Wednesday, June 30, 2010

TLT . . Again

On a day when many of the big caps saw long term support violated TLT was once again the safe haven of choice on Tuesday. After struggling a bit GLD also joined the party, but it's near term prospects look more neutral than positive.
I've adjusted the Rotator components, eliminating NEM and adding GDX, which is the Market Vectors Gold Miners ETF, and which reflects a somewhat wider spectrum of the gold producers than NEM by itself. A quick look at the Gold Rotator shows GLD as the only component that closed positive on Tuesday. This is a rather odd situation reflecting the attractiveness of bullion, but not the underlying companies prospecting and extracting the gold. TLT's chart suggests the potential for more upside on the near term. It is currently chugging along at the mean of the LR30 and not looking overbought. The midpanel technicals are upslope in unison and, while the lower panel technicals are getting a bit toppy, there's scant indication of an imminent reversal.

Tuesday, June 29, 2010

TLT or Not TLT

We did get those new highs in the golds, silver and TLT but only TLT was able to hold those gains at the end of day. A bit surprising to me FXI (IShares China) ended up losing 1/2% Monday . . I was expecting some more enthusiasm for the support of the yuan, but HEY!, you know my bucket list. Also in contrast to my expectations tech didn't exhibit a jump although the retail sector via RTH did display a very modest decline. The glaring exception to retail weakness was WalMart, which rose 2% before that 10 minute closing collapse that shaved 1/4 of the daily gains. Clearly, I need to revisit my crystal ball going forward this week although Monday's closing technicals very uniformly negative.
That was an usually nasty high volume 10 minute sell off reversal at Monday's close...and it was across the board. The 2 minute bar at 12:50 pst was a real doozey on the NYAD...a sure clue that there was more downside to follow.

Monday, June 28, 2010

New Highs Ahead?

Gold and silver look headed for new highs and TLT is tracking in a similar pattern. And there may be good fundamental reasons why. China's decision to let it's currency rise in value adds buying power to it's growing middle class. . . which is both good news and bad news for US companies. While electronics makers can sell more computers and ipods, retailers such as WalMart will find Chinese imports costing more, and since over 85% of WalMart products are made in China, somethings gotta give if they want to hold their price points, which may in part account for Wally's dollar drop on Friday while many of the markets were rallying.
And then there's the weekend's G20 summit with the Pres throwing in the towel . . and that can't be good for the US economy.
This is the equivalent of a one-two punch for the equity markets and looking in the crystal ball I'm expecting some nasty downdrafts this week.
Although we typically see some month end to first day accumulation, that may not be case this month.

Friday, June 25, 2010

Strange Day

FXE really pulled one out of the hat on Thursday, defying the downdraft while at the same time essentially conforming to the intraday cycle of the NYAD. The Rotator now has the FXE ranked in slot #1, a curious situation after Wednesday's action. Rather than waste a lot of time taxing my old feeble brain trying to figure where that rascally FXE is headed next I'll just employ risk management rule #1 and stand back until the technicals sort themselves out. I mentioned earlier in the week that FXE was showing divergence signals on daily and weekly bars and we may be seeing some resolution of that divergence at the present time. Meanwhile, I'm not going to step into traffic until the crosswalk signal flashes all clear.
The yen has touched the May highs again, a scenario that was also suggested earlier in the week and the technicals still look bullish. Ultimate upside FXY targets remain in the 112 range but it's going to take some work to get there.

Thursday, June 24, 2010

Worse Than it Looks

I continue to concentrate on the currency ETFs (and NEM), especially FXE and TLT. The early action in FXE was characterized by another very bearish drop to 1 penny below S3 before it began its intraday run up. In a complete reversal of my previously stated tactic of being short FXE, the early drop allowed me no strategic entry and I therefore took the opposite side of the trade ...long at 121.85. This turned out to be pure dumb luck as the FXE slowly churned up to touch R2 before retreating. That's a huge intraday range for FXE and I was able to exit at 122.85 for a buck gain. Like I said . . dumb luck coupled with the artificial positive beta surge which typifies FOMC days.
Unfortunately, a quick look at the chart suggests that Wednesday's pop did nothing more than push the FXE further into overbought territory . . the technicals are distinctly bearish.
The other object of my attention is my once favorite FXC, which has broken down through the short term LR channel and looks headed for the 93.50 level.
Keep in mind these charts are formatted in 2 day bars. . the daily bar charts look even more bearish.
Both FXE and FXC are exhibiting increasing volume on the distribution side, while UUP volume has fallen off by almost 50%.
The yen continued its run but in the final analysis TLT has the best looking chart of the bunch.

Wednesday, June 23, 2010

No Hiding Place

That nasty afternoon sell off savaged everything but negative beta or very low beta issues. Tech, small caps, energy and financials all caught flak and many of the ETFs suspected in being about to fade, such as IWM, have now turned downslope.
On the positive side of the ledger gold and TLT look encouraging, especially TLT, whose technicals are all poised to continue an upslope run.
On the currency front there's double gold and TLT, accompanied by silver, which has almost reached the 19 target I've spoken about in the past 2 weeks. The yen also is showing some promise, but with only a small likely margin to gain.
FXE . . . that's the real story, and the only encouraging note on Tuesday's action was that FXE stalled slightly below the S1 and didn't plunge to S2 or S3 in the midst of the afternoon slide while TLT manged to gain a buck in the last 3 hours. FXE is actually looking a bit confused with the daily chart clearly bearish and the weekly chart clearly bullish. Go figure.

Tuesday, June 22, 2010

FXE in the Spotlight

I've been watching FXE lately, mostly to check it's intraday synchronization with the NYAD. In the process I've noted what may be an imminent change of character. . .a suspicion that was supported by Monday's negative mood on FXE and the slight positive move in UUP.
Below the FXE and UUP looking a lot like a Rorschach pattern in their juxtaposition.
Monday's action was clearly negative with FXE testing S3 pivot support several times before finally closing a few pennies above that level. On the near term FXE may be on its way back down to the 119s if the technicals are any guide.

Below are comparartive 30 minute bar charts of the FXE and NYAD and you can draw your own conclusions about the similarities. Keep in mind that the scales of these two issues are substantialy different, but the 7/12 MA crosses are well aligned. Just as an edge to your intuition . . if the NYAD fades in early trading, the FXE is never far behind.

Monday, June 21, 2010

Another Day

You're probably getting tired of my talking about BP. Me too! With the latest $20 billion escrow account ($ 5 billion/year for 4 years) you might think this is the end of the story. BUT, I'll just mention in closing that I have yet to hear the talking heads wake up to the likely shareholder lawsuits that will inevitably follow. With a loss of almost $100 billion in shareholder value over the past 2 months, and now a dividend suspension, the worst may be yet to come. Some cursory research this weekend suggests BP might actually see the spill tab hit $ 60 billion. Just a thought for those considering possible longs.

On a completely different note. . .here's something I'd like to see: At the PGA major events (too bad nobody thought about this for the US Open) there's usually a few numnuts who yell out "In the hole!" just as golfers tee off. Tiger's true believers are famous for this inane rudeness. Imagine if, just as Tiger or Phil is midway through his tee swing, the respectful silence was shattered by the blare of several hundred vuvuzelas. Ditto on critical putts. I'd pay to see that.

I also note with some sadness that in May Britain's Norfolk District Council banned the traditional barroom game of "dwile flonking" just as the inaugural world championships were to take place at the Dog Pub in Ludham, Great Yarmouth. The game, which some believe has been played since medieval times, calls on players to fling a beer-soaked rag from the end of the small stick toward the face of an opponent, and in the event the tosser misses the target two straight times, he must quickly down a half-pint of ale. Those Brits . . they know how to have fun.

Finally, a tip of the hat to Robert L., one of my regular readers who tolerate my ramblings, for forwarding the link to Reuter's Insider and the a list of the top 25 most-favored stocks in high frequency trading. Also note the article entitled "Inside the Machine". This is the Institutional Investor site and carries a repertoire of news of a higher caliber than most of the popular press. I'm still running relative performance testing on the DIA versus the GS list of the hedge funds favorite stocks (using a Schwab metrics filter) which I labeled the HF20. Now I've got the HFT25 to run against the DIA and the HF20. I'll report any interesting results as they develop.

Really, finally, these are the top 10 companies hiring new employees. WalMart, Home Depot, UPS, Starbucks, McDonalds, Coke, Sears, AT&T, Boeing and Lockheed Martin. And you thought there weren't any good jobs available after 4 years of college and 3 years of grad school.

Saturday, June 19, 2010

Planning a Break?

I was swapping funny trading tales with my buddy Jeff Pietsch the other day and I reiterate the following true anecdote for your entertainment:
Over the years I've probably bought and read a couple hundred trading books, many of which I've loaned or given to other traders. There came a time last year when I decided to sell a bookshelf of trading books on Amazon after creating my own little online bookstore. During a period of 6 weeks I listed and sold 48 books and put some extra bucks in my pocket while reducing my storage needs. One of the orders I received came from a federal prison in the Midwest. I had no way of knowing what the buyer's infraction might be, but clearly it was a serious enough matter to warrant federal incarceration. Nevertheless, I'm always a champion of self improvement and thought this gentlemen might be considering a trading career when his term was complete. Plus, payment was via PayPal so I figured I wasn't going t have to deal with some heavily tattooed skinhead gang member in order to get my measly $30 payment. Off the book went. About 3 weeks later, here comes the book back in the mail with a notice stamped on the outside of the package to the effect that this was not acceptable reading material for inmates.
I'm scratching my head thinking "this is crazy, it's a trading book" and then the light went off . . the book was Elder's Entries and Exits. Either the buyer or the feds were obviously intrigued by the title which apparently had been construed as either burglar's guidebook or a prison breakout manual. Too bad guys...the book's a great read.

Friday, June 18, 2010

All's Forgiven

Can't we all just get along?
OK. . I apologize to the gold gods for ever doubting their technical superiority.
Both the BZB and Currency Rotator have GLD in slot #1. Actually it's a double header for gold on the Currency front with NEM in slot #2. TLT also had a good day on both Rotators and a closer look shows SLV has continued its positive momentum as forecast on Wednesday.
Hey! . . I'm right some of the time.
The Qs and SMH have the highest MoneyStream numbers, and both have shown relative strength over the past few days. IWM, the single Rotator component that's all green, has been struggling over the same period of time and managed to eke out a small gain Thursday . . but caution is advised . . the chart does not look bullish.
On the currency front FXE has broken to the upside over the past 4 days and is now pushing against overhead resistance. While Thursday's gain was impressive, it was accomplished after a roller coaster intraday ride that was a perfect mimic of the NYAD . . along with the VIXEN crosses. FXE has not tracked all that well with the NYAD in the recent past so Wednesday's action was a bit of a surpise (to me) that will warrant some further investigation.

Thursday, June 17, 2010

Financial Updates

As a follow up to last week's comment on the $ 1.5 billion claims pool for the BP spill I note that number has now morphed into a new dimension as the size of the spill now equals the size of Kansas. What's next? A Texas sized spill?
I haven't looked at the Financials Rotator for a while, having been focused on the 3 Stooges-like boondoggle of BP, but things look like they might be heating up in that sector and here we are:
In top slot is BAC, whose chart doesn't look like the barn burner that most bulls favor, but the technicals are certainly encouraging, with 14 providing a strong support level for the past year.
For the risk adverse a low exposure buy/write of the July 15's will yield 2.5 % with breakeven at 14.63, pretty good odds IMHO.
Stepping back a little almost all the components of the Rotator are showing positive Moneystream values with AXP and KBE showing the most leg. Although negative on Wednesday USB looks like it could mimic the BAC chart in short order. Yesterday's USB weakness may be due to analysts' crystal ball gazing that USB may be up for buying some midcap banks and their inherent risk.
SKF is the proshares' ultra short ETF so it's weakness is just the other side of the XLF coin.

Wednesday, June 16, 2010

The Golden Rule

Bit of a push today with the last hour showing unusual strength and many issues closing on the high of the day. Volume was muted as usual but the nasty last 30 minute plunge that the longs have come to dread was no where in evidence today. After hours most of the majors were off .25% and although it may be hard to believe, a number of issues are hitting short term overhead resistance and displaying mildly overbought technicals.
Hey! nobody ever said trading was easy.
SPY, DIA, IWM and the Qs all showed the same pattern in the last 6 minutes. . big volume selling. Almost 15% of IWM's daily volume traded in the last 10 minutes, while 8% of the Qs daily volume traded in the last 10 minutes.
SMH was the clear star of the day on the Rotator, and this generally bodes well as a leading indicator for the Qs. The bad news...both SMH and the Qs have reached their January highs and while money flow is upslope on both issues, both are overextended relative to the rest of the markets.
On the currency front the Euro may finally be finding a base (emphasis on may) and the dollar got slapped in return. TLT has finally followed suit, showing some weakness while silver and gold reversed the negative mood discussed Monday. Silver has an interesting chart, having been stuck in a consolidation for mode the past few months. That blip up in May was actually a good thing, since it shows what's possible. It may not look that exciting but SLV's technicals are all positive and a return to May highs (19.40) would yield a 7% gain over yesterday's close.

Tuesday, June 15, 2010

Red Gold

No, it's not a new variety of the precious metal, just reflection of the general mood in the sector. Below is the GOLD Rotator and this is more red than we've seen in a long time. The lone holdout, LIHR, is in the midst of a merger with Newcrest Mining who has just completed their due diligence process. Over the past 2 weeks we've noted some arbitrage opportunities with GLD and NEM, but the future of those situations has lost it's shine for the near term.
GLD may resume its uptrend, having only stalled at the lower LR30 channel band and not broken through to the downside. If we do see a "kiss-off" of the channel that may be the time to be short. . .for now there are to too many unknowns and associated risks. Flat is the safest bet for now IMHO.
Now, you wanna talk oil spill?
Here's a little item by Anene Ejikeme on that makes the BP blowoff look like a Saturday driveway spill while changing your car's oil.
Meanwhile, Senate Dems want BP to pony up $10 billion to cover sprill damages (I said this number was volatile) no doubt providing at least part of the impetus for the intraday 10% drop yesterday.
And, before you get lulled into the mindset that the worst is over and that a market bottom is at hand, take a look at Monday's volume, which is more reflective of short covering than serious accumulation.

Monday, June 14, 2010

TLT Surprises

Friday's intraday market action was filled with the kind of twists and turns that we've all come to know and love. One of the most remarkable (to me) was the continued strength of TLT (and UUP) in the face of a bullish market. I've spend considerable time lately trying to create a robust and high probability trading plan for TLT and both Project Z and the PDQ Dashboard have provided some great tools in that research and have produced 78% reliable results over the past 16 months . . . not outstanding in my viewpoint, but definitely tradable.
The metrics columns reveal TLT volume is above normal and while price remains at the 97% level of the 6 month high, the fade in money stream is something that needs to be watched.

On the currency front the clear winner is GLD although the Rotator's trying to tell me something else. As with TLT, UUP is showing a roll over in Moneystream, a situation I mentioned last week.
Over in the chat room a few us closely monitor UUP, FXE, TLT and GLD throughout the day and everyone noted the surprising relative strength of TLT. The chat room is free so stop in if you're in the area, you just have to register with Chatroll to get started . In my continuing search for valuable trading nuggets, this is a venue of choice.

Playing the Energy Rotator is like juggling lit sticks of dynamite and close attention is required. Those beta numbers are deceptively docile . . it's the ATR that requires a closer look. The estimated $1.5 billion cleanup bill that I mentioned as suspicious last week has now mushroomed to $4-5 billion, a substantial change reflective of the great unknowns in this ongoing disaster.
There's some fast money to be made on these stocks if you're on the right side of the mood but the dramatic change in BP's stock last week demonstrated that you can't linger. Having looked at this motley crew in detail I now favor RIG as potential upside mover. Based on the WSJ article I posted last week and other research it appears that RIG has the most clearly defined risk exposure in this whole mess and with southern politicians galore calling for a a quick lift to the offshore drilling moratorium, the odds are building in RIG's favor.

Friday, June 11, 2010

XLE Leads Currencies

Tonight I'm just looking at the 1 day results in lieu of the usual 2 day metrics. Oil really took hold today with XLE making over a 5% gain which happens very seldom (Rob Hanna can provide the precise numbers). The surge in the FXE and the drop in the dollar is a situation that merits closer attention before initiating anything more than a daytrade IMHO. Things can happen quickly in this high ATR environment and the major trend remains downtrend despite today's low volume blowoff. In his commentary Thursday night Don Worden noted that in the 32 market days since the April top half of the days have seen the DOW up or down 200 points. 22 of those 32 days have shown over 100 point gains or losses. Feeling a little giddy?
My little darling BP recovered over 12% on Thursday, keeping in mind that was 12% of a value depressed 15% on Wednesday, so that differential is a bit more than 3%. Glad I closed those long puts Wednesday EOD as the same near 25s closed at .41, down .86 from Wednesday's close.
Still, it was an impressive about face probably catalyzed by a number of BP and government spokespersons claiming that BP has plenty of assets to cover a likely $ 1.5 billion claims pool. This, of course, is complete speculation on every one's part trying to cover their arse and basically has the tangible value of hot air. No one knows the full extent of the damage as the oil continues to gush, pollute and destroy the economies of entire cities. Wait till the residue hits Cape Hatteras for the real backlash. With hurricane season setting up, the gunk could move halfway up the eastern seaboard . . a scenario that won't be smoothed over with a mere 1.5 billion.

Despite it's poor showing Thursday UUP still has one of the most bullish longer term charts along with NEM. Statistically the FXF looks like it should be a winner but the chart is just plain awful.
To be avoided.

Thursday, June 10, 2010

750% in 24 Hours

Turns out my Tuesday short call on BP was a bit understated. Readers who paid attention to that post should be ready to retire after yesterday's action. BP has lost 50% of it's stock value since the April explosion. . .15% of the adjusted value on Wednesday after trading 240 million shares.
Regular readers know I like to play the fringes of these disasters with out of the money puts . . in this case the near 25s which Tuesday were selling for a modest .15. Wednesday's high was 1.47 . . an 880% increase, but I was lazy and got out near the EOD at 1.30 for a 750% gain as volatility took a hit.
I don't think this is the end of story regarding the BP puts, but I prefer to play this one day at a time with the intent to fade any rallies, especially when and if they finally get a cap on it. With talk of bankruptcy looming BP could ultimately turn out to be another Enron situation with a stock value of zero, although it's not clear there was any criminal intent, just a series of bumbling miscalculations coupled with a lackadaisical attitude.
Also of note, Project Z initiated a new BUY on TLT at midday Tuesday. . a situation we'll examine in a bit more detail tomorrow.

Wednesday, June 09, 2010

A Glimmer of Hope

A little glimmer of hope in the oil sector yesterday but, as expected, BP did not participate. RIG also got hit as offshore exploration looks like a threatened species, although it recovered from an almost 10% decline by the end of the day and APC, as one of BP partners, is also in the doldrums. A bit surprising perhaps DVN is looking almost bullish. Almost but not quite. What DVN does have going for it is a LR30 channel that is the nearest to level of the bunch.
However, just a quick look at XLE, XTO and XOM shows an almost identical technical pattern with DVN other than the LR30 channel . . . they're all looking like the next move is down.
After confusing some of my readers by adding NEM and GLD to the currency Rotator, I'm now adding XLE also. In reality, oil is the commodity that drives much of the global economy and while gold may be a tangible hedge, the supply and access to oil is still an important variable in the defining the stability of world currencies.
A little aside here . . . Back about 2o years ago when I was project manager for a $400 million project in Indonesia none of the international contractors working the job wanted to get paid in local currency because the political climate there was so volatile as was the value of the rupiah. Instead, contracts were paid in oil. . . tankers of which were dispatched to various US and foreign ports as payment.
OK, I could bore you to tears with the rest of the ill-fated tale of the Indonesian World Trade Center, but I won't. Instead, we'll just note the little pullback in the dollar that Project Z saw coming. While this certainty doesn't qualify for "reversal" status, a continued short term pull back may provide a lower risk opportunity for chasing the dollar further. And, while GLD also hit a little speedbump, NEM was on a tear as it looks poised to revisit it's mid-May high . . a feat GLD has already achieved.

Tuesday, June 08, 2010

Oily Pigpile

Here's a little teaser to help you appeciate just how volatile the oil sector has become lately. XOM is kind of the senior citizen of the group while APC and HAL are acting like they're on steroids. These are not daytrading vehicles for the faint of heart and later in the week we'll look at some more tactical nuances for trading this group.
Blogger, which I will forever more refer to as Booger, was dead on arrival from Sunday night until Monday's market close thus preventing me from posting what was possibly the most important forecast I have ever shared with my readers. Too late, too bad, too sad. I suspect that GS was somehow in cahoots with GOOG to sabotage my post in order to prevent my readers from reaping the windfall they so richly deserve. Legal action is now pending and while we wait for the suit to lurch it's way through the legal system, here are a few energy related documents that might pique your interest.

Above and below are the results of the Energy Rotator as of Friday (above) and Monday (below). I am frankly amazed sometimes the way the Rotator ranks these stocks and was suspicious of both OXY and CVX, but Monday's results proved it right while SLB, RIG, DVN and BP continue to get spanked.

Monday's Rotator has clearly downgraded BP which mirrors my intuitive thinking. Below is a fascinating article from The Week magazine that really puts the screws to BP and shows how a series to judgmental blunders and braggadocio led to the financial and environmental disaster currently at hand. A close read of the article suggests that BP's subcontractors RIG and HAL probably did (or tried to do) everything pretty much by the book, but that it was BP's direction that caused the blow.
You'll need to zoom in the attached files to read them clearly but I doubt you'll be disappointed by the effort. BP's total liability may eventually encompass most if not all of it assets and short looks like the likely direction for the long term .

Friday, June 04, 2010

Currency Report

Regular readers know the drill by now on this free e-magazine. Of particular note in this month's issue are the lead article on the global currency situation suggesting gold may actually be the trading vehicle of choice, an echo of my previous post considering gold as a currency. Also a clever analysis of the Asian session (11pm to 7 am GMT) and a tactical ATR approach to skimming some low risk gains. Worth a closer look for currency and FX traders or those considering these unique trading vehicles. Thursday's Rotator looks like it made a liar out of me regarding the NEM, but one day does not a market make. This relates directly to the article in Currency Trader that I mentioned above and I'll not waste space reciting that argument favoring gold. Regarding the UUP, it may be instructive to look at some of the additional metrics. Although UUP has a low to medium trending value, Price as a % of the 30 day high (last column on right....also see blog side panel) has the highest value of any of the Rotator components. Just as a cautionary note, these extreme values typically lead to at least a short term retracement. This is not to say that UUP won't continue to climb, just that there may well be a lower price entry in the near future for those who want to chase it.
Maybe it's helpful to look at the losers as well as the leaders on the Rotator and from this perspective the Euro continues it's deterioration. As long as debt default concerns continue to overshadow that continent FXE remains an unlikely rally candidate while the dollar continues to make headway.
Below is Project Z's position on UUP, currently Long but with the Z value reaching short term potential overhead resistance an exit may be fast approaching. Project Z has an 85% reliability with the UPP with very little drawdown so place your bets accordingly. The fixed bar exit on UUP is ten days, which will actually fire today at the close unless a /13 ATR stop is violated intraday.

Thursday, June 03, 2010

Kermit's Color

A big change of momentum yesterday, but will it hold? Getting 2 days up in a row hard been a hard sell for the past month and with Thursday being the highest probability down day in the week, the odds are a bit iffy. After suffering breaks of longer term support levels XLE and EEM staged dramatic recoveries yesterday. The BP incident has really done some damage to the energy sector including BP, APC and HAL. Actually, XLE would look a lot worse except that XOM is the largest component of the ETF and has so far managed to stay out of the liability pool, thereby propping up XLE. Until the BP well is finally capped I expect to see continued volatility in the sector as the specter of federal, state and local liability claims loom.
On the currency front the pound has been enjoying a little rally in the face of NEM's 2% gain. Technically, FXB, FXC and NEM reflect almost identical patterns, the big difference being that the NEM 30 day linear regression channel (LR30) remains upslope while the former 2 are downslope, the implication being that NEM is the better choice for the present time.

Wednesday, June 02, 2010

Project Z Loves TLT

Above, weekly bars of the TLT showing the relative stability of 100 as overhead resistance. I say relative because there were a few months 08-09 when things got a bit hairy and TLT hit 123. Other than that little blip TLT been in a fairly tight trading range of 85-95 since inception in 02.
April and May have seen TLT hold a top ranking in our Rotator model more than 75% of the time, so I thought this might be a good time to check in with Project Z and see what the crystal ball was divining. Z fired off a Long exit 3 days ago based strictly on a fixed bar exit trigger, reinforcing the concept of a timing cycle.
These are the kind of performance metrics that keep me coming back to Project Z. Averaging almost 1 trade a month with a nice balance of longs and shorts the max consecutive losers is 0 to 1. Currently flat, TLT may be in a midst of a short term pullback, or something more substantial. . . only time will tell. Given the neutral to bearish mode of the majors as the market yo-yos, this is probably the safest course of action for the short term.

Tuesday, June 01, 2010

Picking Your Battles

This is a little case study of monthly bars of 4 retailers: WMT, COST, TGT and BIG. The thing they all have in common is that the technicals are decidedly negative. All 4 also suffered a major drawdown in the Fall of 08 and into the first 2 months of 09.
Technically speaking, of the 4, I trend to favor WMT as a trading equity. Now, I understand that some folks would rather eat ground glass than put money with WMT, but I'm not one of them.
What I like about WMT is the 16 point (36%) range over the past 8 years. And as a reflection of its underlying power, it was first out of the gate after the 08 implosion. More than anything, this bias is a reflection of my focus on trading range and mean regression methodologies for short term trading. Clearly COST and TGT have been great trending stocks, both of which doubled from 03 to 08. The other side of this coin is that both were back to 04 levels on 09.
WMT was actually below 04 levels in 09, which sounds rather dismal until you realize that the average price of WMT 2000-2010 has been $ 50.50, precisely where it is right now.
As a consumer I frequent all four of these retailers and without making any subjective statements about the ambiance of these venues, BIG is the current high flyer on the charts and (of the 4) performs best on Project Z, closely followed by WMT, although the trading cycles are completely different.