Home / 2012 / July

Monthly Archives: July 2012

Divergence warning on SPY Charts

From the monthly chart to daily chart, the divergence is there.  What does that mean?  Heed Fly’s warning!

From my perspective, trading in the near future is going to be a day-to-day affair.  Swing trade no more than 1 day to the next.  Anything that is 2 days or more and you are opening yourself to a surprise party; not necessary in the positive light…

Below is the daily SPY chart.  Did you see that last 2 times, after a small range bar was developed from the spike-up, the oscillator headed south along with prices.  Did you also notice that on the 2nd short-range bar (see yellow arrow with the #2), the oscillator below was lower than the previous oscillator high.  And if we are heading south going forward, it will confirm the 3rd short-range bar (see yellow arrow with #3) as the pivot high and the oscillator will head down from here.  On top of that, notice that current oscillator high is lower than the previous oscillator high as well.  This will confirm a solid divergence if prices head south tomorrow.

Again, all this will depend on how price actions end up tomorrow.  If prices head south tomorrow in a intermediate to big way, it may confirm the high of the 3rd oscillator and a repetition of the 3rd retracement.

FWIW, see for yourself in the charts:

Below is the daily SPY chart:

Below is the weekly SPY chart:

Below is monthly SPY chart:

The market will always be around; but you may not be if you don’t protect yourself.  Trade safe and trade with discipline!

Good Hunting!

Comments »

SPY is playing DEFENSE across the board

From the weekly to the 15 minutes charts, SPY is struggling as you can in the the charts below:

Below is the weekly chart:  By the way, the bar you see is qualified to be called the Bearish Divergent Bar per Bill William’s Trading Chaos book (although the day is not over yet; you can say it is in the process of making a Bearish Divergent Bar).

Below is the Daily SPY Chart.  You can see the same deal as the weekly chart.  The making of a daily bearish divergent bar is in process.

Below is the hourly SPY chart:

Below is the 15 min SPY chart:

This is actually an experimental post since I’m trying the TC2000 charts in different size format.

By the way, just because we have a divergent bar (per Bill William’s book) in development doesn’t mean it is a sell tomorrow if price break below today low.  Bill has very specific criteria in applying the divergent bar signal together with the alligator moving averages system.  It is better you read Bill’s material to familiar yourself with his system than for me to explain anything in a few simple charts if you are interested in Bill’s system.

However, I may not necessary follow Bill’s system 100%.  I like to experiment with Bill’s idea with some of my own way of trading the chart.  In a way, I borrow from other traders and try to develop a system that I can be comfortable with.  In another manner of speaking, I’m constantly evolving my trading system so that I can listen to the market better.

Today summary, I’m playing defense today by taking my profit in my precious metals.  I am currently flat on all EXK, SLW, and AUY.  Although I’m tempted to buy them back but SLW is reaching to the 89 xma so I’ve to respect its resistance power.

I’ll wait to see what happen tomorrow before committing cash back in.  Meanwhile, today is just another simple day trading exercise.

Current position:

9.7% LT equity

90.3%  Cash

Good Hunting!




Comments »

You want to bank coin? Say good-bye to dime store economist

What is the difference b/w a dime store economist and a college kid who just got an “A” on his/her economic 101 class?


Not much!  Both are using “fancy” terminology to tell their stories of how the world’s economic system “should” be doing this or doing that; or why the economic system is not working because of this and that.  And while both of them  may be clueless to what is REALLY happening, they both offer their stories FOR FREE.

Now, what is the difference b/w a dime store economist and the economist whose work get published by the trade magazine?   Nothing except one of them get paid handsomely while the other get nothing.

Ok, what has this got to do with us being a trader?

Simple, if you want to trade, STOP listening to the dime store economist and START listening to the price action!

What is even more harmful to your trading is when you become a dime store economist yourself!

Sure, you can have an opinion on the the current economic condition but the moment you “invest” into your theory, you are screwed!


Yes, how many wealthy economists do you see out there (not counting the ones whose salary are paid by the like of “too big to fail” bankers)?

The moment you INVEST your EGO into an economic theory of why the market should be doing this or doing that, you are NO LONGER listening to the market.  You know why?  It is because you just put yourself into another “I need to be right” mental mindset.

Good Grief!  Now, you get two “I need to be right” in your market position:

I need to be right #1: My very logical economic theory

I need to be right #2: My decision on a stock purchase (or short sales) that is losing money.

As a trader, economic theory is just another “probability” that could be wrong!

As a trader, the decision to buy (or short) is just another “probability” that could be wrong!

And what do you do when you are wrong as a trader?

You get the FUCK out of your position to cut your losses FAST!

BUT you can’t do that if you have TWO “I need to be right!” mental mindset going against you!  And if you are a more seasoned trader, these 2 mindsets will deter you from cutting your losses quickly!

Of course, this is just my opinion.  And that is why I like to blog only “theory” about price action based on my chart analysis.  It keeps me focus on what is important- what is price action doing today and what it is likely to do tomorrow?   Anything further than a week and I may end up being a dime store economist myself!

My only antidote to becoming an accidental dime store economist by predicting price action further than a week is my readiness to admit to myself that I’m WRONG again!

Good Hunting!

Comments »

Mistaken identity, there is no Bear twin brother after all

With a slight change of DNA (actually this week bar); the Bear twin brother vanished into thin air!

If you look at bar (5) in 2012; this look like a good healthy green bar to me providing that tomorrow continues to be a positive or a mild correction day.  The good thing about this week bar is that it stays above the lower Pitchfork median line; thus maintaining the uptrend momentum.

Giving the way the wind is blowing, we may have a bullish trend for the rest of the year to re-establish the correlation of a stock rally in the Presidential election year.  Next target is to take out the upper trendline at $137.63; and then the high of $142.21 from April 5th, 2012.

Below is the weekly SPY chart:

Good Hunting!

Comments »

The REBIRTH of the Precious Metals

I don’t know about you; but after the the head of Europe’s Central Bank declared that Euro zone will not be allowed to collapse, one must immediately think of the printing press.  I guess the sound bite means we are getting closer to QE from both Europe and possible the US.

The way I look at it, Mario Draghi’s Pledge is the catalyst to kick start the runner in precious metals.

So without hesitation, I added more EXK (silver), bought SLW (silver), and AUY (gold and silver).

My position is now heavily in precious metals (22% 24% 30.4 %):

9.4% 10.5% EXK

6.9% 10.4% SLW

5.7% 7.7% 9.5% AUY

9.5% 9.6% LT equity

68.5% 66.5% 60% cash

Below is the weekly AUY chart.  See how the over all trend is sloping up and the prices stayed on the 79 & 89 moving averages.

Notice the last bar is an up bar.  Could be the start of a run?

Good Hunting!

Comments »

Taking a break to enjoy the Silver(ware)

Today look like a stalemate day b/w the Bull and the Bear.  I did not buy any TZA nor SKF despite the weakening of the morning rally.  Instead, I only bought EXK this morning.  I like EXK now because price action did not breakdown below the base support yesterday despite a strong down day.  This morning EXK opened up and took out the upper downtrend line.  To me, that is good enough for me to take some position at the market open since my stops will be below the base support.

The important thing for me in taking a position is knowing where my stop loss will be.  Having a strong support base, even if it is in the form of Descending Triangle, tell me that the silver buyers will be putting up a big fight to protect that base.  And if they failed, that simply mean there is a strong fundamental reason for silver to go down and the price actions is telling you this BEFORE you even know what the fundamental story is about.  At the same time, if you look pass the Descending Triangle, you cannot ignore the triple bottoms on the daily chart since late June.  This is a very strong case for a rebound from here if price actions show some bullish signals such as taking out the upper downtrend line.

From here on, if price actions continue upward, there is a good chance we may have a runner here.  And I will continue to add more accordingly.

Below is the daily EXK chart:

Current position:

7% EXK

9.6% Long-term equity

83.4% cash

Good Hunting!

Comments »

Why I sold my TZA when the trend is strong and up today

That is because today the high of TZA reached the 89 exponential moving average which to me is a strong resistance.

I will rather lock in profit now and see what happen tomorrow.   I prefer to protect my profit more than worrying about “missing” the gap up tomorrow since a gap down will mean giving back what I make today.

See below TZA daily chart.  The dash white-line is the 89 xma.

Good Hunting!

Comments »

SPY Weekly Chart- Flagging the Bear

Currently, I’ve 21% of my portfolio shorting the market using TZA and SKF; therefore, what I’ve to say here is inherently bias on the short side.

As the weekly chart below shown, the price action has broken out of the symmetrical triangle that “SHOULD” have been a continuation bullish pattern if price action has taken out the upper trendline.  But instead, price action took out the lower trendline and headed to the downside.   By taking out the lower uptrend line, the weekly SPY also took out the BEAR FLAG.  This is a bearish continuation pattern.  The week is still young; we will soon find out by Friday if this week bar is going to be a long red bar (very bearish); or a green bar like the one 2 weeks (or 2 bars) ago.

Below is the weekly SPY chart:

Current position:

21% 24.4% 0.0% short (by way of TZA and SKF) sold by 03:30pm EST to lock in profit due to strong late rally.

9.6% 9.8% long-term equity

69.4% 66%  90.2% cash

Good Hunting!

Comments »

Silver is surrounded by the Descending Triangle

I bought EXK this morning because it took out yesterday high of $7.77.  I also like the fact that there are 3 triple bottoms since 6/28.  But I only like EXK (or silver) if it can rebound from yesterday low.  Unfortunately, due to a down day today in the stock market, EXK morning rally frizzled and is now in negative territory.  Needless to day, I sold EXK to cut my loss quickly and started focus on extending my TZA and SKF position in the morning.

One thing that silver lovers need to be aware of is the forming of the Descending Triangle.  As a chart reader, I do not put too much weigh on the “fundamental” reason why silver has to go up (or down).   But I do pay a lot of attention to the formation of chart patterns that have been proven for decades with high probability of repetition.

By the principle of Descending Triangle, if the base support (with the 3 triple bottoms in the case of EXK) is pierced to the downside, there is a high probability of  continuation of the downtrend.

You can argue about why silver can’t go any further down due to more printing by the Euro or the US all you want; but I will be paying more attention to the Descending Triangles that are forming on on silver based stocks.  EXK is no exception.  Take a look at the daily EXK chart below.  At the rate it is going now, it may even take out the base support today.  Remember, if the price action of EXK takes out the base support and head to the downside, it is because there are enough sellers to make it happen.  And that mean there are not enough buyers who believe in the printing theory to warrant an uptrend on silver.  At least, not what the chart is saying right now.

Good Hunting!


Comments »

Is the dead cat bounce over yet?

In a way, I’m glad we have this morning mini-rally ’cause I’m looking for a good entry point to re-enter my TZA and SKF.  My morning entries were stopped out earlier for tiny losses.

Basically, I’m banking on the 02:30pm – 03:00pm time-of-day continuation pattern or trend reversal pattern.  I’m betting on the continuation bearish pattern so I re-entered TZA and SKF with a tight stops that were below the most recent pivot low.  In other words, if price continues to rally from here instead of going back down, I’ll only take a very small hit on my losses.  And if the bears take back the control, I’ll look to add more TZA and SKF.

Below is the daily SPY chart which shows that today rally represents close to the Fib 38.2% retracement between Friday high and today low.  Will it be over?  We will soon find out.

Below is an hourly SPY chart which shows a clear picture on the Fib 38.2% retracement on today rally.

Good Hunting!

Comments »