$TQQQ – a Nasdaq bloodbath too far too fast?

TQQQ, the 3x-leverage ETF based on the Nasdaq 100 stocks (NDX), was down 5.4% today, a bloodbath that affected many of the bellwether Nasdaq stocks in the index.

See the table below:

(click on the image for a larger view)

NVDA down 14 points, NFLX down 11, and so on. Pretty ugly in the momentum bellwethers.

There was a fake-out nudge to the upside Tuesday, but can’t say today’s slam down was unexpected. Posted this two days ago:

This could be tricky since long-term breadth continues to climb (up for the fourth day). Given that, if short-term breadth turns up here in the next day or two (or bless a bottom dollar, three days), the market would get another bullish boost. If long-term breadth turns down, this could very easily become the hook that catches every bull off guard. Although the bull market has so far defied the signs over and over again, it is inevitable that one of these times, like today, when the signals signal a turn, the turn will come. Probably when the bears are worn out and the bulls don’t expect anything of on their blindside.

If today’s sell off continues, that will be relevant, but there are signs this is done already.

Nearly every time TQQQ falls through the standard deviation lines (the blocks on the green lines on the chart below), the Nasdaq bounces the next day or two days out (the red vertical lines on the chart). It is as if any fall this far is too far too fast. And oftentimes in this bull market, the bounce becomes another rally (see the diamonds on the chart are TQQQ). In fact, a look-black on the chart shows this last great upswing in the Nasdaq, which began in late September, started with a touch down on the green lines just like today.

So I’m looking for the bounce, and looking to ride a rally if it develops here (Santa time?), and if it doesn’t then the suggestion in the quote above might indeed be a sea change in the market.

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Buy (Day 6).

PRICE: Sell. (Day 1).
SHORT-TERM BREADTH: Sell. (Day 1).
VOLATILITY: Sell, (Day 1).

CONTEXT:

SPY CLOSE – 262.31
QQQ CLOSE – 153.89
CNN MONEY’S FEAR AND GREED INDEX: (67, rising, greed level).
NIFTY-50 STOCK LIST: 14 Buys; 11 Overbought, 8 Oversold, 6 new buys today, 3 new sells.

(click on the chart for a larger view)

#STOCKS – the nifty-50 stock list revised and sorted…

Just scanned the market to add to and sort my nifty-50 stock list.

These, by my measure, are the stocks that have performed best with the market swing signals since the last sort three months ago. That does not mean they will be best going forward but it is my experience they will be strong vibrant participants on market swings to come.

In addition, the list itself serves also as a market-timing indicator.

For instance, historically, whenever 40 or more of the stocks on the list are on sells by my measure, the general market (no doubt in a pullback at that point) is within a day or three of a significant swing bottom. This, like so many indicators in the stock market’s forever bull trend, does not do as well marking swing tops. Too many on buys, 40 or more, does often trigger a pause in the advance. That’s just the way it is.

The stocks are: RIOT, KURA, XNET, ESIO, BPMC, QNST, AXGN, VRS, ACLS, DLB, KBR, ORBK, LGIH, SRPT, OLED, DLTR, MU, YY, TAL, DHI, ARNA, CGNX, JEC, COLL, MRVL, DK, HRTG, AWI, KRO, GTLS, PNK, CAVM, BECN, BURL, RNG, SGMS, CTRL, GLOG, ADMS, RH, EBS, ESPR, MLNX, CRAY, MTCH, YINN, PRTK, AXTI, GBT, HIMX.

The top 12 stocks are in the chart panel below.

(click on the charts for a larger view)

Swing signals – when to take the trade…

My three swing signals, based on price, breadth, volatility, are all on the buys.

A question arose on whether these trades should be initiated on the close of the day they are triggered or on the open of the following day?

Both times make money but the open of the next day is better. This is a market-timing system I developed to have its signal register after the close each day so a trader only has look at it once a day and can look the night before to put in an order for the open of the next day. It is geared to both longs and shorts but as it has turned out longs are more important over the long haul and the next day’s open is better than the previous day’s close probably in both cases because of the market’s long-term bullish bias.

This week has been a pretty good example of the open versus the close. I had a sell signal on Monday’s close and sold into that gap up Tuesday. Gaps go both ways but more often than not it goes like that.

The signals on the close of Tuesday again triggered buys for today’s open and produced a nice bounce for the day. Of the the 3x-leveraged index ETFs I follow, XIV led, up 1.7% from its open. And incidentally, SOXL, the leveraged semiconductor sector ETF, continued its amazing rally, putting on another 3% on its 11th consecutive day up (that is probably not sustainable…).

It should noted that long-term breadth is again climbing – it is never wise to short anything against it.

It should be further noted that the short signals do not work as well as the longs over the long-term. The were profitable in 2008 and 2011 (of course) but not much at any other time. In other words, being in a bull or bear market matters.

XIV, based on volatility, has led this swing system all year. On the chart panel below the closed returns are in the white rectangles on the lower left and the current profit is in the white rectangle on the lower right. Each trade is calculated at $100K to yield an easy percentage number. As the chart shows, XIV’s closed profit on price is up 60%, on breadth up 51%, and on volatility up 71% (appropriately). These were all buys on the open of the day following the close the signal was triggered.

SWING TRADING SIGNALS:

PRICE: Buy. (Day 2).
SHORT-TERM BREADTH: Buy. (Day 2).
VOLATILITY: Buy, (Day 2).

CONTEXT:

SPY CLOSE – 255.02.
QQQ CLOSE – 148.04.
LONG-TERM BREADTH: Buy (Day 2).
CNN MONEY’S FEAR AND GREED INDEX: (83 falling, extreme greed level).
NIFTY-50 STOCK LIST: 22 Buys; 116 Overbought, 7 Oversold, 4 new buys today, 6 new sells.

(click on the chart for a larger view)

#MarketTiming – From fear to new highs…

After basically a week’s consolidation, the rally from fear to greed resumed Monday.

CNN Money’s Fear and Greed Index moved out of the fear zone and into neutral.  First posted here with this below:

http://www.thegodoftrading.com/uncategorized/spy-now-upward-bias-fear-greed/

And previously posted here:

http://www.thegodoftrading.com/market-timing-2/markettiming-moving-up-from-fear/

The buy signal on individual EFTs after that first post started with SPY at 243.06 (closed Monday at 249.21), QQQ at 141.18 (closed Monday at 145.87; the leveraged ETFs, TQQQ moved from 104.41 tgo 114.70 and XIV moved from 76.37 to 84.31.  That’s nine trading days including a week’s price consolidation.

That is the quality of market timing as measured by this CNN Money multiple-component index.

So what now?

Fear and Greed at neutral and the indexes already knocking the highs.  There is a good chance the market goes higher, dragging sentiment, as measured by this index, back into the greed zone (see the red line on the chart below) as the indexes register more new highs and stocks generally stay strong.

All three of the daily signals – price, breadth, volatility – are back on buys as long-term breadth entered its third positive week.

SWING TRADING SIGNALS:

PRICE: Buy. (Day 1).
SHORT-TERM BREADTH: Buy. (Day 1).
VOLATILITY: Buy, (Day 1).

CONTEXT:

LONG-TERM BREADTH: Buy(Day 11).
CNN MONEY’S FEAR AND GREED INDEX: (58 rising, neutral).
NIFTY-50 STOCK LIST: 34 Buys; 23 Overbought, 3 Oversold, 18 new buys today, 1 new sells.

Bellwether stocks meeting 5-minute day-trading criteria for a buy on the open:  TSLA, BABA, AAPL.

(click on the chart for a larger view)

$KBE – Are these banks or the walking dead?

Long-term market breadth has been rising for nine days.  That usually takes most stocks in the same direction.  After all, if a stock isn’t rallying when it has the entire market on its side, when is it going to rally?

So, consider the banking sector…

JPM, BAC, GS, WFC, DB, KBE (the ETF for the sector) are all falling while breadth is positive (see the rising green in the middle of each chart below), and now all of these stocks have broken support falling out of their respective consolidations (see the blue boxes on the charts below).

Don’t those boxes look a lot like coffins?  So is this out of the coffin and into the grave like “out of the frying pan and into the fire”?

Enough fiddling around.

If you’re a bull this is not a sector you want to see lagging, let along falling apart.  So here’s the heads-up, they’re likely going down.

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A $ZEAL for investors…

Investing in an IPO is actually one of the easiest decisions in stock trading but not on its first day.

But it is an IPO’s first day of trading that gives a clear look at when to buy the stock.  Simply note the high price and the low price on day one of the IPO. Those are the lines in the sand (see chart 0f ZEAL below). The stock is a buy on a close above the high of the first day with a tight stop loss below the high of the first day.

With ZEAL that buy would have been at 18.95 on the open of August 28 (after its close above the high of the first day at on August 25).  The stop loss is on any close below 18.69, the high of the first day.  ZEAL backed off for a couple of days and retested its breakout above the IPO-day high but did not trigger its stop loss.  Today it is, at the moment, turning up again at 18.90 (UPDATED: 18.80 on the close), again with a stop below 18.69.

This is an an opportunity for investors to buy and hold.  This is not for traders.  With a good-till-cancel stop loss order in, with very little short-term risk, it is a buy it and forget it with the hope it will appreciate over time.

(click on the chart for a larger view)

 

$TSLA – Is it the best long-term investment since $AAPL?

I am not much for Peter Lynch type anecdotal evidence as a basis for either fundamental analysis or technical analysis in the stock selection but one of my sons, who is 28 years old, recently gave me a lecture on the future of Tesla (TSLA) that actually made sense.

He believes TSLA will one day be the biggest market-cap stock in the market because it is the Apple (AAPL) of the car market.  His reasoning, at the risk of oversimplification, is that Apple’s iPhone took the world by storm for one reason beyond its intrinsic quality and usefulness – it dominates because it happened to be introduced to the market at the exact moment that his millennial generation was able to afford to buy the iPhone.  Now the TSLA is introducing its Model  3 at a price and a moment when the same millennial generation is reaching the point in their lives when they can want and afford one.

Simply put, he tells me, everyone he knows is on the Tesla waiting list for the Model 3.

According to reports, reservations for the car are now averaging 1800 per day and have far surpassed the 500,000 mark – http://money.cnn.com/2017/08/02/technology/business/tesla-earnings/index.html.

And if the reviews are any indications, that number is only going to increase as Tesla gets closer to delivering the vehicle – https://www.cnet.com/roadshow/auto/2018-tesla-model-3-review/.

And, more simply put from a long-term investment point of view, he points to AAPL”s current market cap north of $800 million and TSLA’s current market cap at $57 million and says “do the math.” TSLA has room to move up 14 times its price today.  Can this be true?  Well, when AAPL introduced iPhone in 2007 its stock was selling at a split-adjusted $11 per share.  It is now sells at close to $162 a share – 14 times its price at the iPhone’s introduction ten years ago (how about that?!).

So, as they say on Wall Street, what’s a price target on the upside for TSLA – $800 or so a share…

(click on the charts for a larger view)

 

 

 

 

 

 

$TSLA – #MarketTiming Stock of the day…

“Buy when the market tells you, sell when the stock tells you.”

That is a stock-market adage coined, I believe, by the late great Kennedy Gammage of the Richland Report.

The first part of that quote is always the timing trigger to enter any long in the market, having the breadth, the mass psychology of the general market, positive to reduce the initial risk of any trade and/or investment.

That is what market timing is all about.

The second part of the quote is about time.  If one is a trader, the decision might be to exit any trade when the market turns negative.  Even for one day.  If one is an investor, the decision would be to hold the stock until is reverses, or hits a stop loss level, or violates a trend line or violates a moving average, or any number of other indicators that could cause the stock to tell sell.  Each of those stock exits are up to the individual investor’s risk tolerance or profit motive.

Applying the adage is rather simple which is why Mr. Gammage was great.

The stock of TSLA (see the chart panels below) is a perfect example today of how this works.  My three swing trading signals were all on buy signals indicating a positive market for at least a day trade. TSLA finished the day yesterday on an intra-day buy signal of its own that would carry over to today’s open (see right chart panel below).  In addition, TSLA was oversold on the close yesterday (the cyan color coding in the panel on the left).

That was the set up for a buy on the open today – the result a 4 percent gain on the close.

So what now?  Today’s market environment has weakened as two end-of-the-day signals, price and volatility, have given sells.   While the short-term breadth signal continues to climb (for a dicey fourth day in a row), long-term breadth is still negative.  Long-term breadth is always the context for trend trading (or for counter-trend trading like TSLA today).  So going into tomorrow the trend is down with two out of three daily signals once again in agreement making the market play again to be flat or to be short.

SWING TRADING SIGNALS:

PRICE: Sell. (Day 1).
SHORT-TERM BREADTH: Buy. (Day 4).
VOLATILITY: Sell, (Day 2).

CONTEXT:

LONG-TERM BREADTH: Sell (Day 16).
CNN MONEY’S FEAR AND GREED INDEX: (19 falling, extreme fear).
NIFTY-50 STOCK LIST: 28 Buys falling; 17 Overbought, 4 Oversold, 4 new buys today, 9 new sells.

(click on the chart for a larger view)

#MarketTiming – beware the ides of August…

SPY gaped up today, hit yesterday’s suggested 247 resistance on the first five-minute bar, and turned down, down not so much but maybe enough given that that is a lower high since last week’s nuclear Tuesday reversal.

In addition my daily price and breadth indicators also gave sell signals with lower highs. Volatility remains on a buy but it is for the third day in a row which makes any more time tenuous. If it were to turn it would give a higher low in the VIX, a possible hint a change in trend.

Today’s turn down in short-term breadth (see red circle on the chart below) in context with the continued decline in long-term breadth is often a gift the the bears, which is to say the general market should plunge tomorrow.

These are all quiet signals after yesterday blast to the upside which may mean they mean nothing at all and today’s long sideways price action after the open was nothing but a consolidation of yesterday’s gain before proceeding higher.

But these quiet, disquieting, signals could also be like whispers in the night — “beware the ides of August, beware…”

How often has the market topped quietly in August and fallen all the say into October?

SWING TRADING SIGNALS:

PRICE: Sell. Price (Day 1).
SHORT-TERM BREADTH: Sell. (Day 1).
VOLATILITY: Buy, (Day 3).

CONTEXT:

LONG-TERM BREADTH: Sell (Day 10).
CNN MONEY’S FEAR AND GREED INDEX: (36, still at a fear level).
NIFTY-50 STOCK LIST: 42 Buys; 13 Overbought, 2 Oversold, 2 new buys today, 3 new sells.

(click on the chart for a larger view)

SWINGTRADING2017-08-14_1524

$SPY and $QQQ – not good behavior…

Both SPY and QQQ gapped up today but both meandered all day pretty much below each’s respective open. That is not good behavior despite the gap gains.

And yet, as I said yesterday, the market will go up until it goes down. So QQQ and its leverage ETF TQQQ again registered another up day, the 10th in a row and SPY is overbought.

Any time now these two major ETFs, representing the NDX and and SPX, are going to have a sell-down (may have to say that again and again until I’m bluer in the face). However, I suspect tomorrow is that day.

There are signs. Less pronounced than before, but again…signs.

Short-term breadth gave a sell signal on the close. The buy signals on the individual stocks in my nifty-50 stock list rolled down from 29 to 26 on buys. The Fear and Greed Index is now in “extreme greed”, a contrarian indicator (although it sill has to turn down to give a sell). As I said, less pronounced.

Again, I need to state since long-term breadth is positive, there are no shorts here, just the possibility of a dip to take some profits, and then to look to buy back in hopefully at some lower level.

SWING TRADING SIGNALS:

PRICE: Positive. Long (Trade Day 9).
SHORT-TERM BREADTH: Negative. Flat (Day 2).
VOLATILITY: Positive, Long (Day 2).

CONTEXT:

LONG-TERM BREADTH: Positive (Day 7).
CNN MONEY’S FEAR AND GREED INDEX: (76, reaching extreme greed level).
NIFTY-50 STOCK LIST: 26 Buys, falling; 19 Overbought, 2 Oversold, 4 new buys today, 7 new sells.

The rally results so far (nine full days from the open of 7/10):

TQQQ up 13.8 percent.
XIV up 14.8 percent.
UPRO up 5.8 percent.
TNA up 6.5 percent.

The net gain is now 10.2 percent as marked by the Price buy signal on the open of 7/10).

(click on the chart for a larger view)

fear_and_greed2017-07-17_1525