Sector Analysis Using Pure Price Action

[Gringo]

But then the strength appears to lie primarily in financials, technology, and healthcare.

On popular demand here is the financial index (XLF). Notice the rise, the beautiful rise. Notice also the lower volume as compared to 2009/2010. Those claiming that price rising on lower volume is not a sign of strength might be right, but the price has gone up around 100% (11 - 22) on this weaker volume. So, again, it's the price that determines profit or loss, not the volume.

Gringo

 

[bmwhendrix]

Gringo, I am enjoying your posts on etfs. I mentioned it earlier in chat, but long term bonds are making a nice hinge on the daily. fwiw.

I have also started trading etfs pretty much using Db's straight line approach. I am trading the daily using 60 min chart for entry.
So far, so good.

 

[Gringo]

Gringo, I am enjoying your posts on etfs. I mentioned it earlier in chat, but long term bonds are making a nice hinge on the daily. fwiw.

I have also started trading etfs pretty much using Db's straight line approach. I am trading the daily using 60 min chart for entry.
So far, so good.

Here we look at the TLT (20+ year bond fund). Here it appears we have had a supply line break, then a retracement and a test, creating a double bottom, leading to a strong rise. Price has moved back a bit but might be an opportunity to hop on the long side. Now why on earth are longer term bonds behaving as if they are about to go up? This would imply the interest rates to fall, or the perception of recovery to be faulty! Deflationary forces getting stronger! What about gold! Lack of inflation, wouldn't it be negative for gold? What about the manipulation of gold? What about the tapering and the recovery? What about the economy at last getting on its feet? Is it all a mirage?

I am already sweating, my forehead awash with trepidation. Perhaps we should revert back to focusing on price and make decisions from there. So this looks like long and what BMW is seeing on the daily I am confirming on the monthly.

Gringo

 

[dbphoenix]

Here we look at the TLT (20+ year bond fund). Here it appears we have had a supply line break, then a retracement and a test, creating a double bottom, leading to a strong rise. Price has moved back a bit but might be an opportunity to hop on the long side.

Depends on how tightly you draw the SL. If you draw it across the swing highs, you aren't even close. Instead you drop to 100 and get into a congestion between that and 108. Even if price moved all the way back to 118, you'd still be below the higher SL.

Be aware of that if you decide to go long.

 

[llIHeroic]

Had these in since last week.

XLF looks to me like it's in an interesting spot at the moment. Seems like it will probably break a little more ground to the up-side, but it doesn't appear like it will be able to maintain it's current upward pace convincingly enough, at least at this point, to avoid a decent subsequent push downward.

However, it would need to be fairly strong to finally BO down from what you have drawn in as the mean of your channel. Might end up being squeezed by both sides for a bit over the next few weeks, but anticipation gets a little more nebulous for me the further it stretches into the future. I'll try to re-evaluate after the past ~3 weeks' current up-trend nears completion, whenever that is.

Roughly what length of time for holding positions on these sectors are you analyzing them for? Not much value having a conversation comparing cherries to apples here.

 

[Gringo]

Had these in since last week.

XLF looks to me like it's in an interesting spot at the moment. Seems like it will probably break a little more ground to the up-side, but it doesn't appear like it will be able to maintain it's current upward pace convincingly enough, at least at this point, to avoid a decent subsequent push downward.

However, it would need to be fairly strong to finally BO down from what you have drawn in as the mean of your channel. Might end up being squeezed by both sides for a bit over the next few weeks, but anticipation gets a little more nebulous for me the further it stretches into the future. I'll try to re-evaluate after the past ~3 weeks' current up-trend nears completion, whenever that is.

Roughly what length of time for holding positions on these sectors are you analyzing them for? Not much value having a conversation comparing cherries to apples here.

Heroic,

I don't know the future, so whether XLF will break up or not or maintain the upward stride is all up in the air for me. Keep in mind I am not trading these sectors but just using them for analysis. As for the duration of holding positions, time isn't a factor as long as it's moving in the intended direction and not too slowly. That's the case with most trades for me. If it took one year and kept moving in my direction and a solid demand or supply line, I wouldn't probably exit it. Now theory and practice at times don't work out perfectly. I have in the recent past chickened out of positions before the break of DL so I am not perfect in that respect but am getting there .

Gringo

 

[Gringo]

Depends on how tightly you draw the SL. If you draw it across the swing highs, you aren't even close. Instead you drop to 100 and get into a congestion between that and 108. Even if price moved all the way back to 118, you'd still be below the higher SL.

Be aware of that if you decide to go long.

Yes. Can someone ban this guy. He's ruining my reputation here.

Gringo

 

[Gringo]

Here's is a chart of the long term yields. The down trend is intact but the yields are above the mean. They sure can go higher before the overbought supply line is reached.

Gringo

 

[llIHeroic]

Heroic,

I don't know the future, so whether XLF will break up or not or maintain the upward stride is all up in the air for me. Keep in mind I am not trading these sectors but just using them for analysis. As for the duration of holding positions, time isn't a factor as long as it's moving in the intended direction and not too slowly. That's the case with most trades for me. If it took one year and kept moving in my direction and a solid demand or supply line, I wouldn't probably exit it. Now theory and practice at times don't work out perfectly. I have in the recent past chickened out of positions before the break of DL so I am not perfect in that respect but am getting there .

Gringo

I see, just keeping your tools sharp eh? I'm sure many people benefit from your content. I enjoy your work.

I was asking because I thought I remembered you saying something about trading ETFs for tax reasons a while back. Usually when discussing instruments time-frame comes into play since someone with a long at a decent entry months ago with XLF might have decided everything but a BO below your illustrated mean might be irrelevant to their position, but someone just in a week ago might be much more interested in the more recent happenings.

I hear you on the theory/practice disparity. It's been my experience that you really can't tell someone starting out how big of a difference the emotional landscape of the mind makes in trade execution before they begin to experience it themselves.

Even for myself, I thought that all of my hesitance would evaporate when I was able to produce consistent results that I could logically trust in, but I've had to learn to be patient with myself and not so demanding in the face of the realization that my emotions still affect my thought process as the contracts I trade ramp up, even if my ego is a little bothered I can't just will away my feelings instantly.

Anyway, good to hear from you. Wish you the best with your endeavors! Talk to you again soon I'm sure.

 

[Gringo]

There has been a global RE boom since the 2008 crisis hit USA and credit creation and lower interest rates caused real estate to rise. Since china is now experiencing the same financial issues USA was facing half a decade ago, there is this chance to see where the Canadian RE stands. The interrelated world causes a weakness in one part of the world to force liquidations in other parts when the investors scramble for cash to pay off debts and cover for losses. Now that this fundamental talk is out of the way, how does one really know when it's time to become cautious?

Canadian RE has been going up and up for a long time. The kind of problems USA faced weren't faced by those to the North. Is the time to become cautious coming closer? Is the party going to continue as it has for the past decade or so in the RE market? For this I turn to the chart, my most trust friend and companion. Price is the final arbiter and if prices are rising it doesn't matter what the economy and fundamentals are saying, it's still a rise.

The attached monthly chart of an index for the RE. We can see that the 2007 brought a significant drop in the index and the price has been rising since. The rise began in the first quarter of 2009 mainly when the general indexes and market started rising. Now, though, there's this DL break and a possibility of a change in stride. Price after the DL break has been rising quite reasonably and hasn't given any reason for an alarm yet. A few wiggles here and there aren't a big deal as we are looking at the longer term trend after all.

Price made a lower high when buyers weren't willing to buy at the prevailing prices making the sellers to cheapen their merchandise. After that dip though the buyers became a bit aggressive with their bidding and the sellers kept raising the prices at which they were willing to part with the goods. Price is close to a critical juncture. From here if for whatever reason demand gets stronger the prices could go above the swing high around 250, or head south. The volume on the rise seems to have been getting lower, indicating that the supply is holding back from fighting seriously. Whether sellers think future prices are likely to be higher than current prices and are not unloading now, or whether the ones holding the goods want to unload them when prices go a higher isn't clear not probably will be in time to make a decision. We rely on our ability to read price and what message it's giving us and that's about it. To find out what we have in store for the future we have to wait and see.

Gringo