Collecting One's Wits

We've seen a LOT of CASH alerts since ETFMT went online in the new edition. Obviously we can't take a position every time an alert hits our inbox; we have to pick and choose what will constitute an actionable alert. Because of the unexpected nature of this market, the sheer number of CASH alerts has made me more cautious than I might have been (1) had we been hit with a reasonable amount of alerts and (2) had we been in a market uninfluenced by intervention, sentiment, and extreme dysfunction.

So, as you might have gleaned from my posts to the Community, I decided to ignore the 30% alerts and watch the 10% and 70% alerts. When every sector hit the 10% category (see post below), it was unprecedented. I started paying more attention to the 70% alerts, since they were fewer and farther between (only five of them since June).

Today I'm going to see how the last two 70% alerts panned out. And I'll share a success story at the end.

Let's go backwards from the most recent alert, for Gas Utilities. Here's the P&F from Investors Intelligence:



We can see that in November it took a nose dive, breaking through at least three previous support levels before stopping at yet another support level (light green bars). Let's look at the line graph to find when this fall was initiated:



The red arrow points to the position of the stock on November 10th, the date of the CASH alert. Note how the MACD registered a sell signal right before and how the RSI fell afterwards. The BPI fell from 62.5% on the 10th to a low of 17% on the 21st.

But this is just the BPI. Let's look at the perf chart of the recommended actionable ETFs and stocks:



PXI is the biggest loser of the two ETFs, with Atlas Pipeline barely nosing ahead of DCP Midstream for worst performance of the three stocks. Here's PXI:



PXI closed at $21.70 on the 10th (on excessively high volume). By the 20th it had reached a low of $16 and closed at $20.46 as of the time of this writing.

Here's APL:



APL closed at $15.28 on the 10th and went as low as $6 on the 21st and closed at $7.24 as of the date of this post, still down by almost half.

Turning to the CASH alert for Steel & Iron from November 6th, here's the BPI:



Whew! After broaching the 70% threshold it plunged. Here's the line chart with the 6th marked (the intersection of the two gray lines):



In this instance, the MACD sell signal came after the CASH alert, and the RSI didn't cross below 50 until the 12th.

Here's the perf chart for the alert plays:



To cut to the chase, SLX closed at $31.15 on the 6th and went as low as $20.23 on the 20th. It closed at $28.21 on November 26 - still a 10% gain if you shorted and held it past the 20th.



AKS closed at $10.82 on the 6th and went as low as $5.22 on the 20th. As of November 26, it closed at $8.60 a 20% gain if you waited till then to cover your short play.



Obviously, the earnings would have been greater had we covered when the security was at its nadir, but I wanted to show that decent returns are possible even if you miss the bottom.

I didn't make a play on the steel & iron sector (see below for an earlier analysis), but I did buy put options on DPM on November 13th (currently they're up by about 38%). Earlier this year, after the September 26th 70% Insurance alert, I also bought put options on XL (April 20), on September 30th. On November 11th, I sold them for a 111% profit. Here's the chart for XL:



The day I bought the options is circled in green, the day I sold them in red. If I had sold them on the 9th of October or waited a bit longer, I'd have made more. But, with a 111% profit, do you think I'm whining about what I could have made? No way, Jose!

Find the strategy that works for you in this market and stay disciplined. Teeka's given us the tools to find our way, but it's up to us to devote ourselves to becoming Master Traders.

Oh, and have SUPER Turkey Day!

gobble gobble

Ride a Painted Pony, Let the Spinning Wheel Glide

Another remarkable sight: Every sector on a Bull Alert! Things keep getting crazier.

Let’s look at the NYSE BPI, which is currently in a column of X’s.


I’ve identified the support levels in green and the resistance levels in red. We’ve recently arrived at the most recent support level at 26%. There's definite resistance at 42% but the Bearish Resistance Line would be hit well before that, at about 39 or 40%. (There was resistance in 1999 that turned into support at 40-42% in 2000-2002 and then again became resistance. Prior resistance at 50-52% turned into support in 2004-2005.) Will we continue the upward trend or flip and test the previous support at 24%? I'm not sure, but there might be a clue in the Percentage-of-Stocks-above-their-Ten-Week-Moving-Average BPI.



You can see that it too is in a column of X's. The 10-week moving average is a short-term leading indicator and as such tends to foreshadow what happens in the 30% BPI (currently in O's) and the Bull Trends BPI. It would be unwise, however, to put too much faith in the 10% BPI.

So where do we turn?

Here's the S&P 500 chart:



As we can see, it mirrors the NYSE BPI in many ways (and its 10% and 30% charts are also similar, even though it's made up of 1/6 as many stocks as the NYSE). In fact, most of the indices are looking a lot alike right now, with slight exceptions (the 30% BPI of the Wilshire 5000, for example, is, in contrast to the others, in a column of X's).

The last column of X's in the S&P 500 BPI surpassed both recent and long-term support levels and stopped at a level of slight resistance from February of this year. The next resistance level is at 48-50%, where prior support turned to resistance in April and August 2008. But again the Bearish Resistance Line would be reached before that. As there are too many support levels that the index could conceivably fall back to (14%, 18%,26%, 30%) -- or it could dip below 10% again -- we have to be ready for anything.

So there's no magic eight ball to tell us what's going to happen next, much less what we are supposed to do.

But we already knew that, right?

Now is the time to be compiling our Watch List. The election may or may not have a large or immediate impact on the markets. Regardless, when the market makes a clear move to either form a bottom or continue the trend downward, it will be more than likely the opportunity of a lifetime.