Charts Don't Lie.

 Men lie, women lie, but charts don't lie.

The charts aren't telling me which way the market will go, they're telling me which way the market will most likely NOT go, and that's sideways.

NDX Weekly
The Apex Approaches

COMPX Weekly
The Apex Approaches.. Again

SPX Weekly
The Apex approaches... And yet... Again

 Chart after chart shows these symmetrical triangles with the apex fast approaching. If your familiar with symmetrical triangles you know that the apex is usually decision time. I'm the "wait and see and trade the tape" type, but I'm biased to the down side. This is because all the leading indicators are looking more and more horrible by the minute. The Jobless claims and the Philly Fed survey to be specific.

By now you've heard all about both so I won't go into the logistics of either. I will say that both were sobering and these indicators are nothing to sneeze at, as they are forward looking unlike earnings.... Every body's favorite disclaimer "Past performance is not indicative of future performance" isn't every body's favorite for nothing.

The bad numbers give the the infamous "Double Dip" theory a little more credence to me.

On the flip side, the recent M&A surge means.... Some thing. One way of looking at it is that corporations see recovery coming and are positioning them selves to take advantage of it. Another interpretation

 is that corps. see maybe not hyperinflation, well yes hyperinflation coming and are starting to see those big cash hoards as liabilities and not assets.

Yet another look at it could be that corps are trying to regain control of their balance sheets, which could be a mixture of both interpretations.

To add to that, the ECRI index is projecting slow growth, but not double dip.

We have next weeks jobless claims this coming Thursday (Aug. 26 2010) and ISM numbers the following Friday (Sep. 3 2010) which is the same day we get August jobs numbers, and this will tell us a LOT. As for what I think, I don't think, I watch.

 Especially since I have no clue which way this market is heading right now. I'll restate my bias is to the down side, but I'm not loading up on inverse ETF's. I'm holding $EPB $USO and $APD longs. I grabbed $SPXU $DOG $REW last Wednesday and sold early Thursday as my raised stops got hit. I'm up to about 80% cash and expecting another technical bounce and I'll hedge up off that bounce. For now no new longs. I have pretty good base prices on all my longs except $USO which I just grabbed this past Wednesday Aug. 18 waiting to get a clear response on what the world will do about Iran's new nuclear plant. That sucker is down 1.9% since I bought, I can stand  an 8% beat down, at which time I will promptly sell and cry. #thatisall

Until next time traders, do some homework, make some money.

Tools Of The Trade: Donchian Channels

Donchian Channels.

Richard Donchian is called the grandfather of trend following. His initial trend following ideas form the basis for all trend following achievement which has followed. Donchian's initial systems required using a moving average for the entry and exit indicator part of his program.


Richard Donchian made use of the 4 week rule. Donchian's tactic was to buy whenever a stock hit a 4 week fresh high and the exit rule was sell when it forms a two week low.

The Donchian channel is an indicator found in market trading made by Richard Donchian. It is produced by taking the highest high of the daily maxima and the lowest low of the daily minima for the last n days, then observing the area between those values on a chart.

The Donchian channel is a useful indicator for seeing the volatility of a market price. Where a price is stable the Donchian channel is going to be relatively narrow. In the event the price fluctuates a great deal the Donchian channel is going to be wider. Its principal use, however, is made for offering alerts for long and short positions. In cases where a market trades above its highest n day high, then a long is established. In case it trades below its lowest n day low, then a short is established.

The Donchian Bands are determined in basic formulas:

Upper Band = Highest High of X periods

Lower Band = Lowest Low of X periods

X is the calculation period of the Donchian Bands.

The Donchian Bands are mainly used as a breakout indicator - they determine support and resistance and make entries as price breaks these levels. Because Lows and Highs usually correlate with Support and Resistance levels, this indicator is valuable in objectively defining Support and Resistance levels.

Nevertheless, it is also used as a reversal signal - entering when price touches a band and reverses its direction. Before using the indicator in this fashion, verify the quality of the psychological level by requiring no less than 2 touches at the level. This makes certain that the signal is good and elevates its dependability.

My preferred way of trading the Donchian Band is using its middle band. The center band is the average of the lower and upper band, and may also be used to evaluate trend. Entry signals are made in the following way: When price crosses the middle band from below - buy, and when price crosses from above - sell. It is usually a powerful signal when trend strength is confirmed (with support and resistance or combined with additional technical analysis tools).

Video and description are from http://www.youtube.com/user/StockTradingMaster



As a trader you need every tool out there, that is every tool you feel comfortable with. It's a mistake to use a tool because every one else uses it. Use what your comfortable with, but how do you know what your comfortable with if you don't try all the tools out? You don't, so from time to time I'll post "good" videos I find explaining the tools of the stock trade.

In the mean time, Do some home work, make some money.

Uncle Pennybags Is Back In The Building

The Fed said: To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserves holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. The Committee will continue to roll over the Federal Reserves holdings of Treasury securities as they mature.

And the market turned around in a hurry (yet it did still close in the red.) The market rebounded and the Fed is on the job. Win - win you would think. The thing is, the fact that the Fed has to pull out it's wallet... again, means that the first 2 stimulus weren't good enough. The warm fuzzy feeling of the Fed winding down and the economy recovering is turning back into worry. Why? First off we're buying our own treasuries with money we made. That's like Rich Uncle Pennybags buying Park Place himself instead of selling it to us suckers. We've run out of suckers and we're the only suckers left.

It does seem needed if look under the curtain of Fridays jobs report (Larry Levins' blog tore the curtain down) and a third stimulus bill looks almost certain, just what we need right? May be not. A third stimulus package might put us in the Japan lane, I think. Hyperinflation can come out of no where easy and fast. Probably not as fast as Japan got it but when it comes you won't care how long it took.

So, is this the end? should you go get your gun and wait at the window like Malcom X? Not just yet. But you should take a long hard look at ways to hedge for all the possible futures.

For inflation I'm looking at the ETF $TIP that's iShares Barclays TIPS Bond The investment seeks results that correspond generally to the price and yield performance, before fees and expenses, of the Barclays Capital U.S.Treasury Inflation Protected Securities (TIPS) index (Series-L). it closed today at 107.66 up 2% year to date. Worth taking a look.

Also $CEF That's the Central Fund of Canada Limited (Central Fund) is an investment holding company. The Company is a specialized, passive holding company with most of its assets held in gold and silver bullion. Central Fund’s purpose is to hold gold and silver bullion on a secure basis for the convenience of investors in the shares of Central Fund.

As always you MUST do your home work on these investments before you invest your money!

I'm also looking for the right time to start my $SPXU buy program back up as this market may start seeing the bad for what it is.... Bad. I think I might wait until next month when the big boys come back because the volume is so low the market seems easy to manipulate. On top of that traders can't decide which way to send the market. We get zero follow through it seems. I am holding longs and I think if inflation does come, the beginning will be seen in inflated stock prices and I plan on riding that up a bit. Also with bond rates so low I hear chatter of bond money coming into high yielding stocks. I'm holding $ADP with it's 5%+ yield. Also holding some $GE which just upped their dividend.

All in all it's still summer time so these moves don't reflect the bias of the real big boys. Lets wait for next month and see what the big money thinks of all this. I plan on blogging more, but I planned on blogging more after my last blog so, we'll see. Anyway, until then, Do Some Home Work, Make Some Money.

Peace.