errr – -that wasn't the case. So as I'm standing here beating my chest about my oh-so-brilliant prediction, I do so with the knowledge that I've had lots of lame-o attempts at divining the market's next moves in the past.

The difference this time is that I was really, really confident of what was going to happen, just like I was back in mid-January when I stared at my 30" Apple monitor and felt a glow of assurance about what was coming next. It is truly gratifying to see things pan out so far. If the entire pattern completes, you'll have to forgive me if I put these charts up at least a few dozen more times in order to cluck about it.

There was a bit more to it, though. I mentioned getting a completely snarky email last week – – on the 23rd – – which, by the way, marked the exact day of the highest close on the Dow. On top of that – – and this actually had much more weight – – a stunning number of Slopers yesterday seemed to finally throw in the bear towel. I don't think I'd ever seen so many people saying – in their own words – "I give up. I'm sick of losing money. I'm joining the bull camp and am just going to buy all the dips."

They didn't say it to be funny or sarcastic; they were serious. And when Slopers………..the bears' bears ………surrender, well, things are bound to get interesting. So I was shorting like crazy during yesterday's ridiculous rally.

I have survived the past seven months by being very "light", committing only 30% to 50% of my cash to positions, and by avoiding options and leverage. It's been a losing stretch of time, but only a single digit percentage loss, and something from which I feel I can handily recover. No one likes a loss, but in the face of a 25% explosion on the Russell 2000 over the past seven months, I actually feel OK about it.

My point is that I am finally comfortable being 100% committed. Further, if things continue to break my way, I am comfortable pushing into leveraged territory. As a trader, I strive to lose money slowly and make money quickly. I have excelled at losing money (!) slowly over these months, but I believe things are setting us for some serious money-making. At least that's what I hope!

Anyway, it's been a good week, and I'm going to rest. I'm still stuck in France time, and getting up at 3:30 each morning is getting kind of old. Hopefully this weekend I can shake off this jet lag and resume a more human schedule. Have a good weekend.