TD Sequential Completed for Cisco (CSCO)

I was stopped out of Cisco when it tanked in early November. I have been looking for another entry and it looks like the time is now for getting back in. CSCO finished a TD Sequential countdown yesterday.

If it can get back above 29.70, look for the resumption of the uptrend.

TD Sequential Update

I just wanted to update the year-end bounce candidates that I posted earlier. Looks like we got the best bounce out of ETH, while the other have held steady.

Russell Pearce is a communist

Don't know who Russell Pearce is? No particular reason why you should unless you live in Mesa Arizona or read an article on CNN.com today. You see Pearce is an Arizona state representative who sponsored a bill to crack down on illegal immigrants.

It seems that illegals are streaming out of Arizona as the state's economy slows and a new crackdown on undocumented workers ramps up. Not surprisingly, many people are concerned that with the low-cost labor moving back to Mexico or on to other states, the Arizona economy will weaken further. What does the sponsor of the bill have to say to that?

"I'm hoping they will self-deport. They broke the law. They're criminals."

Ok, if that is what he intended, good for him. Rep Pearce is entitled to that black-and-white, populist view, but it he gets down right bizarre when he responses to the questions raised about the exodus' effect on the economy.

Pearce disagreed that the Arizona economy will suffer after illegal immigrants leave, saying there will be less crime, lower taxes, less congestion, smaller classroom sizes and shorter lines in emergency rooms.

"We have a free market. It'll adjust," he said. "Americans will be much better off."

Of course, Pearce is right about the crime, congestion, classroom sizes and emergency room lines. These things would happen to any community if it's population contracted. Unfortunately, he fails to mention the other effect, which is the decrease in money (and taxable base) that will accompany that shrinking population.

Finally, I doubt that Pearce fully grasps the irony of his "free market" response. Illegals are filling a need in economy and are the epitome of a free market. His legislation is putting an artificial constraint on that market. Perhaps Pearce should call up Hugo Chavez and see how artificial market constraints are doing for Venezuela's economy.

Barry Goldwater must be rolling over in his grave.

Story source:
Illegal immigrants packing up and leaving Arizona

Synchronoss (SNCR) at heavy resistance

As a current owner of SNCR, I've become concerned about it's recent price action. The head and shoulders pattern is fairly obvious but when combined with the established TDST resistance and support levels, the bearish formation is hard to ignore.

Don't get me wrong, I like SNCR's fundamental story and also realize SNCR was placed on Goldman Sach's conviction list recently, but I have seen this kind of behavior before. Look what happened to Force Protection (FRPT) after I noticed the same kind of price rejection on the right shoulder.

I don't think SNCR is destined for FRPT's collapse, but I do think it is important to continue watching how Synchronoss acts as it attempts to punch through the resistance it is now experiencing.

TD Sequential Buys for the year-end rally.

If there is going to be a year end rally on low volume, you might as well pick some stocks that have given a TD Sequential buy signal.

Here are a few. CNO, ETH, RF, and STC

Below I'm showing the most recent chart of Ely Lilly. I posted this when it gave a TD Sequential buy. I'm always amazed by how well the signal works. Remember, however, that you should play these for short term bounces. Don't hold them too long or else you'll just give back everything you've gained.

Are the wheels coming off?

Today was a classic liquidation day. The high-quality stocks went down while the low-quality stocks went up. Either funds are building cash by exiting their profitable positions (profit taking) or they are raising cash to meet margin calls.

However you look at it, the market sure looked ugly.

Beyond the random walk

While I wait to see if many of the recent breakouts can hold up, I went out and bought a book that I found recomended on Stockbee. Before I talk about it I just want to mention how informative and no-nonsense Pradeep Bonde's blog is. I've learned so much about systematic trading by reading his posts and think that his work is what financial blogs should be. If you have not seen it, take a visit and learn something.

The book that I picked up was "Beyond the random walk: A guide to stock market anomalies and low-risk investing", by Vijay Singal. I have become very interested in the development of trading systems and I'm looking to take advantage of any exploitable inefficiency. The book covers many different long-existing anomalies that have resisted any attempts to arbitrage them away.



Most interesting to me were the chapters on short-term price drift and momentum in industrial portfolios. Singal says that short-term price drift is when "events associated with high-quality information signals tend to exhibit price continuations. The quality of the information is characterized by the magnitude of price change, volume, and public dissemination". The momentum in industrial portfolios chapter deals with the evidence that shows that industry groups exhibit price momentum. Singal gives real numbers on well constructed market studies and clearly shows that these price movements are real.

I know that these two inefficiencies are no secret to IBD investors but it is nice to know that the method I choose to study is backed up by empirical evidence.

Companhia Siderurgica Nacional (SID)

An interesting thing happened today. Last week I wrote about the breakout of SID. I didn't buy intra-day and SID ran away from me a little. I didn't chase it and just placed a limit order for 82.55, which was within the 8% of the proper buy point. I actually forgot about the order until I saw that I was filled when the market was down today. SID bounced back nicely and I'm glad that I waited.

The chart looks nice. We'll see how the broader markets hold up.

Metalink (MTLK) the acquisition target

While everyone waits for the Fed, here is an interesting little piece from Shlomi Cohen. He says he is selling his Sigma Designs (SIGM) shares because he expects a big correction and thinks that Sigma will start making some acquisitions. He also thinks they will go after Metalink (MTLK) and I tend to agree with him.

Here is a little bit from his article:

I find it difficult to envisage Sigma maintaining the rate of sales and earnings growth of the last few quarters next year. If there is a slowdown in growth, the stock will undergo a severe correction, and I will get another opportunity to re-enter it. The gorillas are unlikely to allow Sigma to remain almost on its own in the burgeoning IPTV market for much longer, and on the other hand, there is still no strong growth in its other line of business, DVD players using the new Blu-ray disc format.

Last Thursday, Sigma announced that it would be calling a shareholder's meeting to approve an increase in the quantity of registered shares to 100 million. This would appear to imply that a stock split will be announced, but it could also be a preliminary move ahead of an acquisition of a company for shares, a move that is quite logical considering the valuable currency it currently has - a share priced at $70. If there is a field that I feel would be a logical one for Sigma to move into in order to diversify its product range, it is WiFi chips, and here I would advise it to take a look at Metalink Ltd. (Nasdaq: MTLK;TASE: MTLK) as an interesting acquisition target.

Larry Kudlow is a communist

I like wallstrip. It have given me plenty of entertainment while on my train ride home and made me laugh out loud on several occasions. I especially like the Friday chats. I've learned a lot through watching these interviews and try to watch them each week.

This last week featured Barry Ritholtz of The Big Picture. The interview was great as Barry seemed to vent awfully hard when asked about "free-market" guys. You see, Barry is a frequent guest on the Larry Kudlow show. It is painfully obvious that Barry is one of the few rational guests that appear on the show. He is usually surrounded by Bush-cheerleaders, Bush-apologists, and perma-bulls that always seem to blur any distinction between politics and the markets. Barry is always very polite (to my amazement) and never seems to lose his cool.

Well, Barry gets a little hot under the collar in the video below as he calls these "free-market" guys (like Larry Kudlow) communists. I bet this felt good.

Take the Wallstrip survey!

Charles Nenner: A very interesting guy

I'm totally fascinated by this guy, especially since his methods go against every instinct I have as a scientist. Charles Nenner is a numerology/cycle guy who uses everything from sun spot activity to astrology to predict the markets. I've followed his calls for a couple of years and I'm pretty amazed by the accuracy. I don't know what he is doing now but I know he was living on a Kibbutz in Israel last year, studying the Torah and making market calls for his clients, one of which is Goldman Sachs.

This morning on CNBC

He was on Squawk Box this morning and said we are in for a very choppy market next year. He was on TV earlier this year and predicted a bottom in the housing market by 2010. I hope so because that will give me plenty of time to pool some cash for some sweet real estate buys.

See April 13 2007 video here


While I'm on a video posting note, I was flying back from Boston last week and my plane had an aborted landing. We were literally 10 feet from hitting the ground when the engines roared and we took off again. After we gained some altitude, the pilot said that another plane was within the margin of safety. I wonder if something like this happened? (See video)


Runway near-misses on the rise

Stripping down Vcg Holding Group's chart

The breakouts are really starting to mount. Instead of listing all of them I decided to pick what I thought was the best looking chart. This was a big volume breakout on a chart that already had some very nice signs of accumulation. Check out the big up days in October and the low volume pullback since then.

On a side note, the nice thing about being a technical trader is that you don't have to involve yourself in the what the company does in order to make a trade. I'll leave the research up to you but I don't think my wife and I will be doing any on-site research for Vcg Holding Group (PTT). I already had my bachelor party.

Companhia Sider (SID): Breakout buy

Here is a sweet breakout. This Brazillian steel maker has held up well during this uncertainty and today it made new highs on big volume.

The O.C. has financial problems? What a shocker!

Well it was only a matter of time. The place where I was born and raised has announced that 20% of their assets are in SIVs, those wonderful little packages that are littered with subprime slime. From the county that went bankrupt in 94, this admission from Orange County, CA shouldn't be a surprise.

There was something funny in the bloomberg article. Check out this quote.

``We don't have the same kind of debt that Florida has,'' said Paul Cocking, the chief portfolio manager for the county. ``They're all highly rated assets.''

What a joke. We'll see how highly their rated when Moody's has time to really look at them. Has this clown even looked at what Florida's SIVs were rated a couple months ago?

The education in risk continues.

Devious Markets

I never cease to be amazed by how devious the market can be. Just two weeks ago I'm calling for an oversold bounce (just like everyone else) and expect that bounce to bring us back up to the 50 day moving average. Well, it looks like we got just that. I'm showing the S&P 500, but the same can be shown for all of the other averages. We have bounced and then failed after hitting the 50 day exponential averages.

So did I use the bounce to get short like I said I would? Of course not. Now I'll probably end up regretting it, but because all of the major leaders have bounced back with a vengeance and look to start making new highs again, I have actually covered my shorts and picked up some more long positions. It is sickening.

Good luck out there. This market is extremely difficult right now.

More financial pain

It didn't take long for Moody's to downgrade some more structured investment vehicles, which then led to some more states coming out and admitting that they have some investment funds that are in serious trouble. Both Montana and Connecticut look to be in the same boat with Florida and it seems that the politicians in these states are going to get a painful lesson in risk management.

Bloomberg article

More breakouts

Here are three more volatility breakout buys.

Identifiying Head and Shoulders Patterns before the Neckline Break

I would consider myself a student of two distinct methods of trading. First is the momentum, buy high and sell higher methods used to such great effect by William O'Neil. The other relies on the technical analysis indicators developed by Tomas DeMark. His indicators are used to identify changes in the trend and anticipate tops and bottoms in price movement.

While I feel fairly confident in my O'Neil buy and sell rules, I'm continually learning the great power of the DeMark indicator. Take, for instance, the chart of Force Protection (FRPT), which I wrote about in two previous posts. It first caught my eye when I was looking for TD Sequential buy signals. It came up in a scan and I watched it bounce to its previously defined TDST resistance line. I was amazed by how strong the resistance turned out to be, as every attempt to close above it failed. Taking a look at the weekly chart it seemed to be forming the right side of a head and shoulder top. This would have been a great short entry point and would have given someone a very low-risk short, assuming that a buy stop would have been placed just above the TDST resistance line. Also notice that such an entry would have given the position an extra 9 points (or 35%) well before the traditional neckline entry was reached.

I did not enter this short, but have seen this pattern repeat itself over and over again (both long and short). I do not plan on missing the next one.

Breakouts Everywhere!

Here are today's breakouts using the my personally defined rules. What has kept me from buying previous breakouts is that I have been waiting for an IBD type follow-through day, which we got on the 28th.

Notice that I have not included the 52 week high filter. Given that I'm using IBD 100 stocks as my pool of choices, I will assume that the relative strength of any stock is already high. Notice that Flotek is back on the buy list. FTK has taken some big hits and I would be a buyer here, based both on technical and fundamental factors.

Volatility Breakout Buys: PFWD, MTL, ATW, MR, SLT, HRBN, DSX, FTK

Exciting week

I missed some fireworks this last week. Most ominous is the run on the Florida's school district investment fund. Considering Orange County, CA went bankrupt a few years ago, its nice to see that Orange Country, FL was able to get their funds out.

What really disturbs me is that the Florida fund managers also run the state pension plan. More to come on this.

On the plus side, the market had a follow-through day (IDB defined). I picked up some Mastercard and nibbled at Bidu. I'll have some breakout buy suggestions over the weekend.

Cheers

Just reading through some of the articles. This is a MUST read!

``We're such a small school district,'' Wilson, 55, says. ``We don't have the time or staff for professional money management. They have lots of investment advisers. It's risk free and easy.''

Guess what. Florida isn't the only state that has tax payer money being run by amateurs. I'm sure we'll have plenty more of this action.

Bloomberg has more here.

Ely Lilly: TD Combo and TD Sequential Buy

Sorry about the weak posts recently but I'm in Boston for a Materials Research Society meeting. It has been interesting, but so is the market.

Like most people, I'm still looking for a more sustained bounce. Here is another TD Combo/TD Sequential Play. Ely Lilly (LLY)

Rage against the Luddites

I usually like to keep my postings focused on the market. Every once and a while, however, I read something in the blogosphere that really catches my attention.

Enter Al Fin, a blog that's "Primary interest is seeing that the best of humanity survives long enough to reach the next level." I don't know what that means but I just read a very interesting post about nuclear batteries.

Here is a little bit from the post,

Better, safer, more reliable ways to use nuclear decay to powercivilisation (or civilisation's "restart") are coming. Anti-nuclear Luddites of limited cognition and competence are a dime a dozen--being mass-produced by modern "educational" systems and pop culture. But just as many "gray" and "black" market economies inevitably exist alongside the mainstream economy, the same is true for intellectual and philosophical streams of thought. It is highly questionable whether our "dumbed down" society could restart civilisation after a global catastrophic event.

I couldn't agree more when it comes to Luddites. Nice post Al.

One last thing, considering that the company that plans on building these nuclear batteries could possibly go public some day, I guess there still is a slight connection to the market.

King Pharma (KG) and Lloyds (LYG). TD Sequential Plays

I'm out on the road but here are a couple charts that have completed a perfected TD Sequential buy signal.

LYG has completed a TD Combo also.

Credit Suisse Group (CS): Counter-trend bounce coming?

Anyone looking for a counter-trend bounce play? I was watching Credit Suisse when all the trouble started and it seemed to hold up pretty well. That has changed recently and CS has sold off hard. Well the market can't go down forever and when we finally get that bounce, I expect CS to move up pretty well.

CS is only one more down TD Sequential and TD Combo count away from a buy signal. If we get it, I might jump in with a price target of 64.50.

The Market has Landed

Hey, remember all that talk of the lows of August? If you don't, go back and read a rant I had on V-shaped bases and the debate regarding a test of that huge reversal day of 8/16/07.

V-Shaped vs. Double Bottom

Well it took a little while, but here we are at the prices of that insane day. It looks like ol' Bill O'Neil was right.


And now about the sentiment concerns I've had. If you look at the Investors Intelligence survey on Aug 16, you'll find extremely bearish readings. Looking at this last weeks survey, you'll find a reading of over 50% bullish and still under 30% bearish, not exactly the bearish readings that are associated with a major low. The conclusion is obvious, we have more downside action ahead of us.

Market Harmonics has a free sentiment web page.

Thanksgiving Rally and the Slope of Hope

Is it me or does absolutely everyone seem to be expecting a Thanksgiving rally? Well, as we all know, the market NEVER does what everyone expects.

I'm also very concerned with what I see on Bloomberg and CNBC. No one is panicking and it seems that every "expert" they bring on is declaring that stocks are on sale and should be bought here. No one is talking about a bear market.

I like shorting stocks but, for the sake of my friends and family, I don't want to see a protracted bear market.

Step right up and get your shorts!!!

Looking for some shorts anyone? Guess (GES) is a serious leader in the retail sector and has held up pretty well, until now. GES is looking like it is in serious trouble, with plenty of downside left in it.


VF Corp is another retail leader that is only now showing signs of big trouble. It triggered a sell TD Sequential sell signal yesterday and couldn't recover today.

HOG has been building strength to go lower for a couple months. If you are looking for an entry, here you go.

Here are a couple more short possibilities. Neenah Papers (NP) and Datalink Corp (DTLK).

Expecting a shortable bounce

I'm still waiting for that bounce back up to the 50 day moving average. The longer we just hover above the August low bar, the more it worries me that we are just building strength to get even lower.

I was listening to Ken Shrieve today and he was talking about how every correction this year took place without the leaders taking big hits. Now, during this correction, Apple, Rimm, and Google are all taking it on the chin. That is worrisome. I'm also very concerned over the complacency I sense out there. No one is panicking. Here we are near the August lows and I hear some whimpers, but no yelling, kicking and screaming.

Right now, my thesis is to wait for a bounce and then get short. I have devised a brand new oscillator that has been backtesting very well for short entries. I can't wait to give it a try.

Matercard (MA) An excellent technical setup

The smart thing to do right now is to remain in cash. With that said, I have been watching MA ever since the huge breakout last month. What I found so interesting about the earnings inspired explosion was that Q3 07 was supposed to show decelerating earnings growth. Instead, growth has remained strong, catching a lot of people off guard.

The chart is showing a classic sign of a market leader. It not only had a huge breakout in a weak market, but has slowly retraced on ever decreasing volume. We are now approaching the magical point where the price of MA is only 8% above the proper buy point. MA is also approaching the 50 day moving average, an excellent add-on point for those who bought the breakout. For those who didn't, now is time to buy.

Getting even more bearish on FRPT

Here is a bearish chart for you. I wrote about Force Protection (FRPT) setting up a head and shoulders pattern a few weeks back and it looks to be coming true. Today, it broke a TDST support line and looks to be in real trouble. It would take some guts to short FRPT here, as it is very volatile, but it might be worth the risk.

Short Setup for K-Swiss (KSWS)

I've come to really like the setups where a stock closes below its TD Sequential stop loss point and then comes back up to the breakdown point only to resume its downward trend. It looks to me like KSWS is playing out this pattern.

I would start shorting at 20.80.

Counter-trend rally

Today was a low volume counter-trend bounce that is giving everyone a chance to unload or get short. The selling isn't over with a single big day, so look for a bounce up to the 20 day or 50 day moving average and think about getting short. I know I will.

Despite the huge day today, there were only two signals given by my recently devised trading rules. First we have a breakdown in Core Labs (CLB). It is holding its 50 day moving average, but I suspect this has more downside.


On the bullish side, Priceline (PCLN) flashed another buy signal today. This chart is simply amazing given the current market conditions.

Hang in there

Not much to say but it sure is ugly out there and that an epic buying opportunity approaches!

Also, I haven't kept up with my covestor account and it is totally off.

I'm Back

The wedding was excellent and the honeymoon in Jamaica was great.

Looks like I've missed all of the fireworks. This market looks extremely weak and I wouldn't be surprised to see us break the summer lows. Time to keep an eye out for the new emerging leaders.

Wedding Rehersal Pics

Getting Married and Going to Jamaica

I'll be posting a few things here and there but I'm off to Connecticut to get married and then Becky and I are heading to Jamaica. The market picked a bad time to get interesting again.

Here are some pics of Becky and me.

Fear and Greed

I would have to say that while reading around the blogosphere today I got the sense that people were not that worried about today's selloff. There was some serious technical damage done today and it seemed to me that most folks were shrugging of the decline, saying things like, "Don't worry, we will bounce back."

Such complacency worries me and I'm forced to be a little more cautious about the market. Another day like today and we will be back to the August lows before you can say "Helicopter Ben". That high-volume low is a strong magnet that is begging to be tested.

Completed TD Combo for Gold (GLD)

Gold can't go up forever. I hear Dennis Gartman is selling it. TD Combo says to sell also.

Another local bottom called by TD Sequential: Callaway Golf (ELY)

No wonder why the DeMark indicators cost so much money!!! Look at this chart. I posted the Callaway Golf chart recently and was tempted to buy it at the 16.50 level. I didn't and decided that it would be prudent to wait for a lower risk entry. It came back to the original buy point and I planned on going long today. Unfortunately, the company made a positive announcement pre-market and ELY gapped up before I could buy.

I am amazed at how powerful TD Sequential can be.

Short Entry on TD Sequential Failures

Paul Tudor Jones said that when the TD Sequential or TD Combo doesn't work, "it really doesn't work". For this reason, it is sometimes suggested that one go short as soon as a TD Sequential or TD Combo closes below its stop-loss point. I have been looking into this recently and have put together some charts.

Notice how the stop-loss area can be treated as the same stop-loss short postition after the TD Sequential failure. In some cases, the price bounces back and reaches into the stop-loss area. In such a case, this offers someone a late entry point to go short or allows someone who already is short to add to their position.

Given that large short-covering spikes can be so incredibly nerve racking, having a well defined entry and exit strategy would be helpful to those who want to play both the bull and bear sides of the market.