AAPL year-to-date performance vs popular ETFs

Disclosure: No positions, but maybe soon.

ETF Golden Crosses (50/200dma) Galore

IWM (Russell 2000 small caps) daily:

FXE (The Euro) daily:

DBA (Agriculture commodities) daily:

FXI (Chinese stocks) daily:

QQQQ (Nasdaq 100) daily:

Disclosure: I am short EUR and own QQQQ puts.

QQQQ Head & Shoulders Top Forming

In watching the intraday action it feels as though there has been a major shift in sentiment following the 10% market crash we had a few weeks ago. In many of the daily charts you can see a pretty severe breakdown on that day followed by a series of bounces within continiued selling. The technical damage was severe on that day; for example, the Q's broke their 2010 low from back in February before reversing and many former leaders have since broken even lower. It feels as though the 2008-2010 bull market is ending and a new bear is about to reassert itself. In my view a new bear market has not been confirmed technically. On the Q's above I see a head and shoulders top forming with a neckline at $42 that targets around $33.35. The right shoulder is a bit messy and starts on "glitch day" the way I have it drawn but perhaps we still haven't finished the head yet. I am looking for a close below $42 on a weekly basis for a confirmation of a new bear market in tech stocks and completion of this H&S pattern. As far as the recent bounce/rally of the past few days, I think QQQQ could see at most $47 but it appears to be running out of steam right here ~$46. From here that $42 will be a magnet and a good test to see how badly the bulls want to own stocks.

Disclosure: I don't have a position in QQQQ at this time.

Saturday Rock Blog: Llama

What an incredible past few weeks; wow, just, wow. Sorry for the lack of posts, I promise I'll make it up soon with an epic post. For the meantime enjoy this epic youtube video along with this QQQQ chart!

Its just a chart!! (IWM to $42 & a Broken QQQQ)

Disclosure: I own IWM and QQQQ puts. Click chart for higher resolution.

lol: "Apple makes up 18.12% of the Nasdaq"

"'CNBC just reported that mortgage defaults may be driving consumer spending. Lender Processing Service reported that the nation's foreclosure inventories spiked 51.1% year-over-year. That means that 7.9 million Americans are not paying their mortgages. Assuming the average mortgage is $1,500 a month that would free up $11.85 billion every month of extra spending money for iPads. Perhaps that's why Apple now makes up 18.12% of the Nasdaq (QQQQ). What will happen to the Nasdaq if Apple stumbles?'" -read the rest here

Disclosure: I own QQQQ puts.

QQQQ: Bullish

Disclosure: I own March QQQQ calls but I have a few June puts.

Evidence of a trend change (IWM, QQQQ, CME, AAPL, and CME charts)

Isn't it funny how all these big patterns completed simultaneously like this as volume surged. While a throwback wouldn't be unusual at all, the uptrend that has existed since March 2009 appears to have ended. A big squeesy pop wouldn't surprise me all all so tread with caution, as always.

Disclosure: I own QQQQ options (puts and calls).

Still consolidating... (NASDAQ)

Clearly volume has picked up as we have traded in the recent narrow range following the rising wedge breakout. I suspect the big boys can suck in a lot of buyers (short covering and buy stops) on a breakout of this range, so why wouldn't they? Lets see, but I still think this situation will resolve its self with a failed breakout (capitulation) before we begin any kind of real correction.

Disclosure: I have option positions on QQQQ.

Where's the capitulation?

Lately I've been thinking a lot about how obvious it is that the market will decline substantially in the near future, it seems too easy to short the market here and that worries me. The coming decline has become so obvious that I suspect many shorts who have held out this long continue to do so, despite large losses. Bearish sentiment is so low right now that there is very little possibility that this isn't a major top. So will the market behave like its supposed to and just roll over and die? Not a chance, at least, my experience tells me that the market needs to wipe out any hold out shorts and top pickers before it will crash. Thus I am going back to my old mantra of expecting this rally, this bull market, to end in capitulation, as all major market moves do. Some call it a blow off top, it certainly will involve a failed breakout and the volume will surge. Thus, although I am short I have decided to remain hedged until such a capitulation move occurs. In the chart below I have added a few daily candles depicting how this might play out in the next week or two. If i am right look for a very large move up on record volume followed sharp reversal.

Disclosure: I own QQQQ puts and calls.

S&P lowers CA debt ratings, market moves to highs

Disclosure: I own QQQQ puts

011110 QQQQ charts

Welcome to 2010, the year of the even binary dates. For those of you who aren't a math geek or an electrical engineer like me, today's date (011110) is the second of nine binary numbered dates in 2010. I find today's date particularly cool because of the symmetry in it, the decimal equivalent is 30 by the way. No, no, I won't be posting 30 charts. And no, I don't think that the perfect symmetry in today's date means that we hit a major top today in the stock market, although that would be pretty cool. Nope, its just a day like any other, a day that nerds like me take note of.

Since 2010 began last week I have been wanting to post kind of a summary of where I think the markets are as we start the new year. I also wanted to make a few comments about how the past three years started since we all know that "it will be different this time" are famous last words. So without further adiu...
Obviously, the market we all care about most is the stock market. In particular, we care about the segment of the market that is currently leading and for the past year or so that's the nasdaq 100, also known as the Q's (QQQQ). The Q's are at 2007 levels after having nearly doubled since last March. Above I've got a monthly chart of QQQQ over the past decade plus the last year of the 90's for context. Late '99 and early '00 marked the end of the 90's bull market, in hindsight it was a bubble because we're still down by over 50% in the past decade.

If we zoom in a bit to a three year weekly chart (below) then you can see more detail of the top, subsequent decline, and recovery. There seems to be reason to expect some resistance at the apex of these symmetric triangle patterns, and despite having rolled over a few times, the market miraculously moves higher almost every week. Dead bears have been left in the wake of the $9 trillion tsunami.
With unemployment at 20 year highs, earnings generally declining and credit still super tight, we all know that this rally is not even remotely related to any fundamental improvement in publicly traded companies. No, its a bubble of a risk taking frenzy fueled by shamefully low interest rates (read free money from the fed at the US dollar's (and anyone who has savings') expense). In fact, the chart above is misleading because if you price QQQQ in terms of something with real value, like oil below (QQQQ/USO), the "rally" from last March barely even appears.
I've compared it to a game of musical chairs since the goal is to not be the odd man out, or to not be the last to buy. Without many pullbacks to form support I would expect the eventual break to be more of a crash. Its really turned into a question of when not if, in my view, after having watched this bull market go parabolic. One day the big money behind this rally will throw their hands up in the air and revalue all of this a lot lower but for now no one can deny that the trend is up.
To support the notion that this day may be soon approaching, the first quarter has been bearish for each of the past three years. Despite the prevailing trend (up or down), stocks have been sold leading up to March in recent years. I'm not saying this will guarantee that Q1 of 2010 will be the same way, but its something to consider. Do you see a pattern here?So we'll see, I can't imagine anyone would want to be long right now but clearly there's lots of capital heading in that direction in a big hurry. I also can understand why investors wouldn't want to short in the face of such a high octane uptrend. Lets see what happens when the music stops.

Disclosure: I own QQQQ puts (hurting)

Wrong! (QQQQ is going to be 10% off)

When I'm wrong I'll be the first to admit it and boy was I wrong about the broad market the past few months. I was seeing IWM diverge and the Q's roll over at the top of a broadening wedge (see above). Given the general expectation that Q1 will involve a hefty correction in stocks I thought that maybe this move would start in December or sooner. Wrong! My "out there" prediction is going to turn out incorrect by miles (Q's hit $40.50 by xmas). Fortunately I've done well on other positions like the Australian dollar short and JASO so my Christmas spirit will remain in tact! lol. For whatever its worth, I do still believe a severe and sharp correction in stocks is coming and I am not discouraged really at all by the recent breakout in the Q's.

Disclosure: I am slowly adding to a put position in QQQQ.

My "out there" prediction: Q's hit $40.5 by Xmas

Yeah I know, the dow jones hit a new high for the year today and bearish predictions are not so popular when the dow is making news highs. But what about the market leading small caps? Despite all the falling dollar market euphoria, the Russell 2000 (small caps) again failed to retake it's 50 dma. Even the S&P was unable to reach a new high and still lies well below the recent gravestone doji. Looking at the Nasdaq 100 (above), I see a series of lower highs in place now leading up to today's new gravestone doji. Take a look at what happened to AAPL today(below). After being up most of the session it got slammed in the final hours of the day to close down $3 out of the blue. I think everyone knows this market has gotten far, far ahead of itself and has turned into a momentum game of musical chairs. Jittery investors are hitting the sell button at any hint of weakness, like with AAPL today.
While these charts are not overwhelmingly bearish, by any means, this market just feels like it wants to sell off to me. I haven't taken a significantly bearish position in a while, but I'm going to stick my neck out here and bet on a big drop in December. I'm looking for the Nasdaq 100 to break its 50 dma and hit $40.50 this month.

Disclosure: I am short BIDU and own SPY puts, for now.

All quiet on the nasdaq front (QQQQ)

Disclosure: I have no position in QQQQ but I am short some tech stocks like AONE, SPWRA and BIDU. I also own SPY puts to hedge long positions.

An Uptrend: Nasdaq 100 Five Month (QQQQ)

Disclosure: I own QQQQ calls.

A tiny hint of a notion that there might be some weakness...

Disclosure: I own Jan QQQQ puts but was stopped out of TYH short.

The recent rotation out of smalls caps and in to financials in a broader context (the other way)

The narrow range of the past two weeks have been frustrating for just about everyone. The prior vertical run up had bulls wanting a pullback to add to positions and build support while the bears just wanted this parabolic bear market rally to end. I find myself in the latter camp but only barely so. It won't take much more upside for me to be convinced that this rally is for real and that we might be beginning a new bull market (that could last for years). Of course that's speaking from a strictly technical (chart based) perspective. Based on any fundamental metric, the notion of a bull market is criminal to me. But hey, I'm just here to read charts.


First we have the Russel 2000 ETF, IWM, over the past three months. Looks pretty bullish. I've pointed out golden crosses on other charts recently and the IWM has one too. After breaking past the key $53 mark IWM has been pretty much been range bound ($55-$58) . This flag-like pattern has served to work off overbought conditions but I'm not convinced. This whole move smells like a fake out (bull trap), where is the surge in volume that should have accompanied such a big breakout? Volume was declining until Friday's selloff which tested the bottom end of the recent range. I'd bet IWM retraces back to $53 where everybody will get there chance to vote with their wallets. Bulls will buy the pullback, Bears will try and run stops to force a failed move. The winner will draw in volume one way or the other...


The real meat of tonight's post is in the next chart. Lately I have noticed that the financials have really, really outperformed the rest of the market, especially the technology and small cap sectors. Don't ask me why this might be the case, the market behaves in seemingly naive and silly ways at times. But while big money has rotated from small caps into financials recently, the long term trend is a rotation the other way. Below I've got the financial sector ETF, XLF, divided by IWM. This is effectively a measure of financial sector valuation relative to the small cap sector:

So yeah, in the context of this three year trend (note the weekly time frame) the recent relative out performance of the financial sector is just a blip. For years now small caps have outperformed the financial sector by a wide margin and I don't see anything here to make me think that this trend is changing.

For a little more contrast on this issue I've got the ratio of Bank of America (BAC) to Apple (AAPL). Obviously, this ratio has gotten crushed by about 90% in the past three years despite having recently doubled. What I find most interesting about this chart is that you can see a roughly 5 month cycle in the sector rotation. That is, for about five months money moves from into banks like BAC, then for five months money moves into tech stocks like AAPL, then back to banks and so forth. In the end much more money has "rotated" into AAPL and so this ratio declined significantly.

To be honest I don't really know how much weight you can really put in these ratio charts but I have fun looking at them. If the five month cycle is true and if I'm right about the small caps pulling back here, then XLF should get hit pretty hard in the coming weeks.

Disclosure: I have puts on pretty much all this stuff including XLF, AAPL, QQQQ and IWM.

On an unrelated note, this weekend I was listening to an "oldies" radio station up in Chicago and they kept playing music from Woodstock mixed in with true oldies like Marvin Gaye and Roy Orbison. They were celebrating the 40th anniversary of Woodstock this weekend, which is great but come on, lets not start calling Classic Rock "oldies." No, I don't care how old I get, I will never call Santana, Joe Crocker, Jimi Hendrix or any of the other Woodstock acts "oldies." Hell no. What I will do, however, is join in with the "Oldies 94.5" in honoring this weekend's 40th anniversary of Woodstock with some Sunday night rock n roll. Enjoy:

A Chart a Day #17: The Nasdaq Composite Weekly

Looks like a pretty convincing sell to me on this long term time frame. Note that if you use a logarithmic price scale, as I normally do, then the Nasdaq would have a little further to run before hitting the trendline that it hit on this linear chart. I did the linear chart because everyone seems to be talking about this chart and the trendline touch today only happened on this scaling. I think its a pretty low risk area to be scaling into shorts regardless, tech or otherwise.

Disclosure: I shorted TYH today, as a long term position.

Failed Breakout on the Q's