A Possible Beginning of a Market Rally

One of the truest definitions of an uptrend is a series of higher highs and higher lows. On the other side, the definition of a downtrend is a series of lower highs and lower lows. During the time when the market is making the transition from moving from a downtrend to a new uptrend, observing the actions of the stocks that have held up the best during the downtrend is very telling. Most likely these are going to be the new leaders of the next market rally.

If the market is making a decent bounce of the lows, but has not yet made a series of higher lows and higher highs, we don’t have a confirmed uptrend. However, if during this bounce you observe the leading stocks to be breaking out to new all time highs, then the odds are increasing that this is the start of a new rally.

2013-07-05-TOS_CHARTS

 

See the chart of SPY, we have a bounce of the lows. But not a series of higher highs and lows yet. However look at some stocks that I’ve been watching during this correction:

REGI

NXST

RH

 

All these stocks have been doing well during this correction, and are making new all time highs. Stocks like these increase the odds that we have seen the bottom and are begging a new uptrend. However, we need to see the market show us that for full confirmation. If we can close above the highs on 6/18, or make a higher low and higher high, that would confirm to me that we are starting a new uptrend.

Trading Jargon that would make a Good Band Name

There’s a lot of language out there in the trading and finance industry that is not used anywhere else. This is true for a lot of industries. However, quite a few of these terms would make sweet band names. Consider the following:

The Hedgies

Statistical Arbitrage

Long Short

Delta Neutral

The Quants

Japanese Candlesticks

Nasty Breakout

All Or None

Efficient Market Hypothesis

Andrew’s Pitchfork

Automatic Execution

Average True Range

Basket Trade

Bearish Harami

Bullish Engulfing Pattern

Blow-Off Top

Bull Trap

Breakaway Gap

Dark Cloud Cover

Dead Cat Bounce

Death Cross

Golden Cross

Exponential Moving Average

Dragonfly Doji

Falling Knife

Fill or Kill

Flash Crash

Pivot Point

Herd Instinct

Contrarian Indicator

House Money (more of a gambling that pure trading)

Ichimoku Kinko Hyo (surely this one has already been taken)

Irrational Exuberance

Abandoned Baby

Island Reversal

Leveraged Buyout

Margin Call

Mean Reversion

Odd Lot

Pattern Recognition

Compound Annual Growth Rate

Three Black Crows

Time in Force

Resistance Zone (please nobody take this, Heavy Metal is no longer cool)

And my personal favorite…Countertrend

Surely one could have marginal success by just picking a name from this list. Go ahead. You’re guaranteed instant sales from all budding day traders on twitter. They obviously have plenty of money because they’ve never had a losing trade. Ever. I know this because they say so, and what they say can be taken as truth.

Have another trading term that should be trending to the top of the iTunes charts? Let me know in the comments below.

Trading 6/3

Will start using MACD Histogram and Force Index for trend spotting. When histogram is moving up on weekly chart, and force index is above 0, trend is up.

Trading 5/23

Sold RFG for a scratch today as it was dropping below buy price. Still a dangerous market only good for buying support and selling resistance. In hindsight I should have held as there was a monster rally end of day. Stochastics are now back above oversold for all indices as well as rsi. NAA50R is above accumulate. Had I been on trading desk I probably could have made the right decision. Perhaps need to block out twitter and just trade my plan.

Sent from Android

Trading 5/21

McClellan Oscillator over the weekend -110. $OEXA200R 55 (tight trading only), $NAA50R 18.54 (begin accumulate), $NAA200R 39.70, $SPXA50R 13.80 (oversold), $UST:$SPX still rising above 65SMA, Stochastics oversold, RSI oversold. 

Initiated a position in RFG today as it crossed above oversold on RSI and Stochastics. Other indices are confirming RSI cross but not stochastics yet. Stochastics is pointing up but still oversold.

Trading 5/18

McClellan Oscillator -100. From Tim Knight: Time to start buyin’! I like $DBC, $EWZ, $GDX, $XLB, and $FXE. Getting ready for the big bounce.

sold IIM and a little TWO today.

Trading 5/17

% of S&P100 stocks below 200ma is now 61, which usually means liquidate all long positions.

MACD has crossed negative on the SPX weekly chart.

Bond/stock ratio on the weekly has crossed above the 65ma which usually suggests bear market. Also the MACD on the weekly bond/stock ratio has crossed up which is bad.

McCellan Oscillator is at -76 and pointing lower. If it turns up, could be buy signal. McClellan Summation Index is now below 0. (-112)

These indicators are telling me to get out of the market. I am currently holding AGNC, AGQ, CPNO (reluctantly, I’m down too much), DBL, IIM, JLS, TWO, VKQ. All except CPNO are high yield bond funds. I’m gonna find out what it’s like to hold these through a bear market…

Scratch that I’m selling the CPNO turd.

Probably need to remove myself from watching the market every day.

 

 

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