Any Technical Analysis Stock traders here?

[Rockets]

Take a look at this chart formation and tell me what it means to you. It's the DOW from 1999 to present. I've got my own opinion, which I'll reserve for the moment.

Thanks!

[billybob]

It means we are at the all time high recently and we are not through with the 15's, as the recent runup has been based upon a recovering economy. It has been optimistic but, the bears are coming back in...shorterm. Irrational exuberence!

YMMV

[holtrp]

I dabbled in the past... That chart means strap in and hold on for dear life.

[tigerwoodKhorns]

I know nothing about this topic.

But I would say that it says sell.

BUT, in 2001 and 2007 we had the internet and real estate bubble respectively, which were such large bubbles that is was in common conversations by everyone everywhere. (I made so much money in tech/real estate; etc.).

What is the run up this time?

[holtrp]

How about $85 billion in MBS / Bond purchases by the Fed every month? You could also argue that real estate prices are again vastly higher than they should be.

[Ski Bum]

I know nothing about this topic.

But I would say that it says sell.

BUT, in 2001 and 2007 we had the internet and real estate bubble respectively, which were such large bubbles that is was in common conversations by everyone everywhere. (I made so much money in tech/real estate; etc.).

What is the run up this time?

Whatever's going on, it seems to me that the beneficiaries are the more aggressive growth and tech oriented small and mid cap companies. My POAGX and VGHCX have been kicking major butt, probably in part due to the influence of QE on those particular sectors.

It's easier to recognize a bubble after it pops. At present levels, it is not a bad idea to take winnings off the table, to keep some powder dry so you can buy when there's blood in the streets. Of course the bull may continue to run, you never know. I expect the DOW to reach 18 in the next year or so, but my crystal ball is smudgy, and my horizon is so far out I'm just not too concerned. I do know that timing the market is a fool's errand; it's more about time in the market.

Edited January 14, 2014 by Ski Bum

[Rockets]

<Sigh>, I know.... I was just hoping someone would tell me that I was reading the tea leaves wrong. When I saw it, my eyes popped out of my head, and my stomach sank. I looked up the formation to confirm my fears. This is what I found for those not in tune w/ T/A.

The Broadening top is a relatively rare formation that looks like an inverted triangle. Instead of increasingly narrowing fluctuations in prices, the broadening formation is formed by price swings that are increasingly widening. The difference with the triangle pattern is the change in volume. Volume contracts with the triangle, indicating investor indecision, volume in the broadening top usually expands right along with prices, indicating a volatile emotional market.

Broadening Top

• The most common of these patterns consists of three successively higher peaks and another line connecting the two lows combine to give the price formation its distinctive pattern.

• The combination of wide price swings and increasing volume implies a frenzied market that's out of control, symptoms of market tops rather than bottoms. As a result, these patterns are rarely found at market bottoms.

• The signal that the market has topped occurs when prices fall below the lower low. Prices may again test the third peak but usually don't exceed that level. In addition, in some cases, the third peak might not actually exceed the second peak before prices drop and fall below the second low, providing an early indication that the market is topping.

• The broadening top is considered complete once this violation of the second low is made. Which would be point # 6, but if we ever reach that point we are in deep, deep shizz.

I stole this definition from here http://chart-patterns.netfirms.com/broadtop.htm

Nothing is absolute, but if by chance the market breaks out past the top trend line... I'm not sure which scenario would be worse.

[oldtimer]

The description of this seems to beg for a shorter time period than 1999 to present. "Frenzied market that's out of control" has happened of course, but I would hardly describe the entire present back to 1999 in those terms. Is there a distinction in TA between long term formations and short term? A buy and hold three fund investor since 1999 has earned roughly the expected long run return from stocks over that time. By buy and hold I mean steady contributions each month into the fund, and no selling.

[Rockets]

Oldtimer, I'm not sure how best to answer your question. I mean you can apply Technical Analysis to almost any time period. From short term day trading, to longer periods including years. Normally, I don't go so far back in time, but that's where the trend lines took me. Think of it as looking at the Big Picture.

I wouldn't trade based only a particular pattern w/o verification of a few other indicators, like the MACD, Relative Strength Index or some oscillators. You also need to look at the same chart and indicators in three other adjacent time periods (minutes/tens of minutes/hours/days/weeks/months) whatever the case may be. That said, I would not ignore or turn my back on a stock or index if I spotted a known pattern, just because it didn't have a supporting cast. I may not trade it, but I definitely would not take my eye off of it.

It's too soon to tell what this market is going to do. A correction of 1500 points or so would be helpful, but if on the rebound the next peak fails to close higher than our most recent....that would be bad. Very bad. We will definitely have an answer then.

I got out of the market back in mid November, and have been waiting for the proper time to re-enter. Yesterday while reviewing the charts, I saw what I posted here, because it un-nerved me. I'm just looking for a little confirmation or opinions, from some that are smarter than me!!

Coytee...got your PM. Appreciate it. I plan on getting back with you soon...just have too many other ankle biters to take care of at the moment.

Thanks to all.

TC

[RT FAN]

A simple summation would be that there is a LOT more downside risk than upside potential in the DJIA at this point.The question begs: where would the DOW be if the FED was not pumping $85 biilion a month into the economy. I feel a whole lot better now that they have 'Tapered" all the way down to $75 billion a month following the last FOMC meeting. Through their actions the FED has artificially held interest rates at near zero to help recapitalize the major national banks, by lowering rates that the banks pay for their deposits. This has in effect been a massive transfer of wealth from depositors/savers, (have you looked at your interest postings in your accounts of late?), to the banks who keep their deposits on account at the FED, which pay them rates far in excess of current rate levels.

Simply put the banks are paying 1/4 of 1% to borrow money from you and leaving it at the FED where they are paid 2 1/2%, it's called positive carry. Why risk lending it out when you can make free money at the FED? The banks recapitalize, the economy stabilizes and the DOW goes through the roof on the massive quantitative easing policies of the Federal Reserve, who merely turned on the printing presses and created hundreds of billions of dollars out of thin air while debasing our national currency.

So until the FED turns off the spigot, there will be an underlying bid in the form of excess cash floating through the economy which will be looking for a return on its investment. That money will seek the higher yield returns offerd by stocks,rather that currently offered by bonds. When that source is Tapered, the true value of the DJIA will be esatblished, one not supported by the actions of a dovish Fed. Unless of course the Fed has now added to it's charter the responsibility of supporting the stock market, something I am pretty sure was not the intent when the central bank was created.

[Ski Bum]

The FED's policy has made equities the only game in town, thus generally boosted pricing of the market (while simultaneously ripping off all the grandmas out there trying to live on interest). Although I'm not sure all is gloom and doom, as they taper the markets will adjust, and the economy in general will get healthier as things shift to favor real growth instead of fostering asset bubbles. It will be bumpy. Fingers crossed.

Edited January 14, 2014 by Ski Bum

[oldtimer]

If anyone is overly worried then buy insurance.

[Rockets]

Insurance? As in at the black jack table?

That would be great as the cards don't look too good to me at the moment. I hope I'm wrong and the dealer busts.

Real estate anyone? Commodities?

[oldtimer]

Well, actually they are called puts, and work a little different from blackjack.

[oldtimer]

Real estate and commodities and equities should all be a part of it. Keep balanced, that is how you spread risk. If your consider yourself to be an investor that is. I am not a speculator so I can give no valid advice on how to do it.

[Rockets]

Options scare me. So does shorting the market. I know, it doesn't make any sense...just a mental thing I need to get over.

Commodities...I will probably never trade again. Of course things have changed since my last time in that market. Like being able to have a set of real time eyes on the chart and orders. I got burned not once but twice putting in a sell order, via a broker and being assured the orders had been executed...only to get a margin call the next day because said orders failed to be executed on the floor. Tough, expensive lessons those were.

Real estate...maybe. Things have yet to turn in my area, which really should be the best time to buy I suppose.

[Quiet_Hollow]

I see a control system whose transient response is oscillating, underdamped, and is unstable (growing).

Our interconnectedness has increased the velocity of market (information and the perception of value) to the point that our classic paradigm of currency and means of transaction is poorly equipped to handle, at best.

If that growth line gets any steeper in slope....

[Coytee]

Options scare me. So does shorting the market. I know, it doesn't make any sense...just a mental thing I need to get over.

I'm not extolling the virtues of options so take what I'm about to say with any appropriately sized grain of salt.

Given what you said, let me reword it to show how it might also be changed (and in my opinion, still maintain a similar depth of meaning)

Insert item of choice:

'Car insurance'

'Life Insurance'

'House insurance'...................scares me.........

Really? The idea of having car or life or home owners insurance scares you?

Buying a put is nothing more than buying "Stock Insurance"

(that said, I personally look at other ideas than buying puts however, there are certain times they have made a lot of sense....)

At the risk of a dissertation that I don't care to get into... on a day in / day out basis, I'm a MUCH bigger fan of selling options (covered calls & covered puts & spreads) than I am going long.

I'd rather make a reasonable return many times than swing for the moon.

Analogy: Who consistently makes the million dollars in Vegas?

1) The house who sells the bets but, gets burned every now & then?

2) The gambler who plunks his dollar down and spins the wheel?

I'd contend that the house nickels & dimes many many people, not making "a million" off any of them but, a single individual could beat the odds & make a million on Vegas. The odds are simply stacked in the favor of the house.

In the investment world (options) I want to be the house, not the gambler. As a rule, sell the bet.

Only my opinion

Edited January 14, 2014 by Coytee

[Rockets]

Coytee...actually I agree with you. That said, one of my biggest fears, and hence my being scared is that I'm ignorant when it comes to option trading. It's a totally different world that requires it's own dictionary! Mind you, I'm still trying to get a good handle on T/A, and have spent years doing so. It's not that I'm opposed to learning option trading. I just haven't found the time to properly do so w/o adopting a gamblers attitude. I have several books on the subject, (McMillan, Cohen, Fontanills) that unfortunately have gone unread There's just never enough time. Maybe after I read all the books I bought on how to get your kids into college for free, I'll get to the option trading books.

I have friends that trade options. One made a ton of money...and then gave it all back. I'm talking giving a million bucks back to the street. The guy had been doing so well, he quit his job, stayed home and traded. He traded himself right back into his old job... Actually, almost everyone I know that trades options, with a few exceptions, has a poor track record. The few that have done well, are well disciplined, follow a tried and true system (for them), and only trade a small universe of stocks. They also mostly sell options, which is what most of the T/A books I've read support doing, IF you are going to trade in that world.

Here's the kicker, you can't trade options w/ your 401K. Ok, you can if you take the tax hit, move your money into a Roth, and become self directed...(which I may do for other reasons anyway) Other than that, you are, in most cases, limited to your usual small cap, large cap, S&P, bonds...maybe a real estate fund. There are no funds that allow you to go against the market, invest in options, or futures contracts. Like most people, this is the pile of money that I need to protect, and grow the most. And like many, I had a good year last year and want to keep it !!! If the stock market goes south, and interest rates rise...that kills investing in equity funds or bond funds. So what are you left with? Sitting in cash or real estate funds...maybe internationals, but I kind of doubt it. Obviously, my other trading accounts, I'm free to do with as I wish, and so I'm less worried about them. I can trade the SQQQ, no options required!

Now that I've kicked over this bucket of worms...I'm all ears on how to pick them back up!

Getting back to T/A...I am a little troubled that the VIX doesn't support the market taking a crap, at least not at this time. I can't say the same about some of the indicators on the SQQQ. Just more conflicting data. I'm not 100% convinced the market is going to go south. Last week, I was convinced that a 'bull flag' was forming in the Dow. Who knows, that may still be true. If so, and the market moves north, we will definitely be in Greenspan Country. Now THAT is a scary thought...

Oh, Quiet Hollow....EXACTLY!!!

Take care everyone.

TC

Edited January 15, 2014 by Rockets

[Rockets]

_{Speaking of options, here is an interesting article from one of the better know option guru's. http://www.marketwatch.com/story/monday-sell-off-is-a-warning-sign-2014-01-14?link=mw_story_kiosk}

_{The next few days should be very telling.}