pebblewriter

Tag: Channel

  • Moment of Truth

    As Ben Bernanke scolds Congress for how pitiful a job they’ve done on fiscal policy, SPX has staged an important break out.

    Daily RSI broke out of the channel that goes back to January.  It has done a phenomenal job of providing guidance, and a clean break out is unlikely to occur without at least a back test.  If fact, don’t be surprised if RSI closes back within the channel, given that we’ve just reached the .382 Fib level.

    Of course, it’s ALL up for grabs in the event Bernanke actually tips his hand — beyond “we have lots of options” and “all options are on the table.”  Let’s see if we can make some sense of the path forward.

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  • So Crazy It Just Might Work

    As a member correctly pointed out in his comment on XLF Update, a ramp in XLF would mean some big returns for important components such as BAC, C, JPM, etc.  This is very true.  Though it pains me to say it, I think banks are ready for a bounce.

    I sold all my remaining JPM, GS and MS puts today.  I jumped on the downside March 27 when JPM was 46 [see: End of the Line], GS was 127, and MS was 20 [see: Lots More Where That Came From.]

    I bought puts, but even straight-up short positions would have made some decent returns over the past nine weeks:

    JPM:       46 – 32 = 31%
    GS:       127 – 92 = 28%
    MS:    20 – 12.50 = 38%

    But, all good things must come to an end, and I think the tide is turning for financials.  Don’t get me wrong…I still think they’re dead meat in the longer term.  I just think we’re looking at a sizable bounce here and now if — and let me be clear, it’s a very important IF — the rumors are true and Kumbaya Banking and Quantitative Whatever are back.

    If not, this entire exercise isn’t worth the bytes it’s written with.  The financials, along with just about everything else Bloomberg quotes, will roll over and die.  OK, with that huge caveat out of the way — and before you laugh me out of cyberspace — here’s what I’m looking at.

    My targets are as follows…

    JPM:  today’s close = 31.99, price target = 38.69 (+21%)
    C:       today’s close = 25.75; price target = 34.79 (+35%)
    BAC:    today’s close = 7.10; price target = 11.34 (+60%)

    JPM:

    CITI:

    BAC:

    My favorite.  It starts with this little H&S pattern back in the 2007 market top.  Keep an eye on those ascending trend lines.

    Here they are again, on the bigger picture, along with some descending ones, and a nice little channel (red) that works pretty well since early 2009.  Couple of nice channels on the RSI, too.

    This one’s a bit of a long-shot, because it means breaking the red fan/channel coming down from the right shoulder up there, but the RSI channel makes me wonder if we might just make it up to that 61.8/1.618 Fib level.  If not, I think 8.89 is a safe bet.

    So, there you go.  Earlier today, XLF July 15 calls sold for .09 and the August 14’s went for .49.  If I’m wrong, they’ll probably go to negative eleventy-hundred.  Then again, it’s so crazy it just might work!

     

     

    Right about here, my attorney would want me to remind you this is not an investment recommendation — nor is anything on pebblewriter.com.  Investing is risky, and options are a particularly effective way to end up living in a van down by the river.  For full risk advisory and other legal disclosures, read this.

  • XLF Update – June 5, 2012

    Financials play a pivotal role in the markets.  They led the way as they enabled the previous run-ups and bubbles, and they led the way down when the house of cards was revealed for what it was.  The survival of nearly all markets is hanging by a QE thread, so we’ll take a fresh look at XLF to see what the charts are saying.

    We’ll start with the weekly chart going back to inception in December 1998 — lot of water under the bridge with this ETF.

    Fortunately, for us analyst types, it’s been very amenable to chart patterns and Fibonacci analysis.  Consider this chart, that helped me call a top in banking stocks in late March [see: End of the Line and Lots More Where That Came From.]  Note the well-defined channel and the Gartley Pattern reaction at the .786 Fibonacci level.

    I’ve put together a series of charts that, I think tell a pretty compelling story regarding XLF’s future.

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  • NYA Update – June 3, 2012

    The May 8 forecast for NYA was for the index to plunge from 7815 to 7340.  The forecast worked out well, as Friday’s low was 7286 (a quick 7% return, yay!)  As noted in that update, 7340 doesn’t really match up with any particular Fibonacci levels.  And, it doesn’t intersect with the rising wedge until early August (the highlighted oval.)

    I didn’t really see it taking that long to play out, and the market obliged for a change.  It also obliged by precisely tagging the fan line I had drawn off the Oct 2007 top (yellow, dashed) and one of the parallel horizontal channel lines (redrawn as red, dashed line E for emphasis.)

    We still haven’t landed exactly on a Fib level, so we either just overshot the .500 or haven’t yet reached the .618 target of  7145.  Deciding which it is presents some interesting questions.

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  • Channeling VIX

    VIX has very nearly reached the channel mid-line, Inverse H&S and Crab pattern targets I posted back on April 18  [see: VIX at a Crossroads], though we’re 2 days behind schedule.

    Our IHS target was 28.10 and the Crab pattern target was 27.12, expected to occur on May 30.)  Friday’s high was a very close 26.71.  It’s close enough to be considered complete, but a little follow through Monday morning would tie things up in a nice neat bow.

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  • A Walk on the Arithmetic Side

    I normally construct charts in log scale.  In general, I regard it as a more legitimate way of viewing time and price relationships.  But, I try to remember to check in on the arithmetic picture from time to time.

    Here are a few arithmetic charts to consider…

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  • This Concludes our Test…

    That should be it.  Remember yesterday [see: Dueling Bancos] we talked about the little channel being established while the market searched for a Point C.  The lower bound of the channel was 1304…

    I think the exact price is going to be hard to pinpoint, and will likely depend on the nature and timing of news from across the pond.   But, leading candidates are the afore-mentioned channel bottom around 1304 and the .707 Fib/red fan line (from Oct 2007) that intersect around 1309-1310.  A push any lower should find strong support at 1300.

    We’ve likely just bottomed out just below 1300 (1298.90) and should head back up now.  The RSI hit the channel midline, which should be its low point, too.

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  • A Most Lenticular Market

    Looking at the markets these past few days, I’m reminded of the prize that comes in a box of Cracker Jacks.  Not a real prize, mind you — but one of those cheap little pictures where the image changes as you shift the angle from which you’re viewing it.  It’s called a lenticular image.

    Despite the uncanny accuracy of our forecasts these past couple of months, the road ahead seems to shift a little with every fresh look.  I can’t remember the last time I agonized over a forecast for an entire three-day weekend.

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  • Ship It!

    Today’s rise continues our successful run — now up 18.5% in the 5-6 weeks since the new pebblewriter.com came online (knocking on wood…)  As expected, we got a sizable reversal off the Crab, Butterfly and H&S patterns.

    As discussed in today’s earlier post, the 60-min channel is again being tested – – to the upside, now.  A study of the RSI picture indicates that SPX will likely (more…)

  • Moment of Truth

    ORIGINAL POST:  4:30 AM

    The analog I posted on April 9 [see: New Analog I’m Watching] accurately forecast the move from 1422 to 1357, back up to 1415, then down to 1292.  As detailed in the last post [see: Why Bother], merely selling short SPX at the tops and buying in at the bottoms we forecast would have earned investors over 17% versus negative 9.4% for a buy and hold strategy.    That’s a differential of 26% that gets the new pebblewriter.com off to a great start.  Now, will it continue?

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