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Comments »Yearly Archives: 2011
Make Sure You’re Protected
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We are well on our way to a fairly standard doji day today. Im Japanese candlestick terminology, a “doji” is a term meaning a tight range day of indecision with the open and close essential the same price. On doji days, overtrading is usually the biggest mistake that you can make since the market is going nowhere. I suggest casting a skeptical eye over any potential trades you make today, long or short. That said, this type of price action is to be welcomed after the wild moves over the past few weeks and even months. A period where we go dead for a bit should be constructive for setting up more charts properly, and I look forward to it. For now, though, if you are an active trader then today is probably not to the day to try to make a bunch of superstar daytrades.
Don’t Be “That Guy”
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Earlier today I wrote a post raising the notion that if Donald Trump is now accepting gold as a legitimate form of payment for his real estate properties, then perhaps that is additional contrarian evidence that the bullion has topped out for the foreseeable future. As we know, gold has had a spectacular run over the past few months on top of already being in a potent multi-year bull market. Recently, though, the yellow metal has put in what may very well be a double-top and appears heavy on the GLD daily chart. As our own JakeGint stresses often in this gold run, it is awfully tough to short a bull market of this magnitude. Hence, I have no interest in being “that guy” trying to call the absolute top in gold. All I seek to do is interpret the price action as rigorously and objectively as I can for you.
I also said in that earlier post that the metals and miners can often trade in separate and distinct worlds far more often than you would think possible. After all, when you think of “gold miners,” you cannot help but think of “gold.” However, my good friend on Twitter @Xiphos_Trading also pointed out that the gold miners were still strong and there was little evidence that gold has put in THE top and that the miners were not about to go on an epic run and putting in massive bases on longer-term timeframes. Frankly, looking at a few charts of gold miners this evening, there are indeed some ones that are set up well. All they need now are some buyers to hope back on the miner train to keep the beastly locomotive going.
Hence, I believe the best thesis going forward is that the miners should categorically outperform the metals.
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Stock #Market Recap 09/15/11 {Video}
Chaikin, Not Stirred. Part II.
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Just under a year ago during the early stages of a potent uptrend, I wrote this piece discussing and analyzing the Chaikin Money Flow (“CMF”) indicator and why I thought it was helping to suggest that the steel sector was on the cusp of a major breakout. After that post, the SLX subsequently went on a run from $64 to $77.40 over the next few months, with many individual steels attaining even bigger gains.
Today, I see that the steels are finally showing some signs of life. Essentially, the sector has been in a steep and vicious downtrend since February, easily registering as one of the weaker areas of the market for much of 2011. And yet, despite the huge initiative that the bears have held, they could down breach the $50 level of the SLX.
Moreover, the CMF is flashing a major bullish divergence, as it gained throughout each downside test of $50, and is now positive, which usually indicates a bullish bias. In other words, look for the steels to play catch-up here.
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Take the Test Seriously
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The market is squeezing through the psychologically important 1200 level this afternoon. However, we are currently right at 1204 on the S&P 500 which, as I discussed this morning, would likely be the site of a fierce battle between bulls and bears. After lagging for the past few days, the energy/material complex is starting to act better. Underneath the surface, some technology names are not quite keeping up with the senior indices as well. Hence, I am inclined to think that the action tapers off into the close and perhaps for Friday too.
Either way, I view 1204 as a big test and I am taking the process–and outcome in either direction–very seriously.
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