Changes comming

I am in the process of switching a lot of my charting and trading over to a new provider and broker.  I am doing this to better facilitate my short-term trading operations.  While I do not currently have plans to blog about the short-term operations (this may change in the future),  there is no need for me to pay for two charting platforms.  This means that the chart images I provide on this site will soon change in appearance. 

There are two possibilities you can expect out of this.  Ideally, I will be able to provide images from the new platform I will be using.  In fact, I am in the process of requesting permission to do this.  I actually do not expect them to grant this permission -just trying to be realistic. 

If the new platform provider will not allow me to post images of the charts they provide, there are tentitive plans to aquire a low cost subscription to a very common web based platform.  I would then simply reproduce the important notations from my main charting / trading platform on the economy web-based charts, which would then be used for this blog. 

Although you can expect some changes sometime between now and early November, the changes will mostly be aesthetic in terms of the types of charts you are used to seeing. 

Research on tweets finds social mood can predict Dow days in advance

Original Source: Physorg.com

Thanks to my long time friend and former business partner Mike for sending me this link!  It is truly one of the most exciting and interesting things I have seen in a long time. 

In the chart above, the Dow is the blue center line.  Tweets communicating a "calm" mood are shown by the red line in the lower graph.  The top graph has them overlaid. 

Clearly the graphs are pretty self explanatory.  The tweets seem to be a leading indicator.  Social mood is being reflected in the tweets sooner than it is being reflected in the buying and selling of stocks.  I for one see that there would be a major opportunity here for Twitter or someone else who would have access to such data.  One day we could see these charts along side other financial charts.

One thing I would be interested in is a long term chart of these "calm" mood tweets.  Is this good for short and intermediate term indications or longer term as well? 

According to the article and Indiana University information scientists:  

"Measurements of the collective public mood derived from millions of tweets can predict the rise and fall of the Dow Jones Industrial Average up to a week in advance with an accuracy approaching 90 percent....." 

I would really like to see more -more charts and information out of these guys!

As a trader, I could imagine using the daily information from an index such as this as a filter or additional decision point against other trading signals. 

As someone convinced by the Socionomic Theory, I am not surprised to see this.  They are taking what Socionomists have been saying for some time now and applying it to a new index of social mood -tweets.  It is actually predicted by the Socionomic model that interest in such things as technical market analysis and Socionomics will grow during large bear markets.

Murphy-Krugman Debate

The guys down at the Mises Institute in Auburn AL have come up with an idea to get Keynesian Economist Paul Krugman to debate Austrian Economist Robert Murphy for one hour on business cycle theory.

The idea is really brilliant.  Those who want to see such a debate pledge to donate any amount of money they want.  But, the donation only happens if the debate actually takes place.  The proceeds (after 5% to the administrator of the pledge site) go to a food providing charity in NYC. 

If the pledges reach a high enough level, say $100,000 or so, then Krugman would have to explain why he can't invest an hour of his time for such a good cause.  

The pledge site can be found at: http://www.thepoint.com/campaigns/campaign-0-1240

Below is a funny cartoon commercial promoting the event.

If you would have any interest at all in seeing a debate between a Keynesian Economist and a Free-Market Economist, or if you just like to donate to charities that help deal with hunger, I encourage you do pledge any amount you can for this challenge to Krugman.  

Gold Trade Update

 

Our long gold trade was stopped out for profit on 10/21.  Price action that follows from here will let us know if we need to re-enter, continue to stand aside, or short this market.  So, we are just watching for now.  

Gold Weekending Chart 10/15/10 -tightening stops

Gold continues to be our most productive trade right now.  It is also our least complex in that we are just following the trend and letting it go.  For now, we are going to keep stops where they are and give this trend a little room to breath while continuing to ride it until it shows us that it is over.

Some of the most successful commodity fund managers have a winning percentage of trades well below 50%; sometimes it is more like 30% winners and 70% losers.  They cut the loses short on the losers and let the profits become exponential on the winners.  Gold has been our winner in recent weeks.

Because price trend has continued to advance, we are continuing to move our exit stop along with it.  Our stop price has now been moved up to 1325.50.  Profits have been locked in at our stop for a while in this market, and this defends more of those profits. 

If the stop is taken out, then we profit and start reevaluating this market.  If the price trend continues to advance with only small consolidations and pullbacks, then we will likely be given the opportunity to lock in more profits from this trade.   

S&P 500 Weekending Chart 10/15/10

Being so close to the April high, we have to recognize the fact that April may not have been the final top to wave [2] up.  The alternate count takes care of this in the chart above.  If the top count is correct, we should expect to see a sell off start really soon.  If the alternate count is the correct count, then we will not see the wave [3] sell off until a little later and slighly higher prices.  Either way, I expect a momentous downtrend to be right around the corner, be it days or months.  I do not expect the 2007 high to be taken out before the 2009 low is breached. 

A break below 1039.70 eliminates the ALT-1 Count shown above.  

A break above 1219.80 eliminates the Top Count shown above.

Once one of the above counts is eliminated we will of course have to apply new alternate counts to whatever our top count is at the time.  Such is trading. 

Is QE2 going to save this market long term?  I don't think so.  In fact, I would not be surprised if all of that is already baked in the cake as they say.  Of course the market is the final arbiter of these things and we will just have to watch the price action and follow accordingly. 

EURO Weekending Chart 10/15/10

This looks like a classic A-B-C sharp upwards correction for wave (2).  It might have a few more wiggles to the upside, but it seems like wave (2) up is nearer to its termination point than it is to its origin point.  When it is finished, look out below for the EURO.

Crude Oil Weekending Chart 10/15/10

Two alternate counts.  Which one is going to play out?

A break above 87.15 eliminates the "Top Count".  

A break below 70.76 eliminates the "ALT Count".  

Gold Weekending Chart 10/09/10

This has been a winning trend for us, so I'm just letting it run for now.  Stops are in profit territory compared to our entry, and will be tightened further if the trend continues to push forward. 

S&P 500 Weekending Chart 10/09/10

The outlook presented in the chart above will be incorrect if prices break above 1219.80.  

Velocity is currently diverging negatively with price trend.  

A valid Elliott Wave formation appears to be near completion. 

EURO Weekending Chart 10/09/10

Looking like a pretty classic A-B-C sharp correction for wave (2) up. 

Crude Oil Weekending Chart 10/09/10

 

You will often times see baseball analogies to trading.  I see one right now.  We recently took a swing and missed on this market.  The chart above shows the two scenarios that seem most likely from here.  

A break above 87.15 would eliminate the "top count" in black.

A break below 70.76 would indicate the "top count" over the alternate.  This line in the sand can even be tightened up to around 72.75 or 73.58. 

S&P 500's Last Gasp?

I wonder if the S&P 500 rally will continue much higher.  My best guess is not.  In fact, I would be selling short into this rally, or at least selling any break below 1131.87 (cash) from here.  1131.87 is marked by a dashed line in the chart below.  

It looks like we very likely have a nearly complet Elliott Wave pattern that calls for at least a downward retracement soon, if not an all out reversal.  Coincident to that, we can see that the velocity of price change is diverging against the current price uptrend.  My money is on downside action in the intermediate and possibly longer term.  

If the idea that, at the minimum, a downward retracement proportional to the rally starting in late August is due, then its internal price behavior should help clue us in as to whether it is in fact a retracement or, alternatively, an full price trend change.

The swells are forming again.  Time to wax up the surfboard.

Video (Part 3): Prechter - Investing in Extreme Markets

Video (Part 3): Prechter - Investing in Extreme Markets

                                            (Note: This interview was originally recorded on September 20, 2010)

In the video below,  Robert Prechter talks to Yahoo! Finance Tech Ticker host Aaron Task and Henry Blodget about a technical pattern he sees forming in the Dow.






Get Up to Speed on Robert Prechter's Latest Perspective — Download this Special FREE Report Now.

S&P 500 Week Ending Charts 10/02/10

(click charts to enlarge; right click to enlarge and open in another window or tab)

What I am not saying in the charts above is that I can definitively say that wave 2 up of [3] down is complete.  What I am saying is that if it is not complete yet, then I think it is probably close to being complete.  

I am a bear on this market, but it is important to note that we can't really expect to have a perfect record on the future direction of financial markets.  Risk management and money management is where go to make sure the winners are exponential and losers are linear and small.   Technical analysis is where we go to try to identify potentially emerging price trends.  Technical analysis is also what tells us when we are wrong about those potentially emerging price trends.  


The overall intermediate term bearish cash presented above is wrong if the S&P index breaks above 1219.80.  Confirmation of the intermediate term bearish case would be a break below 1039.70 in the cash index.  


Notice the velocity divergence with price indicated by the rate of change (ROC) momentum indicator at the bottom of the daily chart.

EURO Week Ending Chart 10/02/10

Wave (2) up of [3] down probably has a couple of more subdivisions to go before it terminates.  While I still expect a little more upside for now, confirmation of the outlook presented on the chart above would be a break below 1.2587.  A break of 1.2694 will almost certainly lead to a break of 1.2587.

If I am able to clearly identify when we are likely (game of probabilities remember) near the termination of the current up trend wave (2), then I certainly will post about that.  Until then, the chart above is my road map.

Crude Oil Week Ending Chart 10/02/10

Crude is getting pretty close to proving us wrong on the idea that wave 2 of (C) is already in place.  While this is frustrating, it is good to learn to detach emotions as much as possible.  We should not really expect to be correct more that 50% or so of the time when analyzing market behavior.  That is why technical analysis is so great -it tells you when you are wrong.  Cutting losses is important in this game.  

Clearly, as long as Oil does not break above the 82.97 level, it is possible for wave 2 of (C) to be in place.  A break below 73.58 would be a strong indication that the bearish case is correct.

Video (Part 2): Prechter: Ominous Pattern in the DJIA

Video (Part 2): Prechter: Ominous Pattern in the DJIA

(Note: This interview was originally recorded on September 20, 2010)
In the video below, Robert Prechter talks to Yahoo! Finance Tech Ticker host Aaron Task and Henry Blodget about a technical pattern he sees forming in the Dow.



Get Up to Speed on Robert Prechter's Latest Perspective — Download this Special FREE Report Now.