Keltner channels sends us a buy signal on the Shanghai stock exchange

Understanding the Keltner Channels
Shanghai Stock Exchange "Weekly" chart using the Keltner Channels.
1) I prefer using Keltner than Bollinger ; Crossover method is more reliable
2) Three conditions ; see three colours on the chart
3) Condition "1" ; simple crossover 4 and 40 weekly exp moving average
4) Condition "2" ; crossover occurs below the lower band ; allows trader to use the crossover level as a stop loss level. (in this case the stop stands @ 2513.
5) Condition "3" ; allows you to "book" profits and use the crossover as a short trigger (using the crossover level as your stop).
6) Shanghai index stands @ 2652, main resistance stands @ 2750

Charts to watch next week

1) International Business Machines ( IBM ); the channel pattern seems "almost" perfect, 123 to 132.
2) Citigroup Inc ( C ) ; the support level at 3.59 looks reliable ("B" level in the ABC pattern), we did see a fake move up in July, now let's see if this next move will take us much higher.
3) Apple Computer Inc ( AAPL ) ; all the good (great) news priced in ? Why was Apple weaker on this bounce up ? Clear key support stands at 235. Still bullish on the stock, but this price action could be a warning signal. Remember, only fools do not change their minds !
4) Bank Of America Corp ( BAC ) ; the mother of all reversals ? If you draw a trend from April's high, you'll notice that 13.3 is our key long trigger up.
5) United States Oil ( USO ) ; now that's what you call a bounce on support :)
6) iShares MSCI Brazil Index ( EWZ ) ; do you see that head and shoulder ?

SP 500 chart update

Back in Brussels, landed around 2 PM from Toulouse (France).
Had the chance to go to the beach several times (Perpignan) :)
The trading seminar went quite well : )
Ok, back to the SP 500 ;
1) I bought some (see recent post) as well as other ETFs.
2) So far we are facing a clear wide trading range
3) Focus on the trigger levels (up and down)
4) What about all those bad news out there ? One fact we probably forgot ; they might be priced in ???
5) Shanghai index and light crude oil (my leading indicators) are "improving"

The saga of an investor

Will start to buy today

Will build positions in various ETFs today ; FAS, XLF, XLE, and the SPY.
Hope to see them go lower so I can buy more shares :)
Time to act like a VALUE investor and use common sense

Gut feeling

Still in the south of france, giving a trading seminar.
I don't buy this double dip story ......
Pay attention to the following possible events (Dollar, crude oil, SP 500)
1) Dollar index falls below 82.75
2) Euro climbs back up versus Dollar, Swiss, and Yen
3) Crude goes back up above $73
Conclusion ; watch candle reversals towards the end of trading day !
Focus on spikes down, expecting lots of buyers on the dip
Could I be wrong ? Sure, focus on the Dollar and Crude for signs of reversals !

Weekly opinion

Will be heading to the south of France next week (trading seminars), so blogging will be "light", unless of course we get a major bullish reversal.
My trading system vis à vis the SP 500 still reads "Neutral" in both short and long term trading.
We are suddenly seing more talks of a double dip, bearish outlook, and all kinds of reasons why you should get out of the market ....
Experience teaches me one thing ; after a crash, markets tend to form "wild volatile bottoms", with large price swings.
In the meantime, we tend to forget that we are basically forgeting what drives the market ; future earnings .... and guess what , the future looks quite good :)
Oh, but you'll tell me about all those countries almost bankrupt .....
You'll remind me that the debt crisis is far from over .....
Focus on the items you will trade ! Do not try to become an expert at many things .....
Do not try to become an economist .....
I expect more wild swings to come, then a huge rally that will probably last 2 to 3 years until the next crash ....
Commoditiy related companies will rule , becoming the heavyweights of the SP 500.
Expect more mergers in the months to come, sending financials much higher

Euro Dollar moment of truth

Euro Dollar chart analysis ; ABC pattern or an Head and Shoulder ?
1) First, the big picture ; this could just be a typical retracement after the huge fall of the Euro.
2) Euro zoomed up (almost parabolic), snapping hard, and reversed to the yellow channel.
3) Are we facing a "B" level (support before zooming higher to "C"), or are we facing a right shoulder pattern with a down target at 1.2400 ?
4) Focus on key news event that should soon come out ; trade the DIRECTION of the break out.

Light crude oil probable scenario

Light Crude Oil chart analysis ;
1) Monthly higher lows pattern still intact
2) Typical buy "the retracement, sell the rally"
3) Pay attention to the "reversal level" ; avoid crude if prices go below $73.5
4) Buy when prices climb above $77
5) Crude oil and the Shanghai index are part of my leading indicators ; they should be considered as key triggers for the SP 500 index (ie : Crude above $77 will send the SP 500 higher)

What a high premium on a closed end fund teach us ?

PIMCO High Income Fund (PHK) has a premium of over 50% !
Source ; CEFA (Closed End Fund)
The Fund seeks high current income, capital appreciation is a secondary objective. The Fund will normally invest at least 80% of its net assets in debt securities that are, at the time of purchase, rated below investment grade.
How do I use the "closed end fund indicator" ? It usually shows where the overbought/oversold condition (premium/discount) is .....
Money flowing to bond funds .....

Current watch list

Current watch list based on improved chart pattern ;
United States Steel Corp ( X )
Las Vegas Sands ( LVS )
Pfizer, Inc ( PFE )
AT&T Corp ( T )
Home Depot ( HD )
Ebay Inc ( EBAY )
RF Micro Devices ( RFMD )
Sandisk Corp ( SNDK )
Amazon.Com ( AMZN )

Just before you buy Yahoo (YHOO), some quick facts

Lycos was one of the first Internet portals from the mid-90s. Ten years ago, the Spanish company Terra Networks paid more than $12 billion for Lycos. Terra later sold it to a Korean firm for nearly $100 million. This week, the Korean firm sold Lycos for $36 million.
Source : Npr.org
1) Remember the "content is king BS" ?
2) What is Yahoo really worth ? Do you recall that Yahoo bought Geocities for $6 B for nothing !
3) Remember theglobe.com ?
4) Lots of very smart marketing con artists out there .....
5) Now the big hype is focusing on Facebook ..... will wait for everyone and their cousins to buy it, then short it

Case study, ITT Educational Services Inc (ESI)

ITT Educational Services, Inc. (ESI) chart analysis ;
1) One of the reasons I focus on the SP 500 is its "chart pattern" ; If I find a stock/commodity with a better chart pattern, I'll place it on my watch list (ie : Apple inc AAPL).
2) Quick case study with ESI (a reader asked my opinion) ; We have a typical GVN condition ; Gap, Volume, and News.
3) The chart pattern was NOT better than the SP 500 (no higher lows in July)
4) The support break down at $75 (while the SP moved higher) was a clear warning signal.
5) Then ? Le coup fatal ..... News ..... followed by huge volume saying ; "Get me out"
6) Try to buy on oversold condition ? Forget it .... let it drop .....

Once again Shanghai is our leading indicator ?

Shanghai Stock Exchange Index ; The picture is quite easy to read, current pattern gives us a clear bullish and bearish trigger. A break out above 2700 will send the SP 500 back above 1090.

iShares Barclays 20 Yr Treas Bond ETF (TLT)

iShares Barclays 20+ Yr Treas.Bond ETF (TLT) weekly chart ;
1) Price/volume break out in mid April confirmed move up
2) Yield/Bond prices was my "focus du Month"
3) Situation is not the same (see parabolic rise in Oct 09)
4) Still facing a lower high pattern (big picture)
5) Expected scenario ; Bonds trading slightly higher, then a sudden crash ....
Gut feeling ? Yields will rise ($USD heading higher anticipating a rush to buy the $$ ?

SP 500 chart updated

SP 500 chart updated ;
1) Short term trigger is now back into "Neutral" mode, NOT shorting !
2) Last signal was based on my Vix trading model
3) Re entry (bullish) right above 1090 (will confirm the "B" level)
4) Bear signal now stands @ right below 1060

US Dollar index chart updated

US Dollar index chart analysis ;
1) If you have been reading this blog for a while, you know that I turned bullish on the Dollar in late 09. After that clear parabolic rise, a hard pull back was expected ....
2) These kind of patterns are part of a bigger pattern ; a huge ABC pattern ....
3) I urge you to focus on two triggers ; 83.5 and 81.5 ; if we close (weekly) above 83.5, expect a huge rally in the $USD Dollar index. A close (weekly) below 81.5, rush back to the Euro.

The good news could come from Shanghai

Shanghai Stock Exchange Index ;
1) Typical ABC pattern ; we just need to confirm the "B" level (reliable support)
2) Current pattern suggests that Shanghai is "still" facing a bullish reversal
3) Key bearish reversal ? A close below 2500

SP 500 ABC pattern

SP 500 chart analysis ;
1) Focus on current "present time frame".
2) Highly probable ABC pattern ; we just need a reliable "B" (key support)
3) Pay attention to that bear trigger
4) Will the Fed start to buy treasury debt ? High probability.
Gut feeling ; Buy on the dip is on my mind, focusing on financials ; FAS, C, BAC, etc ....

Advanced Micro Devices, Inc. (AMD) warning

Advanced Micro Devices Inc (AMD) chart analysis ;
Focus on that current GVN condition (Gap, Volume, and News) ; we broke below support !

Shares of Intel Corp. (INTC) and Advanced Micro Devices fell sharply Tuesday, amid signs of a slowdown in the personal-computer market, with one analyst warning that orders are "falling of a cliff." (Source Marketwatch)

US Dollar index moment of truth

Powershares DB US Dollar Index Bullish (UUP) chart analysis ;
1) Remember what I said about "parabolic rises" ? They snap ..... hard ....
2) Sitting on key support channel
3) Euro is probably overbought, and its retracement could face a channel pattern, thus sending the Dollar index above that red down trend line (from June high).
4) Yen is also way overbought .... probably thanks to China ....
Gut feeling ; China made some good money on US bonds, sold them, and diversified into other currencies (Euro and Yen) ; time for them to buy back the $USD ?

Is the Japan Index ETF (EWJ) back ?

iShares MSCI Japan Index (EWJ) ;
1) Recent resistance channel is now our key support channel
2) Higher lows pattern + resistance break out suggests we are going much higher
3) Stop stands @ $ 9.70

Gold, Yield, and Deflation

Gold ($GOLD) chart versus the 10 Year treasury note yield ($TNX)
1) Yields broke ANOTHER key support level
2) Deflation is clear .....
3) Do you buy Gold during a DEFLATION ???
4) Do I see an head and shoulder pattern in Gold ?
Yeah, I know, I am Gold bear :)

PowerShares DB Agriculture (DBA), get ready for a buy on the dip ?

PowerShares DB Agriculture (DBA).
Current pattern tells me one thing ; Get ready to buy on the dip !
The investment seeks to track the price and yield performance, before fees and expenses, of the Deutsche Bank Liquid Commodity Index - Optimum Yield Agriculture Excess Return. The index is a rules-based index composed of futures contracts on some of the most liquid and widely traded agricultural commodities ; corn, wheat, soy beans and sugar. The index is intended to reflect the performance of the agricultural sector.

SP 500 chart update

SP 500 chart analysis ;
1) Resistance level is clear
2) Short term buy trigger is still "active"
3) Long term signal is still "neutral"
4) Key reversal stands @ 1090
5) Next move ? Probable channel pattern, waiting for another break out.
6) US 10 Year treasury yield note broke support ..... but the SP 500 did not go below my "reversal level" .... yet ....
Gut feeling ; "Weaker than estimated job report" might already be "old news", priced in !

Japan Yen IMM, probable scenario

Japan Yen IMM long term monthly chart ;
1) Pay attention to one clear fact ; "Parabolic rise" !
2) How do parabolic rises tend to finish ? A spike up, followed by a sharp reversal.
3) Could I be wrong in my opinion and we are actually facing a huge multi year break out ? I doubt the BOJ would allow this to happen .....

Baltic Dry Index update

Baltic Dry Index chart update ;

1) I use the 20 days exp moving average as an entry/exit level

2) Are we close to another buy signal ?

3) A close above the 2200 level should send the Shanghai Stock index much higher

iShares FTSE Xinhua China 25 Index ETF (FXI)

Case study ; iShares FTSE/Xinhua China 25 Index ETF (FXI) weekly chart
1) Typical ABC pattern
2) Current pattern suggests we are about to break out above $42.5
3) Bearish reversal stands @ $38
4) If FXI manages to go above our key trigger "C" (at $47.5) go long global equities, oil, and commodities.

The bigger fool theory

Cartoon inspired by this article written by Peter Tasker in the Financial Times
"The inconvenient truth is that gold is not really an investment at all. Since it generates no return and thus has no fundamental value, the same arguments can be used to justify any price – $500 an ounce or $5,000. Gold buyers are simply trusting in the bigger fool theory – that someone else will take it off their hands at a higher price. They are speculating, not investing, and like all speculators what they are speculating on is the speculations of other speculators. Packaging it in an exchange-traded fund makes no difference."

Euro Dollar probable scenario

Euro Dollar "probable scenario" ;
Based on current pattern, with "time frame" analysis ; I favor the green arrow scenario.
I will ignore this scenario if the Euro manages to remain stuck in a tight channel pattern above 1.3200 for the next 5 days.

US Bonds moment of truth

Focus on the 10 Year US treasury note yield !
We are still facing a higher lows pattern .... for how long ?
Key support level is quite clear ....
See that red down trend ? Its "the" down trend you should focus on, do not attempt to draw other trend lines since it takes the highest high and connects the high "prior" to the lowest low.
Focus on those triggers (1&2) to short bonds.
If we break below support .... I am out of the SP 500 ...

United States of Belgium ?

Cool new tshirt company based in Brussels, called "Bshirt"
http://blog.bshirt.be/
Don't forget to buy one on your next trip here :)
PS : Besides the great beer and chocolate :)

Do you see trends everywhere ?

Do you see trends everywhere ?
Do you tend to focus on "past events" ?
Still amazed to see so many chartist focusing on drawing trends everywhere, looking at old patterns to see if they can detect future entry/exit levels .....
Focus on risk reward entry and DO NOT ignore fundamentals !

Pfizer Inc. (PFE) trading plan

Pfizer Inc. (PFE) chart updated ;
Posted a chart of PFE a few days ago, mentioning that we needed a GVN condition (Gap, Volume and News).
A GVN condition is a reliable entry/exit
Focus on the stop loss level.
Target ; resistance level @ $17.5

ETFs to focus on

The following ETFs (by order of importance vis à vis their chart pattern), should be on your watch list ;
1) Ishares Msci Singapore(Free) Idx ( EWS )
2) Ishr Msci Malaysia(Free) Idx ( EWM )
3) Basic Indus Sel Sect Spdr Fd ( XLB )
4) Ishrs Trst Dj Us Rl Estate Idx ( IYR )
5) iShares Emerging Markets (EEM)
6) Ishares Msci Japan Index Fd ( EWJ )
7) Energy Sel Sect Spdr Fd ( XLE )

SP 500 trigger activated

SP 500 chart analysis ;
1) Short term buy trigger activated (see stop loss level)
2) Key resistance is quite clear (right above 1130)
3) Focus on that key trigger "reversal" ; what events could trigger it ? Chinese bank crash.
Now the gut feeling ;
1) From the lows of early July, we could be "overbought" ; Next move will depend on how the Shanghai index will react ; so far so good since light crude oil did pop up.
2) Worst case scenario ? A huge channel pattern ..... (that is why I am NOT bullish long term)