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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.