Friday, June 11, 2010

Good follow up...

... but not enough to change anything significantly at the technical level. SPX managed to climb a bit above the downtrend line and above the declining 5 days moving average. This is the first for SPX since April so the bullish intermediate term momentum is improving.

I want make it clear one more time that the buy/sell signals generated by EMA50 crossing EMA100 on 30 minutes chart are on intermediate time frames (usually I am getting a buy or a sell signal every 3-6 weeks, depending on the market conditions). This is the time frame I am comfortable with. This way I can sleep better at night knowing that day-to-day volatility doesn't affect me. I am still watching my charts every day but only to update my view on the intermediate time frame trend.Mixed picture on NASDAQ as well. We do have a declining 5 day SMA (bearish) and a price above this MA (slightly bullish). On daily chart we can see the price a little bit above SMA200 (neutral, long term), a negative DMI (bearish) and we may see another attempt to climb above the second downtrend line. Long term, NASDAQ has the best looking chart. DOW and S&P500 are slightly bellow SMA200, while Chinese and European markets are the worst, bellow a declining SMA200. Brazilian and Russian market fell somewhere in between. However, on short/intermediary time frames US indexes are lagging so try to figure out what is your time frame.

Looking at FXI, I must say this looks like a "buy" to me. Remember a week or so ago I mentioned a buy signal on FXI. Unfortunately, the buy signal was not confirmed immediately on 60 minutes chart and as expected it gave a sell signal making a potential buyer losing a little bit. When I am getting whip-sawed like this I am going more conservative and look at 60 minutes charts. If I am getting whip-sawed again I am taking my loss and stay in cash because in this case market is trading in range and my timing system doesn't work in this situation. So don't be afraid to take losses here and there. That's OK, it's part of the game. I do accept to be whipsawed on 30 minutes chart, this happened from time to time but if I get whipsawed on 60 minutes chart I am getting out right away and calmly wait for the stock to get out of the trading range.

Look at the UNG chart to see how you can get whipsawed. It traded in a very wide range for two months and finally managed to get out of the trading range a week ago. It is possible that this crappy ETF finally found a bottom?

So let's look again at FXI on 60 minutes chart. As you can see EMA50 just crossed EMA100. This is great, this is what I want to see on SPX. The price is now above a rising 5 day moving average, another positive sign. I want to be clear here, overall, on long term time frame, FXI looks worse than SPX, we have a slightly rising SMA200 for SPX and a slightly declining SMA200 for FXI just a name a major difference between the two. But I don't care about the long term since I am trading on intermediary time frame. Normally I wouldn't think twice about going into an ETF that technically looks like FXI. What makes me a little bit nervous is that the Chinese market reacts too much to the US market. If it's a sell off on Wall Street you will see a sell off in China, if it's a rally in US there is going to be one in China too. So I want to see the US market giving a shot at a rebound. A temporary rebound it's OK for me. I don't like to anticipate breakouts, it's worth waiting for SPX to get above 1,100 and above SMA200.


P.S. Use the comment form to let me know if you have a stock or an ETF you want to have a look at.

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  1. This comment has been removed by a blog administrator.

  2. Most excellent blog sir. Thank you. Your use of MA's is quite interesting and I want to study it further.


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