Monday, December 21, 2015

Stock Market update - 'Twas week before Christmas... - 12/21/15

'Twas the week before Christmas, when all through the house

not a creature was stirring, not even a mouse...  

 
 
Expecting quiet markets this week, going into the holidays, and as they say, "never (sell) short a dull market".
 
We saw higher volatility on Quadruple Witching (OPEX) Friday, with negligible breakouts on the $VIX. Not a big deal. Fear remains contained, and limited to a handful of stocks such as $AAPL, which helped drag the DOW to a slightly lower recent low, going into Friday's close. Again, not a big deal.
 
You don't see financials making new lows.
Looks like nothing more than a harmless wave "B" pullback...  

Now Dasher! now Dancer! now Prancer and Vixen. On Apple, on Oil on $RIG, and I can't think of a word that to rhymes...!

To the top of the porch! to the top of the wall!

Now dash away! dash away! dash away all!"

$RIG pulls back to support and we like pullbacks.

 The Dow pulls back.
 

$AAPL is a buy at the bottom of this pattern.  Catch my drift?

 
 
 
If you watched any of the financial shows over the weekend, they're all calling Friday's sell-off a result of the 1/4 point raise on the short term lending rate, while ignoring the fact that the market rallied on that news, on Thursday. In fact this rate hike has been priced in for a year or more! 
 
Be carful what you watch, because putting your faith in false narratives, and trading on emotion, is a good to sabotage your trade. It's gotten to the point where I watch as little news as possible, and don't worry too much about what other traders are doing.
 
As far as a Santa Clause rally goes:  

A wink of his eye and a twist of his head

Soon gave me to know I had nothing to dread

I heard him exclaim, as he drove out of sight

“Happy Christmas to all, and to all a good night!”

I remain bullish well into the beginning of the new year - as the charts posted above suggest.

 
The bearish energy trade has worked to our advantage, but I'm expecting a tradable rally, if not a major reversal. We could also see a massive short squeeze in Oil.  I could attach more charts and indicators to this blog, but I've already tweeted 930 charts in Dec., and that's just a small percentage of the chart views I'm normally watching any given month.  
 
My public charts page is back up, and that's a good place to watch the market play out in real time. Market pulled back to 2044 as predicted, and when that support broke that was your cue to sell. Same goes for 2020 support, as we saw that break down... but the pattern remains - sideways - with a good chance of whipsawing back to the top of the range.  Watch $SPX 2000 at Monday's opening bell.
 
 
Your continued financial support helps me keep these charts coming to you. If I've helped you please don't hesitate to spread the good cheer using the PayPal link at the upper left-hand menu on this page.
 
Have a Merry Christmas and a Happy New Year!
AA  
 
 
 
 
 
 
 
 
 
 
      

Monday, November 23, 2015

The Definitive Traders Guide to Leveraged ETFs

The Definitive Traders Guide to Leveraged ETFs

 
There are many compiled lists of leveraged ETF's (L-ETF's) available on the internet, but not much information weeding out the good from the bad, what makes them tick, or how to actually trade these beasts, so here's my take.
 

Risk

 
L-ETF's don't trade like stocks. They're more volatile, and some are more volatile than others. If you're risk tolerance is low, then I suggest you steer clear of them all together. 
 
These funds are not for the inexperienced trader. If you don't know how to sell a rip to the upside in a normal index then it's unlikely you're going to have success exiting a highly volatile L-ETF.
 
Trading commodities offers more risk then trading equities, and L-ETF's that intend to track the underlying commodity... even more so. Funds which track highly volatile sectors such as gold miners, silver, crude oil, and biotech are also some of the most volatile, with intraday swings of 35% - 40%, being not all that uncommon. I say, "the more volatility the better", but you shouldn't feel like a total wuss for choosing to trade something a little less volatile - like the 3X leveraged S&P (for instance).
 

Performance 

 
Certain ETF's I call nonperformers.  They don't track the underlying index as advertised, don't perform well, or are thinly traded (illiquid). Look at a short term chart and if you see the price action leaving gaps all over the map, Its illiquid, and that means you could have trouble finding a bid when you want out. To find some good examples of illiquid funds, take a look at some short term chart views of L-ETF's you've never heard of, like the 2X EURO bear ETF - for instance.  
 
A good example of a fund that doesn't perform well is the $TVIX. It doesn't even perform as well as the underlying index so you not only get the disappointing price action, but none of the reward that comes with being leveraged.

$TVIX tracks short term $VIX futures - not the $VIX - so it's also important to know what you're trading before you trade.

Overlaying the price action on the $TVIX, and comparing it to $VIX short term futures - the $VXX only then do you get a clear understanding of why this fund should be avoided entirely.


 
 
If you thought you were going to get more bang for your buck buying the $TVIX for protection, you were sorely disappointed.
 

Charting Leveraged ETF's

 
Nearly every technical indicator normally at your disposal in and index or stock is totally absent in an L-ETF chart thanks to something called NAV (a daily rebalancing of the fund). This daily rebalancing can cause the charts to become horribly skewed over time.
 
The daily averages on L-ETF charts don't align with those on the underlying index.
 
The only useful purpose I find in charting them is that the trend lines, and patterns, can offer a good guide, when looking for good entry and exit points. See the blue line on the chart above for a good example... and in some ways charting L-ETFs is a lot like charting the $VIX. These charts don't play by the same rules.
 
Most often I'll use the technical chart on the underlying index to determine the trade. The fact that you're trading an L-ETF only means that precise entry and exit points become more critical, as these funds tend to give back all their gains within a few days/weeks after a major reversal, as we've seen over the past few weeks in shares of Direxion's 3X leveraged technology bear $TECS (for example). See the chart below.
 
If you decide to hold L-ETFs over a longer period of time, it's imperative that you exit at or near capitulation points, or you risk giving back a good percentage of your gains.
These funds aren't like an index that you can buy and hold, and forget about for a while. L-ETF's are for serious, disciplined traders.
 
That brings up the question:
 

Should leveraged ETF's be held for more than a day?

 
Some say "no", but that is not the definitive answer. While L-ETFs will bleed value over time even in a relatively flat market, and losses will compound over time - if you are fighting the trend - as long as the trend isn't against you, and you have the fortitude to stick with the trade - without being shook out on every 10% intraday move - then I say, "why not"? Just be sure to get out at, before, or soon after, the next major reversal.   
 
May the trend be with you
AA
 
This guide is not a recommendation to trade. Please read my bullet-proof disclaimer linked at the top of this blog

Sunday, November 22, 2015

Market wrapup week ending Nov 21st 2015 - "Best week of the year for the S&P"

"Best week of the year for the S&P"?

 
Saw this headline reported by CNBC, and even if that's true, it ain't saying much!
 
It's the Financial news networks job to pump stocks, and this is just one more, in a long list of meaningless headlines...  when you know shorts sellers are lightening up on their positions going into the long holiday week. Even the dopes at CNBC must be smart enough to know that this is exactly what you typically see this time of year, not to mention this Friday was OPEX (options expiration). Remember markets are cyclical.
The reality is that few investors are making money in this market, due to the fact that most stocks are down for the year. Market breadth stinks.
 
The market bounced back from it's sell-off into the Paris attacks, which we saw coming from a mile away. I thought we might see a bigger event than what we saw in Paris, but I had a sneaking suspicion "something big" was about to take place when I started tweeting that morning. Still it was surreal watching the events in Paris unfold, especially after mentioning WWIII in another tweet - before the market closed.

 The next day the Pope calls this event, "Piecemeal WWIII", but only after someone on FoxNews had already done so. This is the narrative, whether its true or not, or just another event created to destroy America from within, I still can't say for sure, but I think the latter.
 
Market walked down on a 5 minute chart on Friday the 13th      
 
 
 
 
This was one of the craziest weeks we've seen for a while that's for sure, but not because markets rallied.  


Thursday, November 5, 2015

Stock Market update Thursday 11/5/2015

If you were watching me tweet charts yesterday, we determined that this powerful rally is in fact a wave C, since wave 3 is ruled out when the Wilshire 5000 made a lower low (ruling out wave 2), back in Sept. So what does that mean to us as traders? It confirms that this is a snap-back rally, rather anything more sustainable. There's still the slight possibility that we're going to trade into a broadening pattern, as I tweeted earlier in the week - on a revised DOW chart - but unless and until that develops I have to continue to treat this as a sucker's rally in wave 2 (or possibly a wave b).
Looking at the Wilshire:
The pink line is where we saw yesterday's reversal - by the way. The red line is a possible target, and as I've said before "calling market tops is harder than calling bottoms".


As for the Dow it continues to hold above a channel which it never should have pierced in the first place, with the 200 day moving average currently trading trending @ 17583.


For all I know the powers that be have set some arbitrary target like DOW 18k, because they feel this will offer the market some psychological boost. I see it as a normal snapback rally, which overshot because of damage control. What I mean by that is that no sooner than the market crashed, we saw certain stocks immediately bid up to pre-crash levels as if nothing had happened. Not the plunge protection team, but anxious money managers, having an "oh shit" moment, and attempting to repair some of the damage done in the August crash. Breaking out the top of the pattern doesn't change the pattern, it only extends the rally for a few more days, and allows the PTB more time to take profits.

 Looks like we're seeing a head fake rally in futures this morning, after yesterday's reversal, and I have to assume that was a reversal, because wave 1 always looks like a harmless pull-back. Maybe we retest the highs, but this rally is already so over-extended, and I'd be an aggressive seller into any further strength.  

I wouldn't normally expect stocks to sell-off this time of year, because short sellers typically like to lighten up on their bearish positions, before they leave for the holidays, but this time could be different. after all we did see the market crash into the winter of '07 - '08. We could still see a short lived rally into OPEX, and into Thanksgiving, but a lot can happen in 2 weeks.

Energy has also extended further than expected, but this brings me to the most important point in this update. We've seen certain energy stocks extend their gains, lifting the Dow energy index to new recent highs, causing that sector to trade into an unexpected triangle pattern.

The price action also failed to interfere with the price action in what I've revised to wave "1". If this is correct then energy is headed for new recent lows.

I've revised this pattern to a wave 4 triangle which just happened to kiss the top of a bearish channel. Also, I happened to catch part of the Fast Money show on CNBC, and the ridiculous bullishness I witnessed points to an emotional wave E top.



That's all I have time for today, but Biotech also looks like it could be in a wave 4. I remains Net short that sector and gold miners as well. Maybe more on that in the next update. 

GL, AA

Monday, October 26, 2015

Ready Set Crash - Market update 10/26/2015

Preparing for the next Market Crash
 
As bullish investors write off the August crash, and look (backwards) to earnings, and forwards to Wed's Fed meeting, and high risk tech stocks, to salvage the bear market rally of the past few years, it's time for us to mentally prepare for the next leg down in what I now see as a continuing bear market. If you were under the mistaken impression that we are in a bull market, The chart below represents the ongoing corrective pattern (bear market) of the past 15 years, and primary wave E's are nothing to play chicken with.
 
 
If you recall back in August; I was looking for a capitulation top in a broadening top pattern to take out the previous high set in July, as traders began to return from summer vacation, and put money to work, but then no sooner than I publically called out that trade, the market collapsed.
 
Technically the August flash-crash was the result of "truncated wave 5", followed by the long awaited return of the great bear market, but I think the timing was no coincidence, and as I've said and documented in the past "we are being watched", and I'm sure even more so now that I have over 900 Twitter followers. Well,  "fool me once shame on you; fool me twice shame on me!" Or as The Who said in 1971, "We Won't Get Fooled Again"
 
 
We see the same EW count on the NASDAQ (on the chart below) in wave 3, which should confirm that the "August swoon" was in fact only the beginning of a much bigger crash. That reversal could take place at any time, but knowing thus market as I do, we probably won't see it until a little relief rally upon release of the next Fed statement on Wed.
 
 
 
Timing is difficult to predict, but because all wave 3's tend to be devastating, and this is where the money is made (on the short side), I'm prepared to wait as long as it takes; remaining short into weekends as I did this last Friday, and even into this weeks The Fed announcement. 
 
As far as timing the duration of wave 3, I believe it could last several weeks. Liquidity tends to unwind faster than anyone can predict, so we have to be prepared for the worst. Stay short, and try not to catch any falling knives.
 
I see firm support at the $SPX 1550 - 1575 level, and at least a trade-able rally there, and volatility typically wanes going into the holidays,
so I'm thinking Thanksgiving.
 
 
 


Monday, October 12, 2015

Market update 10/12/2015 - Does this rally have legs?

Does this rally have legs?


I've been somewhat pre-occupied with calling the top in metals, and miners, so I thought it would be good to take a close look at the broader market, and get back up to speed.

In the last update, we were anticipating a sector rotation, and further market consolidation; and since then we've seen got both. We even saw a short squeeze in many of beaten up stocks we've been watching - including $TWTR, Energy, Emerging markets, China, and even Gold miners.

The $VIX took out my 16.60 target, called-out in my interview with Dale Pinkert at FXStreet.com on Sept 21.  Obvious resistance around the 23.50 area, and that becomes the line in the sand, and when the $VIX get's back above that area expect more panic selling. 


I believed the market was trading into a sideways consolidation pattern, but the latest rally - as powerful as it was - looks more like wave C of 2, in an ongoing bear market. Turns out that while the emerging markets and gold seem to be trading into the top of a broadening triangle pattern, certain chart views of the US markets look like a continuing bear market in wave 3.

Let's first compare the pattern in Emerging markets to the US. $EEM in a perfect broadening triangle.

Now let's look at the 2 hr., view of the Dow. It's just way too soon to call this a triangle pattern, and could very well be a suckers rally in wave ii of 3. You don't want to be wrong here, and I'm taking no chances, because the next target in wave 3 looks like Dow 14,000 (14,200), which was the breakout point in late 2013. That breakout was on light holiday volume, and that new support was never retested.  
 
All good things must come to an end, and now it's time to take profits, and let the chips fall where they may. We'll know before long if this is wave 3 or not; I'd say within a couple weeks, as this rally has more to do with a pump into OPEX - on Oct. - 15th than anything else.  
 

Friday, October 2, 2015

Market Update 10/01/2015 The Window Dressing Washout and a Key Reversal

A lot has happened since last month - a key window dressing month - Sept. turned out to be one of the worst Septembers on record. I was anticipating fund managers would buy the dip, and instead we saw them lighten up on their positions. Just goes to show it's hard to predict what's going to happen one day to the next, let alone the next month, and that's why I spend many hours charting each and every day, and why market timing requires both patience, and constant vigilance.

If you possess these 2 human qualities (patience and vigilance) congratulations!  More and more we live in a world that has become increasingly impatient, and one where many folks expect instant gratification. This is exactly the kind of thinking that led to The Fed lowering interest rates to 0, and bank bailouts, in the face of a prolonged economic contraction. I'm talking about the one which started in 2000, not last month, and both are far from over. Of course we would all like crises to be over quickly, but there's a natural order to things. Quick fixes seldom last for very long, and they can even make matters worse, as Peter Schiff often warns.

There's a reason why I'm going on an on about patience, well actually a few reasons.

1. It's important to wait for the pullback, whether it be in beaten down Stocks like Twitter, or GoPro, or countless others - many of which you've seen me tweet, and re-tweet again. It's no fun catching falling knifes, so leave the guessing to other folks, while you wait for your target, or better yet, wait for  a retest of support, once the reversal is confirmed. More and more we see a washout below support - in a shakeout - before we see any kind of reversal, and that can take some time. Watching from the sidelines won't cost you anything, and it's always a good exercise in patience.

Here we see a shakeout in shares of Twitter $TWTR followed by a rebound, which is then followed by just the kind of bullish back-test I describe. The Pattern is a parallel channel (seen in blue), and we now see it retesting $25 support. Another thing to note is that you would never find this bottom using a short term chart, and that's a topic for another time.



2. Seemly endless sideways consolidation patterns - AKA sideways corrections - require a huge amount of patience to trade successfully, and there's a good chance we're in just such an extended sideways (contracting triangle pattern in wave 4 right now). This isn't something I just came up with overnight, this was discovered and Tweeted on Sept 30th, but I had already been working on this chart for a couple weeks.

When the market is lethargic and erratic as it is, it's time to start thinking outside the box, and this pattern matches the action we're seeing, and you can learn more about wave (4) triangles in my free Elliott Wave Tutorial.


The August flash-crash spooked investors and traders alike, and this left many looking for the next leg down, but so far we've only seen another washout in a couple areas, namely the Russell 2000, and the Biotech space. This can be attributed to a reallocation of funds going into the end of the quarter - as I mentioned above - but the major indices have in fact not made new lows, and unless we were in a prolonged crash - say in wave 3 - I would never expect that.

You just don't see the market crash in the first leg down (in wave 1). Once you see a crash like this, you would expect an equal and opposite reaction (which we saw), followed by an extended period of consolidation. Also, as I pointed out in an earlier blog, and again on my Sept interview at FXStreet.com; if August support get's taken out there is no support  below that (1870ish) level. The August low is key support on some very long term charts. If these levels were to break; the next key support level I would be looking at would be the breakout point to new highs back in 2012 (1550 on the $SPX), which was never back-tested by the way. That previous resistance would become new support. I do see some possible support levels on the way down, but as I stated in that interview "things would become sketchy", if that August support is taken out.

I can't say for sure that we're completely out of the woods as far as a bear market is concerned, but I think we've seen the worst of it for now.

As far as the Russell 2000 this pullback looks a lot like the one we saw in Oct 2011


Continue to follow my Twitter @3XTraders for the latest up to-the-date developments.
Anthony Allyn


Tuesday, September 8, 2015

Major breakthough in the charts

Over the labor day weekend; while the hedge fund managers - who attempted to shake us out on light  Summer volume - were out on their yachts; I spent several hours reviewing the charts and had a major break-though Sunday morning.

As a former chartoholic I can tell you that binge charting can lead to errors in judgment. When you're already short on sleep, and the market is swinging wildly during regular trading hours, the more you continue to push the limits of human endurance, the more all the charts start to look the same, so it's always important to take a fresh look at the charts.

If you follow my twitter feed, you'll often see me posting individual stock charts, and underling sectors, even ones we don't trade ($TRAN for instance) because: 1. The market is made up of stocks, and to get a good handle on the market you need to have a handle on the entire market. 2. Unless the market is in free-fall there's always a bull market somewhere. 3. $TRAN and $SOX lead the broader market. 4. Certain sectors like tech are more heavily weighted to an index like the NASDAQ, and certain stocks called "market movers" have a greater impact on an index. For example $XOM, not only leads energy, but drives the $SPX.

This brings us to our first chart $XOM in our continuing broadening top pattern. These are complicated patterns, which take on many forms. The only hard and fast rules on these patterns is that the bottom, and the top, of the pattern shouldn't be flat, but they may be ascending as the chart below illustrates, or broadening in which the target might look like $53, but considering that we already caught the bottom in Oil, and $XOM is trading back above $70 (support), and money is about to flow back into this market (as MM's return from vacation), and energy is the only sector on sale, and that we're already in window dressing season, and the $XOM is "fairly valued" (with a PE-15), and every Money Manager is going to be forced to chase performance when they return from summer vacation, and every MM wants to own $XOM, and that the larger pattern on the $SPX seems to also be trading into a classic broadening top pattern.... I want to own all of it right here!


Transports bullish - and this chart explains the panic we saw in August. Support broke - taking out traders stops - only to trade into a violent wave E reversal.


Watch for a breakout on the S&P back above the 1992 level as soon as this week.


This final reason (#5) you'll see me posting individual charts is bottom picking beaten up stocks.
Stocks like FOSSIL $FOSL - trading with a PE of only 11, and 25% short interest; $BAS - this one saw a major reversal last month, so wait for a pullback; $AVP which never should've traded below $2 - huge short interest; $ARO... But I'll be updating the hot stocks page shortly and I have plenty of stocks to choose from.


Oil will probably get clobbered again this week (in futures markets), before the pullback is complete, and we saw the oil bulls run for the exits going into Friday's close. This may coincide with a little pullback in energy stocks. Follow my twitter for the latest.






 

Thursday, September 3, 2015

Is This the Bear Market?


 Is This the Bear Market..?


As I tweeted into Wednesday's close: the $VIX remains elevated and that means we're not out of the woods yet, and the question remains, is this the bear market we've been waiting for? There's a very good chance it is.

The action of the past 2 weeks is exactly what I would expect to see in a primary wave (C) or (E), whatever the case may be; you've all seen my long term charts. Either of those 2 real possibilities - P-(C) or (P-(E) - would make 2008 look mild in comparison.


I cut my teeth trading the bear market of '07 - '08, and I don't know if that qualifies me as a veteran trader, but it gives me a leg up on anyone who has only traded in a bull market, and as many all-nighters as I pulled back in those days, preparing detailed outlooks... You could say I got the crash course in technical analysis, because my members, and my livelihood depended on it. One of the most valuable lessons from that time was to learn that these things can't be rushed. All I can tell you is that we probably won't know if this is the Armageddon trade for some time.

The market action of late looks eerily similar to '07 - 08'. Crashes, followed by 1000 point rallies, followed by the bottom dropping out again.

I also don't like the fact that the NASDAQ rallied way too fast, and if this is only a snap-back rally in a bear market the market needs to take a breather here - in wave B.



If you follow my twitter feed you'll see me looking at the market from both sides (bullish/bearish), and when the action slows to a trickle as it often does, you'll see me charting very short term views - in some cases even 1 min charts -  but these short term charts are of little value unless you're nimble enough to trade intraday. Most small investors don't trade on margin, and it takes 3 days for cash trades to settle. If that describes you, don't get locked into a 3 day trade based on a 1 minute chart. If you're focused on the very short term you're liable to miss the forest through the trees.
Only trust the longer term - 60 min and Daily Candlestick Charts - until we're out of the woods.
I believe knowing when NOT to trade is as important as knowing when to put money to work.

Of course we have the Labor Day holiday coming up fast, and typically that brings lower volatility, and notoriously unpredictable trading. Maybe we see money put to work, since it didn't happen on the first of the month, and you typically don't short a dull market.

I have some awesome chart views we'll be watching this morning, so be sure to follow me on twitter!

Take Care and everybody have a great Labor Day weekend,
Anthony Allyn




Tuesday, September 1, 2015

The Chart that Predicted the Bottom in Oil




This is a perfect example of what to expect at any major reversal, so I want to document it. Even if you don't trade commodities, you can learn a lot from the chart below.

The talking heads always say, "no one can call the bottom"? That's funny because I just called 2! First the bottom in oil, and not long after, the bottom in the broader market, and though I may not have been right the 1st time or even the 3rd; in hindsight it doesn't matter, because I caught the better part of this classic short squeeze.

Look, I don't start calling bottoms after a historic 30% move, I call them on weakness, and it can't be confirmed until much later.


This is exactly what you want to see at a major trend reversal in commodities. Slowing momentum in wave 5, a shake-out below support or above resistance, and continued bearishness/bullishness into the reversal into wave 1 (marked "i"). Wave 1 may continue as short covering continues into Labor Day, but Oil futures don't expire until Sept 20th, and that's plenty of time for this rally to give back most it's gains in wave 2.   

Tonight I caught the guys on Fast Money debating whether or not this is the bottom, and this the kind of disbelief you want to see in waves 1 and 2, but I think now that the retail short have learned their lesson, it's time to take profits, and I'm actually short Oil and Energy.

As far as broader market the $VIX seems to be consolidating above 24.50 support, and the SPX fails to break out.


Monday, August 31, 2015

Monday Morning Market Update

Reviewing the market action of the past 2 weeks:
Sucks to be an investor, but this is some of the best trading we've seen in years; can't eat; can't sleep, love it! I would like to see high volatility continue, but that doesn't happen going into a holiday. With Labor Day only one week away expect more short covering.

Look back at the past 2 weeks: The crooks who run the Casino Stock Market, first robbed the retail investor in a 3 day shakeout which started by triggering a widely accepted sell signal ($VIX 20+) which was cleverly taken out when few expected it (on OPEX), and then they robbed the retail short (in a historic run-up in energy, oil and more). The oil trade is another story, but that turned out to be an even better trade than the broader market reversal.    

Today the retail investor remains overly bearish, and it doesn't take a genius to know what comes next. The market doesn't care if you want to see a pullback or not. Volume confirms the trade, and this is some of the best we've seeing in years. Either fight it, or enjoy it, but don't let your emotions get in the way of your trade. This is the whole purpose of watching the $VIX.


Speaking of the $VIX: The only way we get a retest of the 1900 level, or a lower low any time in the near future is if the VIX can return to 50.

So I'm reiterating my bullish short term outlook, as it becomes obvious that the $VIX is about to be taken down below 20, and when that happens it's going to bring panic buying by those who continue to insist that "volatility is going to continue", and the "the worst is not over" crowd. Sure there may be more pain ahead in a few weeks or more, but these snapback rallies always continue further than you think they will, and this one is far from over. We haven't even identified a tradable pattern yet.

Once we see the bears capitulate (talking about the market here not Oil) I expect to trade into a confusing consolidation pattern on low volatility - probably after the Labor Day holiday - and pullbacks into consolidation patterns, are far more difficult trades than these short squeeze rallies are. High volatility is where the big money is made, and lost, so stay nimble.

This morning We're seeing a little pullback in futures, but considering that the $VIX is trading in the mid 20s, and headed higher, we could've seen a lot worse than 20 points down on the $SPX. If we see a bigger pullback we'll be watching the 1950 level.

Watch my Twitter feed for up to the minute chart updates throughout the day.
 
Take Care, Anthony Allyn

Wednesday, August 26, 2015

Key Support levels and Breakdown targets

 They say; "It's better to teach a man how to fish than give him a fish", but finding key support levels is an art, and I don't teach art.  


Earlier this year I Tweeted a key support level and showed a long term chart view of the NASDAQ $COMPQ and told folks to make note of it. I'd bet a nickel that not one single person wrote that target down, so I'm going to give it to you again. The number is 4250, and this key support level is determined by the pink line on the chart below. When you see a pink line on 1 of my charts with a circle on it, this is what it represents.

When the market looks like it's breaking down, and all your short term charts are broken, it's time to STOP panicking and time to start looking at your long term charts. If these long term support levels start to break down on high volume, you will see disciplined veteran traders cut their losses. This is also where shorts start working in a big way, because the next support level tends to be a lot lower than the previous one, and in some cases hard to find. This is where decision making is removed from the equation. It's a case of, "shoot first and ask questions later".

Veteran trader Dale Pinkert alluded to this phenomenon (@ 5 minutes) in my April 24, 2015 interview FXStreet.com, but I was nervous, and the term he used was one I was unfamiliar with, and I'm afraid that important point was glanced over too quickly. I have been wanting to touch on it again ever since, and this turns out to be the perfect time!

I've created a fresh chart in order to make it easier to see.



There are also 2 more important indicators apparent on the above chart:

1. Volume is relatively low. Granted the month isn't over but volume doesn't support a market breakdown, and especially at this time of year. Markets are cyclical: kids are back in school; Money Managers are returning from summer vacation and that liquidity is about to return to this market. I also suspect this 3 day market "Rout", was the result of a few clever hedge funds conspiring to take the market down, or shake the weak hands. The fact that the $VIX was driven above a widely accepted bearish signal (20+), precisely on OPEX, supports that view.

2.  The Force index has not rolled over. Again this points to a thinly traded sell-off in which a basket of market movers - several of which I pointed out yesterday (the $MERK and other) were taken down suddenly, and what better time for a bear raid than just before the bulls return from their summer break.

As far as finding these support levels on your own:

1. This only comes with expedience and it took me a few years to really get it.

3. Look for a rising line that has worked in the past. Clone that line, and then apply it to current levels. Like I said in the beginning of this article this is an art.

3. Experiment with different time lines, and chart views, until you find the one that is working.


Take Care, Anthony Allyn











Monday, August 17, 2015

Market may be setting up for a massive rally

 

Market setting up for a massive rally

 
I see a trade coming that could turn out to be one of the best we've seen in years.

Note: I've had to rework and revise this article (originally published 8/17/15) after the recent global market Rout. "Rout" is the cutesy term the main stream media has decided to run with when trying to explain away a shake out in global equities which basically only lasted only 3 days. This was after trading sideways for almost 5 months! Not what I would call a capitulation top.

We did see the $TED spread (anyone who traded the '07 crash should be familiar with this indicator) make a sudden rise, which indicates a tightening of credit, but does not explain the selling of the past 3 days. I personally believe this retest of the lower end of the range has to do more with keeping the market from topping out at the wrong time, than anything else. All Signs were pointed toward Sept, and there's a lot of internet chatter from alternative media, and even supposed prophetic prophecy surrounding Sept 23th - 24th. Linked below is a little snippet of what I'm taking about. Financial Expert Correctly Predicted Black Monday Weeks Before Collapse

Before the recent market Rout, even I was a little nervous about what might really be going down in Sept., but now it appears that the timing has been changed.
 
It's been a while since I've blogged, but the market has remained rather dull, and directionless over the summer, which ended with an unexpected shakeout.

Re: "The $VIX" - If you missed my article on the $VIX I suggest you read it, and regularly review it. Not only will it help you to measure fear in the markets over the coming weeks, but it will help you separate emotion from your trade over your entire lifetime. The week August 22nd, we saw total panic above $VIX 20, and the huge market moves associated with a high $VIX. The Dow shed 1000 points as fear peaked out (in this case around 52), and volatility remains high, and the dow is now poised to rally 1000 points off the bottom, and if the $VIX remains high we could see the market gap up several days in a row.
 
Market breadth has remained lousy for some time, meaning although the market traded to new highs earlier in the year, many stocks and sectors have continued to under perform. Carter Worth made mention of this not soon after I began pointing it out, and to be honest I wasn't very familiar with the term at the time, but now every one seems to be talking about "market breadth". So what does it mean? The broader market remained in oversold condition even as it was making new highs earlier in the year. In other words; while the market traded to new highs, the majority of stocks did not, and according to my sentiment indicators the market remains oversold ever since the October surprise, when we saw the $VIX quickly rise to 31. Commodities; namely Energy and Metals, and more recently retail, China, emerging markers, continue to underperform, while Tech, Biotech, Healthcare, and certain defensive names chug ever higher. There's a very good chance we're about to see a rebalancing, and a return to normalcy. Either a sector rotation, or a broader market rally.
 
As most of you know I have been predicting for some time that the market will trade into a broadening top pattern, as a reflection of the larger broadening pattern of the past 20 years,  (AKA "a child fractal"), as I mentioned in my interview with Dale Pinkart at FXStreet.com, and a video blog (vlog) entitled "The Climax of the Broadening Top revisited",  I posted back in 2013. I have not given up on this pattern because this is exactly the type of emotionally driven pattern you would expect to see at a generational top.    


 
We've been watching this 1900 target for a long time, and although that could end up being the beginning of the great bear market, I think it's much more likely that we're going to make at least one more run at the top of the larger pattern (in blue on the chart above), into the end of the year.

 
For further study, and reference see Symmetrical Triangle
 
 
Elliott Wave Principal: Key to Market Behavior page 49.  Reverse Symmetrical Triangle
 
 
 
 
 
 
 


Friday, March 20, 2015

Trading the $VIX

This blog on trading the $VIX was most recently updated [4/24/2018]

Trading the $VIX

A better title for this blog may have been, "Trading of the $VIX", because I don't recomend actually trading it, but rather using it as a guide, to help keep you on the right side of the trade. 

The $VIX is our #1 fear indicator. High $VIX = fear. Low $VIX = no fear (in the market). Pretty simple.

An oversold ($VIX) can be seen as complacency, and greed, which is bearish, and raises red flags to experienced traders, but usually a low $VIX only means that there's little fear in the market, and this is a good thing.

Exceptions: There are times when the market can continue to rally, despite a gentle rise in volatility (which is what the $VIX technically measures), but that's rare. 99% of the time, the $VIX is going to trade opposite the broader market.

A $VIX that breaks out above resistance, and continues to pop higher, always points to a risk off environment, and a rising $VIX should never be ignored. In fact it deserves a place in your tickers, and even a whole screen, durring times of high volatility.   

Charting the $VIX take some practice, and I can honestly say, after many years, I'm still learning... the $VIX trades like a sentiment indicator, so once it peaks out, it tends to reverse violently. Leveraged funds also trade like this, after a major reversal, giving back as much as 50% in a day. The best advice I can give you, on charting the $VIX, is to use trend lines, and watch certain universally accepted resistance levels like $VIX 20.

Without the $VIX it would be near impossible to determine market sentiment in real time, and if there's one thing I've learned over the past few years it's that what is important above all else is consistency.

The $VIX is technically a measure of market volatility, and volatility works both ways. At $VIX 10 the market hardly moves, while at $VIX 90 the market may swing 10%, or more, in only a few hours.

There are various ways to trade the $VIX, but I don't actually recommend trading the $VIX, and you can see what happened to traders, who were using the leveraged inverse fund to shorting the $VXY in early 2018, as the manipulators were wiped out in 1 day, as I explained in my most recent live interview on F.A.C.E.






Wednesday, March 18, 2015

Launch 3XTraders 2.0

Welcome back Traders,

It's time to dust-off this blog, and get y'all up to speed, and there's no better time than now!

There just hasn't been much to get excited about - marketwise - until now, but there are a couple more good reasons for my hiatus:

For those who don't know it, I used to have a private membership website, with a few loyal members, but it turned out to be more distraction than it was worth, and charging folks even a small fee to trade into a market bubble just wouldn't be right.

Closing the website was one of the best decisions I have ever made. because it has allowed me to hone my skills, with few distractions.

I also relocated a little over a year ago, and moving is disruptive, and it has taken some time to settle in and get adjusted. After I moved I attempted to re-launch this blog, but I found I was better off tweeting, and charting.

Twitter is the best place to exchange up to the minute information, and even blow off steam, when there's nothing better to do. If you don't have twitter; create an account, and follow my twitter [link] for the most up-to-date information. There are going to be times when we need to get more in-depth, and that's what this place is for. I'll direct you here, when I feel the need, and have the time, to blog, otherwise you can find me tracking the market in real time, on Twitter. Market forecasts often change in real time!

Feel free to ask questions here, rather than on Twitter, because distractions aren't helpful. There are times I look at opposing views, but usually it's only as a contrarian indicator. For that reason I seldom check twitter notifications during the trading day, and have been known to block people in the past. I understand, there are times, when it's hard separate your emotions from the trade, and I'm not always going to be right, but lots of opposing views are a distraction. 

In future blogs I plan to show you some of the most important market indicators, and techniques, I look at, to predict market movements, some of which - like the $VIX (our fear indicator) - you should be watching in real time, so you understand what I'm looking at, or why or I hold a certain market view.

More to follow,

Anthony Allyn