HOW THE CURRENT MARKET PICTURE STACKS UP AGAINST THE CURRENT SENTIMENT PICTURE
Given the state of information indigestion that is prevalent in today's financial world, it is only proper that I begin this with a little bit of history. History in this case is a little over one month ago. It was at that time I posted an article titled, "Using The Put/Call Ratio To Forecast 5% Correction." The conclusion that was reached as a result of observing the put/call ratio on March 30th was that the stock market was, at a minimum, one month away from a correction of any substance. Sentiment, however, is but one tool in an investor or trader's arsenal of weapons. It must be used selectively based on the nature of the market at any given time. You can always sniff out an inexperienced investor by the level of importance they place on sentiment data alone. Often times an entire investment thesis and resulting portfolio structure will be based on one or a number of sentiment driven indicators without regard for anything else. A boiling pot of impending disappointment that sends the sentiment driven investor back to the drawing board eventually. Tonight we will look at two sides of the equation. First let's see what market action is telling us here. I'll go over these points in living color during this coming weekend's review: - The Dow Transports, arguably THE leader of the current rally, are exhibiting increasingly sloppy behavior, threatening to move below a key technical point. - Dow Industrials today thrust off of the key trajectory for 2013 pictured here. This is an indication that the market is growing uncomfortable with the slope of the current move. - IWM volume today was the greatest for a down day since September of 2011. It is not just the volume on a down day that is of concern. Perhaps more importantly, it is where that volume surge is occurring. In the case of IWM (Russell 2000) it is occurring right at the key trajectory from the October 2002 lows pictured here. A very significant development indicating that the market is recognizing the importance of a failure at this key trajectory. - The SOX is threatening to fail right at its key trajectory from the 1998 lows for the index. Now let's look at sentiment by looking over the combined put/call ratio using the 20 and 100 day moving averages only: click chart to enlarge If you are confused, then you are right where you should be. The market will also be confused, most likely resulting in choppy sideways action that leads both bulls and bears nowhere throughout the summer months. In this case, the preferred position is leaning towards an...
WHY AAPL JUST HAD ITS MOST SIGNIFICANT WEEK SINCE APRIL 2012
First, a history of the price target that was just hit on the dot for AAPL: - On January 23rd this chart was posted showing the next logical area for support as being the generational trajectory from the 1987 high for AAPL. The price target this trajectory pointed to was 400-420. - As AAPL got closer to the trajectory through a routine of steadily dripping lower, on March 4th this chart was posted bringing greater clarity to the ultimate downside target revealing 390 as being the destination for any sustained attempt at a bounce. The low on April 19th was 385.10. Last weekend I posted an article titled, "AAPL: Downside Price Target Achieved, Now What?" In the article I discussed one of the expected results of hitting an extremely important level of support is high volume. While we didn't get that volume surge last week, this week we certainly did. In fact, it was the biggest weekly volume surge in AAPL shares since April of 2012. This is important not simply because volume finally decided to show up in AAPL, but WHERE that volume showed up gives away a ton of information. Here is a detailed look at AAPL on a weekly...
4 CHARTS TELLING THE STORY OF A CORRECTION THAT IS ALL BUT COMPLETE
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AAPL: DOWNSIDE PRICE TARGET ACHIEVED, NOW WHAT?
In January, I put together a technical piece regarding potential downside targets in AAPL. The first downside target mentioned was based on the trajectory dating all the way to 1987, right before the crash. The downside target determined by this trajectory was 400-420 on AAPL over the short to intermediate term. click chart to enlarge Now that we are in the intermediate term we can see that the downside target on AAPL has been achieved, with a somewhat anti-climactic response. Keep in mind, not only was a key trajectory penetrated to the downside this past week, but a key round number (400) was also broken. If you would have asked me two weeks ago what kind of response I would have expected to such an event, I would have guessed the following: 1. High volume for the week 2. Price fluctuations that are more expansive than usual AAPL saw neither of those things happen this week, despite the fact it melted right through its trajectory and broke through 400. It was as if the stock broke 427.25. Nothing but crickets chirping, with the occasional streamer going off in the background. Here is a look at both the current daily and weekly charts to gauge what investors can expect from AAPL now that it is sporting a 3-handle: click chart to...
5 CHARTS THAT WILL CURE YOUR NAPOLEONIC COMPLEX DURING THE WEEK AHEAD
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5 CHARTS THAT WILL KEEP YOU IN PEACE AND NOT IN PIECES DURING THE WEEK AHEAD
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5 CHARTS THAT WILL REIGNITE YOUR LOVE AFFAIR WITH THE MARKETS DURING THE WEEK AHEAD
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TIMEFRAME DELIRIUM SYNDROME
Admittedly, I am a bit egotistical and somewhat arrogant regarding my views/philosophies with respect to investing and finance. I don't necessarily like to keep an open mind. Or rather, I should say, I don't like to have my mind opened by others for fear that it will cause me to deviate from a process of investment that has been 18 years in the making. Perhaps a better way to put it is that I appreciate the process of organic discovery coming as a result of the process I have developed. This appreciation for my own process leads me to ignore a majority of the views and opinions that swirl around me on a daily basis. It goes a step beyond that in the people who I choose to follow on Twitter. I will never follow an individual who has the potential to influence my opinion. Therefore, if I am following you it is because a) I like you but don't care about your market views or b) consider you an excellent source of data that has no consequence over my investment process or c) consider you a source of entertainment. This is one posting I couldn't ignore, however. A very good informational piece was posted today by Josh Brown @reformedbroker referencing an article about confusing your timeframe with that of others. It such an important concept that seems to be an area of confusion for so many. I would encourage you to look it over, giving it the appropriate consideration. As my process has evolved so has the need to look into longer time frames in order to accurately judge the path of a particular investment. The longer you move in terms of timeframe, the less noise you will have from what occurs on a daily basis, instead getting to the essence of price and volume behavior. There is always a tradeoff, however. The tradeoff with zooming out is that you have to be able to withstand increased risk. The price movement of a weekly or monthly chart spread out over a couple of years will encompass a price picture that is wide in its area of movement. Finding a means of balancing that risk while taking advantage of the clarity in price picture is perhaps the key to be able to using wider timeframes effectively. It is important to always keep an eye on the original timeframe you had for the investment to make sure you aren't deviating from it simply for the sake of an investment or trade gone wrong. As pointed out in the article, a common mistake is turning a trade into an investment simply because it...