EPI - 6 month chart

The emerging markets have been smoking hot for two weeks.  Let's take a look at WisdomTree India Earnings (EPI).  What looked like a reverse head and shoulders that began in early August has now given the impression that this security is in a V-shaped style recovery.  EPI bottomed at the end of August and has retraced everything it lost in the month of August.  

The chart I've attached does not show Volume, but Volume has picked up on average between 50-100% depending on which day you look at.  The optimism in this ETF is coming from both shorts covering as well as value investor putting money to work.  YTD (Year To Date) this ETF is -28% and trailing 12 month return is -15%.  EPI looks like it has resistance at $17 and then at $19.

The stock is way ahead of the 8, 12, and 20 Day Moving Averages.  

So here's the analysis.  8 Day Moving Average is $14.70.  Stock closed at $15.65 on 10-Sep-2013.  Tier 1 is $17.  Tier 2 is $19.

A purchase at $15.65 is giving one upside of $1.35 (1.35 = 17 - 15.65) vs downside/stop loss of .95 (.95 = 15.65-14.70).  You would be risking .95 for 1.35 or 7:5.  7:5 isn't bad at all considering the potential upside in this ETF in the short term.  Yes, the stock is high and it's above it's moving averages, but I'm a fan of "Buy High, Sell Higher".  This isn't investing, it's trading.  

As always, it's important to define risk AND time parameters.  

Markets *PAUSE* before Labor Day weekend.

First, I just want to say Happy Labor Day to those that have worked hard to deserve it.  Unfortunately, there are a lot of working Americans that aren't able to have the day off due to their status being part-time, or they have an erratic schedule, or maybe their employer doesn't recognize the day.  Labor Day was created to celebrate the economic and social contributions of workers.

I've said this before, but we all live in a very extraordinary place on the timeline of mankind.  A time when fiat currency is the prevailing choice of money, a time when deficits are exponentially amplified, and a time when "if something doesn't make sense it usually not true".  Unfortunately, I wish it was not true, but the truth is we live in a society that people are rewarded for not having to work.  In a lot of cases, it makes absolutely no sense to work to qualify for government entitlement programs.  This country has lost its moral compass to distinguish what is right and what is wrong.  As the USA continues to deteriorate, we will look back and be criticized on how economically or socially irresponsible we were.

As a working American to all working Americans, Happy Labor Day!

Onto the markets...

Markets look like they want to pull-in here as they use negative housing data, Geo-political Syria or the September FED Meeting to discuss tapering to add pressure to the markets.  The market was temporarily saved when there was an announcement yesterday saying attacks would not begin until the UN (United Nations) Inspectors were safely evacuated Saturday.  I believe the markets are using any and every headline news to lock in profits and buy on weakness.  There is still a lot of time before the September FED meeting and I believe the FED will come to the rescue (as they have always been doing recently) with asset prices and make the announcement that they will NOT start tapering until later this year.  And then later this year, they will say they will not start tapering until next year due to economic numbers being weak or ________________ (fill in blank).  The bottom line is, the FED can't taper, because everyone will figure out how phony the economy we are living in really is.  I don't see the Dow going below 14k, but that seems to be the short term floor for the market before I believe the Santa Claus rally will end the year.

Uh-Oh Mortgage Market???

http://confoundedinterest.wordpress.com/2013/06/05/whoopsie-mortgage-applications-dive-11-5-as-rates-surge-and-adp-employment-misses/

YTD the 10 year is up .30%.  That might not seem much, but when people are addicted to cheap money (ie. low interest rates), it's very easy to think this is the norm.  In my lifetime, this might be the lowest rates ever.  If it wasn't for our own government keeping rates artificially low (eg bond buying), interest rates would be higher.

Bonds Yields Rising & Gold

Given the recent action in the bond market, how does this affect the price of gold?  It all depends.

If bond yields are rising in the event of a weakening dollar, or weakening economy, or inflation, that's very positive for gold.

However, if the bond yields are rising, because the Fed is aggressively tightening or selling off bonds, this is negative for gold (and stocks).

Bull Pennant Formation for SPY

So ALL the major indexes are under pressure based on the Fed's comments less than two weeks ago.  The news that there may be tapering in the amount of bond purchasing has woken up the bears and has caused some fear in both the US, Global, and World Markets.  However, if we take a look at the charts over the last 6 months, we'll see the first leg (ie. A), second leg (ie. B), and formation of the third leg of a bull pennant.  A bull pennant is developed when you have two intersecting lines coming at two different angles forming an intersection of which the underlying line (ie. support) surpasses the overlaying line (ie. resistance) forming the pennant flag.  The SPY also had resistance at 160 which it broke out and that now provides a reference point to be future support.  I believe the SPY will retest the 160 support line in the coming weeks as the pennant flag completes formation.

I believe the markets will continue to propel forward as the so called tapering will not occur.  The recent economic data has been very week leaving the Fed no choice to continue their bond purchasing as they continue to try and spur the economy.  

Market Pause

Today's action marked a potential 'Pull-In' for all the major indexes as they all failed to hold their 52 week annual highs and manage to close below previous days lows.  At this time I do not think it's a permanent 'Pull-Back', but simply just a breather.  Today's move could translate into a 5% downward move.  My chart system is down, sorry no pictures.

COH - 6 month

"Gap Down" charts are one of my favorite patterns to take advantage for a cash flow trade.  It's even better when another formation "Gap and Go" pattern inserts itself in the pattern to confirm a double bullish trend.  Recently, I had one of my students question Coach, Inc. COH and he thought it was a short.  I strongly disagreed and given it's recent strength, I believe it still has room to run to complete the pattern formation.  Here is a step-by-step on COH.  

'A' = 22-Jan-2012 COH had a gap down from a previous close of $60.68 to 50.75 (- 16.3%).  When a stock has this kind of damage, for many that owned the stock at higher levels there was all by no chance to exit the stock.  The stock "Gap Down" that nothing could have protected you other than if you were wise enough to protect your Long position with some Put options.  The stock is in damage control mode at this point,  The prudent thing if you're long is to sell it immediately, then take a wait and see approach.  Yes, had you sold the stock on the first day it gapped down, you would have missed out on some gains; however, COH ultimately extended its weakness and made another lower.

Remember this term, "Red Dog Reversal".  It is a term Scott Redler, Chief Strategist for T3Live.com, made famous.  The layman's term of the definition is that a stock has 5 bars, with the 5th bar closing off the lows hinting that the 6th trading day would get a bounce.  Not only did the stock experience a "Gap Down", it was followed by a "Red Dog Reversal" which eventually led to a "Gap and Go".

'B'= 27-Feb-2013 is a beginning patter of a "Gap and Go".  A "Gap and Go" is when a stock trades in momentum where the price action initiates a gap and takes off; hence the word 'Go'.  The trade is considered bullish when the stock creates a patter of higher lows.  Here is the price action on the "Gap and Go" that started on 27-Feb-2013:

27-Feb-2013  $47.82

28-Feb-2013    48.33

1-March-2013  48.22

4-March-2013  49.28

5-March-2013  50.10

The fact that the stock experienced a "Gap and Go" especially off of a "Red Dog Reversal" is double bullish.  The stock still needs to complete full circle by getting back to it's 22-Jan-2012 price of $60.68 to fill the gap.  Since the stock broke resistance at $52.41, the pattern is still live to get back to $60.68.  There was a lot of technical damage, but this premier blue chip textile consumer good gets the benefit of the doubt.

Gold Bugs in Hibernation

I haven't received any requests for any charts, so that possibly is a contrarian indication the market still has a lot of upside.  Gold repeated history as it saw it's biggest decline not seen since 1983.  Granted this was 30 years ago, but what is important to know that the 3 years following 1983, Gold actually saw lower prices (eg. $250/oz.)  It wasn't until 1985 that gold ultimately began it's decent back up and a close above it's worst decline in 1983.

What this may mean for gold in 2013.  Although, it's sharply sold off, this is a short-term opportunity to crawl back what it sold off the last few days.  I don't believe we're going to see $2,000/oz anytime soon and one should protect their positions if we close lower than Mondays prices.  If history tells us anything, look for a rebound of gold in 2016, which is 3 years following gold's worst decline since 1983.

Obviously I could be completely wrong.  I do think that when gold ultimately begins it's ascent, the risk of not having any gold is greater than trying to time it currently.  Gold has been a part of MAN's history for the last 3000 years and will continue to be.  Go buy an ounce of gold and put it in a safe place.  Everyone needs it, unfortunately, there's just not enough gold to go around.

AAPL 6 month chart

Apple Inc. (AAPL) continues to be the main focus on everyone's screen as it continues to negatively correlate the major indexes.  As the major indexes make moves higher, AAPL continues to put in new lows.  AAPL has been in official bear territory as it now has lost 38% since putting in a high last September.  

Congratulations if you sold high 500+'s or you've been short, or maybe you're still short, but for the non-trader, you've probably doubled down or maybe even tripled down.  This is a classic example of "Catching a Falling Knife".  As great as AAPL is a company, it clearly has shown evidence of not being a positive performing stock the last 6 months.  I've personally never been a fan of this stock.  If you profile our last two previous major bubbles (ie. internet stocks in the late 90s, housing market, etc.) AAPL has a very close resemblance to those bubbles.  Here is my bubble checklist:

1)  Over owned (eg everyone and their mother owns some form of the product)
2)  One is willing to pay anything for (eg disregard to fundamentals)
3)  A sense of euphoria (eg "Best thing since slice bread.")

If you ask yourself these three bullet points on the previous two major bubbles, one can certainly answer them with ease.  Do these three bullet points sound like AAPL?

As a trade, the bearish pattern looks like it will stay intact for a bit.  Since it has negatively correlated the market as a whole, time will only tell to see if money goes into AAPL if the market starts to see some form of pull-in.  If this were to happen, AAPL would be considered as a defensive stock.  I don't know where AAPL is going, but it's on sale.  A close above $457.33 is the first step this stock needs to change direction in the eyes of the traders.

NFLX - 6 MONTH

Netflix, Inc. (NFLX) has been on a tear as it continues to make higher highs and moving in tandem with the major market indices.  Since gaping up at 140, NFLX has not looked back.  As shorts continue to get murdered since 100, trying to short NFLX could be a lost cause due to it's upward momentum.  Once it breaks the leg up that it's currently experiencing, one might initiate a short position with a target price of 140.  

ARMH - 6 month & All-Time

6 Month Chart:

All-Time Chart:

ARM Holdings plc (ARMH) is a dot com darling survivor.  Its recent action has put it at levels not seen since 2000.  ARMH is reaching Tier 2 Resistance level of $40.39  that could pose as a threat in the near terms to push the stock back to it's Trend Line as it's caught in forming a bullish pennant flag.  Being that the stock is a little rich here and is currently being overextended, the caution flag should go up and tight stops should be assessed.  Next Wednesday, January 14, is a big day as earning season kicks off.  

MCP - 6 month chart

Molycorp, Inc. (MCP) continues to be in every traders arsenal as it has seen a lot of technical action in the last 6 months.  MCP has been stuck in a bear trap 4 of the past 5 months as it's bear trend was finally technically broken on 26-November-2012 at $8.68.  

For the last month, MCP has seen a nice dead cat bounce off a bearish reversal with a nice Trend Line from $6.00 to $10.20.  A break below it's current trend line would signal a potential retest of $6.00 so buyer's here should have a tight stop.  

MCP has major resistance at $11.05 (ie. Tier 1.)  If MCP were to close above $11.05, the next major resistance would be $16.07 which would complete a gap that it has needed to fill since 2-August-2012.  

Currently, the basic materials sector and other industry related companies have seen recent significant pressure as fiscal cliff looms.  While most major stocks continue to rise in anticipation of a resolution, there is still a lot of 'lack of' confidence in the commodity space despite the fact that more money printing would be part of the resolution which would in effect would expand the money supply.

SBX - 6 month chart

A Chartcoach watcher requested SeaBright Holdings, Inc. (SBX).  SBX has been a dead trade since gapping up on 28-August-2012.  SBX still has a long ways down to fill the gap at $8.27 which was the previous close before the move up.

NSR - 6 month

NeuStar, Inc. (NSR) has been very bullish since hitting a low of $30.08 back in June.  With a trend line that was retested on 1-Nov-2012 at $37.47, it continues to be very bullish.  Yesterday, 11-December-2012, it managed to break resistance and set an all-time high of $42.62 before closing at $41.97.  The stock did not disappoint today either as it set another all-time high of $43.29 before closing down at $42.34.  With a market cap of 2.81B and an EPS of 1.98, the stock may have a lot more room to run.  

FCX - 6 month chart

Freeport-McMoRan Copper & Gold Inc. (FCX) had serious technical damage today as it closed down 15.99% to finish the day off $6.12 points.  If we take a look at the previous 6 months, because the stock was up 35.71% from low to high, the charts may have warranted such a correction.  The first sign of danger was on 23-October-2012 when the stock closed at $38.98 when it broke it's trend line that begun on 25-July-2012.  Since breaking it's trend line, FCX came very near to retesting it's Tier 1 support line on 16-November-2012.  And much like it's retest of support line, today it came very close to it's Tier 2 Support line at $31.43.  Although FCX has some major repair coming it's way, FCX should be able to close the gap back to $38,28 especially under oversold conditions.

SPY - 2 year

SPDR S&P 500 (SPY), the State Street Global Advisors Electronically Traded Fund (ETF) that tracks the S&P 500 is the most widely used ETF index.  In looking at the last 2 years, we can see the 14 month bullish trendline was broken at $140.06.  It now is a potential free fall range to retest Tier 1 and possibly retest Tier 2.  So what does this mean?  

It means if one has an open position short, you stay short until you see how the SPY trades accordingly around the price of $125.28.  If the SPY manages to close below $125.28, then a test of Tier 2 level of $112.02 is probably imminent.  

On the opposite end of the spectrum, if one has an open position long, you may want to way the risk/reward ratio.  Locking in profits now or maybe taking a small stop loss position would free up cash to position oneself to rebuy at Tier 1.  

SPXS - 6 month chart

Direxion Daily S&P500 Bear 3X Shares (SPXS) broke it's downward trend on 26-September-2012 when it closed at $17.44.  It went almost a calendar month before it started to get a bid at $18.04.  By looking at Thursday's action (ie. 15-November-2012), it touched it's Tier 1 resistance point of $20.66.  A close above $20.66 would be needed before considering a retest of $26.04 from 4-June-2012.  

GOOD - 6 month

A ChartCoach follower requested an analysis on Gladstone Commercial Corporation (GOOD).  GOOD was in a bullish trend since 1-June; however, the support Trendline was broken on 19-October at $18.35.  The stock is broken and it should retest the $17.00 Tier 1 level in the near future.  $17.00 would be a target price to add more shares to your portfolio. Or lock in profits now and re-initiate a position at $17.00.  Or short sale at the current levels and if you believe it will retest $17.00, one can see if it can hold the Tier 1 level and see if it breaks further.

DIA - 1 year

As 2012 comes to an end, volatility in the equities should never be overlooked as investors, traders, and institutional holders prepare to take action to close the year end books.  Whether the investor is preparing for short-term capital gains/losses, the traders printing profits for their end of year bonuses, or even institutional holders positioning themselves for 2013, everyone has their own reason(s) for taking the action.  

Attached above is a 1 year of the SPDR Dow Jones Industrial Average (DIA) which is an ETF (Electronic Traded Fund) of the major index.  Although it's probably not the best indicator of the US Economy anymore (eg. compared to S&P 500, etc.), media and headlines alike love to focus on the action of this Old Yeller basket of stocks.  Looking at the start of the support Trendline which was on 25-November-2011 and the DIA was 112.14 (ie. Dow Jones Index was 11.2k), we can see it's built a nice support line up until now.  On 1-June-2012, it retested the support Trendline at 120.78 (ie. Dow Jones Index 12.1k) and today it has retested the support Trendline again with a close at $112.53 (ie. Dow Jones index at 12.56k).  Todays action has signaled a 2nd retest of the support Trendline confirming a 'Double Bottom'.  If the DIA does close below $127.49, it would confirm a break in the support Trendline, confirming a bearish downtrend to Tier 1 and Tier 2 support lines.  As the world awaits the US response to the 'fiscal cliff', action in the DIA may already be a preview of how the US stock markets will respond to Washington's solution to the 'fiscal cliff'.

   

ZNGA 6 month

Zynga Inc. (ZNGA) has been in a very bearish trend for 6+ months.  The current price of $2.24 is awaiting confirmation of breaking the resistance trendline at $2.48.  If it does, it could retest the Tier 1 price point of $3.28 and fill the gap all the way to $5.07 (see blue arrow.)