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Jeff Pierce
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I’m a swing trader of momentum stocks with a holding period of anywhere from a few hours to a few months. I run a number of screens to locate the strongest/weakest stocks out there, using technical analysis to determine my entries and exits. Trying to calculate the intrinsic value of stocks in... More
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  • Dow Jones Observartions

    By Jeff Pierce

    Oct 15th - Nov6h

    • 17 trading sessions
    • 1705 point gain on Dow
    • 4 down trading sessions with all closing off the lows and near the highs but on one day

    Nov 7th - Nov 28th

    • 15 trading sessions
    • 274 point gain
    • 4 down sessions with all but one closing at/near the highs

    While it's impossible to know if the markets are going to ever correct again (slight sarcasm), one can't deny that the strength of the recent move is deteriorating. Staunch bulls could argue that we're simply digesting the gains, and that is something one should consider here, but it's really hard to believe that some sort of correction is coming based on the strength of the move and the refusal for any sort of selling to stick.

    Dec 01 8:24 PM | Link | Comment!
  • S&Amp;P 500 Stretched Like A Spring

    By Chris Ebert

    Stock prices tend to act like a spring. The further they are stretched to their limits, the further they tend to snap back in the opposite direction.

    (click to enlarge)

    The opposite is also true. When stock prices are not stretched very far, they don't recoil nearly s far in the opposite direction when the stretching force is removed. This is particularly true of large baskets of stock - stock indexes such as the Dow, Nasdaq or S&P 500 - since the forces that can move an index are limited. Earnings or other news can move an individual stock, but for a large index the news tends to be anticipated and slowly baked in, limiting it's overall effect; thus recoil is often one of the largest forces affecting the movement of an index such as the S&P 500.

    Without a Bear market to stretch stock prices too low, there is simply not as much force to propel stock prices higher when temporary bouts of selling tension are released. This past October saw a rather substantial period of selling tension, but even at the lowest of the lows, the S&P 500 barely met one the most lenient criteria of a Bear market - one such criterion being the lack of profitability of $SPY Covered Call options.

    Other criteria, including the ubiquitous definition of a Bear market being a 20% decline off the highs, were not met this past October. Now that the stock market seems to have heated up once again, it may be helpful for traders to consider just how much tension there was in the spring. In other words, how much upward momentum do current stock prices have considering effect of the rather meager pullback from October?

    One way of measuring the snap-back momentum is to look not just at how hot the stock market currently is, but how hot it has gotten, historically, after meager pullbacks like the one that just happened a few weeks ago. From the following chart, it becomes clear that few rallies get so hot as to exceed the 10%-above-Bear level, and only then when the rally was preceded by a significant Bear market. The current rally in the S&P 500 may therefore be reaching it's upper limit, temporarily perhaps, but reaching a limit nonetheless. If past instances are any indication, the current rally may have used up nearly all the momentum it gained from October's pullback. Historically, it doesn't get much hotter than this - hotter than 10% above Bear (at the current level of the S&P 10% above a Bear market equates to about 200 points). It does not get much hotter than this unless it follows a significant Bear market.

    (click to enlarge)
    Click on chart to enlarge

    The following levels are each 10% above a Bear market:

    Nov. 21, 2014 S&P 2038
    Nov. 28, 2014 S&P 2052
    Dec. 5, 2014 S&P 2089
    Dec. 12, 2014 S&P 2132
    Dec. 19, 2014 S&P 2145
    Dec. 26, 2014 S&P 2149
    Jan. 2, 2015 S&P 2120

    Without a Bear market to release spring tension, each of those levels would be difficult to surpass, based on historical performance of the S&P 500 following minor pullbacks, such as the one that occurred this past October, when such a pullback did not materialize into a significant Bear market environment.

    *Option position returns are extrapolated from historical data deemed reliable, but which cannot be guaranteed accurate. Not all strike prices and expiration dates may be available for trading, so actual returns may differ slightly from those calculated above.

    The preceding is a post by Christopher Ebert, co-author of the popular option trading book "Show Me Your Options!" He uses his engineering background to mix and match options as a means of preserving portfolio wealth while outpacing inflation. Questions about constructing a specific option trade, or option trading in general, may be entered in the comment section below, or emailed to


    Related Options Posts:

    All-Time Highs Possible in Bear Markets

    Options Give Perma-Bears Shadow of Doubt

    Options Define Limit of "Dead-Cat Bounce"

    Nov 22 2:40 PM | Link | Comment!
  • The US Dollar Remains Stubbornly Bullish

    By Poly

    This is an excerpt from this week's premium update from the The Financial Tap, which is dedicated to helping people learn to grow into successful investors by providing cycle research on multiple markets delivered twice weekly. Now offering monthly & quarterly subscriptions with 30 day refund. Promo code ZEN saves 10%.

    (click to enlarge)

    The Dollar stubbornly refuses to fall, even though it too (like crude/bonds) is very deep into its Daily and Investor Cycle timing. Technically it is weakening, as seen within the indicators on the chart below. I believe this is a sign that the dollar has topped and is about to begin falling. When it eventually does fall, it will probably not look back for many weeks.

    Such setups in the past acted as bullish consolidation before launching higher, mainly because they occurred earlier in the Investor Cycle. This time around, being that we're so far past the normal timing band, I expect this is more about the Cycle knocking on support lines that are destined to eventually give way. In the later part of any Investor Cycle, these types of setups normally break to the downside.

    (click to enlarge)

    Related Posts:

    Stairs Up And Elevator Down?

    Crude Has Likely Hit Rock Bottom

    Plenty Of Reasons To Explain Recent Selling

    Tags: UUP
    Nov 22 2:26 PM | Link | Comment!
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