The Beatles did pretty well with their song “We’ve got a ticket to ride!” Was one of their “breakout” songs in 1965. Part of the lyrics…”the girl that is driving me mad is going away!”
Speaking of breakouts and going away… The 500 index and the yield on the 10-Year note, are breaking out from falling resistance… AT THE SAME TIME and pushing away!
Suggested to go long stocks and to short bonds at (1). This breakout is a real plus for these positions. With the breakout taking place and gains in both the S&P and Inverse bond ETF (TBF), now use a break of line (2) as your sell stop.
In the last line of this post, I shared…”the ingredients are there for an upside move that will surprise many!” At that time of the purchase only 20% of investors were bullish stocks and over 90% were bullish bonds!
Have your ticket to ride? With this breakout, odds favor higher prices still.
Hello Chris & WolfStreet,
You are very right Chris, I remember this Chinese say: “a man can make a mistake, but he makes another one not correcting the first one”. But boy! is it hard to get out of a trade when you have been preparing/wachting/analysing for months !
That might be the trap: entering a trade being “sure” about it, and wanting so much to be right about it.
It is incredibly difficult to aknowledge one was wrong, maybe the right way then is to enter a trade on a much lesser comittment, something like: “hey, it’s moving, let’s give this a try (but mind your stops!)”.
The Swiss market index showed some weakness yesterday, even after finishing friday on a “three white soldiers” formation. Eventually it made a “metting line” (bearish) with the last “soldier”.
There are weakness sings also this morning, trading is choppy and on support at 6450, down 22 points since last closing.
It might take a couple more days though to roll-over.
WolfStreet: Unfortunatelly, relief is still not in sight for me! 😉
Yesterday DSK, the guy in charge of the IMF/FMI went out to say “very low probability for a double-dip”, then hours later said something like “the worse may not be behind us”. That is exactly the kind of crazy talk I would come to expect at a market top.
There is plenty of action on gold, silver and the $US/CHF rate this morning. I am looking forward to this afternoon, and watch what the VIX does !
Chris: you and I might not trade looking at the same details, and am pretty much the “details” kind of guy and enjoy doing so, but your method looks much so much more relaxing and less time-consuming than mine I must say ! 😉
I hope I “got the lesson”, and I will try next time to use your approach.
Thank you all very much, best regards, Diego.
Trade the range has worked and odds favor this to be the case, again…see “ground hog” post on the site.
Speaking of trade the range, EEM breaking the range is something I would follow with a stop. Multi-year range is being tested on the breakout.
Thx P!
Hello Chris et Al.
Thanks for the analysis. How about the “trading range” hypothesis? That could leave a target of 1130/1140 on the SP500, then back to 1040/1060.
PLUS that would give Diego some welcome relief:p
what do you think?
Diego,
Thanks for the kind words “I don’t remember seeing you wrong!”
Following and having faith in the “Power of the Pattern” has been very helpful to me over the years! The one thing I do know, is I will be wrong at least 35% of the time. The key in my opinion is this thought…”it is ok to be wrong, it is NOT OK to stay wrong!
The breakout in the 500 index, bond yields and now high yields, would indicate that prices should move higher. With EEM breaking resistance today, the breakout is now taking on more of a global flavor.
Am honored by your comments Diego and your viewership. All the best to you,
Chris
Dear Chris,
I am very worried. I admire your work and analysis, and I don’t remember having seen you wrong.
Since September 1st I have accumulated Mini-Future leverage BEAR shorts on the SMI (I live in Switzerland).
I have invested on 4 steps up to +- 3 months salary. It’s a big deal!
On September 10th we have had a “Three white soldiers”.
I am very bearish. I have spent this whole week-end cheking every year of the SMI, and monthly clycles of each component.
I really hope I am right, and that in a couple of days we will have a breakdown till the end of september/october going through/to 6150/5800 on the SMI.
Have you listened to the interview of Robbin Griffiths on King World News?
Are you sure this S&P500 breakout is not a fake signal?
I have spent +-5 hours per night after work to study the markets since 1.5 years. It would be terrible to loose so much money on this trade, but it would piss me off a whole lot more to have been wrong!
Thank you very much for any input.
Kind regards, Diego.
Longer-term resistance comes into play about 5% above current prices…This is a line drawn from the 2007 highs and the late April high of this year.
On a positve relative strength note…high yields mutual funds are breaking above falling resistance, at the same time TLT (which we are short) and LQD are breaking support.
Usually not a bad sign for equities to see high yields moving higher as govt and investment grade are falling in price.
Long stocks and short bonds…..with stops!
Hummmm…after the close, I may have a short term reversal in the S&P. Not sure it will be straight up from here…maybe its just a short term hic-cup.
duuuuuuude, wassssssup
Gary,
Thank you for the kind comments.
My goal is to inflate portfoliios regardless of market direction.
Great question per is this short-term or long-term. I am attempting to help two groups of investors, short and long-term.
Go to the blogs archive, go to the 500 index tab then scroll down to “Fibonacci Index Four Pack”
These charts represent “long-term” resistance, that if broken to the upside would have us jumping on board.
Hi Chris,
Excellent blog!
Do you see this as a short-term bullish opportunity, with the longer term being driven by the larger H&S formation that will cause the 1040 support to break?
Aaron,
Great job on buying the ETF’s that you did!
Looks like PIN is still under resistance. If you like India, EPI looks to be on a breakout.
John Murphy has written some great books Aaron
Chris
Hi Chris,
Your analysis is extremely insightful. I use RSI, MACD, and Wm%R (28) to determine buying/selling points. I purchased ECH, GXG,and THD in June once they broke out of a range using the above mentioned indicators. I am very interested in learning how you determine resistance. I am willing to buy any books you recommend. Do you simply draw diagonals from one high to the next?
Has PIN India ETF broken out?
Thanks
Aaron
Thanks William.
Appreciate the comments and viewership.
All the best,
Chris
Hey Chris!
Great posts so far. I found your blog while reading Short’s stuff.
Mark…
The suggestion to tighten stops on the 500 index was to protect the gains at falling resistance. I didn’t suggest to sell, just tighten the belts. With a better break today, loosen them up a little.
Per Emerging Markets, strong resistance that has held EEM in check for the past few years remains in place. I am just playing the range and odds. As I shared in the post, if resistance is taken out, I will follow, just like when resistance was taken out we jumped on Chile. The break of resistanc in chile has pushed that ETF up ver 15% in a month.
could the same thing happen on a break of multi-year resistance in EEM? Yes!
Is this a change from the warnings from a few days ago with regard to emerging markets? Suggesting to sell and maybe even by inverse funds? And to tighten up stops on the 500 index?
Good trade…keep stops in
John,
So far so good…as I shared two weeks ago, when only 20% of investors were bullish stocks…an upside breakout will surprise the majority.
Good potential for sure, yet no rose colored glasses here…STOPS are in place.
Bought home builders two weeks ago today, quietly they are up around 10%.
That makes sense…the world is as long bonds as possible and the public has been liquidating stocks at a record pace.
This may be a real good ride.