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Kevin Wilde
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Kevin Wilde is the chief trading strategist at alphaking.com and a Marketocracy.com Master. Investors can follow his trading advisories via his Daily AK newsletter, or have their money run for them via Marketocracy.com money management services, where Kevin's trades will be automatically entered.
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  • Blow-Off Watch. Need A Decision From The Semis (SMH)

    The news from Cyprus yesterday was terrible, yet the market did OK anyway. As I often say, it is the reaction to the news that has importance re future stock trends, rather than the news itself, and yesterday's reversal, along with a distinct lack of volume on the selling, suggests buyers have not yet exhausted themselves, nor sellers being convinced the top is in.

    I have added the semiconductor ETF (SMH) to the divergence/confirmation chart (shown below.) There are three sets of green arrows marking rally confirming signs, and two sets of red arrows marking important divergences. The red arrows are volume accumulation failing to move to new highs (white line top of chart,) and the semis (SMH) remaining below their red breakout line.

    Positive divergence from SMH back in early 09 was a HUGE sign the sell-off to new lows for other indexes back then was about to reverse to end the bear market. Right now we have the mirror view of that, with other indexes blasting to new highs while the semis lag.

    All is not lost for the bulls yet, as yesterday's reversal can attest to. It would only take one serious week of rally to blast both the semis and volume to new highs.

    One of the technical set-ups that made me believe in the bull potential late last year was the transports (purple line) smashing above the down-trending blue line, then later the red breakout line. What happened following those breakout was not a surprise to me, as the longer the base the more impressive the breakout run, and that is exactly what we got.

    If the semis and volume were able to follow the recent breakout for the NASDAQ (black line,) then it is a very real possibility that the SMH and NASDAQ lines resemble the purple one of the transports post breakout a month or so from now.

    Any failure of the semis to eclipse that red breakout line marked by the red arrow, and the top is likely in.

    I continue to hold longs for now, expecting to aggressively move to cash sometime over the next five weeks.

    Kevin

    (click to enlarge)

    Disclosure: I am long QLD.

    Tags: SMH
    Mar 19 11:31 AM | Link | 3 Comments
  • We Know When The Top Is In, When....

    The technical picture remains a mixture of solid bull signs countered with some very serious troubling ones, with the stock market seemingly refusing to tip its hand one way or the other, which makes analyzing what comes next a royal chore.

    All I can say is history says we face an important peak sometime between now the end of April, with the rally potentially extending into early May if the NASDAQ 100 (QQQ) and semiconductor (SMH) ETFs are able to breakout to new highs to confirm the rally and force the bears into one last round of capitulation.

    The prime question is which of the rally phases are we in in the chart below, the middle or final? The contrarian indicator at the top of the chart says either could be in play. The bottom trend trading indicator, however, clearly fits the final rally position, tracking both the 1987 and 2007 lines near perfectly. We will know for sure once the white contrarian line leaves those red circles - signaling the rally phase has ended - and we get to see whether the ADX line is rising or falling by the time the white contrarian lines reach oversold levels (green circles.)

    If the ADX is trending south by the time the stock market becomes oversold on the next sell wave then we are likely in the middle rally position, and we would look to buy at that time expecting one final breakout run to unfold going into the summer.

    If the ADX line is trending north by the time the stock market becomes oversold the final rally is likely already complete, and we would look to hold short positions expecting the white dotted line (for shorts) of the trend indicator to race into the yellow circle that represents the big win for the bears that signals the bull market is over, and next Great Bear phase begun.

    Apple is starting to act a lot better, though the Qs and semis have yet to appear like they appreciate the help, and the current rally phase looks toast without those three heading north to scare the bears into covering their short positions.

    Right now the bears are emboldened, and likely to become more aggressive as the days go by without the Qs and SMH looking like they want to rally to join the breakout fun.

    For now, I continue trying to make financial hay on the long side while the investment sun is shining, though looking to aggressively move to cash in the non-too-distant future.

    Have a great weekend!

    Kevin

    (click to enlarge)

    Disclosure: I am long QLD.

    Tags: AAPL, QQQ, SMH
    Mar 15 5:18 PM | Link | Comment!
  • Looking For A Stock Market Peak And Terminal Reversal

    The chart below shows how the current stock market movement compares to past cycles, with the most recent data as of the close yesterday, and is subject to change by months end, as it uses monthly data and we are only half way through March.

    The bull/bear cycle divides the stock market into four distinct phases based on risk (for the bulls) - low, moderate, high, extreme - with 2013 (black line) in the High Risk variety (orange line.)

    As you can see, current NASDAQ performance is almost exactly what was expected for the first three months of this year. If the pattern holds we are facing a continuation of the gains over the next few weeks that leads to a peak of some significance going into April, with the rally potentially stretching into early May.

    Unlike the other three phases of the bull/bear cycle, high risk years can be very short - sometimes lasting only a month or so, sometimes a year or more - and the blow-off is over the first time the bears secure a big victory on any of the corrective attempts, something they failed to do the whole of last year.

    While the orange line may not look too scary to the bulls, remember the red/maroon extreme line can commence at any time, with lagging volume (white line top of my divergence/confirmation chart,) excessive investor sentiment (white line bottom of my economic/sentiment chart,) and failure of the NASDAQ 100 and semiconductor ETFs (QQQ and SMH) to confirm the breakout, suggesting the peak that delivers the big bear win that starts the red/maroon extreme line will land on the sooner end of the possibly spectrum rather than on the later end.

    If the Qs and SMH breakout I believe we face a stock market top in late April, early May. If they rollover without sealing such a breakout, then the top is likely to land around current levels.

    Either way, the red/maroon line in the chart below is what comes next, once the current blow-off exhausts itself, and I am looking for a place to take profits on longs positions and move to cash. Indeed, I started that process yesterday.

    Kevin

    If you would like a six month free trial to my alphaking newsletter sign up for the 30 day trial at alphaking.com, click on the verification email, and we will adjust to six months. I run four tracking portfolios - so lots of stocks to buy and sell! - as well as a 401K advisory for those looking to make and protect money in their retirement nest-egg.

    (click to enlarge)

    Disclosure: I am long QLD.

    Tags: QQQ, SMH
    Mar 15 11:33 AM | Link | Comment!
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