One of the best parts of writing a blog is getting feedback from the readers.
This morning, a friend in Pennsylvania sent in a cycle length I had not looked at. Richard Rhodes of Rhodes Capital Management sent in a cycle length that fits remarkably well marking the major highs in the last 35 years.
What is nice about this approach is the long term view. The surprising thing for me on the PPO (percentage price oscillator) is from very high readings, the market unwound quickly. In 1994 it was just a 1 year pause, but there is no safety in expecting the momentum to wane at market tops. 1981, 1987,2007 all had PPO reading near or above the previous years readings when everything fell apart.
I also notice a camel hump syndrome on the PPO. 2010,2007,2004,1999,1998, 1987 all have two bumps on the top.
Greg Schnell, CMT
The work of cycles is fabulously interesting. It just seems hard to bet on any particular turn.
George Lindsay used time spans to find places on the chart where a chart was likely to turn. He was looking for the inflection points in the market. His work has been brought back to life by Ed Carlson of Seattle Technical Advisors.
What has made the recent market cycles (last 15 years) so interesting, has been the difference in time spans. From the 2000 high to the 2002 low was a period of two 66 weeks time spans. From the 2007 top to the 2009 lows was 1 time span of roughly 66 weeks. Why 66 weeks? Well, it is only through the manipulation and experimentation of the cycle tool in Stockcharts that I was able to find a time span that worked for all the market turns. While multiples of 66 weeks like 132,198 and 264 work well, they all missed one of the turns. It was only the lowest common denominator that worked. This is trial and error, best fitting with the historical models.
So here is the chart.
You can see it worked pretty well on most cycle lines. It missed in 2001 at the blue arrow. What is most important, is the right edge of the chart. It is telling us that we are near one of those potential reversal points that George Lindsay talked about. Only the history books will tell us how it works out, but it is worth noting in a timely manner.
The Black circle at the bottom annotates the number 66 in gray. That is the number of weeks between the lines.
Greg Schnell, CMT
The JJC is a Tracking ETN for Copper. IF (a Big IF there) $COPPER closes below this trend line, this would be significant. We like Dr. $COPPER as an economic indicator.
We have seen the trend weaken recently. The dotted blue line was also a potential support line with two dips through it( late July, Early February). With this third push, it would appear the solid blue line is more meaningful now.
Horizontal Support is at $38.50 on the chart which is where we are trading today. I don't like the negative cross on the MACD below zero.
Greg Schnell, CMT
After this month closes out, we'll be talking about when Facebook bought a "What's up Doc?" - WhatsApp for $19B.
Some thought it foolish, and I felt out of the loop because I have never heard of the WhatsApp app. So a $19B handle seemed pretty large. Well since then, Facebook has surged higher. The investors love Facebooks' concept of the ability to connect across the various communication channels.
So if that wasn't enough Hollywood, then the Power Rangers showed up for work in the form of a Tesla announcement!
Well, here is TSLA. TSLA went from 196 to 260 in a week on Gigafactory discussions. That's no comedy! Everybody rushed into the stock with the greatest idea of the century.
But looking on the Stockcharts.com homepage earlier this week, I noticed Ballard Power BLDP (actually BLD.TO) and PLUG getting a jolt from the gigafactory discussions. Here are the charts going back to 1997.
So let me add a little personal history to this story. I still have a coffee cup from Global Thermoelectric that I rode from $47 back to $9 in the Y2K top. At the time I had a good broker that wouldn't let me attach more than $10,000 to the trade. It was a $8,000 training lesson.
TSLA can go to the moon and become the next Ford. Or it could become the next Ballard Power. The institutions own a vast majority of the shares. But the rythym of the markets is never kind enough to allow easy money to be made as the spikes back in 2000 appear on the charts.
It might be time to call Tesla or FB and ask for a coffee cup. If it continues to go higher, you'll sip in happiness every day. If it starts to break down, you'll be reminded of Greg's Global ThermoElectric. Note the name of my investment. It was destined to rule the world too. The point of this blog is just make sure you know how to handle high flying stocks.
Back To The Future!
When writing blogs, authors may or may not have a position in stocks mentioned in them.
Greg Schnell, CMT
Its been a few months since October when the $TSX was able to break out to new highs. Since then, it has not been much of a look back. Because of the strength of the gold miners, even the pull back in the early February lows was much shallower on the $TSX than on the $SPX.
This chart has enough information on it to keep a chartist blogging for a novel. I'll work in in pieces, so head down to the next text section and use the chart below the text.
Lets start at the top on the chart just below.
Wow, has this been a difficult trade.
It has worn out almost every bull and every bear on the street. Canada's major miner just seems to roll over at resistance every time. Recently, it looked like Teck was finally going to hold above the 200 DMA (40 WMA). Here is the current chart.
Starting at the top, The RSI is trapped in bear market mode. Currently falling back below 50.
The SPURS are falling again. The SCTR ranks the stock in the bottom quartile one more time. We can have hope that it must be near the lows, but it can stay as a poor performer for a while.
On the Price panel, $26 looks very important on the chart. If that does not hold, that is a problem. We can see the up sloping trend line is in play as well. That move down last week was large. Any upside momentum appears impaired.
As the winter weather sits in snow banks across Eastern North America, $NATGAS has been on a roll.
I expected the top to be in for $NATGAS based on the change in the size of the daily moves and a seasonal top in late January early Feb for $NATGAS. Yesterday, $NATGAS had its highest close in a few years, and this morning in futures trading is sits in the $5.90 range.
Short term, I think that ...yadda, yadda, yadda. I was expecting $NATGAS to top out and roll over.
Long term, outside recent memory the chart has some very interesting history.
I have placed 3 lines on the chart. When $NATGAS surged from below to above the bottom line, it went all the way north of $9.50. Once was in late 2000.
Once in early 2003, when equities were coming out of a nasty downturn, $NATGAS was in the$5.86 high on Valentines day. It rose above the lower line late in 2002. By February 25th it went all the way to $9.58. That is a 50% increase in 10 days.
The move in 2009 could qualify also and that stopped out at $6.01.
Currently the daily volatility (ATR) has moved to be higher than 5% / day at $0.33 which is higher than any time in the last 4 years on a cents/day basis.
At this point, $NATGAS could find resistance at $6 or blow right on through to extreme levels. At this point, the best advice is to be very, very nimble.
Greg Schnell, CMT
Just looking at the market action into the close, one thing jumped out across the charts. Lots of indexes or reference charts were stuck at round number resistance today. What I mean is near price levels ending in zero zero. '00'.
Here is the $TSX.
We can see that the mid month high for the $TSX was 14000. Here we sit a month later and now it seems like the 13900 level is resistance after testing higher both yesterday and today. I have been impressed with the $TSX resiliency on the January pullback. The $TSX found support at the 50 DMA. Recently the $TSX has outperformed the $SPX. The 7 day run of gains into today was apparently the longest run in three years for the $TSX according to BNN. It will be very important for the $TSX to make new highs here and keep the string of higher highs and lows intact. 13901 was the final high before the $TSX started making lower lows under the neckline in 2011.
Let's look back to see the importance of 13900 on the $TSX. This level looks real important to me.