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Trading breakouts with stage analysis
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Trading breakouts with stage analysis

  #91 (permalink)
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Major charts for analysis

Attached is the latest major charts for analysis. I've added the FTSE 100, DAX and Russell 2000 to mix to broaden the comparisons.

The 30 year Treasuries chart is this weeks chart of note for me as it moved from Stage 2B- into Stage 3A- with it's close below the 30 week weighted moving average this week. I've given it a minus rating as the price is yet to close below the recent tight range below 139.75 so it could still go either way here, but the negative indicators continue to build up with increased volume on this weeks move down, the Mansfield RS is also negative and cumulative volume gave a sell signal four weeks ago and has failed to get back above it's moving average.

The Russell 2000 small cap index underperformed the S&P 500 by around 3% this week and broke below it's February consolidation range suggesting to me that people are moving out of the riskiest areas either to the sidelines or rotating into some of the larger more defensive stocks as treasuries didn't see the normal inverse correlation. So a potential warning sign there imo.

Gold and Silver also made headlines this week with a Bernanke fueled sell off, which was exacerbated by the contact rollovers in the futures as people decided to book their profits from the run up since the new year began. Both were hit hard but no major technical damage was done as Gold held above 1700 and Silver pulled back to the support of it's recent range around the $34 level. This could change if Gold closes below 1700 or Silver below $33 so it will be interesting this coming week to watch.

Copper advanced a little further towards it's Stage 2A breakout point of $4 again this week and settled the week at $3.903. I personally think this is one of the key components necessary to drive the stock market higher as if it can breakout then it will give extra weight to stocks to continue higher.

WTI Crude Oil put in a short term high at $110.55 after quite a volatile week of headlines affecting it, but the short term trend is still up as it's forming a new trading range between $105 and $110.

Finally the Dollar Index had a strong reversal following the Bernanke comments and closed the week higher. The $80 level looks to be fairly strong resistance as it's had a number of reversals around there recently, but it closed the week back above it's uptrend line so it is definitely an important one to watch this coming week as it is mostly inversely correlated with the stocks and commodities markets.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
Attached Thumbnails
Trading breakouts with stage analysis-spx_weekly_2_3_12.png   Trading breakouts with stage analysis-ndx_weekly_2_3_12.png   Trading breakouts with stage analysis-iwm_weekly_2_3_12.png   Trading breakouts with stage analysis-ftse100_weekly_2_3_12.png   Trading breakouts with stage analysis-dax_weekly_2_3_12.png   Trading breakouts with stage analysis-gc_weekly_2_3_12.png   Trading breakouts with stage analysis-hg_weekly_2_3_12.png   Trading breakouts with stage analysis-cl_weekly_2_3_12.png   Trading breakouts with stage analysis-ty_10yr_treasuries_2_3_12.png   Trading breakouts with stage analysis-us_30yr_treasuries_mrk_2_3_12.png  

Trading breakouts with stage analysis-dx_dollar_index_2_3_12.png  
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  #92 (permalink)
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Market Breadth

I highlighted the $NYA50R - NYSE Percent of Stocks Above 50 Day Moving Average in the last update of the breadth charts on 5th February as it had reached the highest levels it ever normally reaches and so was suggesting an increased risk in the short term. This has finally started to be seen this week, with the amount of stocks above their 50 day moving average in the NYSE dropping by around 14% to 75.43%. It is however still above the key 70% level so it isn't a sell signal yet. However, it does show that a large number of stocks are moving lower while the large cap indexes have held up, so a warning signal at least for the short term trend.

The medium term indicator of the NYSE Percent of Stocks Above 150 Day Moving Average ($NYA150R) is now reaching higher risk levels also, but the longer term NYSE Percent of Stocks Above 200 Day Moving Average ($NYA200R) and the The NYSE Bullish Percent Index ($BPNYA) - which is considered the head coach of the team are still moving higher and have room to the upside yet. So risk of a short term correction is increasing and it is already occurring in the smaller names clearly, but the longer term picture still looks good from the breadth charts point of view, however, the easy gains may be over, so it's time to be more selective with picks from here imo.

Market Breadth Signals
TickerDescriptionPercentSignalColumnRisk
$BPNYAThe NYSE Bullish Percent Index77.38%BuyXsHigh
$NYA200RNYSE Percent of Stocks Above 200 Day Moving Average74.62%BuyXsHigh
$NYA150RNYSE Percent of Stocks Above 150 Day Moving Average82.42%BuyXsVery High
$NYA50RNYSE Percent of Stocks Above 50 Day Moving Average75.43%NeutralOsHigh
SPY/TLTS&P 500 / US 30 Year Treasuries-BuyXs-

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"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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  #93 (permalink)
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US 30 Year Treasuries Stage Analysis


An important chart to note if you trade stocks due to it's mostly inverse correlation (that I highlighted had changed to Stage 3A- a few weeks ago) is the US 30 year Treasuries. The last two days have seen the confirmed breakdown into Stage 3, with today's increased volume moving it lower and managing to close below the 200 day simple moving average.

The 135 area now becomes the Stage 3 lower support level to watch as a weekly close below that would signal a Stage 4A breakdown imo. However, the measured move from the four month range gives a rough target of 134 in the short term, so that gives extra weight to the 135 level holding up on a closing basis on the first attempt at breaking it.

So with that level rapidly approaching we could see a reversal there and a retest back up towards the breakdown level, which would pressure stocks in the short term causing a correction. However, if treasuries then rolled over and moved to break down again, the Stage 4A breakdown could be the catalyst for the next leg of the stock rally imo.

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  #94 (permalink)
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Nice! Keep up with the good work!

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  #95 (permalink)
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Update

I was a little bit impulsive at the beginning of last week and decided to close out all the open positions on 12/3 to secure the 7% gain I've made since the end of October. I'm pleased with that as it just managed to outperform the S&P 500 in the same timescale, but without any of the volatility that the S&P 500 had at the end of last year. Obviously I've missed the big move up last week, but am fairly content as I feel like the forward testing has been successful so far and I'm now comfortable with the method.

I opened two new short trades on 14/3 in Silver and Gold as they broke down at 32.767 for Silver and 1650.21 for Gold. As these are both priced in US Dollars I placed an equal size hedge in the GBP/USD to mitigate any currency movements affecting the trades.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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  #96 (permalink)
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Major charts for analysis

The S&P 500 and the Nasdaq 100 continued continued to push to new 52 week highs, but the Russell 2000 Small Caps failed to confirm the move and didn't manage to break out also.

The Dollar Index had more than twice it's normal volume and moved higher before pulling back to close the week slighter lower just above the 50 day MA. This had an effect in the Gold market also, with Gold breaking below it's 200 day MA on the Dollar strength early in the week, but it didn't manage to recover and instead had two inside days and settled very close to it's 3 and half year trend line - as you'll see on the weekly chart. So a big test for Gold this coming week, as a weekly close below the trend line would likely encourage some more selling. But, if it instead reverses and closes back above the 200 day MA, then the buyers may come back in.

Copper still continues to be range bound in the upper portion of it's Stage 1 zone. The 50 day MA and 200 day MA will cross on Monday which is another positive, but it still needs to breakout and have a weekly close above $4 to hit Stage 2A imo. Which would be a further boost to stocks if that happens.

The major move this week though was in the treasuries markets, with the 10 year and the 30 year breaking down and moving into Stage 3. Both closed below their 200 day MA and near the bottom the Stage 3 ranges.

So another interesting week ahead

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
Attached Thumbnails
Trading breakouts with stage analysis-spx_weekly_16_3_12.png   Trading breakouts with stage analysis-ndx_weekly_16_3_12.png   Trading breakouts with stage analysis-iwm_weekly_16_3_12.png   Trading breakouts with stage analysis-dax_weekly_16_3_12.png   Trading breakouts with stage analysis-ftse100_weekly_16_3_12.png   Trading breakouts with stage analysis-gc_weekly_16_3_12.png   Trading breakouts with stage analysis-hg_weekly_16_3_12.png   Trading breakouts with stage analysis-cl_weekly_16_3_12.png   Trading breakouts with stage analysis-us_30yr_treasuries_16_3_12.png   Trading breakouts with stage analysis-ty_10yr_treasuries_16_3_12.png  

Trading breakouts with stage analysis-dx_weekly_16_3_12.png  
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  #97 (permalink)
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Congratulations on your journal!



In the spirit of our March Trading Journal contest, I am asking everyone to spend a few minutes and share their journaling experience.

A) What are the top five benefits you have seen as a result of regularly posting in this journal?

B) What are the top five problem areas you have identified as a result of regularly posting in this journal?

C) Were you initially reluctant to start this trading journal? If yes, why?

D) How do you feel, overall, about your journaling experience?

E) Would you recommend to others that they should also start a trading journal?

Thank you for taking the time to answer my questions. I appreciate your posts, and I hope you have benefited from your journal. I also know that others will benefit as well, just by reading about your own experiences.

Enjoy your weekend,
Mike

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  #98 (permalink)
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Big Mike View Post
Congratulations on your journal!



In the spirit of our March Trading Journal contest, I am asking everyone to spend a few minutes and share their journaling experience.

A) What are the top five benefits you have seen as a result of regularly posting in this journal?

B) What are the top five problem areas you have identified as a result of regularly posting in this journal?

C) Were you initially reluctant to start this trading journal? If yes, why?

D) How do you feel, overall, about your journaling experience?

E) Would you recommend to others that they should also start a trading journal?

Thank you for taking the time to answer my questions. I appreciate your posts, and I hope you have benefited from your journal. I also know that others will benefit as well, just by reading about your own experiences.

Enjoy your weekend,
Mike

A) I've found the benefits of keeping a journal is that it gives me a record that I can look back on and review where I've gone wrong and what I've done right. Also I find that it helps with the discipline of trading as as an individual I don't have the benefit of a risk manager watching over me and making sure I don't do anything stupid. So the journal helps me to keep my discipline I find.

B) Only problem is that there's not much feedback, as my trading style is too long term for the members on here as the vast majority are day traders.

D) I think the journal has been very positive as it's documented my learning and forward testing of Weinstein's system and shows me where I've made mistakes along the way.

E) Keeping a journal is vital imo, as documenting your trades for later review will help you learn to be better.

Hope that helps

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
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  #99 (permalink)
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Market Breadth

The NYSE Percent of Stocks Above their 50 Day Moving Average has continued to fall away during March and is now on a sell signal after making a double bottom breakdown. It has also made a number of lower highs and moved below the key 70% level suggesting a short term correction is occuring in the broad market as around 28% or so less stocks are above their 50 day MA now than they were on February.

The NYSE Bullish Percent Index continues to hold above the 70% level. Dorsey Wright's research suggest that the average time it spends above this level is around 96 days before reversing down. We're more than half way through that now, suggesting that we have another month before we reach that average.

Market Breadth Signals
TickerDescriptionPercentSignalColumnRisk
$BPNYAThe NYSE Bullish Percent Index75.32%BuyXsHigh
$NYA200RNYSE Percent of Stocks Above 200 Day Moving Average76.69%BuyXsHigh
$NYA150RNYSE Percent of Stocks Above 150 Day Moving Average80.93%BuyXsVery High
$NYA50RNYSE Percent of Stocks Above 50 Day Moving Average61.30%SellOsMedium
SPY/TLTS&P 500 / US 30 Year Treasuries-BuyXs-

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Last edited by isatrader; April 1st, 2012 at 05:21 PM.
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  #100 (permalink)
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Major charts for analysis


Here's my observations on this weeks major charts.

Crude Oil broke down below it's recent range and the 50 day SMA.

Dollar Index appears to be in Stage 2B- with a possible move into Stage 3A as it closed the week below the trend line since the lows, turning the 30 week WMA negative. However, it is still above it's 200 day SMA which will should offer some support if it attempts to move lower from here. But if it does continue lower, it would benefit the commodities and precious metals.

Gold spiked up to test it's 200 day MA, but rolled over under the 1700 level to close the week below the 200 day MA again. But closed slightly higher on the previous week still, so it's holding above the 3 and half year trend line for the time being. The last few weeks price action in Gold has given us a swing low below the 200 day MA which can now be used to define the Stage 4A breakdown level imo, which is a weekly close below 1627.50, as that would also be a close below the long term trend line and the 30 week SMA is negative. It could still recover here though and try to move higher again. But I'm trying not to give a personal opinion, I'm just trying to analyse what the charts are saying based on the method and currently it is that Gold is in Stage 3B.

Copper continues in Stage 1 to bounce around the 200 day MA. It's forming a bit of a triangle formation which can go either way quickly.

Treasuries moved higher as expected last week to try to retest the breakdown levels. The 30 year fell short and closed back below it's 200 day MA on Friday, but the 10 year reached the 130 breakdown level and was rejected on Friday but closed above it's 200 day MA. Both are in Stage 3 and have defined their Stage 4A breakdown levels over the last few weeks. For the 10 year a weekly close below 127.7188 and the 30 year a weekly close below 135.1562 should do it. As noted before Treasuries have a largely negative correlative with equities, so if a Stage 4A breakdown did occur then stocks would likely benefit.

Finally the stock indexes. The S&P 500 closed the week slightly higher after an indecisive week in either direction. The Nasdaq 100 closed very slightly higher, but it was down for the final 3 days of the week. The Russell 2000 small caps also closed very slightly higher, but was down for the final 4 days of the week and the DAX and FTSE 100 were down on the week. So there wasn't much follow through after Mondays move higher, which could be down to profit taking at the end of a very strong quarter or it could be something else. But the price action suggests caution imo, as the indexes are all in Stage 2B and Monday is the start of a new quarter. So the chances of sector rotation and a short term trend change are increased imo.

"Fate does not always let you fix the tuition fee. She delivers the educational wallop and presents her own bill" – Reminiscences of a Stock Operator.
Attached Thumbnails
Trading breakouts with stage analysis-spx_weekly_30_3_12.png   Trading breakouts with stage analysis-ndx_weekly_30_3_12.png   Trading breakouts with stage analysis-iwm_weekly_30_3_12.png   Trading breakouts with stage analysis-dax_weekly_30_3_12.png   Trading breakouts with stage analysis-ftse100_weekly_30_3_12.png   Trading breakouts with stage analysis-gc_weekly_30_3_12.png   Trading breakouts with stage analysis-hg_weekly_30_3_12.png   Trading breakouts with stage analysis-cl_weekly_30_3_12.png   Trading breakouts with stage analysis-us_30yr_treasuries_30_3_12.png   Trading breakouts with stage analysis-ty_10yr_treasuries_30_3_12.png  

Trading breakouts with stage analysis-dx_weekly_30_3_12.png  
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