Remember that sentiment indicator?  I have not used it in a while since we really were not getting any 52 week new highs, but this rally is turning that around  and twice in this rally we had new highs greater then 100.  That has not happened since last fall.

In the traders room we have been tracking the new highs intraday looking for the 5 day moving average (the yellow line) to pivot or turn down.  Each day I have been publishing the “Magic number” that will break the rising 5 day.  Today’s number is 60.  If we close below 60 new highs today the yellow line will break lower showing some slowing in this latest bull market run.

A technical note: Some have pointed out that the TradeStation new highs symbol ($52WHN) does not line up with other published NYSE new highs.  Yes this is correct.  There is no standard calculation or publishing of NYSE new highs. If you look at the raw NYSE new highs yesterday there were hundreds of new highs.  Many companies have multiple symbols, all those warrants and different series that make new highs at the same time and there are some symbols that are illiquid, so each vendor that produces a New High symbol is on their own to filter down to the core.  Hence the differences.  I can only historically recall the TradeStation data so that is what I use.

It is not necessarily a great leading indicator, but it does give us another picture of the momentum and strength of the current run and gives us confidence to continue in our longs.  So today we look for 60.  As a rough intraday model we should be above 20 by 9:45 and more than half-way there, so above 30, by 10:30 am this morning to continue the new high momentum.

Check out the members-only website.  In the trader’s corner I will try and update the running number and a close prediction throughout the day and of course in the live traders all day, or upon request.

As always if you have difficulty logging in of if you are having any technical issues email me: redliontrader@gmail.com or IM me in PalTalk or AIM or GTalk all as redliontrader.

happy trading

-rlt

This is my Zweig panel that I watch on a daily basis:

Hopefully it is readable. I have it set up the charts so that the charts on the left-side are more “broad based” , that is the universe of stocks they track are large and relatively unrelated.  The charts on the right are the standard indices and have a small universe of stocks. 

During yesterday’s morning’s review I noticed that the left-side indicators never really went to the oversold line (except the NYSE), even the $RUT (R2000)  was just touching, while the other sisters had well established their beach-head above that overbought line. I incorrectly read the indicators as telling me today that the indices, relative to the market itself, were way overbought and shorting them would be a good thing.  In hind sight the charts were telling us that a broad market catch-up rally was about to happen, and boy did it.

A reading of 66% on the ZB would indicate that on average for the last ten days the A/D line was 2:1, that is for every one stock down there was 2 stocks up. Looking at the NAZ-100 you can see that has happened almost 6 days in a row!

The indicator tends to go up and down on a day-to-day basis.  Yesterday’s pattern was to be an up day. Today should be a down day on the oscillator, but a down day from here is any closing a/d that is less than 2:1, but a less than 2:1 day can still be very green.

From the March 9th lift off the NYSE ZB moved about in that oversold region for 8 days before a reasonable 3% pull back.  Our current thrust has just finished day number six.  If the pattern repeats we should be down a little today, up on Monday and then down bigger on Tuesday (maybe a turn-around Tuesday?). (big equating to 2-3% on the SPX).

Happy Trading

-rlt

Some of our members are still not using the website and some of the features we have added, with even more coming.

First let me give you two links. 

http://pv.ttthedge.com

This is the link that will take you to the members only area of the website.  If you are a paid-up member and have filled out the membership form you should have received a password to the site.  If you don’t have a password please email me: redliontrader@gmail.com and I will issue you one. I have some visitor passwords too if you want to visit.

The second link is:

http://express.paltalk.com/index.html?gid=1088749347

For our traders level members this is a link that will take you directly to the TTTHedge.com trading room in PalTalk Express.  If you do not have a paid membership to PalTalk I would recommend PalTalk Express over PalTalk Scene because it does not serve up ads that can cause a trojan to be downloaded on to your machine.  I also think it is a little bit more stable.  For our email-level customers, please come by for a visit and see what we do.  You might be asked to identify yourself as the room is not password protected, just IM me (redliontrader) and let me know you are visiting. 

 

More about pv.TTTHedge.com

 

Most members that are using the website are using our all portfolio view.

Since our last Tech note I have added links to charts from symbol names contained in the portfolio’s.  We have also added the Futures to ETF conversion chart. Another great page is the closed trade view  showing all the trades we have closed since tracking started in mid-May.

This view displays trades closed out on a day-to-day basis.  They are sorted by exit date top down so the most recent exits are at the top.  Notice Tom’s excellent handling of hedging today, taking his stops on the shorts today and allowing the profits to run as we transition from our Bearish positioning to Bull.  We were up $7,700 today!

Use the website to learn proper hedging and position sizing and review our trades against your trades.

If you have any questions about using the website, or have ideas about improving the website or our service please let me know.

Happy Trading

-RLT

Not exactly.  But close, maybe close enough for technical work.  For those keeping score at home and who have been following our tracking of the Zweig Breadth indicator, recall that a special thrust firing (ZBT) of the indicator occurs when it moves from oversold to overbought in 10 days or less.  This occurs rarely but has preceded almost every bull market. A second firing of the indicator is common and is used to confirm the bull market recovery.  From our chart to the left you can see that on the  ZB- low of July 8th we did not reach the oversold conditions needed to meet the Zweig Thrust definition. On that date the markets began to recover and we were watching the orange trendline to see if the ZB would turn around and resume its downward momentum loss indicating more of a correction to com.  We now know it shot past that trendline without any hesitation and sits pretty close to the highs of the other breakouts in overbought territory.  Regardless of whether it is an official ZBT or not, this move has been very powerful and has added new upward momentum to the markets that have been missing over the last month.

Have I Missed the Move?

Remember it takes 10 days for the thrust indicator to fire. During that time you miss the market moves, but this indicator is a long buy and hold type indicator, an attempt to mark major market turning points.  Let us look at the price action on a weekly scale to the left. You can easily see the two thrust bars in the current recovery from the March lows.  They have many similarities.  The March thrust was preceded by 4 weeks of red bar selling.  Our new July thrust bar was also preceded by 4 red weekly candles.  The selling was not as fierce, hence no oversold on the ZB, but the consolidation was completed and the earning info started coming in strong for the second quarter.  What should scare the bears, and those holding shorts or puts is the lack of retracement into these weekly thrust candle.  The  first thrust candle only allowed a 1% pull back into its bull defended territory as shown to the right.   These thrust candles are hard to retrace. That 1% retracement in the March candle occurred on the second day of the next week.  That day, 3/17 started with a flat open with an immediate 1% sell off.  By 9:45 am the selling was complete and on that March 17th, which coincidently was a Tuesday like tomorrow, the market rocketed up closing up 3.2% for the day. This is the kind of strong bull like market we find ourselves today.

A 1% retracement into our new July Thrust candle would take us to the 934 area.   Most of us caught on the wrong side would love to get there tomorrow.  We are definitely overbought and at extremes on most of my indicators, but these thrusts have a momentum of their own.

If we get a 1% pull back I would be covering my shorts and adding to longs.  Add some more at 2% and even more at 3%.  Trail them with a 4% –8% stops.

But Have I missed the Bull Market?

This picture is a little crazy.  This is the weekly SPX  with my Zweig entries.  While we almost got a breadth thrust trigger, we definitely got a 4% Zweig/Davis buy signal.  This signal buys and sells the market when ever there is a weekly change of 4% in either direction of the Value Line index.  4% Up triggers a buy, 4% down a sell.  I track this system too and the results on the SPX are on the chart below.

The ZBT system entered the Markets officially on March 19th, 10 days after the March lows.  This entry is the thick yellow line.  To walk through the chart, you can see that I marked the opening of the March 9th candle as the basis for measuring performance.  Our entry on March 19th missed a 14.82% movement from that March low.  Since our system’s entry we are up 22.31% on the high of June 6th, so while we missed some of the market we still have captured most of it, and if we are in a second leg we will capture even more.

The 4% system has made one complete trade and is currently in a second trade.  The first trade entered on March 13th missing 11.1% of the climb.  The first trade exited on the May 15th pullback booking a 16% profit. The system was out of the market for two weeks, re-entering on the close of the week of May 29th.  Since then it has been as a high as 3.72% for a total of 19.88%.  Not quite as good as the ZBT system, but better protected.  If this system were not already in a trade it would have entered last Friday on the July 17 bar and you would be up 1%.

If this bull leg is as strong as the last one we could easily go up another 25% on the SPX from here.  That would put us in the 1090 range.  So don’t sweat that 8% you might have missed, go get that 25% before someone lets the cat out of the bag that this economy can not continue to grow on job cuts, cost slashing and government spending.

That’s my view from 10 feet up.

Happy Trading..

-RLT

 

 

 

 

I have added to the member's website at http://pv.TTTHedge.com the following conversion chart that will allow non-futures enabled traders such as myself to trade along with Tom's futures calls.  The chart included in this mailing/posting is non-dynamic and the share equivalents change every day, so to get the current data you must go to the members site.

For those that are not members we are offering a 3 day free trial, and a special mid-summer enrollment into both our email and traders level of service.  You can read more about these services at http://TTTHedge.com

If you are a member and have not been to the member's website, or you are having difficulty getting onto the website please email me: redliontrader@gmail.com.

Lots of news today which should reveal the nature of our new bull market.  If the Bull is back in full charge any bad news will be absorbed without any real reaction.  The earnings season has started very strong with better than expected reports from Goldman and Intel setting the stage for a financial and tech rally.  The bars have been set for the other companies and we will see how they perform.

We are facing a gap up this morning as a result of the Intel announcement last night.  While we are invalidating the Head and Shoulders boogey man set up days ago with this rally, we are also starting to get into overbought territory on several indicators so I would expect some selling either this afternoon or tomorrow.

The ZB indicator currently stands as looking like this:

Technically speaking we have not broken the downward momentum pattern setup starting at the beginning of May.  If today’s open holds and the A/D line stays higher than 2:1 on the NYSE that should be enough to push the indicator over the trend line, which to me would be more evidence that the bull has returned and that  our strategy moving forward should be buys on 1-3% pull backs.

What could stop the current stampede? Exhaustion for one thing.  The bulls are a little tired from the March run up.  Another possibility  is that with the early pacesetters in earnings (GS, INTC)  we have setup a possibility of the market becoming disappointed when earnings don’t exceed expectations and whisper numbers for other companies.  Economic news and there is a lot of it today can either act as a drag or a propellant. 

Either way, it will be nice to get the noise from OPEX out of our view.  The market pinning during the day drives me insane as I like to scalp to keep my head in the game and it is impossible on these OPEX weeks.

In the traders room we are in a little bit of a hole in the traders account.  If I know Tom like I think I know him, (I haven’t talked to him since 4pm yesterday), I am sure he has been thinking all night how to work his way out.  There is nothing more fierce than a natural bull acting like a bear caught on the wrong side.  I am sure trading will be fast and furious today in traders as we watch Tom masterfully trade his account back into profit.  I would recommend being in the room today if you can.

Here is a quick link that will launch the PalTalk Express Flash application and bring you into the room:

http://express.paltalk.com/index.html?gid=1088749347

Happy Trading!

-rlt

Lots of news today which will be revealing of the nature of our new bull market.  If the Bull is back in full charge any bad news will be absorbed without any real reaction.  The earnings season has started very strong with better than expected reports from Goldman and Intel setting the stage for a financial and tech rally.  The bars have been set for the other companies and we will see how they perform.

We are facing a gap up this morning as a result of the Intel announcement last night.  While we are invalidating the Head and Shoulders boogey man set up days ago with this rally, we are also starting to get into overbought territory on several indicators so I would expect some selling either this afternoon or tomorrow.

The ZB indicator currently stands as looking like this:

Technically speaking we have not broken the downward momentum pattern setup starting at the beginning of May.  If today’s open holds and the A/D line stays higher than 2:1 on the NYSE that should be enough to push the indicator over the trend line, which to me would be more evidence that the bull has returned and that  our strategy moving forward should be buys on 1-3% pull backs.

What could stop the current stampede? Exhaustion for one thing.  The bulls are a little tired from the March run up.  Another possibility  is that with the early pacesetters in earnings (GS, INTC)  we have setup a possibility of the market becoming disappointed when earnings don’t exceed expectations and whisper numbers for other companies.  Economic news and there is a lot of it today can either act as a drag or a propellant. 

Either way, it will be nice to get the noise from OPEX out.  The market pinning during the day drives me insane as I like to scalp to keep my head in the game and it impossible on these OPEX weeks.

In the traders room we are in a little bit of a hole in the traders account.  If I know Tom like I think I know him, (I haven’t talked to him since 4pm yesterday), I am sure he has been thinking all night how to work his way out.  There is nothing more fierce than a natural bull acting like a bear caught on the wrong side.  I am sure trading will be fast and furious today in traders as we watch Tom masterfully trade his account to get to profit.  I would recommend being in the room today if you can.

Here is a quick link that will launch the PalTalk Express Flash application and bring you into the room:

http://express.paltalk.com/index.html?gid=1088749347

Happy Trading!

-rlt

I have had a couple of people ask me what the Zwieg Breadth looks like now.. So here it is for the NYSE:

If we are completing the pattern in the crayon thick trendlines then the ZB should continue to move down and touch the bottom descending trendlines placing the NYSE ZB into oversold for the first time since March.  The Nasdaq exchange ZBI has completed it’s lower low on the downside channel, so if  you are a bull or a skeptic bull I would suggest focusing on Nasdaq stocks since they have completed their downside and are currently oversold on the ZBI.  If you are a bear than I recommend the Dow listed stocks since they are at 48% now and need to drop to 39% in order to establish a new intermediate low.

-RLT

Happy Trading!

First before we talk about the status of the ZB indicator I wanted to show the famous Head and Shoulders SPX chart.  Some of our newest members, welcome by the way, are quite new to trading and I want to make sure that the danger marker is understood.  Here is a chart of the SPX as it stands after market on July 8th, 2009.

This daily chart shows clearly a left shoulder, a little deformed but there, a head and right shoulder.  The neckline is right around 883 according to my crayon.  Head-n-Shoulders (HNS) is not my thing but if I remember correctly, and if I don’t please correct me, we can expect a correction equal to number of points form the neckline to the top of the head.  On June 11th the SPX hit 956 , the neckline is 883.  That is a difference of 73 SPX points.  If the pattern is correct we should go down 73 points from 883 which should bring us to 810 on the SPX.  Those are my rough numbers and I just wanted to throw out a little technical work. 

There are a couple of other points to be made on this chart, which is a very busy chart.  I like to use a 200,100 and 50 day MA to set up overall trend.  My colors are Red, White and Blue.  When we are trending healthy in the correct direction the averages will fall into “natural” order with the 50 above the 100 and both above the 200.  This ordering would be Red, White and Blue, which I remember as being good for America.  Currently we are Red (50), Blue(200) and White(100).  We appear to be sliding down the still negative sloping 200 DMA, which is now right at the neckline for our HNS pattern!  You can also see that we are close to putting the averages into correct order.  The $NDX is already in RWB order, so we will be watching for that to fail to confirm a failed 200DMA crossing.

Back to the Zweig Breadth indicator.

This is the ZB from the July 8th closing.  We have talked in the past about how this breadth momentum indicator is good a making higher highs or lower highs to point out the winding up or winding down of  market momentum.  Since that May 4th high ZB reading, we are slowly loosing momentum with interspersed counter trend rallies, the last one being not so strong.  Yesterday before the end-of-the-day rally the NYSE ZB was right at that lower blue trend line, making a lower low.  

This is what the ZB on the NAZ exchange traded stock looks.

This indicator has made the lower low to keep in place the downward momentum.  We are oversold here on the indicators and we should start a counter-trend rally any day now.  Perhaps today.  Any rally would put the HNS patter at risk.  If there really is a PPT you can bet that they will do what is necessary to invalidate the HNS. 

My strategy would be to take any long profits quickly until we see a change in momentum.  There are dark clouds ahead between the HNS, the decreasing ZB and the early research I did on failed 200 DMA crossings. We could be heading toward March lows, but enjoy today’s sun while it is shining.  Maybe a strong wind (earnings) will blow those dark clouds away.

Happy Trading

-RLT

Yesterday we showed the divergences in the the ZB indicator for several markets and indices.  The NYSE, the real base market for the ZB, show a slight upward ZB while many others showed a downward ZB.  As promised I would reveal the winner the next day, and as you know, the NYSE and the ALL US indicators joined their brothers and are all now pointing south.

The NYSE is still the strongest of the brothers with a 53.2% reading.  The weakest is the DOW-30 with a 48.5% reading.  The rest of the brothers sit almost exactly at 50%. How much more neutral can you get?  Today I will be watching closely the NYSE for signs of weakening as well as the Russell for the same.  The sell off in the Russell yesterday at the close, [in keeping with our Hogan’s Hero theme this week], was “veeeery interesting” - [Col. Klink]. 

This morning’s futures are all pointing higher, Asia had it usual mix of good and bad markets last night, all the major Europe markets are up about 1% as I write this.  Lots of Economic news today.  Around the world German retail sales month over month showed a positive growth (the forecast was for negative) and the Euro and British PMI numbers came in slightly above expectations.  Hence a good run today in Euro land.  Here in the US the MBA mortgage application data came out showing a 19% decrease in mortgage applications.  On the employment front the fore-shadowing ADP employment report is out showing a greater than forecast job loss, but less than the previous month. (Actual: 473K, Predicted: 410K, Previous: 532K).

Now we wait for 10:00 am for the ISM, Home sales and construction information.  10:30 am this morning we get the crude inventory numbers, so lots and lots of action today on what is the first day of a new quarter as fund managers re-arrange their holdings and strategies for another quarter.   Off to the races!

Happy Trading

-RLT