scottvanv on April 17th, 2013

Well…I guess these past few days weren’t too unexpected by me…I’ve been eyeing a much larger Big Red Line on the S&P 500, that goes back to the beginning of the 2001 crash.  I haven’t posted on this because I’ve been analyzing the Dow (whose similar line is at a much higher price point), and wanted to keep this blog relatively simple.  My previous Extremely Bullish post was based on the fact that I thought the market was going to power right through this line given its recent trajectory and fractal ‘count’.  Clearly not the case.  With gold crashing hard…this does bring into play the specter of Deflation and that this is potentially the beginning of the third major crash that I had predicted some time ago.  Even Larry Kudlow capitulated just yesterday that maybe the money printing was going to work.  Sigh.  (Capitulation by hard core believers is usually when they’re proven correct — but you can game theory yourself to death on that one.)  Also, with leading stocks simply not acting correctly, my bullish post was likely, at best, premature.  The positive interpretation of the below two charts, is that the market has simply hit a massive trend line that it needs to work through and that it will travel along it for some time, just as it traveled just below it for some time in my ‘Random Walk My Ass’ post.  I am and have been 100% cash.  I haven’t had the time to look into trading the Dow yet…and something’s been bugging me…perhaps this was it.  No matter what this is a MAJOR market inflection point, I recommend cash until this plays out.

S&P 500 Monthly - Note the upper red line I've drawn back to 2001. Also note the big hump in volume. Declining volume is...not good.

 

 

Zooming into the hourly...note how it drives above the longer term red line then falls sharply until it hits its more recent trend line shown in white. There's still a possibility that it will continue to follow the more recent trend. But caution is the order of the day.

 

 

scottvanv on April 9th, 2013

First, let me say this…all of my positions have sold off recently.  I am 100% cash at the moment.  I haven’t posted recently because, frankly, I’ve been befuddled.  Leading stocks are treading water.  Or they’re shortable.  And yet my fractal analysis of the Dow tells me that it’s going to go up…for quite some time…even to Dow 20,000+.  And if this occurs, we’re likely out of danger of a massive crash for decades.  QE infinity might just work.  Bernanke could well be known as a hero who saved us from our own stupidity by separating out balance sheet bankruptcies (read: massive unemployment) from a social mood that prevents us from fixing clearly identifiable problems.  Concurrently, something is happening, a change occurring.   Society is changing.  We’re becoming more liberal.  Getting rich is getting less important than taking care of everyone — e.g. Obamacare.  This is cyclical, and we’ll revert back after too much liberal excess (with lots of  “I told you so’s.” from Conservatives).  So traditional growth stocks, e.g. tech, are not where the big money is playing at the moment.  But I’ve yet to do the research to find out where it is playing (stay tuned for a post on this).  So in the meantime, since I seem to be doing awful well at predicting even daily moves of the Dow I’m going to start trading Dow futures.  Don’t get me wrong…it’s quite possible the gloom and doomers are correct, that all this money printing will cause massive inflation (which could be one reason why my Dow analysis only points up).  But, their arguments are always, “NEVER BEFORE IN HISTORY HAVE WE BEEN ABLE TO PRINT MONEY TO GET OUT OF THESE MESSES. IT’S ALWAYS LED TO DISASTER!!!!”  And they’re always preaching at the top of their lungs, which makes me doubt them all the more.  They assume we don’t learn.  And yet, the amount of goods and services we produce today is on order of 500 fold what it was just a hundred years ago.  Phenomenal.  Clearly, we learn.  So if Bernanke can simply replace the monetary base that was and has been wiped out by the crashes and stimulate a bit to counter the recent lack of demand by now saving baby boomers, a delicate balancing act for sure…we might just muddle our way through this mess without a financial disaster.  We’ll end up on the other side more wary, with hopefully, less destructive bubbles, and a fruitful, generally happier, healthier society.  Time will tell.

scottvanv on March 6th, 2013

CHUY, URI, ANGI, CELG, RLGY, SNTS, CRM, EXPE, MHO, GILD and the others that never sold off are:  FLT, LNKD (double my starter position), WPC.  I sold VMED at around $47 for a nice quick profit near the acquisition price.  I’m 98% in equities in my trading account.  (And I’m thinking about switching my 401K into stocks as well, but will need to noodle on that a bit as it’s so illiquid.

scottvanv on March 5th, 2013

The Dow crossed The Big Red Line today on strong volume (and also happened to make an all-time high).  It’ll likely keep moving straight up from here to around 15,500 in a month or two and then tack sideways or correct sharply about 5%.  Leading stocks are also breaking out…so many that I’m going to have to weed out many that look good.  I’ll post what I purchase tomorrow.  This is a good time to be in the market…retail investors are coming back in…and with all the news about the new record even more will come.

scottvanv on February 28th, 2013

So…here’s a couple close ups of today’s action.  I promise, I have not moved any of the lines I have shown you previously, including The Big Red Line from yesterday’s post.  The first is a half hour chart, and zooming in even further a one minute chart.  I’ll just let the pictures speak for themselves.  What will happen next?  Hard to tell…might pop up into the this new middle channel and then pop out into a very bullish longer term channel, or it might pop back down into the original “expanding flat” that I mentioned and continue to the end of the triangle.   My strategy is the same…tight stops on my current winners…if the market pops up, I’ll add to my positions.

30 Min

 

Zooming in - 1 Min

 

scottvanv on February 27th, 2013

Intermediate term, I have no idea what the market is going to actually do (not with anywhere near the certainty that I called the rally the day after a 200 point drop).  The intermediate term picture is just too complex.  But I do know this:  we’re nearing the end of the converging channels that I pointed out in the Random Walk My Ass post.  In the included graph in this post, I’ve turned one of the channels red.  If we break through this (and it could be tomorrow) this will be extremely bullish for some time to come, quite likely all the way through the year up to Dow 17,000ish (with an intermediate correction somewhere in there).  If we don’t break through this and we get closer and closer to the White line on the right…it will be more and more likely that we’re heading for a pretty massive drop, but I give this a lower probability of happening, because the shorter term outlook would suggest that we need to complete wave 5 (I’ve labelled 1-4).  So, I’m not buying at the moment, I’m just letting my winners ride and continuing to tighten up my stops as they move up.  Oh, just as I predicted LNKD popped nicely, really nicely.  If we break through the Red channel, I’ll likely add to LNKD and look to add more positions.

scottvanv on February 25th, 2013

Odds are good for a rally tomorrow.  We broke the lower ~3 week trend line on the included 2 hour chart, which normally might mean that the market is going to drop to the next trend line.  But, the pattern for the last two weeks has been setting up as a long “expanding flat” which means that we’re correcting, but sideways.  So, I think no need to panic as the market will likely re-enter the trading range, but my stops are very very tight (because as always, I could be wrong), with a lot of my positions already sold off.  LNKD is holding up particularly well (my largest position), so if the market does rally and breaks out of this latest range, it could skyrocket.

scottvanv on February 7th, 2013

This small market pull back has not been fun.  I was up quite nicely…the problem with leading growth stocks is that they are highly volatile, and they do truly lead the market.  So even with my pretty graphs, this is not easy.  Most of my positions have sold off at the tight stops.  My first clue we were entering a pull back was when DDD and SSYS each dropped about 15% in one day on no news.  Nothing. (Luckily I stopped out much higher than those drops.)  Now, these are 3D printing companies, and there is very little out there terms of cool technologies that beats these guys.  So these are the leaders of the leaders.  I probably should have gone to all cash right when that happened because those drops prefaced even other leading stocks dropping.  Instead, I held on, trusting in my stops.  And guess what?  VMED popped on a buyout, and LNKD just tonight popped a ton on great earnings.  So net net over the last couple months, I’m just a bit ahead.  But boy have I learned a lot.  I’m going to start paying very close attention to those channels (previous post), plus the behavior of the leaders of the leaders.  Perhaps I’ve found a combination method of trading that can work quite well (most traders stick almost religiously to only one method).  As always, time will tell. (VMED can’t make me rich…but LNKD likely has a loooong way to run).  Stay tuned for more trades, but I don’t think this sloppy market action will end for a bit, so I’m taking a break.

scottvanv on February 7th, 2013

Take a look at the below weekly chart of the Dow.  Take a close look at the most recent four line channels, the first pair beginning in early 2009, the second pair beginning in mid/early 2010.  I drew these lines about 3 months ago (each channel is truly parallel).  Now take a look at what the market has done since then.  It’s obeying the channels.  This recent market market malaise started when it got to the top of the more recent, narrower channel.  Now notice where it’s heading…right at the convergence of the two separate overlapping channels.  If this doesn’t convince you the market is not random, I don’t know what will.  I find this actually pretty eerie.  But is it predictable?  Absolutely.  Not 100%, but certainly with enough certainty that if one makes the right bets, you can make money.  And good money.  So where’s it going?  From what I can tell…it’s going to break out of the converging tops & bottoms to the upside.  I’m thinking Dow 17,500 by early 2014.   Or, it might drop back into the more recent channel, but I think that’s a lower probability.   And what’s really interesting, by following leading stocks plus these channels you can get a preview of where the market will go short term (next post).

scottvanv on January 23rd, 2013

The market still looks good for the intermediate term especially with the debt ceiling debate likely to be pushed to May, so no panic will ensue shortly.  Weird how the market anticipated this cleverness on the Republicans part.  Although the drop in AAPL could cause some heartburn tomorrow.  And this does cause me some concern, but I think it’s now a story stock of yesterday…the market is sensing something very wrong with that company…and I don’t think it will any longer lead the market up or down.  So, I remain bullish.    Today, I bought into DDD, POL, RMD, and NNN.  ARMH sold off yesterday, leaving me with a long portfolio of:  AIRM, DD, LMCA, LNN, MHO, POL, RAX, RKUS, RMD, STRZA, USG, VMED, and WY consisting of about 75% of my trading portfolio (all with tight stops, of course).    Search on the symbols, and you’ll note that this is light on tech, moderate on energy, and heavy in housing/construction.  It does feel as if housing has bottomed.  But we are not in a market/economy that will be led by technology and therefore productivity.  It’s being led by the basic necessities, as well as likely a nice little bubble caused by the Fed printing money.  Is this a bad thing?  I don’t know…with a contraction of credit comes a contraction of the money supply, leading to deflation.  The Fed is fighting deflation with everything it has…will this ultimately cause folks to lose faith in the dollar/U.S. itself — leading perhaps to massive inflation?  The doomsayers think so…I’m not so sure.  As long as they keep prices stable (and that’s a big if), I believe that this long down/flat-turn will be eased through rather than consist of further massive shocks.

So what is causing this long down/flat-turn?  Well, I just finished reading a couple of fascinating books by Harvey S. Dent: The Great Depression Ahead (2008), and The Great Crash Ahead (2011).  Take the titles with a grain of salt, because he’s been completely wrong about many of his predictions.  BUT.  His model is fascinating.  I now believe that this isn’t just about Social Mood (but this is certainly related), but about the hard numbers of population.  28 is the average age someone in the U.S. gets married, 18 is the average number of years past marriage that their kids leave the house.  The total is 46.  Well, guess what?  The peak of the baby boomer’s birth occurred in 2007 minus 46 years ago = 1961.   What do folks do when their last kid leaves for school?  They start saving for retirement.  Which means that their spending habits decline dramatically.  So, we are experiencing a decline in overall aggregate demand caused by a good majority of our population beginning to save rather than spend.   They also caused the big run-ups into 2001 and 2008 with their profligate spending.  And the stock market simply follows this trend of spending.  This also explains the acrimony in Congress — I’ve worked for companies that are shrinking, or simply not growing.  The internal politics are quite ugly, because everyone is fighting over a shrinking pie.  And that’s what we’re going through today, but at an aggregate level — Congress is fighting over a shrinking pie.  I highly recommend reading these books if you really want to understand what we’re going through as a society.  The good news…he predicts that by 2020 to 2023, we’ll begin another growth phase — only 7- 10 more years of this nuttiness (and not out of line with my predictions based on Elliot Wave theory).  But looking at his charts, I think we might hit a nice economy through 2016, because we’ve now basically made it through the first down wave of the boomer spending decline, and we’re due for a 3 year uptick — but with more pain to follow after that.  So, so far so good, the problem comes if  our government doesn’t prepare us for the second wave down and the world loses faith in the USA itself.

Ok, so now for my coolest trade, MLNX.  If you’ll recall, in mid December, I bought a Put on MLNX.  I did this simply by looking at the chart.  I did absolutely no fundamental research.  Well, guess what, not only has it dropped since then on a nice slope, but after hours today after announcing its earnings, it lost another 20%!!  Which means that my Put probably just tripled in value.  This should tell you just how much information is included in a simple chart…if you know what to look for.