Category Archives: indexes

Four Things to Watch for Warning Signs

educational newsletters, ETFS, indexes, jay kaeppel, stock market, Stock trading
First things first: I am primarily a trend-follower (this is based on, a) the relative long-term benefits of following trends and b) my lack of ability to actually “predict” anything – but I digress).
As a trend-follower I love the fact that the stock market has been trending higher and the fact that there is so much “angst” regarding the “inevitable top.”  Still, like a lot of investors I try to spot “early warning signs” whenever possible.  Here are the four “things” I am following now for signs of trouble.
Fidelity Select Electronics
In Figure 1 you see, a) the blow-off top of 1999-2000 and b) today.  Are the two the same?  I guess only time will tell.  But the point is, I can’t help but think that if and when the bloom comes off of the electronics boom, overall trouble will follow.  Here is hoping that I am not as correct here as I was here.
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Figure 1 – Ticker FSELX (Courtesy AIQ TradingExpert)
Just asking.
Transportation Index
As you can see in Figure 2, the Dow Transports has a history of making double tops which is followed by trouble in the broader market.  Are we in the process of building another double top?  And will trouble follow if we are?  Dunno, hence the reason it is on my “Watch List” rather than on my “OH MY GOD SELL EVERYTHING NOW!!!!! List”.
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Figure 2 – Dow Transportation Index (Courtesy AIQ TradingExpert)
I guess we’ll just have to wait and see.
Ticker XIV
Ticker XIV is an ETF that is designed to track inverse the VIX Index. As a refresher, the VIX Index tends to “spike” higher when stocks fall sharply and to decline when stocks are rising and/or relatively quiet.  To put it in simpler terms, in a bull market ticker XIV will rise.  As you can see in Figure 3 one might argue that XIV has gone “parabolic”.  This is a potential warning sign (assuming you agree that the move is parabolic) as a parabolic price move for just about anything is almost invariably followed by, well, let’s just say, “not so pretty”.
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Figure 3 – Ticker XIV (Courtesy AIQ TradingExpert)
Let’s hope not.  Because if it does qualify as  parabolic that’s a very bad sign.
Ticker BID
This one may or may not be relevant but for what it is worth, Sotheby’s (ticker BID) has on several occasions served as something of a “leading indicator” at stock market tops (for the record it has also given some false signals, so this one is more for perspective purposes rather than actual trading purposes). Still, if this one tops out in conjunction with any or all of the above, it would likely serve as a useful warning sign.
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Figure 4 – Ticker BID (Courtesy AIQ TradingExpert)
Summary
There is no “urgent action” to be taken based on any of this.  Bottom line: Nothing in this article should trigger you to run for the exits.
Still, it might be wise to at least take a look around and “locate the exit nearest you.”
You know, just in case.
Chief Market Analyst at JayOnTheMarkets.com and AIQ TradingExpert Pro (Courtesy AIQ TradingExpert) client. http://jayonthemarkets.com/
Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

AIQ Market Timing signals a sell

expert rating, expert system, indexes, market timing

The AIQ TradingExpert Pro Market Timing Expert System uses over 400 rules based on numerous technical indicator conditions to determine if a change in the current trend is imminent. The signals can be quite early and confirmation from other indicators not used in the AI system, like Phase are recommended. Quick disclaimer, we are not advisors and do not give recommendations.

Here’s the signal from last week. The number of stocks with new highs vs new lows is clearly showing a persistent down trend, while the market has been flat.

By clicking the ER button in Charts we can see some of the major rules that have fired to generate the signal

The AIQ market Log in Reports  provides additional information that gives us some broader information on the market. here we can see how a broad range of indicators on the market are fairing and also the percentage of buy vs sell signals on stocks in the S & P 500 (Unconfirmed signals 43-57, confirmed signals 33-67) .
The market action from Tuesday generated a second down signal of 2-98, following the 200 point fall in the Dow. The major rules that fired this time are below.
While never perfect, we always take heed when this many rules are firing

It’s all relative you see

group and sector, indexes, stock market, Stock trading

The markets have been shall we say been less than inspiring recently. Brexit came and went with a brief hiccup in the action and only in the last week or so has the volatility picked up. The Dow as you can see in this weekly chart is back the same level as December 2014

 

 

The VXX shows clearly the decline in volatility since the high back in 2011

 

The summer doldrums may be over, but during periods when the market is range bound, segments within the market are often performing very well or very poorly. One AIQ Report that can show the strength within segments is the Relative Strength Strong – Short Term. This report shows stocks in 3 month trend up and is a great report for those who trade with ‘the trend is your friend’. Here is Friday 9-16-2016 report. The report is ranked by the stocks with the best trend.

 

 

I highlighted 6 stocks in the top of this report. All have good trends in place, and all in the Oil and Exploration S&P 500 group. The group has performed quite well recently. The top 2 OILEXPO stocks CHK and DVN have both had a small pullback to their uptrend line. We’ll see how they do this week.

 

Inverse Head and Shoulders on the market?

chart patterns, indexes, market timing
There was an interesting Inverse Head and Shoulders pattern completed last night on SPY. As SPY is the proxy ETF for the S&P500 index, it caught my attention. A closer look at the Chart attached shows this pattern usually breaks out to the upside.
Analysis of the supplementary information clearly shows that the uniformity of this inverse head and shoulders is good, however the overall quality of the pattern is only average. The biggest issue is the lack of volume and lack of power of the breakout. The volume is particularly low. More volume is needed before this pattern is confirmed, particularly on a strong up day.

Learn more about Chart Pattern Recognition for TradingExpert Pro  http://aiqsystems.com/chartpatterns.htm

Soybeans, Crude Oil and Gold, Oh My

commodities, educational newsletters, indexes, jay kaeppel
Well I have not been writing a lot lately.  The truth is I am a little “out of sync” with the markets these days.  And I prefer to write when I feel like I have at least some idea of what the heck is going on.  Which is a good thing I think.
So for today let’s just review and update some relevant things that I have written about in the past.
Soybeans
In this article I suggested a bullish position in May soybean futures.  Under the category of “One for the Good Guys”, beans have rallied nicely as shown in Figure 1.  
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Figure 1 – May Soybeans (Courtesy: www.Barchart.com)
At this point a trailing stop – or selling half into strength and using a trailing stop on the remaining position – sounds like a good idea to me.  It should also be noted that “First Notice Day” for May soybeans is 4/29.  Bottom line, unless you want someone to dump 5,000 bushels of soybeans in your front yard (OK, it doesn’t really work like that but it is fun envision that it does), then you need to exit any and all long positions in May beans before that date.  This can involve taking profits, rolling into July or both.
Crude Oil (ETF ticker USO)
In this article I wrote about entering a somewhat bullish position using put options on ticker USO.  As you can see in Figure 2, it is “so far so good”.  At this point the trade has captured $588 of the initial $689 credit.
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Figure 2 – USO put position (Courtesy www.OptionsAnalysis.com)
One position management note: USO is at a key price level as you can also see in Figure 2.  If USO fails to break through to the upside I would consider taking some (or even all) profits and moving on to the next trade, rather than waiting another 3 months in hopes of capturing the remaining profit potential.
Gold
In this article I wrote about a relatively crude moving average method I use to help identify the trend of gold.  As you can see in Figure 3, my “Anti-Gold” index recently flipped back to being “bullish” for gold (by virtue of the fact that the “anti-gold” index flipped to being bearish).3
Figure 3 – Ticker GLD vs. Jay’s “Anti-Gold” Index (Courtesy AIQ TradingExpert)
So does this mean it is “clear sailing” for all things gold related?  Not at all.  All moving average systems are susceptible to whipsaws.  This one is no exception.  In the short-term gold and gold stocks appear to be overbought.  Still, as you can see in Figure 4, the Elliott Wave count for ticker GLD is suggesting the possibility for higher prices in the not too distant future.
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Figure 4 – Bullish Elliott Wave count for GLD (Courtesy ProfitSource by HUBB)
Jay Kaeppel
Chief Market Analyst at JayOnTheMarkets.com and TradingExpert Pro client