Thursday, April 17, 2014

Dual Time Frame Volatility Analysis

VXN is Spiking
Click on Chart to Enlarge

I have shown charts like this in pats videos to The Trader's Crystal Ball mailing list, but I thought I would share this one today with everybody.

This chart shows the VXN which is like the VIX but for the Nasdaq 100 stocks.  And the specific set-up here is that the dark blue standard bollinger bands have expanded so that the top band is above the 126 day 2.0 standard deviation bollinger band.

What does this mean??  It basically is just telling us that the short term volatility is far from the average longer term volatility.  And this is a condition that often precedes significant lows in stock prices.

We did not see this happen in the VIX on this pullback, but the chart above of VXN very clearly shows the spike in the VXN and now a reversal back inside the bands which has corresponded with a hammer type candlestick in QQQ prices on Tuesday.

So for now, it looks like a significant low may be in place in QQQ.  My suspiscion is that we will see a significant rally, but this one might fail to make a new high in QQQ, and then we see a larger scale correction.

For now I am bullish as long as prices are closing above Tuesday's low in QQQ.

Saturday, April 12, 2014

VIX/VXV Ratio Is Spiking Again

VIX/VXV Ratio greater than 1.00
Click on Chart to Enlarge

The chart above shows the last 2 years of VIX/VXV daily closing ratios.  I have discussed this many times on this blog, but when the ratio exceeds 1.00, that is basically a theoretical imbalance in the market, and it usually resolves to the upside before too long.

However, I have also discussed the fact that while it may be a short time until a relative low occurs, these increasing volatility environments can lead to dramatic price declines in that short period of time until a price low occurs.  So I don't suggest necessarily just buying with no further confirmation that price may reverse or with no defined risk.

With the current set-up in the stock indexes I believe there are a couple highly probable scenarios:

1) Prices sell off sharply, maybe VERY sharply for a few days, and then we start a significant multi day rally
2) We see a brief lower daily low within the next couple days, followed by a rally attempt 

Currently, my analysis is that we are nearly 100% certain to see a lower daily low than Friday's, but we should be aware of the buying set-up with this volatility imbalance.

The intermediate term price logic has been behaving in downtrend fashion off the recent highs, and so for short-term traders the play is to look to short rebounds until a buying signal occurs.

If I had to take a stand on the larger market direction from here, I would say that I think this market has seen a more significant high than the others over the last year and a half.  However, objective signals are the key to success, so I could change my mind at any time when those occur.

Thursday, April 10, 2014

Brief Stock Update

Hourly chart technical analysis suggests a possible long set-up for tomorrow, but the daily and weekly current are down and so what often happens with the intermingling of the cycles is that the shorter term set-up will have a more muted effect than it would if the larger currents were up.

Panic levels are still a ways off on the put/call ratio and VIX, and so despite the increased price volatility here, my outlook remains bearish for the intermediate term until further notice.

As a side note, for those who follow gold and silver, I would suggest that you be tracking those markets closely for long trade set-ups.  There may be some lower lows for the recent decline to set-up a bullish divergence, but my take is that a buying opportunity is potentially near.

Monday, April 7, 2014

Top Warning For Stocks

This is just a written heads up that Friday was a bearish engulfing pattern on SPY with weekly, daily, and hourly bearish divergence at the high.  So there is a major multiple time frame divergence here, a wide range reversal bar, which is typical of past major highs, and there really really sharp bearish divergence in VIX and total put/call compared with price.

Additionally, the Russell 2000 and Nasdaq 100 did not confirm new highs this week and so now the leaders have become the laggards.  All of these things would indicate to me that despite the sell offs in many stocks, the real meat of this sell off only may just have begun.

I remain bearish until further notice unless there are closes above Fridays's highs in the stock indexes.

Monday, March 24, 2014

What Will Stocks Do From Here?

As suggested in this weekend's video update, stocks have started off weak this week.  Without going into details in this post, I suspect prices will pullback a bit further, and possibly more extensively than we have seen in the last 1.5 years.  As we get into April and May we enter the traditional seasonal high in stocks, and the technical analysis at this juncture supports the prospect of a typical annual sell off this spring.

For me the line in the sand is relatively clear in that I remain bearish until further notice, as long as SPY continues to close below last week's high.  I won't speculate too much here on how far prices may decline (if they do) other than to state again that a typical stock market correction throughout history has averaged about 10-11% and lasted about 6 weeks from high to low.  And also I will reinforce the weekly time frame bearish divergence present in the MACD which would suggest that any pullback here may be of a larger magnitude than most of the minor corrections since Nov 2012.

Drop a comment if any specific info is desired.

All the best in your trading.

Pete

Saturday, March 22, 2014

MACD Multiple Time Frame Bearish Divergence on SPY


MACD Multiple Time Frame Divergence on SPY

This stock market video covers the SPY ETF and explains the current multiple time frame divergence in the MACD indicator.  There are both weekly and daily time frame bearish divergence patterns in SPY which indicate the potential for a significant high occurring at this level.

Additionally there is a minor failed breakout of the March 7th high, and a potential major failed breakout of the January 2014 high if prices continue lower below the 185 level.

Friday displayed a reversal day in SPY with the S&P 500 moving to slight higher highs, but reversing sharply and closing near the lows in a wide range day.

On the balance the technical analysis suggests that stocks are likely in a position to decline from this level, and traders should be in cash or sizing up shorting opportunities.


I wish you all the best in your trading.  If there is anything else I can do to help you develop as a trader, drop me a comment to let me know what it is or check out my trading courses.

Pete

Wednesday, March 5, 2014

How to Move or Trail Stop Losses Using a Moving Average Channel

 

This video shows you how to move stop losses on stock trades in order to keep you in the truly huge trends that will make most of your profit as a trader.

I show you how to set up your charts to create a moving average channel, and then take you through a number of detailed examples showing you the simple but objective and effective method for using the channel as a stop adjustment indicator.

Specific charts examples include CENX, UNG, FSLR, SPWR, MSTR, RVBD, LOGM, DPS, CCIH, and SPY.

I also discuss how to use this on any time frame and specifically how to scale out of trades but using this same stop movement method on two or more time frames once a position is entered.




Remember that you SPEND money when you enter a trade.  You MAKE money when you exit with a profit.  Exits and trade management are what separates good traders and profitable traders from simply good analysts or unprofitable traders.

Hope this helps you in your trading.

Pete