See the interview here.
He uses the experience to promote the Ludwig Von Mises Institute and Murry Rothbard.
4/30/11
4/29/11
Technical Analysis - S&P 500 4/29/11
You probably have noticed that the major stock indexes are making new multi-year highs. Let's review updated charts.
A very simple, but extremely useful tactic is to draw a trendline from the origin of the current trend to the current extreme of that trend. You then create a parallel to that line you just drew. Next, you place the parallel line along the most recent counter-trend correction / consolidation. This correction / consolidation should be the one that preceded the most recent trend extreme. Simple tactical practices like using parallel trendlines are robust and work in both up and down markets.
Today, we have redrawn these lines yet again in an effort to continue to follow the current trend.
Last week, I published a supplemental post regarding a possible inverse Head and Shoulders consolidation pattern in the S&P 500. In that blog post, we talked about how such a pattern would be confirmed or not. Since that time, the pattern has been confirmed.
Prices first closed above the neckline. The following bar then had a low price that was above the neckline. Both of these actions suggest pattern confirmation.
Targets for Head and Shoulders formations are usually found by measuring the distance between the head and the neckline, and extending this distance from the point at which prices broke the neckline after forming a right shoulder. Those measurements are shown on the chart above.
There are few certainties in life on Earth, and, for that reason, you should never marry a trade or a position. If prices break below 1294.70 before hitting the areas suggested by the measuring technique, then it would be on reason to be out of this market.
Another thing regular readers will notice is that by making a new high, the market has allowed for the drawing of new intermediate term parallel trendlines. We will continue to redraw these if the market makes new highs from here. If prices break below the lower trendline, then that will be an intermediate term signal that the current rally could be finished.
Some of our other methods for trend identification are moving averages and moving average envelopes like the ones posted in three different time frame above.
The long and intermediate term moving average envelopes, as represented by the weekly and daily bar charts, continue to confirm a price uptrend. Recently, the intermediate term became a little consolidated and trendless, but along with the breakout of the chart pattern mentioned earlier, the daily bar chart here is also communicating uptrend in place.
RSI on both the weekly and daily bar charts, when used as a trend identification indicator, is in uptrend range. Likewise on the 60-min chart, but the 60-min chart less useful for long and intermediate term trading / investing. However, the long and intermediate term traders / investors can use the 60-min to help time entry once a decision to enter has been made.
Sometimes you have mixed signals, and other times it seems like most of the techniques point in one direction. The Dynamic Trailing Stop moved right into uptrend mode along with the Inverse Head and Shoulders price pattern. DTS is also trending positively on the daily bar chart.
DMI / ADX on the weekly chart has not really confirmed the uptrend yet. On the daily bar chart, ADX is turning up, and +DMI is rallying above -DMI, so the intermediate term uptrend looks to be further indicated by the DMI / ADX tool.
I tend to get a lot of Elliott Wave questions when we are in bear markets. That's probably because 1) I usually suck less in trading bear markets, and 2) Elliott Wave and Technical Analysis in general become more popular in bear markets. Well, I'm going to head this one off at the pass a little bit. The chart above shows idealized and generalized Elliott Wave based outcome expectations I currently have for this market.
Wow, Markham, does that mean you are currently both bullish and bearish at the same time. Yes, I guess it does. We are following the price trend with tight risk management and clear exit strategies. At the same time, we think the Elliott Wave count(s) listed above give us a picture of the most likely probabilities around the corner. Over the long term, those probabilities currently appear to be bearish.
Face it, the VIX is very complacent right now.
We will likely see a low reading in the Put/Call Ratio above near the market top.
Current Stance
Long Term:
1) Sell, or tighten stops if you are the buy-and-hold type.
2) Hold if you have stops and risk management in place, and don't look at a stock market trade / investment as if its a marriage.
Intermediate Term: Hold
Short Term:
Our semi-automated short term trading system is currently taking trades to the long side, but it is possible for this to change more frequently than the weekly blog posts on this market.
A very simple, but extremely useful tactic is to draw a trendline from the origin of the current trend to the current extreme of that trend. You then create a parallel to that line you just drew. Next, you place the parallel line along the most recent counter-trend correction / consolidation. This correction / consolidation should be the one that preceded the most recent trend extreme. Simple tactical practices like using parallel trendlines are robust and work in both up and down markets.
Today, we have redrawn these lines yet again in an effort to continue to follow the current trend.
Last week, I published a supplemental post regarding a possible inverse Head and Shoulders consolidation pattern in the S&P 500. In that blog post, we talked about how such a pattern would be confirmed or not. Since that time, the pattern has been confirmed.
Prices first closed above the neckline. The following bar then had a low price that was above the neckline. Both of these actions suggest pattern confirmation.
Targets for Head and Shoulders formations are usually found by measuring the distance between the head and the neckline, and extending this distance from the point at which prices broke the neckline after forming a right shoulder. Those measurements are shown on the chart above.
There are few certainties in life on Earth, and, for that reason, you should never marry a trade or a position. If prices break below 1294.70 before hitting the areas suggested by the measuring technique, then it would be on reason to be out of this market.
Another thing regular readers will notice is that by making a new high, the market has allowed for the drawing of new intermediate term parallel trendlines. We will continue to redraw these if the market makes new highs from here. If prices break below the lower trendline, then that will be an intermediate term signal that the current rally could be finished.
Some of our other methods for trend identification are moving averages and moving average envelopes like the ones posted in three different time frame above.
The long and intermediate term moving average envelopes, as represented by the weekly and daily bar charts, continue to confirm a price uptrend. Recently, the intermediate term became a little consolidated and trendless, but along with the breakout of the chart pattern mentioned earlier, the daily bar chart here is also communicating uptrend in place.
RSI on both the weekly and daily bar charts, when used as a trend identification indicator, is in uptrend range. Likewise on the 60-min chart, but the 60-min chart less useful for long and intermediate term trading / investing. However, the long and intermediate term traders / investors can use the 60-min to help time entry once a decision to enter has been made.
Sometimes you have mixed signals, and other times it seems like most of the techniques point in one direction. The Dynamic Trailing Stop moved right into uptrend mode along with the Inverse Head and Shoulders price pattern. DTS is also trending positively on the daily bar chart.
DMI / ADX on the weekly chart has not really confirmed the uptrend yet. On the daily bar chart, ADX is turning up, and +DMI is rallying above -DMI, so the intermediate term uptrend looks to be further indicated by the DMI / ADX tool.
I tend to get a lot of Elliott Wave questions when we are in bear markets. That's probably because 1) I usually suck less in trading bear markets, and 2) Elliott Wave and Technical Analysis in general become more popular in bear markets. Well, I'm going to head this one off at the pass a little bit. The chart above shows idealized and generalized Elliott Wave based outcome expectations I currently have for this market.
Wow, Markham, does that mean you are currently both bullish and bearish at the same time. Yes, I guess it does. We are following the price trend with tight risk management and clear exit strategies. At the same time, we think the Elliott Wave count(s) listed above give us a picture of the most likely probabilities around the corner. Over the long term, those probabilities currently appear to be bearish.
Face it, the VIX is very complacent right now.
We will likely see a low reading in the Put/Call Ratio above near the market top.
Current Stance
Long Term:
1) Sell, or tighten stops if you are the buy-and-hold type.
2) Hold if you have stops and risk management in place, and don't look at a stock market trade / investment as if its a marriage.
Intermediate Term: Hold
Short Term:
Our semi-automated short term trading system is currently taking trades to the long side, but it is possible for this to change more frequently than the weekly blog posts on this market.
4/28/11
Technical Analysis - EURO 4/28/11
As currencies go, we are more partial to the Swiss Franc, but we cannot deny that the EURO has continued to rally against the Dollar.
Long term, I have concerns because the overall EURO chart pattern looks more like one of possible distribution than one of accumulation.
That does not mean we are married to this longer term bearish stance. We have been holding the intermediate term, after all. It's just that between the USD, EURO, and CHF, we would currently rather be in the Swiss Franc (CHF). That could change tomorrow, but that's where we are at right now.
One argument against the distribution hypothesis is the fact that price is now clearly above a trendline drawn against recent highs. Additionally, the intermediate term trend remains up.
No question about it, the intermediate term in EURO futures, represented by the daily bar chart above, continue to hold an uptrend for now.
Moving average envelopes on weekly and daily bar charts continue to register an uptrend. RSI is also in uptrend mode on the same two charts.
As has been mentioned before, the Dynamic Trailing Stop we are using on these charts is set fairly tight. Part of the reason for inclusion of this DTS is because I am just watching this indicator as I work on some similar proprietary coding. The proprietary coding is planned to be a component of an automated system I currently run manually using spreadsheets.
DTS can definitely be a great tool for cutting losses short and letting profits run, but sometimes it gets whipsawed (what trading tool doesn't?). We have seen it go back and forth a little in the EURO on the daily chart. For now, it is back to uptrend mode on both daily and weekly bar charts.
Directional Movement Index / Average Directional Index (DMI / ADX) is confirming trending action on both the weekly and daily charts. The yellow ADX line is trending up. Less so on the daily chart, but it has still turned up since last week.
Remember, we have been holding the intermediate term based mostly on little ole simple parallel trendlines. Not sexy, but they work. Its still neat to see other, more sophisticated indicators, confirm what the kid with the straight edge can tell us.
Current Stance
Long Term: Sell
Intermediate Term: Hold
Long term, I have concerns because the overall EURO chart pattern looks more like one of possible distribution than one of accumulation.
That does not mean we are married to this longer term bearish stance. We have been holding the intermediate term, after all. It's just that between the USD, EURO, and CHF, we would currently rather be in the Swiss Franc (CHF). That could change tomorrow, but that's where we are at right now.
One argument against the distribution hypothesis is the fact that price is now clearly above a trendline drawn against recent highs. Additionally, the intermediate term trend remains up.
No question about it, the intermediate term in EURO futures, represented by the daily bar chart above, continue to hold an uptrend for now.
Moving average envelopes on weekly and daily bar charts continue to register an uptrend. RSI is also in uptrend mode on the same two charts.
As has been mentioned before, the Dynamic Trailing Stop we are using on these charts is set fairly tight. Part of the reason for inclusion of this DTS is because I am just watching this indicator as I work on some similar proprietary coding. The proprietary coding is planned to be a component of an automated system I currently run manually using spreadsheets.
DTS can definitely be a great tool for cutting losses short and letting profits run, but sometimes it gets whipsawed (what trading tool doesn't?). We have seen it go back and forth a little in the EURO on the daily chart. For now, it is back to uptrend mode on both daily and weekly bar charts.
Directional Movement Index / Average Directional Index (DMI / ADX) is confirming trending action on both the weekly and daily charts. The yellow ADX line is trending up. Less so on the daily chart, but it has still turned up since last week.
Remember, we have been holding the intermediate term based mostly on little ole simple parallel trendlines. Not sexy, but they work. Its still neat to see other, more sophisticated indicators, confirm what the kid with the straight edge can tell us.
Current Stance
Long Term: Sell
Intermediate Term: Hold
Fight of the Century: Keynes vs. Hayek Round Two
You might remember the original Keynes vs. Hayek Rap. Well, its time for Round Two!
I love these! Hayek wins again. He has Mises in his corner after all!
The economy is organic. Put away the wrench, we don't need a mechanic.
I love these! Hayek wins again. He has Mises in his corner after all!
The economy is organic. Put away the wrench, we don't need a mechanic.
4/27/11
Technical Analysis - Gold 4/27/11
Gold prices continue to hit new highs.
Parallel trendlines continue to be redrawn to respect and follow the trend until it ends.
Just riding the wave for now. It will do what all waves do and end at some point.
Directional Movement Index / Average Directional Index (DMI / ADX) are confirming both the long and intermediate term uptrend.
Current Stance
Long Term: Hold
Intermediate Term: Hold
Parallel trendlines continue to be redrawn to respect and follow the trend until it ends.
Just riding the wave for now. It will do what all waves do and end at some point.
Directional Movement Index / Average Directional Index (DMI / ADX) are confirming both the long and intermediate term uptrend.
Current Stance
Long Term: Hold
Intermediate Term: Hold
4/26/11
Technical Analysis - Swiss Franc 4/26/11
The Swiss Franc continues to be one of the strongest currencies. Let's look at some charts.
We have again adjusted the parallel trend lines on our long term chart to account for further gains in Swiss Franc futures.
The intermediate term uptrend in Swiss Franc futures is still intact according to our updated parallel trend lines.
Long and intermediate term moving average envelopes are still trending.
Directional Movement Index / Average Directional Index (DMI/ADX) is confirming both the long and intermediate term uptrends. Likewise, our somewhat tightly set trailing stop indicator is also confirming these trends.
I know this not exciting econ commentary or rocket science, but how many economists, who spend so many words telling you all about the supposed external factors, make livings actually trading the markets they talk about? We seek to ride price trends, because that's how we make money. In terms of operations, we don't really care about the supposed why's or the after the fact rationalizations for market trends. We just want to ride the wave.
At the time of this posting, 1 USD = 0.87661 CHF.
We have again adjusted the parallel trend lines on our long term chart to account for further gains in Swiss Franc futures.
The intermediate term uptrend in Swiss Franc futures is still intact according to our updated parallel trend lines.
Long and intermediate term moving average envelopes are still trending.
Directional Movement Index / Average Directional Index (DMI/ADX) is confirming both the long and intermediate term uptrends. Likewise, our somewhat tightly set trailing stop indicator is also confirming these trends.
I know this not exciting econ commentary or rocket science, but how many economists, who spend so many words telling you all about the supposed external factors, make livings actually trading the markets they talk about? We seek to ride price trends, because that's how we make money. In terms of operations, we don't really care about the supposed why's or the after the fact rationalizations for market trends. We just want to ride the wave.
USDCHF cross rate:
At the time of this posting, 1 USD = 0.87661 CHF.
Current Stance
Long Term: Hold
Intermediate Term: Hold
4/25/11
Technical Analysis - Silver 4/25/11
Silver continues to make new highs.
We are again redrawing parallel trendlines to keep up with the uptrend in the silver market.
One other change I made to the weekly bar chart of silver futures above is to change the scale from linear to semi-logarithmic. Semi-log does a better job in showing price change for longer term periods. This is because the vertical price axis is based on the percentage of price change rather than a static numerical distance. Sometimes, semi-log is not as great for drawing trendlines, but it works here.
Moving the parallel lines in the daily bar chart of silver too! We will keep following the trend until in the end when it bends and is no longer our friend.
Moving average envelopes continue to mark a clear uptrend.
Trailing stop indicator is set with tight parameters and following right along with silver's price trend.
Directional Movement Index / Average Directional Index (DMI / ADX) records a strong uptrend that has been underway.
Current Stance
Long Term: Hold
Intermediate Term: Hold
We are again redrawing parallel trendlines to keep up with the uptrend in the silver market.
One other change I made to the weekly bar chart of silver futures above is to change the scale from linear to semi-logarithmic. Semi-log does a better job in showing price change for longer term periods. This is because the vertical price axis is based on the percentage of price change rather than a static numerical distance. Sometimes, semi-log is not as great for drawing trendlines, but it works here.
Moving the parallel lines in the daily bar chart of silver too! We will keep following the trend until in the end when it bends and is no longer our friend.
Moving average envelopes continue to mark a clear uptrend.
Trailing stop indicator is set with tight parameters and following right along with silver's price trend.
Directional Movement Index / Average Directional Index (DMI / ADX) records a strong uptrend that has been underway.
Current Stance
Long Term: Hold
Intermediate Term: Hold
4/24/11
Head & Shoulders Consolidation in S&P 500?
In a supplement to Friday's weekly overview of the S&P 500, I wanted to mention a pattern that is on the table. Yet to be confirmed, that pattern is a Head and Shoulders consolidation / continuation pattern. While most of the time we think of Head and Shoulders chart patterns as top or bottom reversals, they can form as continuation patterns as well. For example, in late 2009, Gold confirmed a Head and Shoulders continuation pattern in a long term uptrend.
As with the reversal variety of Head and Shoulders chart patterns, confirmation is important for the continuation version of this pattern; hence the question mark in the title of this post. Right now, the pattern is just a potential. It is not confirmed yet, so it is not to be definitively called a Head and Shoulders continuation pattern yet.
Confirmation would come with a break above the neckline, which is identified in the chart below by a solid white line across the bases of the left and right shoulder declines. Some require more than just an intraday break to confirm. This could mean a certain % move above the neckline, a close above the neckline, or the low of the bar following the breakout bar being above the neckline. Such discretion is up to the individual trader.
If prices do not confirm the pattern, then we can just ignore its possible implications and move along. Because we realize that price trend is the final arbiter of all arguments in the markets, we mostly just try to follow it.
As with the reversal variety of Head and Shoulders chart patterns, confirmation is important for the continuation version of this pattern; hence the question mark in the title of this post. Right now, the pattern is just a potential. It is not confirmed yet, so it is not to be definitively called a Head and Shoulders continuation pattern yet.
Confirmation would come with a break above the neckline, which is identified in the chart below by a solid white line across the bases of the left and right shoulder declines. Some require more than just an intraday break to confirm. This could mean a certain % move above the neckline, a close above the neckline, or the low of the bar following the breakout bar being above the neckline. Such discretion is up to the individual trader.
If prices do not confirm the pattern, then we can just ignore its possible implications and move along. Because we realize that price trend is the final arbiter of all arguments in the markets, we mostly just try to follow it.
4/22/11
Technical Analysis - S&P 500 4/22/11
On the intermediate term, represented by the daily bar chart above, S&P 500 prices are inbetween recent highs and lows. If prices break above the 1340 level, we will be able to draw a new intermediate term set of parallel lines with the base line starting from the 3/16/11 low to the 4/8/11 high. The line parallel to the base line would be placed along the 4/18/11 lows. If prices do not break above the 4/18/11 high, then we will basically still be in a sideways pattern.
RSI still in uptrend territory on the long term chart to the left.
More sensitive than some of the other trend following methods employed, the Dynamic Trailing Stop on the weekly bar chart remains in downtrend mode. DTS on the daily bar chart entered uptrend mode after trading on Wednesday produced an inter-trend rally. These are mixed signals that are not unexpected when prices are within a range between highs and lows. We will only know if the consolidation is going to continue or not when price break out above or below the range.
Directional Movement Index / Average Directional Index looks very weak on both charts. This too is another picture of market that is currently not positively trending one way or the other.
The Elliott Wave pattern, or, more specifically, my current interpretation of it, indicates that right now is not a great time for buy-and-hold types to purchase the stock market. While, as tactical traders, we do follow these price trends even when the Elliott Wave pattern might be warning us, we do so with specific and fairly tight risk management procedures and exit parameters. Without risk management and exit plans in place, this is no time to be investing in the stock market long term. Wait for a major low in price and social mood if your investing is not of a tactical and agile nature.
Can the market get anymore complacent? I want to mention again that as tactical traders we will follow price trends, but this is no time, in my view, to be purchasing stocks for the long term in a buy-and-hold strategy.
Put/Call is pretty neutral.
Current Stance:
Long Term:
1) Sell, or tighten stops if you are a buy-and-hold type.
2) Hold if you have stops (exit strategy) and risk management in place.
Intermediate Term: Hold
Short Term:
Our semi-automated short term trading rules are currently taking trades to the long side (buying instead of selling short). This has changed since last week and it is possible for this to change much more frequently than the weekly blog posts on this market are published.
4/21/11
Technical Analysis - EURO 4/21/11
Overall, the long term pattern looks like a possible distribution pattern. The Swiss Franc seems to be a better choice for having a currency alternate to the US Dollar.
We must admit that the intermediate term trend in EURO futures remains up right now. However, we view this in context of the larger pattern, which appears to possibly be one of distribution.
Long and intermediate term moving average envelopes remain in an uptrend. Recently, RSI on the daily bar chart had a positive reversal, but has not caught up to prices on the upside.
The Dynamic Trailing Stop is in uptrend mode on the weekly chart, but has recently entered downtrend mode on the daily bar chart, after a series of back and forth signals in a choppy trend.
Directional Movement Index / Average Directional Index on the weekly bar chart is in uptrend mode, but +DMI is currently weakening while -DMI is strengthening. DMI / ADX on the daily bar chart does not indicate definite trending action, as the ADX itself seems to be consolidating in a range while +DMI and -DMI move closer and closer together.
Elliott Wave
Current Stance
Long Term: Sell
Intermediate Term: Hold
4/20/11
Technical Analysis - Gold 4/20/11
Gold is in the news again as it makes new highs. Some are even questioning where the limit for Gold is. Let's look at some charts to see what they say.
Although it may seem simplistic and boring, we just keep moving our parallel trendlines with the market because it works. Our goal is to be in harmony with the large price trends in the time frames we trade. For this, we seek simple tactical methods.
Long term and intermediate term moving average envelopes still uptrending.
Long Term: Hold
Intermediate Term: Hold
Although it may seem simplistic and boring, we just keep moving our parallel trendlines with the market because it works. Our goal is to be in harmony with the large price trends in the time frames we trade. For this, we seek simple tactical methods.
Long term and intermediate term moving average envelopes still uptrending.
These other trend following indicators are telling us the same thing the parallel lines applied to the price charts are telling us: gold is currently in an uptrend. Although it has happened in a few instances, most of the time we don't try to pick tops and bottoms. We just try to ride the trend, leaving a little on the table at each end in order to participate in the middle.
Where does Gold's current trend end? We will know when we get there, because we will be stopped out of our long positions. Until then, we only know what is in front of us -a continuing price trend.
Current Stance:
Long Term: Hold
Intermediate Term: Hold
4/19/11
Technical Analysis - Swiss Franc 4/19/11
Long term uptrend in Swiss Franc Futures still intact.
Intermediate term uptrend in Swiss Franc Futures still intact, and making new highs since the last post.
Long and intermediate term moving average envelopes are looking healthy. RSI is diverging negatively a bit on the long term chart.
The Directional Movement Index / Average Directional Index looks good on the long term chart, and is also trending up on the intermediate term chart.
USDCHF cross rate:
At the time of this posting, 1 USD = .89968 CHF.
I continue to like the idea of holding physical CHF along with some gold and silver in safe global storage for wealth protection.
Current Stance:
Long Term: Hold
Intermediate Term: Hold
4/18/11
Technical Analysis - Silver 4/18/11
I just keep moving the parallel trendlines with the price trend until they are broken.
Silver is trending. Ride the wave.
Current Stance
Long Term: Hold
Subscribe to:
Posts (Atom)
Disclaimer:
