Sunday, March 31, 2013

Q1 is done

Disappointing first quarter for the RumWave, but there is plenty of time left

Well, friends, that wraps up the first quarter of 2013.  Amazing how fast it has gone!  I'm a little disappointed that there were exactly zero buy signals produced by my trading model, but that's just the way it went.  I'm not overly concerned because I'm still confident that follow on signals will propel us beyond the DJIA benchmark I have chosen.  The good news is that we didn't loose anything either.

All that said, I'm still a bit nervous about this market.  Fundamentally, I think things are humming along nicely and the Fed has pretty much focused all of their efforts at raising equity prices and boosting the housing recovery.  It appears to be working.  However, even the strongest markets have to pull back from time to time.  Today's post is dedicated to predicting such an event.

First, my calculated scores:

"Score Total" since June '12; hovering around mid range giving plausibility to bullishness or bearishness:

Now for the weekly charts:

What I notice about the above chart is that the RSI is showing a market that is really overbought.  Such conditions leave a lot of room for the market to fall if the right catalyst occurs.  I also drew a trendline on trading volume.  It has been steadily declining, which is a sign of a tired market.

Here is another look at the DJIA weekly chart, this time from
I just threw this in because it is another way of looking at the same info, but it is easy to see just how far above the 20 day moving average we are (the red line on the upper graph).  Markets will always revert back toward that mean, often violently and with little warning.

S&P 500:

On the S&P chart above, I increased the size of the Slow Stochastic and MACD.  What caught my eye was the Slow Stochastic %D line.  It has rolled over, taking a negative slope.  I went back and put some vertical hash marks on similar instances in the past.  I matched up those hash marks with the MACD and the overall upper chart.  The results show that this condition occurs before multi-week declines.

Pictures are worth a thousand words, which is why I like technical analysis so much.  All of the above data lead me to the conclusion that a significant event is not far away.  My investing ship is in the safety of the harbor for now, and I'll be happy to keep it there as long as necessary to protect it.


Wednesday, March 27, 2013

All eyez on me

First ever televised bank runs.. or not

Today I was fortunate enough to listen to a lot of CNBC and Bloomberg in my truck.  The general trend seemed to be concern about Cyprus bank openings tomorrow and, to a greater extent, the inability of the Italian gov't to create a majority (or whatever it is that they do.)  The honeybadger market is in a bit of a rut, but it is a day trader's dream.  Buy at low oscillator levels, sell at high ones.  It's worked for the last couple weeks.

Daily scores:


Tuesday, March 26, 2013

Quick post

No news is good news

This morning my Twitter feed had no references to Europe or Cyprus for the first time in ages.  The market rebounded this morning as I suspected it might.  Tomorrow.. I don't really know.  It will be good to see if the bulls can continue their push to new S&P highs.


Monday, March 25, 2013

Uh, what I meant to say was...

Foot-in-Mouth disease

I swear, those European officials have such a hilarious tenancy to say dumb stuff when the cameras turn on.  Today's example was the dude that said, and I'm paraphrasing, that Cyprus could be a model for future bailouts throughout Europe.  Way to freak out the markets, bro.  Somebody should see if that guy shorted the market an hour before his press conference.

I'm sure there will be a substantial amount of backpedaling in the early hours of tomorrow's European trading.  Based on that, and the DJIA oscillators I like to look at, I would fully expect a gap up tomorrow again.

Today's scores:

Score totals June '12 to today:


Saturday, March 23, 2013

Technical signs

Honeybadger poison for sale...

The honeybadger market, as I've been calling it, flopped around to end the week ever-so-slightly down.  I guess the big money scoffed the Cyprus issues and decided that the Stimulus will be enough to get us through whatever the "Cyprus-Crisis" can throw at us.  I can see their point.  After all, where else in the world would you want your money to be right now?  The US stock market seems to be a nice incubator for hard earned capital.

That said, we are wicked overbought.  If only there was something to start the ball rolling down hill.... more on that to follow.  First, my calculated scores:

"Score Total" June '12 to today:

The weekly chart of the DJIA is below.  We broke through the yellow trend line nicely when it was a level of resistance.  Now, it should be some kind of support when the market does decide to correct.  This week's Heikin Ashi candle was not more bullish than last week's.  This is a sign of weakness.  What bugs me is the RSI.  It is out-of-this-world high.  If only there was a reason to roll the market over...

Oh, look.  Here it is.

The head and shoulders pattern (above) on the DJIA (5 minute chart) could give market technicians just enough reason to start selling.  My experience has been that these thing turn into "self fulfilling prophecies" once the computers that look for patterns and humans that look for patterns (and there are a lot of them) think they see a recognizable formation.

If it does take hold, the target is in the vicinity of 14,250.  If not, the Honeybadger didn't eat the poison.


Thursday, March 21, 2013

Honeybadger naptime

Sorry for the lack of pictures tonight, but I'm short on time. Here's the deal... the RumWave chart is showing a pivotal point. It is against some support here, but if it breaks through there is a lot of room to run down. Despite the general apathy toward the crisis in Cyprus, Europe posted some pretty weak numbers overnight that keep it in recession-land. I'm not real optimistic about a region in a recession that has a member of its currency group about to "restructure" its banks on the back of an attempted blackmail of Russian bazillionaires. Call me crazy.

Wednesday, March 20, 2013

Honeybadger doesn't disappoint

Thanks, Uncle Ben!

FED print money / buy MBS = good for stock market.

FED determined to print more money / buy more MBS = good for stock market.

EUROPE faces bank runs in Cyprus when Cyprus banks reopen = bad for stock market.

IMF forces Russians to contribute funds to Euro bailout one way or another = bad for IMF later

Tuesday, March 19, 2013

Honeybadger market tomorrow

Can we repeat the honeybadger-ness?

If this market keeps true to form, we should expect some kind of bounce or resumption of the uptrend tomorrow.  The RumWave chart is at a specific level of support, so if it doesn't hold it would suggest the uptrend has ended.  My CNBC app just informed me that Asia is selling off on news of the Cyprus vote.  We'll see!

Score total June '12 to today (doesn't match the chart above):


Monday, March 18, 2013

Honeybadger Market

Honeybadger don't care..

This morning there were no lines at banks across Europe, so everyone sighed a breath of relief and the markets rallied off their morning lows.  This could mean that wave 5 is not done, however I won't be a participant in whatever happens before the next decline.

Today's scores:

Score total June 2010 to today:


Sunday, March 17, 2013

Cyprus Update

If you are reading this blog, you are probably well informed enough to have heard about what is going on in Cyprus over this weekend. Just in case you haven't, here's a synopsis:

-Cypress needs a bailout
-In order to receive a bailout, the IMF demanded that money be taken directly from bank depositors
-Between 6 and 9% of every savings account at every bank in Cyprus will be removed by the government.. and there's nothing that can be done to stop it (technically it still has to be approved by Cyprus' parliament Monday, but the alternative is a default, which is even worse).
-Upon hearing this, crowds of people went to ATMs to attempt to withdraw as much money as they could because the banks are closed (its a 3 day weekend there)
-The ATMs are now empty.

Why does this matter to us? The reason is that this is the first time that Joe Average's bank account was robbed. It sets a precedent that it could be done again in any of the countries in Europe that are facing fiscal problems. The big fear is that people throughout Europe will feel that their money is unsafe in a bank, and will attempt to liquidate their accounts.

That wouldn't sound like a big deal, unless you realize that banks make money by lending out money that they have (plus a lot more) so at any given point there is no way a bank can pay out all of the money that has been "deposited." Suddenly, as people attempt to withdraw funds, the bank runs out of cash to give out, goes bankrupt, and people's deposited money is vaporized. No one wants to be the last one to withdraw, so once something like this starts, it will probably escalate very quickly.

So, if you were living in a European country, you would probably be marching over to your local bank to retrieve your hard earned money as soon as they open on Monday.

This very dangerous, and it will probably result in a significant sell-off in worldwide markets Monday.

The most ironic thing, to me, is that there was almost no news coverage of this disaster in the making this morning. Sure, CNBC and WSJ were all over it, but Fox and CNN had one tiny blurb in their "business" sections and the sunday morning news shows were only concerned about CPAC and the US budget. I bet that changes real quick.


Saturday, March 16, 2013

Weekend update

Living on borrowed time

As relentless as this bullish market has been, I think it is somewhat naive to believe that it will continue much longer.  Things this quarter have been great for the equity markets.  We've witnessed a first quarter gain that has been better than most yearly gains.  If you haven't booked some profits and/or moved at least part of your portfolio into something "crash resistant" then you are asking for trouble, my friend.  While it is true that I've been a hater of this rally (and I have been wrong) since 1 Jan, I still think something nasty is lurking in the next month or two and it is going to hurt a lot of investors who are just starting to throw money at the stock market again.

Daily scores (13 Feb to 15 Mar):

Chart of the "Score Total" (June 2012 to Today):
... looks pretty high, don't it?

Regular readers know that I'm somewhat fascinated by Elliot Wave theory.  For those who are not familiar, here is a picture from Wikipedia that sums it all up:
The idea is that markets move in waves, and each big wave can be broken into smaller waves.  Now, here's the DJIA with my caveman interpretation of Elliot Waves:

So, I suspect there will be an end to the 5th wave in the next week or two.  After that there should be a fairly significant correction.  At a minimum it would be a an A-B-C correction targeting the 13,600 to 13,300 range.  Assuming a peak at 14,600 those numbers would correlate to about a 50% to 61.8% Fibonacci retracement of this wave.


Thursday, March 14, 2013

Might have been a good day to short

Tomorrow could be interesting

So, the mini sell signal I wrote about yesterday was completely negated today.  Like I had mentioned, it was barely any signal at all in terms of my confidence in it.  However, I do think today could have been a good opportunity to go short.  We'll see tomorrow, but with options expiration and overbought conditions "risk-off" may be the phrase of the day.  Also, 10 days of uptrend is just ridiculous.

Today's scores, first time I've seen a 1,000 level total score in quite a while:

Charted depiction of the "score total" row June '12 through today:


Wednesday, March 13, 2013

RumWave Mini Sell signal

Tiny Tiny Sell signal

So, today the RumWave chart produced a sell signal.  However, it barely met my criteria for the signal.  That said, if it turns out to be true it will be in line with the massive bearish divergence that the RumWave chart has been building for a while now.  Such bearish divergence preceded large market sell offs.  Time will tell how this one turns out.  I should point out that when the next correction starts, it should be the conclusion of a 5 wave Elliot Wave move and would probably last for quite some time, and possibly erase all the gains of 2013.  Doom and gloom.. the sky is falling.. cats and dogs living together.. etc.

Here are today's scores:

Here is the bottom row (Score Total) graphed since June of 2012.  Note where it is in relation to previous peaks:


Tuesday, March 12, 2013

Quick Update

Short Post

Quick post tonight, as not much changed from yesterday.  No change in my positions or recommendations.


Monday, March 11, 2013

Overbought.. again


The major market averages are overbought once again, just in time for retail investors to throw money at it.  In my opinion, this is a super dangerous time for market participants.  The Sirens' song is tempting, but there ain't no way I'm jumping in.  The "larger" Elliot waves seem to be completing, weekly oscillators are really high, daily oscillators are really high, 4 hour oscillators are really high, and the RumWave chart is set up for a disastrous negative event.  What it will be, I can't say.  Not to be a doomsdayer, but I'm a little nervous.  To add fuel to the fire, there has been increased noise on the media outlets I pay attention to (CNBC, Wall Street Journal, and Bloomberg) that interest rates are ready to move up, in spite of Fed action.  What a change of events that would be..  Most pontificators on the subject don't act as though it is going to happen in the very near term, rather sometime next year.  But I wonder how the banter will make the "smart money" react to a negative catalyst.

IMPORTANT NOTE ABOUT THE CHART:  The graphical depiction of the scores (above) is not correlated to the color coded scores.  Meaning, the graphical charts are of the scores since I created the blog last year, it is a little easier to see that way.


Sunday, March 10, 2013

Fresh all time highs

Climbing market surprises skeptics

I'm one of those that thought we should have entered a correction by now.  I'm still not in any long positions because I don't want to capitulate to the bullish momentum only to have my head ripped off by a bearish downturn.  I'll probably go the entire first quarter of the year with no positions.  That's ok, I'm in this for the long haul and I know there will be other, more predictable opportunities.  Here are some charts:

The daily scores, moving back into red territory.  Frankly, there is a lot of red showing up on the internal parts that go into the overall scores you see below.  Previously it has been a decent indicator of a short term decline.

Now for looks at the weekly charts.  Overall, I'm seeing a pattern that showed up during the topping formations that have occurred in the last couple years.  If this bullish market does the same thing, we would expect some ups and downs for a couple weeks, then a precipitous decline.

Ultimately, I'll be scaling into a short position over the next couple weeks.

TSP:  Move 1/3 of portfolio into G fund if not there already.  Will move remaining parts over coming weeks.


Thursday, March 7, 2013



This morning on my drive to work I was listening to a reputable wall street trader who said [I'm paraphrasing] "no one really knows where this market is going.. I have no idea."

I'm in that camp with him, as I have expected a sell off for quite a while now.  Nonetheless, the market is always right and I've been on the wrong side of the trade.  However, I suspect the bears will knock bulls down a peg or two in the coming days, maybe starting tomorrow.

Daily scores:


Wednesday, March 6, 2013

What to say...

When will it end?

There are so many people trying to guess when the uptrend will end.   I've been trying to do it with relatively miserable success for the last 2+ months.  So, I've resigned to the fact that I can't call this one.  That said, I won't stop my analysis on a daily basis.  I also won't be chasing this rally.  I still have a very long horizon to catch rallies, so I'm not going to go chasing this one anytime soon.

Not sure what is up with the website tonight, but the pics won't upload.  What you would see is scores that are on the very high range for the daily and 4 hour scores.  The overall score is in the moderate range.


Tuesday, March 5, 2013

New All Time Highs

Poppin' Bottles

What a resilient market!  These bullish impulses never cease to amaze me.  It is great news for those that are long.  It seems interesting to me that investors either really love this rally, or they really hate it.. there aren't many inbetweeners.  When I thought about this today, I thought about all the stocks that I've seen that were either really hated or really loved.  NFLX and AAPL come to mind.  Both were crushed eventually.  Man, I hate being so bearish all the time..  I'm not really a pessimistic person, I promise.

Anyway, here are today's scores:

One of the components of the RumWave made a large move higher today.  It is interesting, but doesn't change any of my predictions.


Monday, March 4, 2013

Quick post

Quick update

Appologies in advance, but I just have time for a quick note.  The market was a strong showing for the bulls.  Good on them for bringing the heat in the face of technical bearishness.  We'll see if the trend continues.  The RumWave chart still favors downward movements over the next few sessions.


Sunday, March 3, 2013

Resume the downtrend

Batten down the hatches

Well friends, sequestration has come and gone with little market reaction.  I think most US stock market followers expected to have some kind of sell off by now, but it didn't happen.  So, what is the market psychology now?  It is incredibly difficult to guess what the mood of investors may be at any given point, but I tend to believe that the market will find a way to disappoint the most investors most of the time... otherwise we'd all be rich.

Last week I warned of a RumWave prediction that a multi day rally would unfold followed by a continuation of a downtrend.  Part one of that two part statement has occurred   Now, I think it is time for part two.  The rest of this post will support that claim.

Daily scores.. we are quite overbought again on the daily and 4 hour scores:

The DJIA weekly chart shows a little strength, but still lots of indecision.  If the rest of my data didn't support a downtrend, I would think there could be a little more upward momentum here.  The next candle should solidify the direction, but the RSI is in "ridiculous land":

The SPY is showing some signs of fatigue.. oscillators are favoring downward moves over the next  4-6 weeks:

The Russell 2000 is one of my favorite charts.  I believe small caps tend to lead the mega caps.  The RUT now has a nice little red candle at the end of the chart, and the oscillators support continued moves lower:

Finally, the ugliest chart... the Nasdaq (QQQ).  IF the market does make a down move for the next few weeks the QQQ will have formed a HUGE head and shoulder pattern... very bearish.  The fulfillment of that pattern would be very very bad for the tech sector, and probably the rest of the US market:

So, I'm currently sitting on a bearish position.  Time will tell if it plays out for me!