So, are we topping here? No, not yet. Is it possible that we will top here? Yes, it is possible. You yourself wrote last week that the December-to-June Season is the Growth Season for stocks, the June-to-December Season is the Rest Season for stocks. Yes; history indicates this.
Should all this makes us scared to be in the market? Well, how can one be in the market without being (sometimes) scared? But I have a secret weapon. I have a weapon no one else in the market has. I have the ability to take the temperature of the market, to see if it is overheated, or cooling off. A cold market is a SELLER'S MARKET. A hot market is a BUYER'S MARKET. Where are we now?
I took the temperature of all of the non-inverse stocks/etf's/issues I follow -- 641 at the moment, this is always changing -- and found that the market's temperature is 70.64°.
We are always developing new instruments for our creative pleasure -- this one we call PROP1/EMV Simple -- PROP1 is the temperature-taker, with -7 being the threshold (above) to the BUYER's PARADISE or (below) to the Nordic Hades. A 70.64° temperature is the same as a 70.64% of our 641 issues being above or equal to -7 -- that is, a buy. Let me finish my thought. A simple trading system with a great deal of promise (and obvious visual legitimacy) requires that PROP1 break up above -7 while EMV (Ease-of-Movement Variable) is oversold, below zero. Conversely, when PROP1 gets cold suddenly, and when EMV is overheated (+1), this is a sell signal.
We have also been developing what we call a RESISTANCE SERIES trading system. This involves a sophisticated mathematical measuring device of how today's close interacts with previous resistance and support levels. This gives us two indicators, a Resistance line and a Support line, that does interesting, unexpected things, besides triggering pretty interesting buy and sell signals. Let me show you. TNA is the Bullish ETF, which, if we are topping, should show us some of this. There is selling in this chart; but nothing catastrophic is suggested. Look at the deep red line, our Resistance Line. In December of last year note how it exploded up above the red Support Line signaling a SELL. Note how the green Support Line bolted up above the red Resistance Line in February, signaling a BUY. While we are at it, we also can take note of how PROP1, working with EMV, signaled both SELL and BUY signals at the same time. The chart also shows TNA with a BUY SIGNAL currently. Follow our logic here. We took a long position in February; PROP1 is still bullish; when EMV dips down below zero (oversold) and PROP1 is bullish, this becomes a secondary Buy Signal; a chance to add to one's long position. Using this criteria, TNA is giving a second buy signal now. No sign of a top here.
We decided to look at a few more charts, to see if this 'advanced warning system' was consistent.
This system seemed to be working in 2015, triggering the sell signal
How did the Dow announce selling spates?
What about today? Last week I announced that TSLA was bearish.
When watching the Support and Resistance lines, we love to see the Green Support Line break up above the Red Resistance Line and GO VERTICAL. See February in the TSLA chart above. TSLA is now bearish. We ran a report on our LONG ONLY database last night and found that 431 of our 613 long only issues are in LONG POSITIONS now: 70.31% (very close to our 70.64° Temperature Reading). We got a list of recent buy signals -- recent meaning in this past week -- and one name surprised us, XBI, Biotech Bullish ETF.
We had been negative on the biotechs, in large part. Note in this chart that one could play the EMV readings to add to (short) positions before February -- shorting at 77, 68, 73, and 70, before covering with the BUY SIGNAL in February at 46.05 -- adding to long positions at 46.05, at 49.66, and here at 55, the implication being that it is going higher.
If we have a tendency not to believe our eyes and our own logic (common and often wise where investment is concerned) we might look at the XBI Monthly chart to see what the less noisy picture looks like. It is Bearish -- and seems to be SCREAMING AT US: ABORT! Do not make this ridiculous, Daily Chart trade.
So, while a general truth is NOT to buy a Daily Chart signal if the Monthly Chart does not confirm the position, my prediction is that XBI will go a little higher, up toward 57.84. However, I would suggest readers wait for a pure BUY SIGNAL using this PROP1/EMV System. These secondary buy signals tell us something about momentum of issues and the market generally -- however, it would be better to have bought XBI at 46, the original buy signal, than at 54 today. We will be running this trading system report more often (daily?) so that we can all trade it more consistently. So patience is good here.
We talk about the Growing Season as being a Vertical Growth season. The Resting Season is a season of Horizontal Growth. This is the ideal. A stock advances, goes vertical. Then it goes horizontal, to rest. This will generally involve a bearish lower lows and lower highs consolidation. It 'feels' like the market is now horizontal. Horizontal is good; Anti-Vertical is not good. Horizontal necessitates a temperature (PROP1) above -7. This Rest Period 'builds a base' -- vitalizes the root structure -- and we are seeing this with a lot of gold and silver stocks currently.
During the Summer, days last long, nights are short. Days are the vertical growth period; nights are the horizontal resting period. In the Winter, nights are long, days are short. During the Winter, the horizontal resting period often goes Anti-Vertical, goes 'Seed-Planting', digging a hole deeper and deeper into the lower zone, the Earth, in order to plant the seed of the next Summer Growth Period.
We are hunting two stocks we want to buy. HMY, Harmony Gold; and Apple Computer. Harmony shows us a (so far) wonderful horizontal rest period. Apple, less so. Let's update these hunting charts, with a special eye on the horizontal season aspect we are going through now.
Apple has a more serious 'horizontal season' to deal with than HMY. But we still like Apple. TIMING IS THE KEY ISSUE IN INVESTMENT. HMY has its own problems also: central banks as key adversaries. Yes, that is a major problem, as we saw from 2011-2016. But not the adversarial relationship is changing, seems to be changing. Central banks and governments are now net buyers of gold, not net sellers. Is this true? If so, this is a HUGE change. It also looks like Japan is finished with the Western advice section of their financial cycle -- listening to Nobel laureates who tell them it is SMART to destroy one's currency and take on massive amounts of debt -- otherwise, why is the YEN suddenly become vertical?
Is the Dollar rising again, to destroy markets and punish all non-standard currencies? But the Dollar's advance against the Japanese Yen ran out of gas last June and has not recovered its footing. What is this suggesting? The behemoth US Dollar is resting. Will it continue to rest?
Here is our report on this New Trading System, PROP1/EMV Simple. No new trades today (Friday) or yesterday (Thursday). We have show you charts of XBI (NASDAQ:LONG). We show a couple others.
|Symbol||Close||PROP1||PROP1/EMV||NEW TRADE||NEW TRADE||COMPANY|
|BZQ||36.23||-13||Short||Short Brazil Shares ETF|
|GUSH||72.8||-7||Short||* Oil and Gas Bullish ETF 3x (NYSE:O)|
|XES||17.57||-5||Long||SPIDER Oil Gas Equipment ETF|
|XIN||5.14||3||Long||Xinyuan Real Estate China|
|XME||20.78||-7||Long||Spider Mining Metals ETF|
|XOP||34.4||-5||Long||Spider Oil Gas Exploration ETF|
GUSH, Bullish Oil. Mixed picture. SHORTSELL SIGNAL intact; Trend Direction (top pane) bullish for oil.
XES, Oil and Gas Bullish ETF: Long Trade continues.
XME, Mining Metals Bullish ETF: long trade continues.
Note the bearish reading on BZQ, Short Brazil Shares. This is a 'long' reading on Brazil. That is our current position. Only BRZU is volatile and has been punished this past week. Our SHORT THE SHORT on BZQ tells us to stick with BRZU (long Brazil), which is still a BUY in our Weekly Chart.
I know this is getting long. Sorry. I promised a couple of buy signals. Yes. In a trading version of our PROP1 Look-Back Portfolio (up 17.57% so far this year) comes: IRWD, Ironwood Pharma.
Well, let's leave it at that one. The market is in a resting phase now, horizontal. Let's look at one more of our current positions, which tells us that the markets are ok. UDOW is in an up-move, but is pausing to rest. The current chart gives a picture of a rather choppy market and trading indicator -- but when we stretch the chart to show more Time we see a picture that has had long periods of non-choppiness.
We mentioned last week that we think we have developed a 'magic' trading system for 3x ETFs, very volatile issues. We will introduce it next week. It is different that the system we introduced today. We have only one current trade using this system(s). We are calling it the VIX System since is was designed to trade the VIX seamlessly. It has been designed with the intent of trading very short-term options for consistent profits. Last week it gave one signal, a Buy Signal on LABU, Biotech ETF Bullish, at 24.13 on May 13. It is currently up 22% in six trading days. The key with these volatile issues (3x) is to sell them early enough. Buy is less an issue with these; selling on time has been difficult.
Hope you are well. Best weekend.
In my theory we should have been 'planting this seed' from 2001-2019. 2001-2019 is the Night or Winter of this cycle. The FED had other ideas. Now, because of the FED, we still have a HUGE debt load -- and our 'seeds' may still be in the rotting fruit at the top of the tree, not in the Earth where they need to be. I shook my fist at the FED for a long time. Now I am no longer chastising. We have this reality: what can we do with it. (I think the FED will always choose the protection of the status quo, the existing power grid, over abstract truth. Pragmatism is a powerful incentive. Austerity is hard to sell.
Ok; here is the reality we have today, blaming no one for the given data. Markets are not overheated. They are not entering a deep freeze. They COULD. That is why we watch them closely.