Jul 30, 2014: 12:41 PM CST
If you’re not paying close attention, you may be missing the stealthily increasing positive correlation between stocks and bonds.
Let’s cut through the charts and focus on the “Positive Correlation Creep” that’s taking place as seen in SPY (S&P 500 ETF) and TLT (a popular longer-term Treasury bond fund ETF).
SPY (Green) and TLT (Red):
In general, Stocks serve as a “Risk-On” market where money flows when economic conditions are good while Bonds serve as a “Risk-Off” market where money seeks safety from potential future downturns in the stock market or economy.
That’s an over-simplification, but it does allow a departure point for comparison of how Stocks and Bonds trend – do they trend together in the same direction (which would be a positive correlation) or do they trend in opposite directions (a negative correlation).
The chart above plots stocks (green) and bonds (red) on the Daily Chart from mid-2012 to present.
The indicator at the bottom is Stock Chart’s Correlation Tool which calculates a rolling Correlation of 60 days. Continue Reading…
Jul 30, 2014: 11:58 AM CST
Is it possible that US Steel (X) is finally catching a bid from a breakout (and reversal pattern) from a long-term resistance level?
Could this be the start of a new long-term uptrend in price?
Let’s take a look at the Weekly and Monthly Chart to give us some clues for a longer-term play.
First, let’s start with the long-term “Rounded Reversal” or Saucer Reversal pattern that has developed since mid-2011 to present (mid-2014).
Note the lengthy (multi-year) positive momentum divergence into the April 2013 low near $16.00 per share.
Lengthy positive divergences tend to precede – though not guarantee – long-term trend reversals.
On the swing up (and doubling in price) toward $30.00 per share, we saw volume and momentum surge with price (which is bullish).
So far, 2014 treated traders to a sideways consolidation, but buyers broke price above the $30.00 per share level and then the more important $32.50 level which is not only a multi-year resistance ceiling, but moving average resistance on multiple timeframes (including the 200 week SMA at $29.39). Continue Reading…
Jul 29, 2014: 1:24 PM CST
Price provides a choppy Range Day environment for traders ahead of tomorrow’s “Fed Day” announcement.
Let’s chart key levels, note breadth, and highlight the stocks in play for today’s session.
We’ll start with the intraday update of the S&P 500:
Today’s session developed a Range Day or consolidation session between the 1,985 high (the opening gap of July 25) and just under the support (rectangle) trendline low near 1,975 (which is actually a decent 10 point range).
Pay attention to the current 1,980 pivot and the potential bullish upside breakout play toward 1,985 and balance this upward pathway with the logical downward or sell pathway back to the 1,975 low.
Also – for educational purposes to new traders – study the dual divergences (Momentum and Internals) that preceded the recent reversals.
Jul 29, 2014: 10:29 AM CST
I’m excited to announce an upcoming featured webinar by John Carter on Thursday, July 31st (to end the month!) on Trading Options Like a Professional.
I’ve known John and attended many of his educational presentations since 2005 and highly respect his work and commitment educating traders in a simple, understandable manner.
In this webinar (just register with your name and email – no obligation beyond that), John will share some of his experiences and teach a new concept known as “Options Stacking” to help increase your odds of a successful outcome.
I also am looking forward to the discussion on “Structuring Your Trades as a Campaign” which is what I like to do in my strategies that incorporate the broader picture into trade set-ups (it’s all part of a larger whole).
I’ll be attending this webinar as well (I’m always up for learning new information from colleagues – and I am a loyal affiliate of John’s Simpler Options program) and am looking forward to seeing you there!
Jul 29, 2014: 10:21 AM CST
Former high-flyer Plug Power (PLUG) could be setting up another bullish breakout and run for the prior highs.
Then again, it could be luring buyers into the stock like a seductive siren’s call.
Let’s take a look at the chart and decide which levels are key for trading a potential bullish breakout and avoiding a Bull Trap.
PLUG shares took two spike-bullish rallies (December 2013 and January 2014) along with two “bull flag” retracements ahead of the early 2014 famous double-in-price from $5.00 straight up above $10.00 per share.
After the parabolic rise (see today’s earlier post on Intel’s INTC Parabolic Arc), a climax occurred for a violent V-Spike trend reversal lower as shares collapsed from the $11.00 per share high.
Shares consolidated and stabalized into the $4.00 per share horizontal support level and built a base from which buyers could rally (bid) the stock higher to continue the uptrend at a more normal upward pace.
That’s what we’ll be watching in the weeks ahead for PLUG shares:
To what extent can buyers bid shares higher to continue the uptrend without overheating the stock and seeing a repeat pattern of the parabolic arc then collapse?
For now, keep a close watch on the current spike high from July 22nd above the $6.00 per share level. Continue Reading…