Has the Next Leg for Bonds Begun? …

When you look at the weekly chart for bonds, you have to think that maybe, just maybe, the great Central Bank manipulation to global interest rates is coming close to the beginning of the Great Unwind.  Here are some weekly charts to ponder …

20-Plus Year US Bond ETF (TLT) – Weekly Chart

Price is still contained within the weekly downward broadening price pattern … we are in the middle of the 7th consecutive “contraction” warning signaled by my software painting the weekly candles yellow.  What follows contraction?  Typically it is a new expansion phase …

The Price Momentum indicator has shown that price has been in a squeeze for 16 consecutive weeks, which is pretty unreal, and almost all bond portfolio managers are likely fast asleep at the wheel and not prepared for what is going to happen next.

The Moving Average Spread Indicator is looking like it wants to make a second, lower cross-over, which typically is the sweet spot where the best shorts are made.

Where is support for price inside the weekly broadening pattern?  It is around $106.50ish … which is about 14% lower than yesterday’s close.

What would a 14% drop in bonds mean for all those equity holders who are maxed out with their margin accounts??  Probably a little bit of pain!!

Cheers … Leaf_West

Crude is Right Near the End of this 3-Wave Structure …

Lots of people waking up to the move that crude and energy stocks have made since I talked about a possible swing low in energy stocks back on August 29th (see post here and here).  Like happens often, the market pundits and talking heads starting recommending the sector as we push into resistance levels/zones (i.e., the SLOT).  Here is how I see the charts …

Crude Futures – Daily Chart

Crude is pushing right into the measured 1.272x target for the 3rd wave of the move coming off of the low made this past summer … I see 3 nice waves to the move and three minor waves in the bigger wave 2 and the terminating wave 3.

So for traders that don’t trade crude futures, how do they capitalize on this end to what could be only the first leg higher in crude in a bigger commodity rally that could play out over the next several years?

S&P Energy Sector – Daily Chart

The light blue warning candles that my software is painting, warns traders of an extended move in price away from the slower moving averages … the “return to the mean” effect is telling traders to take profits here in the short-term and/or sell some short-dated at-the-money or near-the-money calls for XLE or ERX the leveraged bullish ETFs for the energy sector.

3x Bullish Leveraged Energy Sector ETF – Daily Chart

The January monthly $40 calls for ERX can be sold for just under a dollar today …. I will look to sell some of these as well as looking for intra-day moves to the downside, as the intra-day moves lower are likely to be bigger than the shorter-term moves higher.

Cheers … Leaf_West

Today will Be a “Fade the Highs” Kind of Day …

I always try to get a sense of what type of day it is possibly going to be well before the start to the start of the regular cash trading session.  Today it looks like the NASDQ will be the kind of market where it will be ok to try and fade any push to new highs after the opening.

NASDQ Futures Contract (NQ) – 7 & 12 Vision Renko Charts

The bigger time frame charts are in a nice bullish trending position … we have now recorded a negative divergence signal on the 12 Renko chart, and we have pushed above the 1.0x Standard Deviation level on price momentum for the 7 Renko chart.  To me that 6617.50 level is likely going to be the high for today and probably for the rest of the week.  To me that means it will make more sense to try and look for short entries intra-day today and possibly tomorrow.  Longs will probably only work on larger oversold intra-day signals …

NASDQ Futures Contract (NQ) – 2 Vision Renko Chart

The 2 Renko chart painted some dark blue candles with pink divergence dots … this is another good sign that the pre-cash session highs are likely the high for today.

Cheers … Leaf_West


AMZN – Which Way for the Next Positional Trade??

I did well trading AMZN last year for what I thought were possible 3-5 day bullish moves.  I typically look for expansion phases that are beginning or about to begin when I have looked for these bullish moves.  Here is what I am seeing currently …

AMZN – Daily Chart 

The daily chart has set-up what looks like at first glance a nice bullish consolidation pattern (a pennant or wedge).  The Trend Strength histogram has pulled back from an extreme trend strength warning, and is now in a spot that gives better odds to an expansion phase beginning.  The Relative Strength indicator on the right shows that R/S is also making a bullish consolidation pattern similar to price … so all is fine for bulls to play for a 3-5 day move higher here in early 2018 right?  Well, don’t forget to check your odds of the daily chart pattern with the weekly chart …

AMZN – Weekly Chart 

The best daily chart setups occur when the weekly chart is pushing in the same direction.  Can we say that here with AMZN?  Actually, I think that odds of a relatively big daily chart move to the upside are not great odds wise here in early 2018.  The price momentum on the weekly chart is relatively stretched to the upside so the weekly chart could actually be losing steam here early in 2018.

That weekly chart could lead to chop on the daily chart, while the bigger time frame consolidates and builds up energy for the next push higher.  All-in-all, I think I will stick to intra-day trading AMZN here early in 2018, both to the upside and to the downside as well when the charts are lined up for a good intra-day move.

Always try and confirm the daily chart with the weekly when considering multi-day positions.  If you are trying to swing a trade positon for several weeks, then that monthly chart has to give you the go-ahead as well.

Cheers … Leaf_West

AAPL … Looks like a Year-End Ramp Job!

Today is the “triple witching” expiration date where index options and futures expire along with stock options.  Once we get this behind us, institutional managers are free to ramp their favorite stocks into year-end.

One of the stocks that I own call options on into Dec 29th expiry is AAPL …

AAPL – 195 Minute Chart #1

To me it looks like the third wave of a 3-wave price structure is about to officially break the ATR resistance level and “signal” the beginning of the final push into year-end.  $180 is my target … the market likes nice round numbers in part because of stock option strike prices.

AAPL – 195 Minute Chart #2

The Trend Strength histogram looks like it has completed the majority of its consolidation/pullback into the Chop Zone, and that should allow price to make its next push higher.

Price Momentum and the Moving Average Spread Indicators look like they are in a good position as well to get long AAPL into year-end.

Bottom Line – All that we need now is for Trump to not fuck up the last push into year-end!!

Cheers … Leaf_West

What’s Going on in Bonds?

Bonds have not been doing much at all in 2017 …

30-Yr US Treasury Yields – Weekly Chart

The high in yields came in about 3.20% and the low of the yearly range at about 2.60%.  We have spent the better part of the last 6-months in about a 20bps range – like watching paint dry.

30-Yr US Treasury Futures Contract – Weekly Chart

The weekly chart for the 30-yr futures contract has painted 6 yellow warning candles in-a-row here … things are getting unsustainable, and maybe we get some fireworks in bonds to coincide with a little pullback in equities in the new year?   Nah … not possible, right?  Didn’t think so.

20-Yr+ US Bond ETF (TLT) – Weekly Chart #1

The TLT is not quite as tightly wound as the futures contract, but it looks even more like it wants to break higher than even the futures contract does.

20-Yr+ US Bond ETF (TLT) – Weekly Chart #2

The downward broadening pattern for the weekly chart in the TLT shows us that a potential big trend reversal could be close at hand if the upper resistance line can get taken out … could that be one of the bigger trades for 2018 – a rally in bonds?  No one is expecting it, as everyone is betting the strengthening global economy will lead to lower bond prices.

If that is the case, why have bond yields been falling?  Must be that transient factors driving inflation measurements lower these past few months!!

Bottom Line – keep your eyes on bonds going forward here for the next couple of months.

Cheers … Leaf_West

GS Update – December 14, 2017 …

My favorite Fast Money talking head, Dan Nathan talked about GS on today’s show so I called up my bigger broadening price pattern to see if I can see the bearish outlook that Dan sees …

GS – Weekly Chart #1

Price is back testing the upper resistance line of the broadening price pattern on the GS weekly chart … with the strength shown in that kick-off move, I would have to assume that price is going to push to new highs.  Question is whether or not we can go much higher if the overall market has any kind of a hiccup during early 2018.  I ask that because of my post yesterday that talked about the extreme trend strength warning on the S&P 500 Index (the first since July 1995).

GS – Weekly Chart #2

All of GS’s weekly chart indicators are pointing higher …

GS – Weekly Chart #3

And it looks like the R/S is about to break out of a consolidation pattern … I love when it does that!!

GS – Weekly Chart #4

I have an audio alert set to warn me when the R/S indicator makes a break higher …

Cheers … Leaf_West

S&P 500 Painting Extreme Trend Strength Warning on the Weekly Chart …

The weekly SPX chart is painting a dark blue candle this week that signifies that the trend strength histogram has pushed above the 100 level and is therefore now in the “extreme” trend strength warning zone …

This is a big deal on a weekly chart – the last time the weekly SPX did this was in July 1995, which was about 6 months into the multi-year internet/tech craze.  There are lots of extreme trend strength warnings on moves lower, primarily because declines are more emotional than grinds higher in the market.

S&P 500 Index – Weekly Chart

So what does all this mean?  Has the S&P 500 just broken out higher out of a trading range and about to go on a 5-year rocket ship ride higher like the craze we saw back during the 1995 – 2000 time period?  Maybe, but I would argue that we are not just breaking out of a trading range here in late 2017.

I heard on CNBC this morning that the DJIA is on the way to finishing the current calendar quarter and register the largest quarterly gain ever in % terms as well as in the total points added.  I think also that I recently heard or read that 2017 is going to be the lowest volatility year on record.  All is good right?  Bitcoin is dominating the news, Trump is making American great again, and the new Saudi leaders are bringing back movie theaters to their country.

What could possibly go wrong in 2018?  It has to be a replication of the prior 12 months right?  ……. Right??  This mornings inflation numbers reconfirms that there is no inflation in the US (cough cough … except in financial assets) and therefore, there is a chance that the FOMC’s decision this afternoon is to stay pat, but to warn the markets, that they are data dependent and stand on guard against inflation if it were ever to raise its ugly head again.

My recommendation is for traders to not assume anything and to just stand on guard and watch price action even more closely this coming year.

Cheers … Leaf_West