Join the Mousketeers

Written By: DragonFly Capital

Disney stock ($ DIS) has been on a tear since it made a bottom during the financial crisis with the market in March 2009. It took the summer off as you can see in this weekly chart, but a little closer analysis of the technical situation shows it was a logical point for it to consolidate some gains. Stocks trade in broad harmonic flows a lot of the time and this stock shows that with the AB=CD pattern over this period. The consolidation beginning in May began at the 138.2% extension of the move from A to B. This is an important Fibonacci level for traders. There are a lot of patterns from this point that we could speculate about going forward. A third move higher in a 3 Drives pattern would target a move over 100 in 2016 if it moved higher now. That is a long way higher and frankly not very useful right now with so much time until the target. It also seems

dis w

like a target a Fundamental Analyst would use so lets dig in a bit closer first to see what is more reasonable in the shorter timeframe. The daily chart below shows the consolidation zone zoomed in. The red line of resistance at 67.60 is being tested from below Monday. It has support for a move up through it from the momentum indicators. The RSI is rising in bullish territory and the MACD line (blue one at the bottom) moving higher. These are good things. Also the yellow channel around the price formed by the Bollinger bands is opening higher as the price presses on it. This is also positive. A break of that resistance would carry a conservative target of 81.22 on what is called a Measured Move higher, shown with the

dis d

pink dotted line. I like to see multiple forms of Technical Analysis re-enforcing each other though to make a trade. In this case the thin blue line will act as a neckline for a Inverse Head and Shoulders pattern if and when the price breaks through it at about 68. This would carry a price objective of at least 75. So a move over 68 has targets of 75 and then 81.22 before the long term view of over 1000 kicks in. I am starting my application to join the Mickey Mouse Club ready for my accounts.

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Dragonfly Capital

SPY Trends and Influencers October 19, 2013

Written By: DragonFly Capital

A weekly excerpt from the Macro Review analysis sent to subscribers on 10 markets and two timeframes.

Last week’s review of the macro market indicators suggested, moving into the October Options Expiration week, to look for Gold ($ GLD) and Crude Oil ($ USO) to continue to move lower. The US Dollar Index ($ UUP) looked to continue higher in the down trend while US Treasuries ($ TLT) consolidated but were biased lower. The Shanghai Composite ($ SSEC) and Emerging Markets ($ EEM) were both biased to the upside in the short term. Volatility ($ VIX) looked to remain low and falling again keeping the bias higher for the equity index ETF’s $ SPY, $ IWM and $ QQQ. Their charts also looked higher with the IWM and QQQ near their highs but the SPY needing a little more to get there.

The week played out with Gold finding support before a bounce higher while Crude Oil continued the drift lower. The US Dollar made a lower low to end the week lower while Treasuries made a higher high. The Shanghai Composite and Emerging Markets continued higher but with the Chinese market topping and ending the week on a down note. Volatility made a strong move lower, continuing last weeks fall. The Equity Index ETF’s reacted with the SPY and IWM making new all-time highs and the QQQ new 13 year highs. What does this mean for the coming week? Lets look at some charts.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

SPY Daily, $ SPY
spy d
SPY Weekly, $ SPY
spy w

The SPY started the week by completing a Three Advancing White Soldiers pattern followed by a Harami, an indecision candle and often bringing a reversal, only to continue higher ending the week at new all-time highs. The 3 white candles to end the week are not as bullish as the ones that started it as it ended with an Evening Star, another potential reversal candle. The RSI continues to support the bullish case with a move higher in bullish territory over 60 and the MACD continues to rise, also supporting more upside price action. On the weekly chart the Marubozu continues the bounce off of the trend support and bodes for more upside action to come as well and a possible 3 Advance White Soldiers on this time frame. The RSI is rising and bullish and the MACD about to cross up on this timeframe, supporting the bull case. There is support at 173.60 and 170.90 followed by the area from 168.85-169.35. There is no resistance higher but the Measured Move takes it to 175.08. Continued Upward Price Action, Minding the Evening Star.

Heading into the next week, the markets are behaving strongly but showed the first sign of being extended Friday. Look for Gold to continue to bounce in the downtrend while Crude Oil continues lower. The US Dollar Index is set up to continue lower while US Treasuries are poised to show if they really want to reverse higher at resistance. The Shanghai Composite looks to continue lower in the uptrend while Emerging Markets move higher. Volatility looks to remain low and possibly continue lower keeping the wind at the backs of the US Equity markets. The SPY, IWM and QQQ are all looking very strong on the intermediate timeframe but with Evening Stars to end the week may need to close the gaps lower before continuing to advance. Use this information as you prepare for the coming week and trad’em well.

Join the Premium Users and you can view the Full Version with 20 detailed charts and analysis: Macro Week in Review/Preview October 19, 2013

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Dragonfly Capital

Time to Buy the Gold Miners?

Written By: DragonFly Capital

The Gold Miners ETF, $ GDX, will likely attract some attention as it has a strong move higher Tuesday and closed the gap down from Friday. The Relative Strength Index (RSI) also turned back higher as well, a sign of a possible reversal. Longer term traders will see the downtrend for what it is and stay away, letting the traders that try to jump the signals take

gdx

a swing at it. But should they avoid it? To answer that take a look at the Gold ETF, $ GLD. History says not so fast! It is showing a Heading and Shoulders Top with a price objective of at least 110.44. Kind of bearish, huh? This pattern could always fail, but until it does , by moving back over the top of the right shoulder at 128.44, it is in control. This is important for the miners as they price of Gold is a big input into their costs and revenue. But there is also a long standing relationship

gld

between the price of the Miners relative to Gold. The last chart below shows the ratio of the Gold Miner ETF to the Gold ETF plotted as candlesticks, with the area chart for the Gold ETF behind it. There are two key points to take away from this chart. First, as Gold rises so does the Miners ETF. The ratio line is level as Gold is rising. The second is that the Miners tend to fall before Gold starts to fall. The ratio is falling as Gold is level and then it catches up to the downside. Gold

gdx-gld

and Miners move in lockstep on the way up and the Miners lead on the way down. So for confirmation to buy the miners look for the Head and Shoulders top for Gold to be negated. Otherwise you run the risk of that Head and Shoulders leaving you a headless Miner, as the clock runs into Halloween.

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Dragonfly Capital

SMBU Midday Recap

During the SMBU Midday Recap Bella discussed:

1) Why he got long $ FB and his stops

2) Where and why he bought $ SPY

3) A trade you cannot miss as a swing or intraday trader in $ SCTY

4) Why you should be following Robert Costa on Twitter for breaking machinations on the debt ceiling crisis

5) Dark pools and the importance of access to them

6) The advantage proprietary technology offers to a Consistently Profitable Trader

Related blog posts:
My Thought Process: $ FB
I Am Worried About Dark Pools

You can be better tomorrow than you are today!

Mike Bellafiore

One Good Trade
The PlayBook

No relevant positions

Read more […]
SMB Capital – Day Trading Blog

STTG Market Recap October 16, 2013

As the framework of a deal in D.C. comes to fruition at the last minute (try to act surprised), the S&P 500 and NASADQ had bountiful sessions with gains of 1.38% and 1.20% respectively.  As we have been mentioning, if last Wednesday was a bottom, if the recent pattern of rallies continues we’ll see a move of 12-14 sessions of nearly vertical move up.  It is not supposed to work like that but Quantitative Easing markets tend to be violent to the upside in the initial bounce. Yesterday was a bit of a curveball but that was due to some stalling in negotiations – today would be session 5 of the current rally.  Tomorrow will be a good test because after the bell IBM – which is very heavily weighted in the Dow Jones Industrial Average – reported some disappointing numbers and we will see how quickly dip buyers show up if there is even a dip.

On the economic front, homebuilder sentiment slipped to 55 in October, touching the lowest level since June, according to the NAHB/Wells Fargo Housing Market Index, amid worries over Washington and higher labor costs. Economists polled by Reuters had predicted the index would remain flat at 58.

Both the S&P 500 and NASDAQ are now back in breakout mode which is bullish.  The S&P 500 is on day 4 of a breakout…

spx

NASDAQ is on day 3 of a breakout above this descending channel (blue line)

nasdaq

Transport stocks are likewise breaking out – something bulls like.  Day 4 here.

tran

The volatility index – which we mentioned was breaking out last week (bearish), reversed and today imploded as uncertainty on the debt deal moves away.

vix

Financials had been a laggard during this correction but this sector is acting quite well the past few sessions.

xlf

We also mentioned energy had been showing a lot of relative strength along with health care – these are already above highs earlier in the year.

xle

xlv

Have to mention one of the four horsemen as these have been leaders of the market – here is Facebook (FB) with a stellar session.

fb

Now to IBM which is down to the mid $ 170s range in after hours.  The stock has been weak for a long time and reported a revenue miss of $ 1B after the bell.

IBM, the world’s largest technology services company, reported third-quarter earnings that beat Wall Street estimates, but it missed revenue expectations due to a decline in its hardware business and in emerging markets. International Business Machines Corp said on Wednesday its quarterly net income rose 6 percent to $ 4.0 billion, or $ 3.99 a share on a non-GAAP basis from $ 3.62 a year earlier, above estimates of $ 3.96 a share, according to Thomson Reuters. Revenue dropped 4 percent to $ 23.7 billion below Wall Street analysts’ expectations of $ 24.74 billion mainly due to a decline in its hardware division.

Here is the daily chart…

ibm

…and you can see how it acted negatively immediately via this intraday chart from Thinkorswim by TDAmeritrade.

intraday

 

Original post: STTG Market Recap October 16, 2013


Stock Trading To Go

Kicking the Can

The scale of the Republican capitulation yesterday was impressive and the Democrats got their ninety day extension without any real concessions. Frankly I was surprised and clearly the Democrat strategy of hanging tough on the negotiations was realistic after all. There wasn’t much reaction on the equity futures market and ES is down four points […]
Slope of Hope

Government Shutdown: my aviation nerd friends’ perspective

In my October 1 posting I predicted that the government shutdown would last for 8 days. So it looks as though the risk of me having to buy everyone a Taco Gigante is increasing.

How is the shutdown affecting my friends? Here’s a note from one who lives in Concord, Massachusetts:

The Minuteman National Park has cordoned off all of its parking lots.  Busloads of people are still showing up, but now the buses are parked on the sides of Monument Street, creating, well, monumental traffic jams.  They don’t chain off the lots at night or on holidays.  Why do they do it now?  Because a central bureaucrat in the National Parks Service or in the White House told them to.  Our public servants feel it’s their job to make our lives difficult to prove how important they are. This is what happens when Americans vote for more and larger Government …
Another friend is selling a helicopter:

The aircraft is sold, pre-buy [inspection] done, money in escrow… but the registry at the FAA is closed and we can’t finalize the transaction. Hope they open up soon so that we can fulfill the government mandate they came up with which is to register with them. An amazing example of government overreach and self-sustaining politics.

First you pass laws that require anyone to deal with you… then you provide bad service and ask for more money to do so… then you close down the one office (probably no more than one person!) that handles billions a year in airplane registrations to prove to the public how powerful you are.

And finally this story from a charter operator:

The [$ 10 million jet] is sitting because the FAA took ten weeks so far to conduct the required conformity check for 135 [charter or “air taxi” operations]. When they did they supposedly found a sticker that was missing. Now they won’t do anything.

Separately, has anyone heard what federal workers are doing? They don’t have to go into work, but those who aren’t living paycheck-to-paycheck shouldn’t have any financial fears (since the government should eventually pay them). I know only one furloughed government worker and asked his wife what he’d been up to lately. She said “Oh, he’s been biking every day. The weather has been beautiful here in Washington.” This USA Today article says that golf courses and gyms are doing well. Has anyone heard of anything exciting? A government worker building a life-sized LEGO model of the Fontana di Trevi?

Philip Greenspun’s Weblog

Now That Earnings are Done….. A Look at Bank of America

Written By: DragonFly Capital

Bank of America, $ BAC, reported earnings Wednesday morning and the reaction was a jump higher in price. But now with earnings out of the way how does it look going forward? Actually the charts are set up for a very good run if it can just get a little kick start. Take a look.

bac d

The Daily chart above shows a wedge that has been building since mid July. The latest leg higher, now over all of the Simple Moving Averages (SMA) is getting ready to hit the top of the wedge. This is the key to the story technically. That top wedge. A push through triggers a target on a pattern break on this daily chart to 16.50 on a Measured Move higher. It has support to at least test that top rail of the wedge from a bullish and rising Relative Strength Index (RSI) and a MACD that is rising and positive. That could get it going.

bac w

The weekly chart then gives some clues as to how much room it has to run in the intermediate term. The Harmonic Bat it is building carries a Potential Reversal Zone (PRZ) all the way up at 35.21. But there is resistance 15.31 and 19.92 along the way, from the highs in early 2011 and 2010. This view also has a bullish RSI but with a MACD that has leveled after a pullback. If that initial move from the daily chart happens the MACD will likely rise to support more upside as well.

bac m

Stepping back further to the monthly view shows that there is some real upside potential. A move higher through the symmetrical triangle at 15 would trigger a target of 31.50. It would also take the stock over the 23.6% Fibonacci retracement that has been containing it since it fell back of the slight over shoot in 2010. A 38.2% retracement would bring it up to 22.58 and 50% retracement closer to that 31.50 level at 28.78, with resistance on this timeframe at 23.75 and then 34. You can see that the RSI and MACD are both rising on this timeframe to support more upside. Keep an eye on that daily chart and the 15 to 15.30 area.

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Dragonfly Capital

Academic Eggheads: Unemployment benefits encourage unemployment

In January 2011, I questioned whether paying able-bodied people to stay home and play Xbox for 99 weeks was a smart idea. In January 2013, I wrote about academic studies that found that indeed the American economy’s recent period of high unemployment and high long-term unemployment was closely tied to our politicians’ decision to pay people to stay home. Last night a reader sent me a link to an October 2013 paper: “Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects,” by economists from the University of Oslo, the Federal Reserve Bank of New York, and the University of Pennsylvania. The authors look at integrated labor markets that happen to be intersected by a state border. In markets, there are workers who have the same job opportunities but potentially different maximum duration for unemployment benefits.

The conclusion? “We found that unemployment benefit extensions have a large effect on total unemployment. In particular, our estimates imply that unemployment benefit extensions can account for most of the persistently high unemployment after the Great Recession.”

Philip Greenspun’s Weblog

October 16 Trendline and Level Planning for US Equity Indexes

With equity markets continuing to focus on headline news from the US Capitol (is there a deal or not?), let’s take a broader look at the Dow Jones, S&P 500, NASDAQ, and Russell 2000 equity indexes and note relative strength and weakness within the context of rising parallel trendlines.

We’ll start with the S&P 500 and Dow Jones which show similar structures:

SP500 S&P 500 Trendline Planning

As I highlighted in yesterday’s post, the SP500 continues to trade within rising parallel trendline channels and paused into the Midpoint of the pattern.

This post is a quick quad-index check-up, and we note the potential upside breakout through the midpoint which would extend the upside target toward the 1,745/1,755 level depending on how quickly price rallies up above the 1,700 level.

While the SP500 is above the midpoint and closer toward the high, the Dow Jones continues to show relative weakness in that it is the index that is the greatest distance from its recent September high.

After a trendline Bear Trap event in early October which was actually a successful test or support-bounce up off the rising 200 day SMA, the Dow Jones traded powerfully higher off the 14,700 level toward its pattern midpoint into 15,350 (achieved today).

Like the SP500, we’ll use similar logic and planning for the Dow Jones Index in terms of an upward movement increasing the upside target to the 15,900 or 16,000 upside trendline pattern target.

Both the NASDAQ (tech-heavy) and Russell 2000 (small-cap) equity indexes have shown relative strength to the Dow Jones and S&P 500.

If you only focus your attention or trades on the SP500, you may not have noticed today’s breakout to new all-time highs in the Russell 2000 and to new recovery highs for the NASDAQ:

The NASDAQ shows relative strength due to its breakout above its September high and its location above the Midpoint of the Rising Parallel Trendline pattern.

The NASDAQ upper potential target stretches toward 3,900 in the event we see a continuation of the pro-trend rally and a breakout (short-squeeze) environment.

The Russell 2000 shows similar strength with the NASDAQ:

Russell 2000 RUT Index

Finally, the Russell 2000 also broke (albeit gently) to new highs above the September 2013 peak – compare this to the S&P 500 and Dow Jones above.

Generally, it is a sign of broad strength or optimism for the future when the NASDAQ and Russell 2000 outperform the S&P 500 and Dow Jones.  We’ll continue watching for additional upside price action to see if that tendency holds true for the near future.

Continue watching breaking news updates as necessary, particularly related to the US Congress, and monitor price action in all indexes relative to the Rising Parallel Trendline (channel) patterns and Midpoints.

I’ll be discussing breakout, retracement, and reversal trading tactics live at the Las Vegas Traders Expo on November 22 – join me and your fellow traders at the free expo!

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Corey’s new book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


Afraid to Trade.com Blog

How does the U.S. government know how much it owes?

There is a lot of news lately about the Federal government potentially running up against a debt limit and not being able to keep borrowing. This raises the question of how the government keeps track of debt. http://www.publicdebt.treas.gov/ doesn’t explain anything about the information systems used by the Federales. Are we sure that we didn’t blow through the debt limit some months ago? http://www.fms.treas.gov/index.html makes it look as though some efforts are being made to keep track of the cash, but with $ 16.94 trillion to track, it seems possible that bonds and other obligations could slip through the cracks.

How do we know what we know about the debt?

Philip Greenspun’s Weblog