Friday, May 27, 2011

Towards the upper edge...

... of the descending channel. If SPX can't push above the upper edge, the intermediate time frame downtrend remains intact and this is going to be a wonderful shorting opportunity. Daily DMI continues to be negative and hourly chart shows a bearish picture as well with EMAs crossed on the bearish side and price bellow SMA 120.

Weekly DMI is only slightly bullish at this point. If weekly turns negative we are going to have another summer plunge.

Silver on the other hand continues to go up and it looks like EMAs crossing plus SMA 85 did a wonderful job giving a "buy" signal around 34.25. at that moment I said that despite this buy signal, the price action was not convincing and I was looking for confirmation, a jump above two short term resistance levels, 34.5 and 34.7. Even an entry at 35 was good. Let's see how long this uptrend is going to last.

Wednesday, May 25, 2011

Intermediate term downtrend continues

Three weeks in a row on the downside and we are heading for the forth week. Market made an attempt to move up in the morning but ended in red. As you probably noticed market formed a downtrend channel. Right now market is touching the lower edge. We may see another attempt to climb to the upper edge. However, a move bellow the lower edge will trigger a fast sellout.

Looking again on hourly chart it's easy to notice that EMAs gave a bearish crossing on May 13th. However, please notice that EMAs generate a false "sell signal on May 6th. In all fairness the price didn't move bellow SMA 120 on that date. Right now the intermediate time frame downtrend seem real since not only the price is bellow SMA 120, but also jumped up after the EMAs crossed but failed to go above SMA 120, a move seen very often in a real downtrend. Even better SMA 120 is pointing down now unlike on May 6th.

On longer time frames we have mixed messages. Price moved bellow the September-May uptrend line, bearish event. Then we have market slipping bellow SMA 50, another bearish signal but it did happen two more times in less than two months without being followed by a market collapse.

At the same time looking carefully at the charts one can say that market is doing a lateral consolidation. Except the short lived plunge to 1250 we can say that market traded in the 1,305-1,365 range since the end of January. Of course another slip bellow the support line around 1,305 is going to be bearish long term. Daily DMI remains bearish. However, weekly DMI is slightly positive. 

Silver moved, finally away from $34 to my great relief. It looks to me that the downtrend is over and we may see a decent rally from here. I doubt is going to be as crazy as the one who pumped the price from 26 to 50 in a matter of 2-3 months but the move is going to be on the upside. The problem with commodities is that they are depending on the dollar and the Feds may change their policy at any time bringing the dollar up or down as they please.   

All the best!


Monday, May 23, 2011

Still no move in silver

My straddles at $34 on SLV are taking a hit today since silver is still not moving above or bellow 34. On the downside there is a short term  support level is around 32.5 and a long term one around 30. On the upside we have two short term resistance levels, 34.5 and 34.9. As a said last week, silver is at a crossroad it can sharply go in any direction from here (you can say this is my wishful thinking since I own a few straddles--))

Market in general is very frustrating from my point of view. The moves up or down are too short lived to make any profit using EMAs crossing on hourly chart. Please notice that the daily DMI has turned negative a couple of weeks ago but weekly DMI is still positive.

In terms of individual stocks there are plenty of stocks to short at this point. CLF, WLT, NOV are my favorite.

On the upside I'll keep an eye on AKAM. The stock is really down, it's even bellow SMA 200 so it's a "NO-NO" from my point of view but insiders bought a huge amount of stocks on Friday, so maybe they know something we don't (they know for sure!). If you want to gamble, this could be a good candidate.

Friday, May 20, 2011

Silver at a crossroad

Hi guys, I'm back. Before talking about the market in general let's look at the hottest trade right now, the silver. After an insane rally and an equally insane plunge silver is trying to change directions again.

EMA 25-EMA 50 pair on 30 minutes chart worked very well in the last four months. Also SMA 85 seemed to offer an excellent support during the uptrend and a resistance level during the downtrend. Right now price moved slightly above SMA 85 and the two EMas are touching. This is a good sign that silver MAY change direction here.

However, looking on the longer time frame (daily chart) I can see that price is slightly bellow SMA 85 and EMAs are ready to give a bearish crossing. Please notice that the same pair of EMAs and SMA 85 can be used both on daily and 30 minutes chart. This should not come as a surprise since you already know that many times (but not always) market in general or an individual stock have a "fractal" property, a pattern noticed on a small time frame does repeat on longer time frames.

Looking on ever longer time frame (weekly chart) notice that DMI is still slightly positive so overall the rally started in September 2010 is not over yet but is seriously challenged at this point. If EMA25 is going to cross EMA 50 on daily chart and the weekly DMI is going to turn negative I expect further plunge. However, if EMAs are going to give a bullish crossing on 30 minutes chart or "refrain" from crossing down on the daily chart I expect a nice mini-rally. Either today or next week we are going to have the an answer.

Talk to you later