ONE-TWENTY TWO: Trading Financial Markets
Exploring the poetry in financial markets for students of money and economy since the year 2000.
Many homebuilder stocks, like Toll Brothers (TOL), went parabolic in April. The homebuilder index, XHB, hit 18-month highs at the time. Since flaming out, TOL is down 26%, and the homebuilder’s ETF, XHB, has sunk 23% in two months. This action further confirms the principle that parabolic moves more than likely signal the coming end … Read more
By now, I think we should recognize that low-volume rallies simply do not last – the odds tend to favor a return of most, if not all, those kinds of gains, sooner than later. Last week, I was particularly puzzled by a low-volume 2.4% rally on the S&P 500 that came on the heels of … Read more
Two weeks ago, I wrote “Sellers Step Out of the Way” to describe an impressive rally from oversold conditions on poor volume on May 27th. The S&P 500 closed up 3.3% that day, just short of the 200-day moving average (DMA). Today, the index finally hurdled over the 200DMA resistance for the first time in … Read more
I last wrote about the Australian dollar during its worst slide since the financial crisis. At the time, I claimed that the slide was probably good for a short-term bounce, but the currency could easily go even lower given macroeconomic concerns. Since then, the Australian dollar has firmed up nicely and formed a potential “W-bottom” … Read more
First Solar (FSLR) has been stuck in a downtrend for two years (see chart below). The stock has traveled a volatile path through this trend, providing strong trading opportunities up or down. For example, a sharp two-month rally from the March, 2009 lows doubled the stock price. Insider buying earlier this year provided a convincing … Read more
At the heights of the stock market’s low-volume spring rally, Ambac Financial (ABK) soared 72% and the 105% on two consecutive days. ABK was up another 50% the next day before closing with a 28% loss. The upward surge was quite startling given ABK was pretty clear in its earnings report at the time about … Read more
For many commodity-related stocks the bounce from the March, 2009 lows to the first peak in June encompasses the bulk of their respective gains in the past 15 months. The current, on-going correction has delivered such heavy losses to some of these stocks that they are now trading at those June, 2009 prices. About 1/3 … Read more
As I feared might happen, the stock market has already fallen back into oversold territory as measured by the percentage of stocks trading above their 40-day moving averages (DMAs). This indicator, T2108, dipped under 20% and closed at 18.5%. This is the third oversold period in just a month, and this third time is not … Read more
Toyota (TM) filled the headlines of business news for several weeks as it struggled with seemingly unending revelations about its poor product quality. After about a month, sellers finally exhausted themselves, and TM began an impressive bounce. This bounce only lasted the same amount of time as the overall sell-off. TM peaked in late March, … Read more
I spent a lot of time over the past oversold period studying rules and guidelines for trading the (inevitable) bounce out of the selling pressure. The oversold period ended inconclusively, but my rule for buying the ETF for Brazil, iShares MSCI Brazil Index Fund ETF (EWZ), definitively worked for a second time. When EWZ started … Read more