BullBear Trading: Stock and Financial Market Technical Analysis

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Since treasures has lead the stock market (treasures up, stock market down) by 2 weeks for a long time and now backing off from its peak, shorting treasures may be a better bet than long the stock market at this point.  Also, Volatility Index has not back off to suggest the nascent up move would be different from earlier up move.  Also, shorting volatility index via XIV may also be better than long the stock market.

 

There is so far not much confirmation for a reversal to the up side and a hugh potential for the market to go crazy on the down side or at lead reach its bear flag target of 1030.  In particular, treasures has yet to top out to indicate the worse is over for stock.  Exiting long position on the first notice of momentum lost is advisable.

 

In the interest of disclosure, I am in to have fun and to lose money. Anyone is to exercise his or her own judgement.

The VXX:$VIX Ratio Chart may be a good guage to the market.  VXX is the future of $VIX and should lead $VIX.  The Ratio itself offer a weighting of the future vs the present.  When the ratio top out, the expection is that the future will have a max or higher level of volatility and pretty predictive as to the short term tops.  The parameters for PPO was varied to minimize the amount of whipsaw and the PPO histogram is used for singaling purpose. The chart show an up signal in the morning of September 23 (Vertical blue line) and is about to issue a down signal in tomorrow morning.

 

Note that the signal line lag the peaks by a day and if there is a certain peak, it is by itself a pretty good and early signal.  Yesterday's trading general what looks like a certain peak to me.

9/28/11

 

VitctorVest usually filp flop between long and short based on its 5 day UP/Down (Primary Wave) Calls and seldomly goes into cash for any length of time. Today VictorVest surrendered to the market with the following statement,

 

"Portfolios: We will not open any new positions until the market turmoil subsides."

 

 

VictorVest's Riding the Wave and Yellow Brick Road Portfolio were up 30% and 23.3% for the year.  If you look at the equity curve for the Portfolios, you will find that almost all the money was made in the week of 8/1/11.  This is particular so for the Yellow Brick Portfolio.  The rest of the year the two strategies was basically treading water with many many trades.  Good save.

Excerpts from VictorVest 9/28/11 View:

"Riding the Wave Portfolio: We are in cash and will go short tomorrow with selections from the Derby Winners shown above if the market continues to move sharply lower.
Yellow Brick Road Portfolio: We are in cash and will go short tomorrow with selections from one of the following strategies if the market continues to move sharply lower."

 

VictorVest is not keeping its words in just one day.  The 5 Day Chaser will start chasing tomorrow again. The market has been on an approximate 5 Day Cycle since early August.  It will be luck or finally for VV to get a break when the break to the downside occurs.

 

Excerpts from Fibtimer's Blog,

 

"September 28, 2011

Both the S&P 500 Index (SPX) and its tracking ETF the S&P Deposit Receipts (NYSE: SPY) have rallied for the past two days. But there are still clouds on the horizon.

Last week’s decline broke below a rising trend support line. On the daily chart, connect the lows of August 9, August 22 and September 12 with a line that extends to the right of the chart. This creates a rising trend support line broken last week.

The September 16 rally reached a lower high than the previous August 31 rally. If you also connect those highs you get a declining trend resistance line that has not yet been surpassed. Also Tuesday’s rally reached the 200-day moving average and reversed.

Add this all together and you have a bearish forecast. Even with two days of rally SPY is not a safe bullish trade. It is also a very risky bearish trade.

When SPY breaks out one way or the other we should see a substantial trend considering the time spent in the sideways market (since early August). Then the market will tell us which way to trade."

 

Qualification for using PPO histogram as signal.  For down calls, PPO Line itself has to be flat or declining.  If PPO line still has an upward slope, price still can go up with declining momentum.  The opposite is true for up calls.  PPO Line itself has to be ascending.  If PPO line still has an downward slope, price can continue down with decrease in negative momentum.

Interesting Reading from Joe Duartes this morning:

 

"The battle between the bulls and the bears continued on Tuesday and seems set to move to another stage on Wednesday. The bottom line is that the U.S. rally has lost some of its early steam, but is still viable. 

The action yesterday was clearly bipolar. The heady gains of the early morning held up, but by the afternoon were reduced. That kind of late afternoon fade took some wind out of the bulls' sails, and led to less than robust action in Asia and Europe. The U.S. pre-market futures were still up as we penned this column. But even as we wrote, some of the gains were evaporating. 

Those are the signs of a market that is insecure. And insecurity is due to fear, both of what is known, and what is unknown. What is known is easy. Europe is still a mess.

 

The U.S. economy is not growing. And the presidential election looms as the huge elephant in the room. What is unknown is whether there are some hedge funds out there which are in worse trouble than they may be letting on. 


The Wall Street Journal had two interesting articles this morning on that subject. One was about Man Group, a publicly traded U.K. listed hedge fund, whose shares lost 22% on Wednesday morning after the group announced hefty redemptions. According to the report, the combination of a stronger dollar, client redemptions, and investment related losses, wiped out $6 billion from the $65 billion fund. The fund also gave a worse than expected future outlook, with its profits expected to be in the neighborhood of $145 million for the six months ending on September 30, worse than expected. "

 

Sorry, I am not a subscriber.  That's how much Joe Durate allows reading of his writings for free.

The following article dissecting Mr. James Altucher may be of interest to some people:

 

http://www.safehaven.com/article/22711/helping-james-altucher-under...

Need another 60 min reading to reverse yesterday's preliminary 60 min sell signal.  But the action so far seems to be the market maker taking out the stops because the upside action only lasted 20 min.  Second servicing to add additional shorts ? The volume pattern very similar to yesteday morning. Big last 5 min spike into the prior day closeand continuation for additional 20 min at the opening.

Excerpt from Bob English's The Precision Report this morning:

 

"The markets continue to run with news in both directions, as a European short selling ban yesterday afternoon begat weakness, and beats on Jobless Claims and GDP have facilitated a minor rally, as we write.  We’ve little to add to recent commentary.  Upside potential is likely limited to a short squeeze, while risk of a downside fallout remain."

Mr. DiLiddo, Chairman of VictorVest, has only a 10% long position in AAPL in his model portfolio but the latest VictorVest View indicated his inclination is to be bullish at the moment.

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