S&P weekly....

The Volume was higher this week then the previous 4 weeks to the upside... Along with a DOJI candle it appears the markets are undecided what to do. The Slow Stoch is over sold, and I do believe the markets should lower next week however, there is a chance we will see something similar to what happened before the May flash crash where Slow Stoch embeds and the S&P goes higher.  The biggest news day should be Friday with the employment situation in the states coming out.

Also I would pay attention to other Central banks and what they are doing to stabilize their currencies.  It will also be interesting to see what China will do with the Yuan peg.  I view this as a tactic that has been employed by many countries for many years.  Today it has become inconvenient for the States politically as it is being blamed for the unemployment rate.  I pose this question, if the Yuan value increase 15% (estimate I have seen was 25% undervalued), and manufacturing jobs begin to come back how long will this transformation take?  Assume it takes at little as 2 years, will tax payers be happy with every good in Walmart increasing by 15% for 2 years?  I don't think so, this peg if removed would be a death sentence for the consumer of the US and for businesses that get parts from china.

Gold/Silver, are still making new highs, it is amazing to see how strong they have been.  However, I expected a pull back before gold broke 1300, and I still expect a pull back or sideways consolidation before any other major moves that could take Gold realistically to 1350-1400 over the next 2 months.

AVL entry: Rare Earth Industry Drama

As mentioned before AVL is one of the few Rare Earth miners in North America.  In June, China restricted some exports of rare earth.  Strictly from an economic standpoint this was a clever move to continue to insure their manufacturing sector can absorb some of the appreciation of the Yuan.  The battle of the US and China over this issue took an interesting turn as legislation to impose tariffs designed to impact China was passed by the House of Representatives. Article from cnn.  

Other news about the rare earth industry:

http://www.bloomberg.com/news/2010-09-29/pentagon-losing-control-of-afghanistan-bombs-to-china-s-neodymium-monopoly.html

http://resourceinvestingnews.com/7758-china-export-cuts-good-for-rare-earth-juniors.html

On to the entry.

My entry was at 3.54, which is 4 cent off the lows.  It is interesting that the lows came very close to touching that 20 MA.  After this drop, the stock moved up considerably, closed 19 cents from the lows. The MA are also lined up bullish with 20 on top of 50 on top of 200.  A 61.8% retracement could be fairly be argued, If this count holds, the upside target of this is wave 3 is 5.23 and 6.51.

However, look at an expanded time frame.

 
AVL is close to challenges its all time highs which occured on Sept 8th, 2009 @ $4.24.  It could be argued also that the true top in 2009 was slightly less @ 3.98 on Sept 23rd, 2009.  So breaks of this level could be a solid entry into this stock.  This position I think I will have a loose stop as it is quite volatile.

Market indecision

The key to playing this market is to wait for an opportunity.  Don't chase them.

I was stopped out on friday from my small short position on the nasdaq.  However today we had a slight down day today.  Remember you want to take calculated risks, the short I placed was a setup with a stoploss that made sense, just above the recent high.  Friday it was taken out.  If this week we continue to slide, one could say you should have stayed in the trade and had a looser stop loss. Perhaps, however, after a big up day on friday would it really make sense to hold that position?  So I am out and waiting for another entry that makes sense.  I am still in some metal mining companies actually in three a gold , a silver and a platinum company. 
Gold is also in a state of indecision.  After attempting to break the key 1300 level, it has fallen back to regroup. The metal is over extended so a pull back is expected however depending on the other markets, gold may just hover in the 1285 - 1300 range and correct through time.   What we are still seeing in this market is gold being pushed down during North American hours only to be bid up in the Asian markets.   Remember seasonality is in favor of gold right now.  For key level of 1300 to be take out with strong volume will only occur when either the QE2 is announced, more global instability occurs, or more currency war talk.

Gold is so high because the countries are in a race to the bottom as most believe that the way to beat this recession is to stimulate their export market via devaluation of the currency.  Japan recently intervened, China has not allowed the Yuan to gain value quickly, and the US has been engaging in QE. 

When my article for a school paper is posted I will post the article here.  The topic is on how Mr. Keynes' name has been dragged through the mud unjustly. 

Properly entitled:  "Is John Maynard Keynes turning in his grave?"

Stay tuned.

Debt Monetized, stocks head up

Like I mentioned in my previous post the only thing stopping the markets to roll over is the constant injection of money into the system.  Today close to $4 billion in debt was monetized.
My stop loss on the nasdaq was hit, however, on the S&P todays action did not break a few days agos high.  I will wait for more sell signals before going short again.  Also, I might not even bother going short because if this is going to be the pattern, few days of downside followed by money injection, then I would rather still to the metal markets for now.  However, as gold has been attempting to touch 1300 a pull back could be expected as this barrier is a barrier that has been talked about for along time.

http://www.zerohedge.com/article/pomo-results-39-billion-monetized-41-submitted-accepted-ratio


This increase of 1.5% on the markets so far at 12:30 pm, is following worst than expected economic news. 
Durable goods was worst than expected followed by New Home sales dropped more than expected.

Observe the overall trend since Aug 2007

Nasdaq update......

So today I was hoping to see confirmation of my trade.  My stop was most recent high that happened 2 days ago.  There was a gap down and a strong rally that failed.

The candle stick formation is called anShooting Star.  The MACD has a large drop on the historgram indicating that a cross over could start to be seen quick which would be a sell signal.  Volume was not as strong as I hoped for.  The Slow stoch ended at 80.90, with this downward momentum I would say that it is likely to move from embedded to overbought breaking that 80 line which is also a sell signal.

This would be a great starter position if this really is the top.  I borrowed this Elliot wave count from this article on zerohedge

It is an interesting count..... What is basically says is we are entering an impulse down and we have seen the correction take its course.
This count I believe would predict the impulse wave down would end at 1765 on Nasdaq.  This is a very bearish count so again it is one of many possible counts.
It might be a good guide if the prediction starts to materialize.  However, the utter of QE will force the markets up up up, so be cautious.

I hope the end of the week is definitive, rather than an indecision day.

Just shorted Nasdaq, Silver play.

I entered a small speculative short entry position.  Here is the chart.

From CandleSticker.com
"If a Black Spinning Top is observed after a long rally or long white candlestick, this implies weakness among the bulls and it is a warning about a potential change or interruption in trend."

Target:
I think it is fair to say that the 200 MA should show some support, but if broken this trade could move fast.

Stop loss:
Just above the highest level reached on the second candle.  This is a 1.3% potential loss from the current level.

The 61.8% retracement level is also where the 200MA average is.

Slow stoch is overbought / embedded.  It looks like the momentum is shifting, a drop to less than the 80 line would indicate that this has a decent probability of continuing to drop, indicator confirmation would increase this probability.

MACD
This histogram had a sizable decrease today which could indicate a top of the current wave and a pull back is coming. However, the MACD line is above the 0 mark which is bullish.

ADX
Still indicates a strong trend with a 40 rating.  The DI+ line is above the DI- so the trend is still tectonically up.

In an ideal world, this would be a medium risk trade that paid off as this would be a top in the down leg to test somewhere in the 2100-2250 range.  We will see what happens next week.

Silver Play: AXR

Hourly chart of AXR a stock I am pretty bullish but haven't caught a solid entry into this stock. It found support on that trend line and all the current indicators are looking bullish.

ADX is showing a weakening of trend and the DI+ is just crossing the DI- indicating a buy signal.

MACD has another high positive tick on the histogram, Momentum is turning bullish.

Nice strong volume in the last hour.

Slow Stoch is looking like it will embed soon potentially driving the price for the next couple of days.



Food for Thought

20th consecutive week outflows From ZeroHedge

Will S&P follow the recent past?

Here is a daily chart of the S&P500.  After the May flash crash, the index has had a hard time holding the 200 MA.  What has happened is sideways action until a break down. The top around June 16th-19th is an example and the top starting August 2nd.  A series of DOJI candles form then a breakdown.  Our current action is very similar, we had traded sideways for 5 days.  The MACD shows a slowing of momentum.  The real question is, will the pull back slice through the 20 /50 MA and continue to new lows or will this pull back just be the start of forming higher lows and higher highs.  The FED meets I believe the 21st to discuss their next course of actions.  A rumor was QE2 will be announced then however, unless the markets are falling QE2 I don't think would be justified as it would put more pressure on the bond market.

Friday Gold continue to make new highs.

On Friday the 1280 mark was breached.  So a 1300 gold close over the next 2 weeks is not out of the realm of possibilities.  I still do believe there is a pull back in the works, but with growing uncertainty and possibility  of QE2 looming, gold has continued to be bullish.  The MACD has a larger positive tick on the histogram so momentum is continuing up.

As always, the next week will be quite interesting.  I was let down by quadruple witching week last week.  The volatility was not as intense as I expected.

Check out this article on how the ECB on Friday intervened in Ireland's bond market