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Friday 15 July 2011

July Opex

This hasn't been a great week for trendlines, and I've been struggling to find anything interesting to show short term in terms of channels or patterns as a result. Yesterday I had two channels on ES, one rising and the other declining, and neither survived the day. Some weeks are like that. I do have a sort of falling wedge building on the SPX 15min, though I'm not that happy with the quality of it as yet:
On the TF 15min I have a reasonably good declining channel, though I'd like another touch of the lower trendline to strengthen it:
I have nothing short term on NDX really, but having looked at the bigger picture as a forming cup and handle yesterday, I'd like to consider the possibility today that it might be a rectangle. It isn't as nice a setup as a rectangle, but it is still a significant possibility, and if we see a retest of the lows from here, that will become a strong possibility:
I've mentioned before that I tend to read Cobra's blog most mornings as there's often something of interest to read there. He was talking last night about the relative weakness of RSP, the equal-weighted S&P 500 ETF, and I've charted that up against SPY this morning. I've shown both ETFs with the bollinger bands and added a relative RSP:SPY trendline at the top. As you can see SPY is resting on the daily 20 SMA (the middle bollinger band) whereas RSP has already broken it. Cobra was suggesting that this means that the internals on SPY are worse than they appear, with some relatively strong large cap stocks masking greater overall weakness. Interestingly though, as you can see from the relative trendline, relative RSP strength in May preceded the slide to the lows in the first half of June:
Oil's looking interesting today, with a symmetrical triangle forming on the CL (Sept) chart. The next obvious move is to triangle resistance in the 99.5 area, and it has already moved up an encouraging 50 pips since I capped this chart (and went long):
Before I broke my leg I had started to do more individual stock charts and posting these at SharePlanner and I've let that slip since. I'm going to start doing more of these again, and am planning a big project to track hundreds of these through a huge spreadsheet with a chartist friend. That's going to occupy a lot of my time over the next few weeks and though I'll still be doing these posts every day, I may not be around much of the rest of the time as I clear everything else from my desk, and then do and collate the thousand or more charts over various timeframes that this project will need. Just for a taster of the many setups that I am hoping to extract from this project here is the four year chart of JNJ showing why it is looking an attractive short at the current levels:
On the long side I've been watching JPM post-earnings to see whether it can break out of the declining channel from early April. If it can, much as I'm not wild about bank stocks generally, it will look a very strong buy. Here's the declining channel on the 60min chart:

Why would JPM look such a strong buy on a break up? Well for that you need to look at the weekly chart really, where an IHS has been forming since September 2009. Obviously it's a continuation IHS, but you often see those play out and the target is an attractive 61. On the even bigger picture though, and this is obviously very speculative, that IHS is just the right shoulder on a much larger continuation IHS indicating to 81. Can that target be made? Impossible to say, but 48-50 has been such a strong ceiling on this stock for so long that a break up over it could run a long way. At the least it looks worth a punt from 41.5 if JPM breaks the current declining channel:
It's July opex today and those have been down 6 of the last 10 years on the Dow. The stats for the week after July expiration aren't great either with Dow down 7 of the last 12. We've been seeing a pattern in the last few days of a strong start to the day, with an early high and then weakness for the rest of the day. We might well see that again today

I have a question for my readers. My brother has asked me for a decent ETF to short banks with over a period of several months to a couple of years. This is intended as a hedge. Are there any recommends of what I would expect should be a 1X short ETF with historically decent inverse tracking over longer periods? Leveraged short ETF suggestions would be welcome too but not if those ETFs tend to degenerate quickly with a high theta burn.

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