Biiwii.com Technical Analysis & Commentary

Dat all ya got Bully?

2009-07-13T13:32:00.008-04:00

I probably should not taunt these creeps because hope and hype can go a long way in the short term. Rather than contemplate covering anything, I added back starter positions in a couple favored gold stocks (sold on the unsustainable rise to HUI 400) because as noted in NFTRH41, the gold-silver ratio has come to a point where markets (including silver and gold stocks) can get a bounce.

Will it be a one day wonder or something more? I don't know. But the state of the various market technicals say hold short against long gold positions. So, if this mess drops as expected and takes gold miners lower, at least they have investment merit and the shorts will come back to life.

Failing that, if the market turns and burns higher here, mentally stopping out my short positions, it may invalidate what I have been following as a very bullish intermediate term potential as most recently discussed in #41. This is counter intuitive I know. But this is the markets.

To subscribers: Today's activity will probably be a good lead in to an email status update tomorrow morning.

Edit (2:51) Here is the operative clip from NFTRH41:

The GSR [gold-silver ratio] has chosen its path and broken to the upside of the wedge we have been watching. This signals bearish tidings for the hopeful trade in stocks and commodities. If the GSR hits some turbulence at the SMA 200, markets could get a brief reprieve from recent bearishness. This would include gold and silver stocks of course.

Again, if stocks remain on a higher course short term, a very bullish intermediate pattern will be all but invalidated. A drop to the low 800's by the SPX would be best for the bulls. The problem is nobody bothered to tell the bulls what is best for them beyond their short term impulses.

Dow 60 minute

2009-07-13T11:39:00.002-04:00

Dohh, I guess this is why bears tend to get pretty angry.

NEW YORK (Reuters) – Stocks rose on Monday, sending the Dow Jones industrial average up 1 percent, as bank shares advanced following an upgrade of Goldman Sachs Group (GS.N). and bullish comments from an influential analyst.

Speaking of back tests...

2009-07-13T11:02:00.005-04:00

...here is the Dow doing all it can to make you believe.

Well, I will think about believing when the neck line and moving average cluster are surmounted in conjunction with RSI resistance being taken out and the bearish MACD signal being negated.

Until then, sorry Mr. Dow. No can do.

SRS (RE Short) - Back test in process

2009-07-13T09:59:00.007-04:00

I will probably never be known as a perma-bear, and if I have identified one weakness in my financial market makeup it is that I tend to get a bit emotional when short the markets. I think I know why that is too. It is because, just like the gold bugs who are sometimes criticized here, I think I know the truth about how what I consider an illegitimate financial system runs. When I take morally superior positions against that system it really pisses me off when it flies in my face.

I am just telling the truth. I tend to get a lot of things right in the markets and usually net out very nicely in my trading and investments. But this is a weakness.

All that said, I continue to hold several short positions including the ultrashort real estate etf, SRS shown here. They are back testing the breakout this morning but I don't buy it. Thus far my shorts (China, real estate, financials, euro and oil which has been closed out) have been an easier hold than normal I guess for two main reasons; 1) They are just acting normal, which I can deal with chart wise and 2) My macro research points toward events in line with a short term bearish stance.

Anyway, here's the chart showing the back test.

NFTRH41 Out now

2009-07-11T19:52:00.002-04:00

NFTRH41 overcompensates for the abbreviated 5 page NFTRH40 published mid-week and goes on for 14 pages with lots of technical analysis and commentary in what I think of as a continuum moving forward. In other words, a cohesive narrative carried forward through the dog days of summer and into what I believe will be make or break decision time in the next few months.

To be sure there are very different possibilities on the horizon and not having a crystal ball, all I can do is analyze and adjust as needed. Thus far, things are going to plan and I have not had to make many adjustments at all.

My commitment is that NFTRH subscribers will be ready for whatever lay ahead. I feel I have done a good job of continuing with that commitment today in NFTRH41.

NFTRH41 out now.

Have a great weekend!

Speaking of shorts...

2009-07-10T14:06:00.004-04:00

Why do I continue to hold the majority of my ultra short ETFs? Because they are no longer acting like basket cases. In fact, most of them are forming beautiful looking bottoms and the charty geek in me cannot resist bottoms like this, especially when they are doing a good job of protecting my bullish positions in some of the smaller gold stocks.

Here is SRS, the ultra short real estate ETF acting nicely inverse to the IYR chart shown yesterday and trying to confirm a breakout.

IEF treasury bond fund - target reached

2009-07-10T13:51:00.003-04:00

Yes, I grew uncomfortable owning the longer term debt of the chronic inflator, so I took my 1.50% plus dividend and moved along, preferring to short the market for my deflationary kicks. But since the trade was opened here on the blog, I thought I would close it out for you.

IEF has hit target.

Gold Ratios - Time to Pay Attention

2009-07-10T08:07:00.006-04:00

Ever since the sentimentally unsustainable negative events of Q4, 2008, when gold simply exploded higher in ratio to over-played assets far and wide in a panicked rush for safety, the ancient monetary metal has been consolidating its relative gains. As noted at the time in NFTRH, this excessive reaction had to be worked off. Now, unfortunately for the unprepared and hopeful, it has been worked off. Forewarned is forearmed.

Dialing forward to today, we find a tired rally in nominal stock, commodity and low quality debt prices. We see a rising Gold-Silver ratio (GSR) and a US dollar not far above our 'do or die' support level of 78. See the free, albeit abbreviated issue of NFTRH for the monthly view of USD.

NFTRH held and added gold miners strongly throughout the process of gold's impulsive rise in ratio to the things that are positively correlated to economies and rising human spirits. This even as nominal gold stock prices imploded. Positions were added 'all in and around' a historic bottom and this trade has paid off quite well.

Okay, that is history. Now what?

We have been watching the GSR (among other indicators) tirelessly and its message for the markets has been actively bearish for about a month now. To review, when silver is rising relative to gold it indicates a willingness on the part of market participants to accept risk, to 'play'. The GSR has been working like a more sensitive version of the VIX in recent years. Ah, but there is literally a world of ratios that can be used to advantage when attempting to gauge the winds of the markets.

In the chart included today we see gold in ratio to the Reuters CRB commodity index ($CCI). Even as many people micromanage nominal prices of asset markets, gold's ratio to commodities tells a story of a bottom in the making, which of course tells a story of a top in the making in what NFTRH called 'Hope 09'.

Sure, I would like you to join my newsletter. With its early identification of the various rallies off of unsustainably bad sentiment, it has acted as an early warning system for those looking for opportunities to make money. Most recently however, NFTRH has acted as an early warning system in service to preservation of capital gains with an eye toward coming opportunities.

Regardless, let this short article serve as notice that gold's consolidation vs. the assets of hope looks to be in its final stages. This is a bullish chart, and in this weekend's NFTRH41, we will look at gold's ratio to several other assets and markets. It is time to pay attention and it is time to get it right.

Markets travel in roundabout directions and cycles - both short and long term - must be endured. It is technical, sentiment and market ratio analysis that guides us through these cycles and keeps us on the right track. Please heed the above chart and consider what will happen when gold finishes consolidating the explosive ratio gains of 2008.

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Notes From the Rabbit Hole

IYR - Real estate iShares

2009-07-09T15:02:00.003-04:00

This etf is looking pretty toppy and if the neck line is broken it will look to the 25 area as a measured target.

This economy is not going as policy makers would hope, which is no surprise because the only real effects I see from the 'make work' stimulus package come in the form of things like signs telling me 'your stimulus money at work' while I sit in traffic jams on the highway.

But I digress. Here is the RE etf threatening its neck line.

Bully tries late theatrics

2009-07-08T16:35:00.006-04:00

But as yet the market has proved nothing. Noted resistance and neck line reside above, per the 60 minute chart. If Bully gets above those levels, then we can talk bull.

Separately, here is today's abbreviated edition of NFTRH (NFTRH40) for your review. It is about half of the normal length but covers some important topics. If you like it or think that it hints at providing value for you going forward, feel free to do what many folks have already done; sign up for the monthly or yearly subscription.

NFTRH is delivered to your inbox weekly with interim email updates.

Check up on SKF (financials short position)

2009-07-08T12:52:00.004-04:00

I will be the first to admit that I neither know nor care how these things work, these high octane ultrashort ETF's. A subscriber who is an economist by training sent me a mathematical breakdown of the dynamics in play on vehicles like this but I could not understand it. I am a psychology and sentiment guy after all, not a numbers guy. :-)

So, while it is advised to use these things as no more than day trading vehicles, I find myself watching SKF and the other ultrashorts daily and seeing charts that look to be making nice bottoms. Here is SKF hinting toward a breakout that would target the 55 area at which point I "think" I will sell it, subject to ongoing review of course.

An abbreviated version of NFTRH (#40) just went out to subscribers and I am thinking of making it available for free on the blog after the market closes. If so, it will be linked here with no need to email me.

Euro vs. USD

2009-07-07T15:42:00.003-04:00

Ino.com builds a good case here for a stronger euro vs. the US dollar which is contrary to my current positions in euro ultrashort EUO.

Now, I am not necessarily bullish the dollar nor bearish the euro. But I am attempting to use this short as a hedge against dollar strength and short term weakness in the gold market, where most of my positions are.

We shall see. But I thought it was an interesting little video.

HUI not looking so swell either

2009-07-07T12:22:00.003-04:00

Not to be outdone, Huey sports a daily down trend and potential for the SMA 200 to be seen near term.

But in a high risk (of a dollar upturn) environment and considering the gold miners' volatility, there is lower potential as well, including a compelling buy point that NFTRH has been following for months now.

It was not too long ago that many people were salivating at the thought of paying HUI 400 to get aboard. I have got to believe we are in the midst of getting some nice work done on that toxic sentiment.

As yet however, HUI has not broken and risk in owning quality gold stocks is so much less now than it was in May.

Oil - We got our breakdown

2009-07-07T09:23:00.005-04:00

...and oil could have further to drop, but I think I am going to take the profit on this short trade (SCO) today, given the erratic nature of these ultrashort ETF's and my spotty record in the oil market. Profit is currently a bit over 16% and in a market like this, that is worth taking.

Edit (9:35) There, done... profit of 17.7% taken. After allowing no more than a small loss in NatGas last week (per the parameters in previous post) we exit the energy patch feeling good in that while 17% may not be a home run, profit is always a good thing in difficult markets.

A look at the Dow's status

2009-07-06T10:16:00.004-04:00

You have no doubt seen this little potential head & shoulders elsewhere, so there is no new ground being broken here. But here is its current status showing a little hammer of hope trying to get the heck over the neck (blue) line.

This market has been flashing warnings for a long while, both in the rounding look of the nominal indexes and associated momentum indicators and especially in our vital indicators like the Gold-Silver ratio, which is up again this morning.

Here is the Dow showing downside support as well as a measured target for the H&S in the event it becomes actualized. Risk vs. reward in being bullish much of anything right now stinks. I continue to protect certain gold positions with well chosen (I hope) short positions. This is not a drill people, this is war; financial war. Be ready for anything.

Risk/reward sucks...

2009-07-03T19:47:00.005-04:00

...or have I mentioned that before. :-)

Of course, the multitudes are going by generic signposts erected by established and sanctioned experts. No wonder they were selling in March and agonizing whether to buy in June as hope drags its tired ass on and on, seemingly interminably.

Yes, this blog began posting 'risk is rising' and risk is high while the party was in full swing. We (or at least NFTRH) were in full rally mode way earlier, when risk was acceptable. The risk/reward has not been acceptable for some time now. About as long as it has taken for that gross toppy-looking rounded thing to form on the broad markets.

The GSR shown here has been front and center and it appears to have made its move. Now we may look forward to hope revivals in spurts here and there, but this is not a good looking market. Ah, but will it just be all bear all the time upon confirmation of the next significant correction? No, it's not that easy. There are sub-scenarios at work and now the fun starts.

Those who trust and want conventional expert analysis will seek it out. Those who want to preserve or just maybe grow capital will seek out their own answers by asking the difficult questions that do not have ready-made answers.

This stream of consciousness is inspired by some of the emails I receive from NFTRH subscribers that tell me the exact people who I want to find and make use of my newsletter are doing so. It is a feeling beyond description, at least as far as the financial world goes.

Have a great 4th you Americans and have a great weekend all.

Shorts

2009-07-02T09:42:00.003-04:00

Now I remember why I am short these and several other markets. As aggravating as it has been holding short through bull denial, I have kept in mind days like this and the idea that risk is untenable in the markets right now.

Watch the dollar folks. It's all about Uncle Buck right now.

Edit (10:15) A reminder to subscribers: The URL noted in NFTRH39 for this week's updates was updated yesterday.

UNG - NatGas

2009-07-01T13:48:00.003-04:00

The trade in UNG is on its last legs. With Natty now at 3.82, there are precious few ticks left to the downside before I will call this a failed trade. This may not be updated again on the blog so consider these the parameters I am working with.

This is the problem with buying charts while having no fundamental attachment. Ya can't, by definition, be a strong holder.

HUI did not like previous post

2009-07-01T13:29:00.005-04:00

And I am glad I was wrong (well, with this kind of whipsaw, I think I was wrong).

However, the discipline of 'buy the downside only and do not chase' is still in force. Luckily, today one of NFTRH's favored exploration companies - sold on hype fueled upside - is now getting blown up back to buy levels. Adding that one and remaining patient elsewhere.

I have been buying all through the current correction, on down days. Seems like a plan.

Next leg down for gold stocks?

2009-06-30T10:59:00.003-04:00

I am not bearish on Huey. I am bullish but have withheld lot's of dry powder for lower levels on HUI, as NFTRH readers know. There are several gems I want to either re-buy or add to at lower targets. So, I am not unhappy to see the gold miners get hit, possibly into new lows for the correction, per the 60 min. chart shown here.

We have our targets for several gold stocks, as well as the HUI and the most preferred ones are lower than here.

Good luck out there.

NFTRH39 - an excerpt on commodities

2009-06-28T15:54:00.004-04:00

Just want to call your attention to a short excerpt from #39: Commodities

NFTRH39 out now

2009-06-27T17:39:00.004-04:00

...and boy am I pooped. A great weekend thus far and in New England lately we define great as 'it hasn't rained in 12 hours, yey!'. I want to get out and enjoy some of it.

NFTRH39 considers the grind going on in markets as we roll into the dog days. Our ongoing major themes are still very much front and center and the implications of one vs. the other are profound, at least for those who would like to grow and/or preserve capital.

Have a great weekend all.

5 Fatal Flaws of Trading

2009-06-27T08:44:00.005-04:00

At the moment I am holding several strategic short positions against gold stock positions that I am in the process of reloading after the decline from the predictable (in NFTRH) resistance in the HUI 375-400 area. These shorts may or may not end up being successful taken individually, but they are not in the speculative portfolio so that I can make knock out trades and brag about them here. They are in the port to help me be a stronger buyer and holder of the main big picture bullish area (IMO), the goldies.

In other words, I resisted the urge to dump these things as a trading jockey and take profits and instead am being what I usually am; a bottom feeder, portfolio tweaker and longer term swing trader. My self-taught method has worked to the tune of +194% since 2002, when I began managing my own accounts. Over that time, the S&P 500 is about even.

Why the tout? Because, while an annualized 20+% is not as sexy as the gaudy figures you see in those trading service advertisement cartoons, it is real and it is reflective of a long-term system that works. I understand who I am when I show up each day to the markets. I understand that I sometimes hold positions that I am fairly sure are going to lose me some money on paper in any given short term scenario. I understand that in my trading world, some things balance out other things and have relationships to each other that are not readily apparent on the surface. I understand that I need to be right about some intermediate and long term trends and then make many adjustments in any given year.

Most importantly, I understand that I need to manage risk at all times. Much of this comes from my background building, shaping and operating a real world business in a sector that much of the world has left for dead, US manufacturing. It has been necessary to be adaptable, progressive and strategic which not coincidentally are things that go into my approach to the markets.

In short, I know the trading style that works for me and that is why I am one of the 10% who can make money in the markets. Start with Reminiscences of a Stock Operator and work your way out from there. Meanwhile, understand that we are all different and there is no one size fits all if you are going to do this yourself. The only other options are to use a canned, automated service, submit to a guru or go through the process of trying to separate the pretenders from the real deals in the financial planner herd.

Meanwhile, Jeffrey Kennedy has some good basic tips to trading here: Five Fatal Flaws of Trading

Nat Gas - UNG

2009-06-26T08:12:00.008-04:00

Separately, and in direct contrast to my bearish commodity stance is Natty, looking for all the world to be presenting one of the best looking bottoms I have seen in a long time. It's got a MACD bullish divergence to the previous strong downtrend and a beautiful looking bend upward, on volume. Even better, the trend has recently triggered up by AROON even as UNG came down for 5 days in a row.

Only caveat? Symmetrical triangles are usually 'continuation' patterns. So, is this a consolidation before new, unthinkable lows? I put the odds at 65% bullish, 35% bearish. This may be worth a look for a blogger who is having thoughts of having to consider whether he began micromanaging the end of Hope '09 a bit too soon (NFTRH's 'best case' upsides have not been registered in SPX, oil, etc. after all). Edit (10:29) Well, UNG declines this morning and I say what the heck, put some money where your chart is. UNG added in all accounts for a trade at the least. This after checking the chart of the actual commodity, which does not show a sym-tri.

Gold, silver and the GSR

2009-06-26T07:37:00.010-04:00

The grind continues. Gold, in its ratio to other things remains depressed as the ratio pays the price of exploding higher during a time of unsustainable fear and loathing.

Policy makers have done all they can to ignite the spirits of bi-polar market participants and they have swung to the opposite end of the scale, without fear of speculation and looking mighty right. Which of course means that blogs like this one continue to look mighty unsexy with messages of caution. So be it.

Here are the parameters on the Gold-Silver Ratio. They are to be taken in conjunction with several other indicators and financial signposts, which will be reviewed in NFTRH39 this weekend.

GSR (using GLD-SLV) will help end the festivities with a break above noted resistance and the top of the wedge. Alternatively, could those hopped up bulls actually break the GSR down and Hope '09 to new highs? Stay tuned.

GLD meanwhile, wants to fill some gaps to the upside after breaking the downtrend. Gold is still going with the Hope trade more than against it. A decoupling of gold from everything else would indicate the turn is on.

Contrary to the silver bulls' ever bullish view, I don't see a lot of bullish here. Can silver (SLV) rise? Yeh, look at that gap up there. But it will have to break and hold the downtrend line to imply anything more.

Edit (8:35) I just found this post by my pal Otto, where he explains the gold-silver ratio in a way that human beings can understand it. If you have any question whatsoever as to what I am rambling on (and on) about with the GSR, Otto decodes the message here in wonderfully simple terms.