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I am an equity option and futures trader. I have been trading the markets since 1979. More about me on my website
My company:
Beyond the Chart LLC
My blog:
Beyond the Chart
My book:
7 Keys to Successful Option Trading
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  • Caution Flag Is Up

    After creating today's video I did a little more analysis. I've talked about the concept of compression followed by expansion many times. The compression for the two-week period ending September 5th is one of the more extreme readings. Based on how the markets closed yesterday, caution is warranted.

    Friday's Close

    The S&P 500 (SPX), Dow Jones Industrial Average (DJIA) and New York Composite Index (NYA) all closed the week below the closes of the last three weeks. This combined with the extreme compression of the prior two weeks, has my attention.

    What Compression?

    And what do I mean by compression? I am talking about the range of trading that occurred during a specific period. In this case I looked at the range of the high and low for that two-week period on the SPX and then divided it by the high reading, to get a percent.

    The percentage was more compressed than mid-July or early January of this year. Each one of those periods were followed by pretty good moves to the downside. Therefore the caution flag is up.

    Thursday-Friday Low

    Now I know I talked about the Thursday-Friday low during the week before option expiration week (3rd Friday for standard options) in the video. And we may very well get a bounce. But given what I see on the weekly charts, and that this is September after all, caution is advised.

    Trading Psychology

    The nature of the gambling experience drags our emotions and fears to the surface and forces us to deal with them."

    - Miron Stabinsky, Zen and the Art of Casino Gaming

    Rule 79 from The Tao of Poker : In the whole poker process, the least stable part is the player.

    I talk further about this in a March 5, 2014 post.

    In Focus

    In today's video I review the market action of the last two days and for the week. In addition to the 5 major U.S. indices I look at several indicators and ETFs.

    Also today I check in on GS, FSLR, LVS and MGM to see how they are trading.

    Photo by Flasshe

    Sep 13 4:50 PM | Link | Comment!
  • China Up...Gold Down

    (click to enlarge)The China Shanghai Composite Index (SSEC) has had a big move over the last several weeks. The move looks solid with great volume. Gold on the other hand is still in an overall down trend and looks to be breaking down further. What is up with that?

    China Channel

    Let's look at the SSEC first. Below is a weekly chart. You can see that SSEC has been in a down trending channel for four years now. Recently it has a had a strong move up out of 7 months of consolidation.

    (click to enlarge)Weekly Chart of Shanghai Composite Index Feb. 2007 - Sept. 5, 2014

    The interesting thing about this chart is that although SSEC has had a great move recently, it still hasn't broken out of this 4 year channel. There's been a lot of power behind this move...we'll see if it can keep going. In tonight's video I take a closer look at the daily chart.


    So gold, via GLD, continues to break down. GLD is the ETF that is a proxy for gold. In the weekly chart below you can see the symmetrical triangle that gold has oscillated in for the last year. Last week looks like the beginning of the break down.

    (click to enlarge)Weekly Chart of GLD Nov. 2004 - Sept. 5, 2014

    Let's look more closely at the daily chart. I last talked about GLD in Where is Gold Headed Now? on July 7th. GLD has held true to form from my analysis in that post. It has continued to move down and on Sept. 2nd broke down out of the triangle pattern.

    (click to enlarge)GLD Daily Chart Showing Wave 4 Triangle

    Based on the wave structure of the entire move, I have three potential end points for this 5th wave down. The first target is 110-111. The second target is closer to the support zone at 102. The third target is 94 and closer to the bottom of the channel.

    If Wave 5 is equal to Wave 1 then it will end at around 98. So these targets gives us some idea as we watch the wave structure as the 5th wave unfolds.

    Tonight's Video

    In tonight's video I review the market action of the last two days and take our weekly walk around the globe by looking at the BRICS countries' indices. I then check in on JKS, BIDU and SINA.

    Sep 10 9:36 PM | Link | 1 Comment
  • Alibaba - A September To Remember
    (click to enlarge)Jack Ma, Founder and Chairman of Alibaba Group

    This September is going to be remembered for one thing. Yes there has been talk about how September is one of the worst months for stock performance. And September leads to October. But this September on Wall Street will be remembered for one thing...Alibaba.

    The latest news on Alibaba is that they are planning to raise about $21 billion in the IPO. That would value Alibaba at about $150 - 160 billion. Trading is now estimated to begin on either September 19 or the week of September 22.

    A Fascinating Story

    I must say the story of Jack Ma is fascinating. Here are some of the highlights from an Inc Magazine article in January 1, 2008

    • He flunked his exam for university two times before he was accepted by what was considered his city's worst university, Hangzhou Teachers University.
    • After graduating he was the only one of 500 students to get a teaching job at about $12-$15 per month.
    • After teaching English for five years he tried to enter business but struggled to find a job and was actually turned down to be secretary to a Kentucky Fried Chicken general manager.
    • On why he called the company Alibaba? - I wanted to have a global company, so I chose a global name. Alibaba is easy to spell, and people everywhere associate that with "Open, Sesame," the command that Ali Baba used to open doors to hidden treasures in One Thousand and One Nights.

    Jack Ma and his team have come a long way from his apartment in 1999. Alibaba is now a combination of Yahoo, Ebay and Amazon all rolled into one.

    The Alibaba IPO is expected to be the largest ever IPO in United States stock market history, surpassing Visa Inc.'s $19.7 Billion IPO. It will be exciting to watch.

    Of course we need to have our irrational exuberance antennae up at the same time. Peak emotions, at times like this, can be a signal of a top.

    In today's video I review all 5 major U.S. indices as well several indicators and key ETFs.

    Sep 06 5:19 PM | Link | 1 Comment
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