Friday, October 22, 2010

The Week Ahead

It's time to move out to the weekly chart on the Dow to see what might be ahead this coming week, the last trading week of the month. Here's a year's worth of action for your perusal. There are two things that stand out. First, we remain solidly in the rising RTC going all the way back to the end of August, and second, there's getting to be a lot of similarity between the current pattern and the February to April rally which ended very close to the current levels. The resistance at 11,258 is not to be overlooked.

Although it's too early to call an end to the current rally, it is definitely worth noting how overbought all the indicators are now looking, and also how the dollar has stopped its decline in the past week. I wouldn't be surprised if we got another 200 point drop sometime this week, but it's impossible to call it right now. As a swing trader, I'm trying to be less concerned with individual one day moves and look more at the overall short-term trend.

If the Dow stays around its current level (11,132) for three more days, that will take us to the lower edge of the RTC channel and setup for a trend reversal. A one day drop to 11,090 will do the same thing. I'm not going to try to call the top, but I will try to call the end of the trend using RTC analysis.

It might happen this week, but it's looked like a possibility for several weeks already and hasn't happened yet. Still, I'm starting to see more risk than reward in the current environment and it's getting harder lately to find anything that looks like a decent buy. It looks to me like the road higher is going to be a tough slog from this point.

That's about it. Trade well, do well, be well.

Performance update

It was a pretty blah week overall for me. I ended the week down 0.49% while the Dow was up just a bit. But I am still up 21.93% year to date which puts me on track for a 34.6% annualized return, very near to what I realized last year. Also, since the Dow is up just 6.76% YTD I'm currently beating the Dow by a decent margin.

I had one good trade in Lowe's last week, netting a quick point in two days. My AUY play didn't fare as well - if it doesn't perform tomorrow, it's see ya. My cheapo dividend stocks (AOD, CIM, NRF, RSO, SPIL) continue to do well.


As always, this isn't investing advice, just a point of reference you will hopefully find interesting. I'm retired, I work for no one other than myself. There's no ads on this site, I am beholden to no one. I will always disclose my position in any stock I mention here, or my association to any product I may talk about. My performance numbers are honest (really, if I was going to lie about it, would I claim to be up merely 22%?) What you see is what you get.

Thursday, October 21, 2010

Still rising...

I am just tickled pink with the performance of the regression trend channel technique. Since I learned about it this spring, it has become my analytical tool of choice. Yesterday it foretold of a continued rise in the market and today that's just what we got. Just look at the daily Dow to see how well this works.
Look back down the rising RTC channel from today to its start back in August.

Notice how in at least four different spots the curve flattens out and just looking at the candlesticks you might be tempted to call a top. But looking at the trend lines of the RTC, you can see that it wasn't in the cards. Today's small rise keeps us near the centerline of the channel and affirms a continuation of the uptrend. In fact, the traditional indicators (stochastic, RSI, momentum, and money flow) in the lower panels have come off their oversold levels lending additional support to the bullish thesis.

I made no trades today. I am now 50% in cash, though that is a function of some bonds maturing recently. Modulo those, I'd be fully invested according to my strategy earlier this year. The "high yield" section of my portfolio continues to do quite nicely. I'm in AOD, CIM, RSO, NRF, and SPIL.

Trend break rejected

The Dow today made back most of what it lost yesterday and in so doing climbed back near the middle of its rising RTC channel. The setup for a trend break yesterday was convincingly rejected. Accordingly, we remain long with one more week to go in the scary second half of October.

My long in LOW is doing well, up 2.85% today to close at 21.65. And after seeing AUY stabilize, I went long that too at 10.77 today. It closed at 10.87. I will let both of these run as swing trades until they look topped out.

Wednesday, October 20, 2010

Setup but no trigger

Today's nasty 165 point decline in the Dow (courtesy of the Chinese Communists) took us under the ascending daily lower RTC line but closed exactly on the line itself. Check it out:
For a definite bearish setup, the close should have been below this level (10,979) but I'll call it close enough. Is it finally time to call the top? Tomorrow will tell if the setup triggers as a trend reversal or if we climb back into the RTC channel negating today's setup. For what it's worth, the ES futures are actually up 450 at the moment (12:30 AM).

In the meantime, I note that gold was hard hit today with AUY falling to 10.65, something I thought might be coming as I mentioned last Friday. It is approaching a tradeable level here but I will wait to see what tomorrow brings before pulling the trigger on gold.

Today's action put Lowe's (LOW) on sale, so I bought some at 21.03. I note the following news, courtesy of Well Fargo Economic Commentary: "Housing starts rose 0.3 percent in September, which was well above expectations. Starts of single family homes increased 4.4 percent, while multi-family starts fell 9.7 percent. Single family permits rose 0.5 percent." This can only be helpful to LOW.

Monday, October 18, 2010

Uptrend Intact

A look at today's Dow daily chart shows that the RTC uptrend dating back to the end of August remains intact as we enter the scary season of late October. Forget what everyone says about how bad September is historically (and September was great this year) - I have found that the last two weeks of October have been the worst of the year by far in my own experience, going back 10 years now.

But in the meantime we remain firmly inside the rising RTC channel, so we remain long. To paraphrase the old TV ad, "We will call no top before its time".

Meanwhile, note how both AUY (11.17, -0.89%) and the gold/silver index XAU (204.95, -0.54%) are both lower again since I wrote about gold last Thursday. This now puts gold at the lower end of its own RTC. This bears close watching. A further decline tomorrow would signal a trend reversal in the precious metal.