Weekend Reading

Au.Tra.Sy. blog:

Excellent! I would recommend following volatility research too (link provided in post).

Trade with the “Big” Trend

Bespoke:

S&P 500 Breadth Hits a High For the Year

Breadth Pulls In Slightly

MarketSci:

An Early Look at Thanksgiving

The Big Picture:

“Quantitative Mining” Debasing Gold

Fascinating!

Kvetching on 311: What New Yorkers Complain About

Percentage of Stocks Over an Index’ Moving Average as an Oscillator

Top40 - end of the day recap for week ending on November 14th

In this week’s update I will take a look at some important end of the day levels and ways to play them.

Last week was more or less sideways week with candles that showed indecisions. There are many reasons for that as numerous traders did not believe in this break out and were not ready to participate in it. But, as we all know, market does what it wants and it doesn’t care what traders think about the market. I believe that the most of them who missed this move are now expecting pullback, so no money is getting into market.

Top40 chart is showing us that market is trending very nicely from the low which was set in late August. Since then market added almost 5000 points and all of that in almost straight line. Close on Friday at 28253 was the highest close on Top40 from July 1st, 2008. Problem that Top40 is experiencing now is trend line connecting last two tops with current market top. It was tested few times this week and market had difficulties to break above it. Trend line is almost parallel with major trend line that started in early 2009 and all in all we have very nice channel.

Small channel that developed from low in August nicely determines current uptrend, with market spending most of the time next to top line. It is easy to see that 10 and 20 exponential moving averages are working as nice supports with 20 ema being tested only once over last 2 months. Oscillators on the top are overbought, but that by itself does not mean market shall collapse. In strong trends oscillators tend to stay overbought.

So, all in all, Top40 is in nice strong uptrend and so far there are no indications change will come soon.

If you are riding this trend - good for you and enjoy while it lasts. However, if you have missed it, don’t try to short it because there are good chances that you are going to lose money. Rather try to find nice pullback to hop onto it with tight stop loss.

Levels to watch are 20 exponential moving average and bottom of the channel - both in 27500 region currently. If Top40 closes bellow those two, one should consider closing long, or if we come close and test them one should add to long position with tight stop loss again.

My personal opinion is that we are not going to collapse 10-20% from here, more likely we are going to continue going up, with small pullback here.

Trade with trend!

Monday Reading

Afraid to Trade:

Remember Remember the Fibonaccis in November

Au.Tra.Sy. blog:

State of Trend Following: October, best month of the year so far

Bespoke:

Dollar and Stocks Not Getting Along So Well Lately 

Silver Gets No Respect

ETF Prophet:

Analogues Suggestive of SPX 1,250 by Year-End

Quantifiable Edges:

The Importance of Breadth & Volume Confirming A Move To New Highs

SMB:

The Fixed vs Growth Mindset- The Consequences (Part III)

The 800 pound gorilla in the room: EXITS

The Big Picture:

Current Dow Rally, Duration and Magnitude

The Talent Code:

How NOT to Develop Your Talent: The 3 Deadly Habits

Trading the Odds:

%B and (really) Overbought?

VIX and More:

Money Market Mutual Funds

J154 daily and hourly chart

Let’s take a look at JSE’s J154 index or Other mineral extractor index, as two biggest companies listed on JSE, Anglo and BHP Billiton, are part of the index. Two of them, as well, make big part of J200, so those two indices are highly correlated.

First chart is end of the day chart from March 2008 and it shows clearly peak from 2008. After massive drop, index bounced and trended nicely. In April 2010 it broke trend line and retraced somewhat, making what can be seen as triple or quadruple bottom around 6800-6900 level. After last bottom was recorded at end of August 2010, market relied strongly and currently is at 8700 or some 2000 points from the bottom, what makes around 30% run. There is massive resistance on the same chart around 9100 that was tested already twice in January and April 2010. There are good chances that we are going back to it to test that level again. What is very symptomatic is that if J154 breaks above there is not much resistance all the way to all time high around 12700.

Second chart just shows how this 30% move from the bottom panned out. There are nice trend lines all the way that were not broken. J154 extended high above trend line, so we could see temporary pullback towards 8500 level. But, before this index clearly shows us some downside, I would not short J200.

Trade with trend!

EDIT:

As from 04.November J154 reached resistance at 9100. As you can see bump it's head three time today agains it.

There are two options now, first one is break above tomorrow where J154 will make new year to date high or second is small pull back and retest again.