Combining GB with spread trend

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Vil
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Re: Combining GB with spread trend

Post by Vil » Fri May 01, 2020 9:42 am

pmward wrote:
Fri May 01, 2020 8:01 am
20% of your trades make up 80% of your gains.
YTD, I have 63% winning days and exactly 50% winning trades. I did some quite stupid moves (from retrospective point of view) and still my VP is + 15%, so do concur with you. Shorting EU indexes in the early days of the covid panic was especially fruitful. But that was the easy part, together with the gains from some of the previous days (prior to covid panic & lockdowns) - as mentioned, after we entered the zig-zag markets, my performance is slightly disappointing. Was even considering to go fully in cash in my VP and just wait for the things to calm down (which may not happen in the next months).

Day trading is still not something I can afford, given I have a full day utilization on my quite well paid (even for US standards) job.
It's swing trading that perhaps would fit my personality, given I tend to put a bit too much emotions when I have to take quick decisions under pressure. So, entering position and exiting after 20 seconds is definitely not my cup of tea. But there's still a lot to learn from many places/sources (you inclusive, again thanks for that) ...
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Re: Combining GB with spread trend

Post by pmward » Fri May 01, 2020 10:04 am

Vil wrote:
Fri May 01, 2020 9:42 am
pmward wrote:
Fri May 01, 2020 8:01 am
20% of your trades make up 80% of your gains.
YTD, I have 63% winning days and exactly 50% winning trades. I did some quite stupid moves (from retrospective point of view) and still my VP is + 15%, so do concur with you. Shorting EU indexes in the early days of the covid panic was especially fruitful. But that was the easy part, together with the gains from some of the previous days (prior to covid panic & lockdowns) - as mentioned, after we entered the zig-zag markets, my performance is slightly disappointing. Was even considering to go fully in cash in my VP and just wait for the things to calm down (which may not happen in the next months).

Day trading is still not something I can afford, given I have a full day utilization on my quite well paid (even for US standards) job.
It's swing trading that perhaps would fit my personality, given I tend to put a bit too much emotions when I have to take quick decisions under pressure. So, entering position and exiting after 20 seconds is definitely not my cup of tea. But there's still a lot to learn from many places/sources (you inclusive, again thanks for that) ...
50% winning trades is nothing to sneeze at. You have shown that you can be wrong 50% of the time and still be up 15%. This is exactly what I'm talking about here, it's all about risk management. I'm not a day trader either, as I have a day job. I prefer to be an intermediate term trader, but volatile times like this brings all of our timeframes down a bit. We need to be agile. But still, whether you're a day trader, swing trader, or an intermediate term trader, you should know in advance before you put on a trade where you will buy, where you will sell when you are wrong, and how you will get out if you are right. There are numerous strategies for this. Are you going to use a trailing stop, if so how? Are there support or resistance levels you will use? Are you going to take profits as you go or let it all ride? How are you going to size that position in order to keep the risk/reward in your favor? Are you going to buy all in at once, or scale in? These are all things you need to keep in mind.

Also, as of right now my trend following model is still risk on, unless this changes, I will be going into the weekend with my trend allocation in equities. I am looking really closely at small caps though, they are very close to the level where I would sell and move that back to large cap growth even if we stay risk on. I still have a small gain here, but the relative strength vs LCG is fading.

TLT however may be on the chopping block today. I'm not liking what I am seeing, so I may close my VP position in TLT and wait to see if we can get an hourly close above that 171.93 high to buy back in. It is oversold on the hourly chart though so I'm going to give it a couple more hours to see if it can prove to me it has some life left in it.
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Re: Combining GB with spread trend

Post by pmward » Fri May 01, 2020 3:39 pm

Wow what a day. I took the day off work to go hiking and relax... let's just say the market didn't really give me a chance to relax. After my last message this morning I literally hit the send button, threw my shoes on, and walked out the door to go on a hike... and just as I walked out the door my notification went off that I was stopped out of my small cap mean reversion trade. Seems like Elon Musk tweeted how his stock was overvalued and the whole market just plummeted. Now those small caps are a part of my trend allocation. I normally would have swapped them over to large cap growth instead, but with the volatility trend signal basically hugging the line of risk on/off all day and since it's a Friday I just sat on my hands. In the end, my trend model stayed in stocks. So we will see what cards Monday deals as to whether that cash goes into stocks or stays in cash (and the rest of my trend allocation then going back into cash).

GDX came through today though, and its back above where? Above that $33 price that I keep mentioning. $33 is a very important level if you haven't noticed. It was battling all day back and forth over that $33 level, and wound up closing at $33.27. We also got a bullish engulfing candle over the big down day yesterday. Very good looking sign, especially on a day stocks are down. Bonds have went to sleep lately, so getting some strength here makes me feel a bit better.

Speaking of bonds, I did keep my TLT trade on. I was thinking about maybe taking profits and sitting on the sidelines to see if we get back above that $171 area to get back in. But with the craziness in stocks that ensued the rest of the day, I think it's worth sitting on my hands and seeing what the next card is that is dealt.

SLV is also testing my patience. This may get rolled over into GDX or GLD next week if it continues to under-perform both. But, like with bonds, I want to see the next card that is dealt before making any decisions. That $14 level seems to be really important. Looking at the 5 min chart, earlier this week it was functioning as support and we bounced off of it multiple times. The last couple days though it's been resistance and we keep getting rejected every time we try to get above it.

S&P lost that important 2850 level, but it held its ground at 2810, at least for now. It's still above it's 50 day line. As long as we are above the 50 day moving average it's hard to get too bearish. We very well could go test that 50 day SMA and then turn around and rip back to the upside to go test 3k.

So I had a feeling I was going to get stopped out of something today, and it looks like it was small-caps. I only lost like 20 bps of my total portfolio on that trade so no harm, no foul. This market is insane right now. Fake outs on top of fake outs on top of fake outs. That small cap fake out was a good one. I bet a lot of people that jumped on the train later than I did got really chopped up on that one. In hindsight, I wish I would have taken some gains when I was up 10% in the first couple days, but oh well. The 64 trillion dollar question now is this? Is this bearish couple days the turning point? Or is it yet ANOTHER fake out, luring the bears back into the short trade just to give them yet another pie in the face, roll up to 3k-3,100 to stop out all the shorts as well lure the retail investors back in.... only to do the fake out thing yet again and sweep out the rug on the bulls and retail investors alike? I'm currently tempted to think that this latter case of delivering the pie to the face of the bears, and then to the bulls and retail is the most likely scenario. But anything could change. We have to see what happens next week. I for one am glad the roller coaster week is over, and I can go relax and forget about markets for a couple days.
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Re: Combining GB with spread trend

Post by pmward » Sat May 02, 2020 4:20 pm

In my weekend research this week I dug deep into my small cap trade now that I've slept on it and could look at the charts with fresh eyes. I see two errors I made.

First, I got greedy. I know that when I catch a quick 10% gain in a couple days to take some profits off the table, especially in a mean reverting market like this where the odds are if your up huge today you're going to be down huge tomorrow. I saw that gap close at $140, and we were so close at $136 and I left the full chips on too long. I could have taken half the position off, and put it back in lower.

Second, I didn't account enough for the mean reversion trends in my stop. I got stopped out at the support level around $125. However, the 50 day moving average was at $124.50. Considering how it's very common behavior to go periodically check in at the 50 day SMA, I should have put my stop below the 50 day SMA. Lastly, there was an open gap on the daily chart at $123.30. I should have put my stop below that as well, as it is also common market behavior to close all gaps. So what did the IWM do on Friday? It bottomed at exactly $123.29. What is that number? 1 cent below the gap. Where did it close? just above the 50 day moving average. The market went down to close the gap almost to the penny, then went back above the 50 day SMA. Was there really anything wrong here? No, there wasn't. It was an ugly and painful 2 day plunge, but no technical damage was really done. I did not look close enough when I set that stop. My bad. Is there any saving grace here? Well, technically my small cap trade was split between my taxable account and my 401k. The chunk in my 401k is still on since my volatility model did not go risk off. So can I salvage this mistake? You bet. And this mistake could still benefit me as well. We have to see what the market does tomorrow. I have this cash as optionality. I can put the trade back on, or cash out my chips in my 401k either by going risk off if my volatility signal goes red, or if small caps relatively continue to perform like shit I can go all large-cap growth by "rebalancing" my 401k and buying QQQ in my taxable account. No harm, no foul. I played this one wrong, even if we go down big again on Monday and I would have gotten "stopped out" lower it doesn't matter, I still had my stop in the wrong place. The 20 day SMA about $121 is probably the right spot. There's the last low at $116 that also could provide support, but that's a bit more leash than I really would give a mean reversion trade. That $116 spot is probably a good spot to go short if we break below it.

So what went well this week? All the things I did wrong in IWM I strangely did right in GDX. I gave GDX the space it needs on it's stop and I benefitted from that. GDX and IWM are volatile instruments, and tight stops do not work with them. GDX looked down right ugly on Thurs and the open on Fri, but it came to the rescue of my portfolio because I gave it the space it needed. I knew there were 2 open gaps between $30 and where I bought. It also had some good support around $31. So I knew when I bought it that I needed to at least give it a 10% window down to $30. That's a large window, one I normally wouldn't consider... but the risk/reward of GDX currently is worth it. So where did it go? As low as $31.31. If I would have kept a tighter stop I would have been stopped out and missed the spike on Friday. Now the trade is still on, it still could go against me... we closed one of the 2 gaps on Friday, but there is still another... but that bullish reversal on Friday is a good sign. I also dug through a lot of the individual miner stock charts and I'm seeing a lot of bull flags. Most of these companies rocketed up and are simply sitting around consolidating for their next run. There's nothing wrong in gold miner land right now. It doesn't have to go up next week. It may continue to slosh around for a week or two just to test the intermediate to long term holder's patience. But all signs are still pointing up as the next big move.

The big takeaway? Mean reversion is nasty right now. If something is up today, odds are the next day it will be down. This is not just on the major indexes but also in sector rotation. Every other day it seems like leadership is changing. One day it's all large cap tech, health care, and utilities up big and everything else floundering. The next day it's all small caps, financials, and energy stocks up big and everything else floundering. For someone like me, who mainly plays trends and breakouts, this is a tough environment. I'm not as good with mean reversion trades. So this is a bit of a challenge for me to overcome and improve as a trader. Instead of my normal mindset where I buy something up today expecting it to be up tomorrow... I instead need to assume that if something is up today it will be down tomorrow. Instead of buying the breakouts, I need to learn to buy the pull-backs (or at least the initial break out above the lowest candle in a pull-back). Instead of waiting for confirmation before buying, I need to either buy before confirmation or on the first pull-back after confirmation. At least until the market gets back into a more normal trending state I need to adjust a bit. It's just all over the place right now, and if I can adjust I can profit.
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Re: Combining GB with spread trend

Post by Vil » Mon May 04, 2020 2:25 am

Indeed, its not only the small caps, many things turned south in the last days. Comparing the ETFs on relative strength basis (e.g. etfreplay) show a slowing down and possible revert. As you say Gold Miners clearly outperform. I was having a look to some sectors (as Health) that had a good momentum, but that has faded away in the recent days, guess have some 'common logic' explanation. Gold and miners have a good start today, silver and large cap stocks have some decline - S&P500 still holding above SMA50, but silver keeping under it (actually it was not able to close over it since the pandemic started). Silver is also well into the Ichimoku cloud, can see S&P is also approaching it .. Nikkei is closed those days, European indexes are down approx. 3% with opening, so another bear day approaches :)
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Re: Combining GB with spread trend

Post by Vil » Mon May 04, 2020 4:36 am

Quite interested whether SPY will close under SMA50, EU indexes have crossed it already. Stoxx 50 is -4.1% so far. It will be ugly day for stocks, good that I am quite off-loaded of them...

Actually, I am more and more leaning towards sitting on my hands until things calm down and VIX drops under 30. It is a volatile market that one can make plenty of money (and lose even more ;) ), though the way volatility is expressed with opening gaps makes it a sort of un-trade-able for me. It might be only me, though wondering how the owners of xAL (AAL, UAL etc.) feel right now...
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Re: Combining GB with spread trend

Post by pmward » Mon May 04, 2020 10:39 am

Vil wrote:
Mon May 04, 2020 4:36 am
Quite interested whether SPY will close under SMA50, EU indexes have crossed it already. Stoxx 50 is -4.1% so far. It will be ugly day for stocks, good that I am quite off-loaded of them...

Actually, I am more and more leaning towards sitting on my hands until things calm down and VIX drops under 30. It is a volatile market that one can make plenty of money (and lose even more ;) ), though the way volatility is expressed with opening gaps makes it a sort of un-trade-able for me. It might be only me, though wondering how the owners of xAL (AAL, UAL etc.) feel right now...
Yeah, it's a tough market to trade. This is the market that favors short term day-traders and swing traders. Everyone else has a hard time not getting chopped up. This is why I'm looking at some strategies that may be a bit more fitting for the current market climate, as my typical toolkit is not going to work here. So far even the R2K has been holding its 50 day SMA.

SLV is still testing my patience... but still is well above my stop. It's still in a consolidation at the moment, so still requires patience. I'll let my stop dictate when I sell. I think at some point this month we get the next leg up in metals, so I'm willing to give my VP SLV and GLD positions the leash they deserve. I've also identified an area in both that I will take some profits if we get that next leg up.

I did officially get the "risk-off" signal from my vol based trend following system today. The data slightly favors selling on the following days close. Given we've had 3 down days in a row, and no indexes below their 50 day SMA, I'm going to wait until tomorrow and sell at the close. It's likely we get a mean reversion bounce to sell into tomorrow (and if that bounce is good enough it could even negate the signal). If I do have to go risk off again, I'm likely to swap from the aggressive entry strategy over to the conservative entry strategy going forward so I'm not bounced in and out. It's a slower signal so I'll get back in at a higher level, but I also have less chance of whipsaw.
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Re: Combining GB with spread trend

Post by pmward » Mon May 04, 2020 3:09 pm

Nice reversal in stocks today. S&P bounced off its 20 day SMA as well as its 150 week SMA today. R2K also bounced off of its 20 day SMA, as well as its 50 day SMA today. It's still hard to get too bearish on stocks as long as they hold those moving averages. Very common bull market behavior for these indexes to periodically pullback to check in with the moving averages before going higher. Not to say they will go higher, but as long as they stay above the moving averages the proof supports higher prices in the short term.

Also, my vol trend signal pulled back as well and just barely closed risk-on, so I will not be selling equities tomorrow in my trend allocation. Stocks have a little more leash to run.

Tomorrow may be a big day for GDX one way or the other. NEM, it's biggest holding, reports before the open.
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Re: Combining GB with spread trend

Post by pmward » Tue May 05, 2020 1:28 pm

Ding we have a new cycle high for GDX!
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Re: Combining GB with spread trend

Post by buddtholomew » Tue May 05, 2020 4:45 pm

Hear, hear...let’s hope the trend continues.
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Re: Combining GB with spread trend

Post by pmward » Tue May 05, 2020 6:56 pm

Today's chart of the day. Something that caught my eye that I find kind of interesting. Since the bottom on March 23, mid-caps have actually been the best performing cap tier.
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Re: Combining GB with spread trend

Post by pmward » Wed May 06, 2020 10:27 am

What small caps I had left in my 401k are getting moved over to large cap growth today. It was worth a shot on the mean reversion bid, but it's just not working out beyond that flash in the pan last week. Also, I think it possible that we get a pullback (potentially even another down leg) in stocks sometime in the mid-May - June timeframe, and I think large-cap growth is a safer place to stay in case that does happen.

Also, I'll see later about doing an in depth analysis of the bond markets since everyone here is talking a lot about bonds lately. Full disclosure, I did get stopped out on my VP TLT position. That 10% of my portfolio had been in bonds since last spring and I cashed in on a nice ~40% profit. That was a nice trend. It always sucks having a position stopped out, but they all get stopped out some day. If you're going to trade intermediate term trends, even your biggest winners will eventually end on a sour note. But, even though I was stopped out, I'm not sure it's all doom and gloom for treasuries going forward. It simply was time to lock in profits. For now, an argument could be made that it's just a pullback (we only just tapped the 31% fib retracement today). As such, I'm keeping an eye for potential buying opportunities, especially if equities start to sour again. More to come later.
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Re: Combining GB with spread trend

Post by Vil » Wed May 06, 2020 12:02 pm

pmward wrote:
Wed May 06, 2020 10:27 am
I did get stopped out on my VP TLT position
Was that on crossing SMA50 or the support mid April ? Know that's not lead by tech indicatos, but end of April/begin of May there was a small interesting divergence between the price and MFI(14). Looking forward your bond review :o

Miners got kicked slightly today, it seems.
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Re: Combining GB with spread trend

Post by Vil » Wed May 06, 2020 12:07 pm

pmward wrote:
Tue May 05, 2020 6:56 pm
Today's chart of the day. Something that caught my eye that I find kind of interesting. Since the bottom on March 23, mid-caps have actually been the best performing cap tier.
This graphic reminded me on one 'strategy' I read about couple of years ago (in a book with the same name as far as I can recall) - the 12% solution (claiming that's the average annual gain). Its 60/40 - equity/bonds with monthly rebalance. Equity part is chosen in between QQQ, SPY, MDY, IWM for the past 64 days - whichever is on top - that's the one to hold next month. If none goes above 0% - goes to cash. The same is done for the 40% bonds part - choice was between TLT and JNK ... ;D
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Re: Combining GB with spread trend

Post by pmward » Wed May 06, 2020 12:34 pm

Ok bond market analysis. First, lets start off here with the TLT weekly chart. A couple things to notice. First is that ever since that initial rally from the March lows we have been range bound, but today we just broke below that range and set a lower low. If we close below 163.27 that is a point for the bears. Second thing to notice is that neat trend channel we held all through last year prior to the melt-up. It's possible that if bonds do have a big pull-back here, that we just go back into that past channel and continue grinding back higher. This is the third time we've broken above that up-trend, and the first two both failed and fell back in. Now we are way above upward sloping 20, 40, and 150 week moving averages. This is a point for the bulls. Under normal market conditions the price periodically goes back to check-in with the moving averages. That 20 week moving average at 153 would be the first "check-in". Lastly, momentum and relative strength are obviously fading. BUT, we had a massive rally off the lows in march. After a massive rally seeing declining momentum and relative strength is not always a bad sign. The rally was so strong that it is hard to keep up from a relative perspective. So on the whole, the weekly chart is mixed.

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Next we will take a look at the daily chart. What stand out most to me here? The 50 day moving average and the 38% Fib retracement are both being tested today. Currently we are below the 50 day SMA, but above the 38% Fib. This could be a perfect bounce point. If we close below both of those and below the last low of 163.27 that could open up the trap door. So what are the next support levels below that? 160 is an important level. We also have that 50% Fib retracement about $153. What else stands out to me here though? Look overhead. See those to massive gaps from today and yesterday? The market doesn't like to leave gaps like that unfilled. It's going to be difficult to really open up the trap door until we at least close those gaps (though not impossible). Also, $170 has been very strong resistance. Once again momentum and relative strength are fading, but after the massive rally that would be expected. So as of the moment, this chart is mixed as well.

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Next we will look at the 30 year yield. Notice how we were in a wedge formation, that broke out to the upside. Notice also how we busted above the 50 day SMA. This is a big point for the bears and something you cannot see in the TLT chart. You can also look back in April though, we tested the 50 day SMA and fell back down. So is this a repeat of March and a killer buying opportunity? Or is this the start of a leg up in yields? And if it is a leg up in yields, is it a retracement before going lower again, or is it the start of a new up trend? Only time will tell. However, of note is that RSI still has not gotten above 60. Usually 60 RSI is viewed as the cap for bear market rallies. So I would really want to see RSI above 60 in order to really give full credit to the yield rally. These are all simply puzzle pieces on the table at the moment.

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Lastly, let's take a look at IEI, as this chart looks much different. Notice how we really have went nowhere in weeks. We've just been pinned between 133 and about 133.25. To me, this chart is an interesting divergence, as this is a bull flag right here. You can clearly see the flag pole up and the flag just going sideways. The longer price knocks on resistance like that, the weaker the resistance level is. It slowly chips away at it. This chart, unlike TLT, to me looks extremely bullish. Also, even with price going nowhere, look at that RSI? It's still above 50. This chart looks super strong to me. So, is this hinting at a new bond rally? Or is this simply a laggard that will eventually get dragged down? Time will tell. These are all simply puzzle pieces on the table. You have to look at all the evidence as a whole, look from both sides, and make your own decision.

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Last edited by pmward on Wed May 06, 2020 12:46 pm, edited 2 times in total.
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Re: Combining GB with spread trend

Post by pmward » Wed May 06, 2020 12:38 pm

Vil wrote:
Wed May 06, 2020 12:02 pm
pmward wrote:
Wed May 06, 2020 10:27 am
I did get stopped out on my VP TLT position
Was that on crossing SMA50 or the support mid April ? Know that's not lead by tech indicatos, but end of April/begin of May there was a small interesting divergence between the price and MFI(14). Looking forward your bond review :o

Miners got kicked slightly today, it seems.
Yes I set my stop this last weekend actually just below the 50 day SMA. I didn't think we would hit it this soon. I figured the 50 day SMA would increase and widen from my stop a bit.
Vil wrote:
Wed May 06, 2020 12:07 pm
pmward wrote:
Tue May 05, 2020 6:56 pm
Today's chart of the day. Something that caught my eye that I find kind of interesting. Since the bottom on March 23, mid-caps have actually been the best performing cap tier.
This graphic reminded me on one 'strategy' I read about couple of years ago (in a book with the same name as far as I can recall) - the 12% solution (claiming that's the average annual gain). Its 60/40 - equity/bonds with monthly rebalance. Equity part is chosen in between QQQ, SPY, MDY, IWM for the past 64 days - whichever is on top - that's the one to hold next month. If none goes above 0% - goes to cash. The same is done for the 40% bonds part - choice was between TLT and JNK ... ;D
Yes, Ocho uses strategies like this as well. I don't trade just off of these charts, but I do use these as clues to where I want to tilt. This is kind of where I start, then from there I look at spread charts, and the relative strength of those spread charts to help me drill deeper. I also go beyond just those ETF's, I look at a plethora of individual countries, market cap segments, sectors, factors, geographical regions, etc and look for long term and sustainable trends in relative strength.
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Re: Combining GB with spread trend

Post by pmward » Wed May 06, 2020 3:09 pm

And TLT closed at 163.45 with a bullish looking hammer candle, above the last low of 163.27, the 50 day SMA, and the 38% Fib level. That is a big fumble for the bears. The failure of them to close us below any of those important support levels completely overshadows the fact that bonds had a 1.5% down day. It currently looks like the market wants to go back up and at least close those two gaps instead of "opening up the trapdoor" right now. Anything could happen though. We will have to see. It's certainly possible that I got shook out prior to the next rip to the upside. Probably should have put my stop below the 38% Fib level, in hindsight that would have allowed me to see one more card before folding. Hindsight is always 20/20 though. Long bonds are a tricky puzzle to figure out at the moment. We will have to wait to see what clues the market gives us tomorrow. The bears gave it all they could today and they failed miserably.
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Re: Combining GB with spread trend

Post by pmward » Thu May 07, 2020 9:03 am

Today's chart of the day SLV. SLV is currently above it's 50 day SMA for the first time since 27 Feb. More importantly, it's been struggling to get above it since 14 Apr. You can see it's basically been pinned down by the 50 day SMA and slowly following it down. But today, in the blue circle, we are above it. We are also just below the 20 day SMA. If we can close above both, this could be the launching pad for the next leg up in SLV. Also, on the 4 hour, 2 hour, 1 hour, and 15 minute charts we are also breaking above important moving averages today, but the higher timeframe always takes precedence which is why I chose to show the 1 day chart here over the others.

If you're looking to take a stab, the next overhead resistance is $14.80 followed by that wide gap from $15-15.64. On the south side we have support at $13.55 and very strong support at the gap from the island reversal between $12.31 and $12.87.

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Re: Combining GB with spread trend

Post by pmward » Thu May 07, 2020 12:48 pm

BOOM SLV and GDX both doing the deal!

Also of note, remember how I said last night that the bears failed in dragging TLT down and that it meant that the bulls were going to try to close the open gaps? What happened today? Gap 1 closed. Gap 2 is still open. $167.16 is the number it has to get to in order to close that gap. What I am currently seeing on the 15 minute chart looks like the beginnings of a bull flag, basing to try to make a run at that $167.16 gap in the coming hours/days. How TLT handles that $167.16 resistance level will be telling.

EDIT: Now that a little time has gone by the bull flag on the TLT 15 min chart is definitely in play. That's a textbook bull flag if I've ever seen one. It's definitely bracing for a run at that $167.16, which is really the gateway to retest that stubborn $170 resistance level.
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buddtholomew
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Re: Combining GB with spread trend

Post by buddtholomew » Thu May 07, 2020 3:20 pm

Out of GDX at 35.20 at least for today.
Nice to see LTT’s rebound and surprised to see stocks rally before tomorrow’s unemployment.
Still leaning towards a slow melt up with everyone in the media expecting a pull-back and/or retest of the lows.
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Re: Combining GB with spread trend

Post by pmward » Thu May 07, 2020 4:04 pm

buddtholomew wrote:
Thu May 07, 2020 3:20 pm
Out of GDX at 35.20 at least for today.
Nice to see LTT’s rebound and surprised to see stocks rally before tomorrow’s unemployment.
Still leaning towards a slow melt up with everyone in the media expecting a pull-back and/or retest of the lows.
The market has bad news fatigue, so I am not surprised to see stocks rally before tomorrow's unemployment. I mean, they've pretty much ignored all unemployment data thus far. And I also agree with you that the market won't go down as long as everyone is expecting it to crater. *If* it is going to go back down again it will want to rope all the bears and retail investors back into the long side just in time to sweep the rug out from under them. I think a rally to about ~3150 by the end of the month would likely be enough to do the trick. Then in June starting another leg down. Not saying this is what is going to happen, but it's a possibility I see on the table and am prepared for.

The other option on the table is that the market just diverges from the economy and melts up anyways... which lays the kindling for a bigger implosion later. If you go back a page or two here you will see I posted a monthly chart of the S&P showing it's megaphone pattern going back to Jan 2018, and this scenario would basically be continuing on that volatile megaphone pattern going forward with these massive quick volatile swings up and down every year or two, yet over the long term not really going anywhere. I mean we have went nowhere since Jan 2018 already, there's nothing that says we cannot keep doing this for another year, or two, or five.
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Re: Combining GB with spread trend

Post by sophie » Thu May 07, 2020 5:32 pm

pmward wrote:
Thu May 07, 2020 4:04 pm
The market has bad news fatigue, so I am not surprised to see stocks rally before tomorrow's unemployment. I mean, they've pretty much ignored all unemployment data thus far.
The unemployment data hasn't been ignored. It's all been priced in. What matters is whether it will be worse or better than expectations. It's looking like unemployment claims are dropping earlier than expected, so that's interpreted as good news - despite the fact that the numbers are still horrific by any other measure.
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Re: Combining GB with spread trend

Post by pmward » Thu May 07, 2020 6:07 pm

sophie wrote:
Thu May 07, 2020 5:32 pm
pmward wrote:
Thu May 07, 2020 4:04 pm
The market has bad news fatigue, so I am not surprised to see stocks rally before tomorrow's unemployment. I mean, they've pretty much ignored all unemployment data thus far.
The unemployment data hasn't been ignored. It's all been priced in. What matters is whether it will be worse or better than expectations. It's looking like unemployment claims are dropping earlier than expected, so that's interpreted as good news - despite the fact that the numbers are still horrific by any other measure.
Yes, I was making a quick to the point statement about it. Obviously there's more to the response as markets are extremely complex in nature. But, so far all unemployment data news days but 1 I think(???) have all been up days in the market... some of them big up days too. Also, on these days, futures haven't generally moved around much after the announcement. They pretty much just continued to do the thing they were already doing before the number was announced. So it just goes to show that the stock market hasn't really been paying much attention to this. The bond market on the other hand might be. I mean TLT was about flat in pre-market, and it had a really big day today after the announcement. We will have to wait and see tomorrow if and how the market responds to the number.
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Re: Combining GB with spread trend

Post by pmward » Fri May 08, 2020 11:32 am

Today's chart of the day, SLV:GLD spread. This is the chart that is basically the performance you would get if you were long SLV and short GLD. This is a good way to look at the relative strength of one asset vs another. This is a 6 month daily chart. Worth keeping in mind is that this has been going down for many years now. What do we have here? Looks like a bull flag forming. That's an approximate measured move of what would happen if/when we break out above it. To me, I'm starting to get the feeling that SLV is starting to lead GLD. If this resolves to the upside, it would put in both a higher high and a higher low on the chart, for a brand new up trend. Also, I'm not a huge Elliot wave guy... but they do say that the third wave is the longest and strongest wave generally. So if this breaks, it would be a wave 3. Also of note, RSI is positive, setting a higher high, and increasing even though price has been in a sideways trend. This is a bullish divergence. So both ways of looking at the relative strength of SLV:GLD are looking promising.

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Re: Combining GB with spread trend

Post by pmward » Sat May 09, 2020 9:32 am

Weekend watching, another great video from Ciovacco this week and worth watching specifically because it is a very different viewpoint from what you will hear everywhere else. It's always good to look at the tape from both sides: "It sounds crazy and irrational, but history says the low may be in and stocks could continue to rally": https://www.youtube.com/watch?v=YQvz_r73d2Q
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