Ian Woodward's Investing Blog

The Canaries I gave you last Weekend are Flying High and although the Volume is sub par, who cares when they are going like gangbusters if you are short term oriented and want to make a quick buck.

…And here is their recent performance in the last seven to nine days:

There is always a “Market of Stocks”, but the time to keep an eye out is when the Market is badly oversold.  I gave you the ponies to watch and their performance is covered in the next several slides:

…And here, hot off the press are the results for the last two days:

One of the Two Tiddlers I gave you is flying high.  They are all sitting with %B above 0.7, so these stocks have been on fire for the past five days:

The Group Index for these 25 Stocks is very strong as shown by the Chart Below:

It will not be difficult to establish that this group and the move so far was just a Flash in the Pan or the Real Thing…you wo’nt have long to wait:

I can’t leave you without a view of Grandma’s Pies which are tasty and delicious so far:

So far, so good…at least the Bulls have some breathing room.  Unfortuntely this market is so news driven that we can suffer a surprise downward spike at any time…and the PIIGS seem to be the place to keep a beady eye on:

Stay light on your feet; you roll the dices and take your chances!

Best Regards, Ian.

June has invariably been a volatile Month over the past six years, but the week going into the July 4th Holiday should give us a “Kicker” to the upside.

At times like these where the Market is Oversold but has failed twice in recent weeks to achieve any reasonable Bounce Play, it pays to evaluate both sides of the coin.

Maybe it is the time of the season when Graduations, Weddings and Vacations are affecting the results as usual, but the Bounce Plays these past ten days have been putrid to say the least and given that, the natural bias is that the Market is headed down further.  However, as I constantly remind you it is a quirk of History that 70% to 77% of the time for the Nasdaq and S&P 500, respectively, the Markets turn back UP from this level.  We are now at that crucial point, so we shall see if the floodgates open and we head down or we hold here and at least have a decent bounce play going into July 4th:

…And for those who prefer to see the various levels of Correction, here is that view.  it is not surprising we are “Churning”:

For those who avidly follow the Bucketology, the picture is no better and on Friday we headed down one more time:

Given where we are at this stage of events, I dusted off what I affectionately call the “Mark Pharr Chart” named after one of our faithful followers who was interested in the long term buy and hold picture, which I conjured up for him several moons ago:

For good measure, here is another one I conjured up a while back on the same theme using Bollinger Bands of 89 and 40 Periods with Weekly Charts:

History never repeats itself exactly the same way, but let me compare this year to the Flash Crash of last year, not that I am expecting a Flash Crash, but the similarity was striking and this time last year we had a “Fakey Relief Bounce Play” in the last week of June as shown in the next chart:

Now let’s turn to where the glimmers of hope may be to give the Bulls some breathing room in the week to come…always keep an eye on the Canaries:

What struck me was the similarity of the Bounce Pattern that each of these four Large Cap leaders produced this past week or so…judge for yourself:

Fast on its heels, my good friend Robert Minkowsky reminded us that there was an unusual bounce in ERG 255 and ERG 270 stocks this week, so I felt it was high time to do my homework and offer you a set of 25 stocks that have shown signs of life this past few weeks that look promising leaders:

There are a couple of tiddlers in the bunch, but I am not recommending any of these stocks, so you do your own homework.  Obviously seasoned HGSI Software users will immediately take note of the sea of green with both Bongo Weekly and Daily Green along with an RS of over 90, strong ERG and plenty of Box stocks to boot.  Also some wolf packs emerge as seen on the right hand side of the chart.  Here are the results for each stock for the past three weeks:

Now you have a Game Plan to go either way depending on what the MARKET Indexes, the Canaries and the Leading stocks tell you next week.  If the market continues down then watch to see if the “Bow Breaks” and the Canaries fall, but if it revives itself going into the July 4th Weekend don’t be surprised if it is just a short term Bounce Play for another Fakey the way it happened this time last year as I showed you above.

Best Regards.  Ian.

It’s the final day of the U.S. Open so I will limit my commentary as in addition to that, the news is obvious we are so oversold that we are due for a Bounce Play.   The last two attempts have been putrid, so all signals point to more to come on the downside.

…And here is the disappointing picture for the last two Bounce Plays…there is absolutely no enthusiasm by the Bulls in this Market.  The latest zinger this past week came from the problems in Greece, which impacts the Euro, raises the Dollar and takes the Market  and its Indexes down:

This next chart shows that we are in Correction at levels not unlike the Flash Crash a year ago, but we are still only about half the distance down from the recent high.  That’s the good news…the bad news is that the Market Internals are so weak that even a respectable Bounce Play will be suspect to a “Fakey” so don’t get too excited before any rally has shown its strong stripes to the upside:

The Gloom and Doom of Bucketology continues to show the pitiful Oversold nature of this market…we badly need some “Green” Buckets:

One more picture to show that we are down at Flash Crash Levels…note the Bounce Play Fakey Green Bounce in June 2010 before it faded not once, but twice more:

And those who avidly follow the McClellan Summation Index see that it has rolled over and now is setting up for “Large Separation of Postings”:

Last week I couldn’t resist showing a caption of “It’s a Long Way to Tipperary” as my grandfather taught me when I was a little fellow, meaning we have a long way to fight back through all the overhead supply  as the number of stocks above the 200-dma falls precipitously towards the red line of 30%:

…And Finally, we have had to change the Canary in the Coalmine to NFLX since the original one, AAPL, rolled over a week ago.  Watch 230 like a hawk:

Now to enjoy watching the new Phenom Mcilroy win his first U.S. Open.  Keep your powder dry and don’t get “Fakeyed”!

Best Regards, Ian.

My friend David Steckler always signs off on Friday  on the HGS Yahoo bb with “Its Milluh Time”.  Today it is 401 Keg Time!  I had a couple of questions from RichardB and Charlie Willey which I answered in the “Comments” section, but I told them in the note that I planned to put the answers up here.  Since I mentioned the 401 Keg, I felt I should let you know that back on October 6, 2008 I had 5364 hits from around the globe on that day, the most by far ever, and I have been doing this blog for four years.  So, since most of you know I am NOT a Fearmonger, I hope you will accept this reminder of what a 401 Keg is with tongue in cheek:

You all know that Ron and I teach you to be your own guru’s, so although the UNDERLYING  message on my blogs may not always be obvious, those who know me well understand that I will lead you to water but you have to unravel what “that” message is when you drink.   With that said, I hope the following answers to Richard and Charlie’s questions will make you think…I do not spoon feed, but I felt it important for you to know where my head is at:

RichardB Says:
June 10th, 2011 at 6:10 am   edit
“Any further than this to the downside can do much damage to your 401K, so you know the drill by now”.
I’m sure the answer should be obvious, but what would the best drill be, please?
Thanks again so much for these blogs.

RB

Charlie Willey Says:
June 10th, 2011 at 7:32 am   edit
Ian – The chart NAZDAQ with ABCDE Reverse Scores is a very interesting chart. Just from a glance I am seeing a bit of Forwarned is Forarmed for anticipating bottoms as you have discussed.

You have a red dotted line drawn at about 1.40 on the Reverse Score column. Is the line drawn there to accomodate some risk value or do you think any penetration of the horizontal blue box will suffice as a warning?

Or am I off track here?

– Charlie Willey

Hi RichardB and Charlie:

As usual you are on the ball!

1.  Red dotted line at about 1.40…Worst Case Scenario ala Black Swan Days.  It suggests to me that although there should be a bounce at that level, the worst is not over, particularly if on the Bounce it can’t get above 2.25 on the score.  Note that it took four tries from that level of 1.40 together with a lot of pain before the doom and gloom had worked itself off.  So, the best one can do at that level is to be very nimble and essentially day trade or at most a few days to a week…Type 1 and 2 Types enjoy volatility, both long and short.

2.  Penetration of the Blue Box to the level of the blue dotted portion within that box suggests that we should sharpen our pencils for a Bounce Play, and the odds are that although the correction may not be over, the likelihood is that if it retests down to the 1.50 score level the chances are that we will be spared a BEAR MARKET. The worst we should expect is a Major Correction of between 16% to 20%, similar to the finish of the Flash Crash ultimate drop of ~17%.

3.  Today’s action should take us into the blue dotted area within the blue box.  Where we go from there is in the lap of the gods and the Large Players…you and I know it is all a big game, but if it goes down further then the cushion we have is ~50 points to reach the Thin Blue Pencil Target of 2600 on the Nasdaq.

4.  We then have to watch for The Thin Blue Pencil Line Chart of  “Lower Lows and Lower Highs”, and if that is breached after a further tepid oversold bounce then we are headed for the red dotted line and you better take care of your 401K before it becomes a 401 Keg!

5.  Last but not least, I am NOT a Fearmonger, but there comes a time when commonsense over rules the heart and it is time to take action before there is a total downdraft…in which case it is invariably too late. When is that point you ask?  It is right there in the blog on the Russell 2000 chart.  If that beast breaks 750 it will for sure be 401 Keg time.

I aim to put your questions and this answer up on the Blog instead of hiding it here in the Comments which may be missed.

Best regards, Ian.

I dug up an old favorite picture I use at times like this where the market is very “iffy”as to whether it can recoup:

…And then to give you perspective as to why, I have thrown in another theme for you to reflect on as to whether a long Pause to Refresh is due:

Here is the reason for my dismay in today’s feeble attempt at a Bounce Play.  It was due after six down days, but it tailed off in the last hour or so with rather pathetic volume overall despite that it finished up about 0.4% on the Nasdaq:

So, it is time to think about the Thin Blue Pencil Line to be aware of Lower Highs and Lower Lows:

I have dusted off the Road Map to Hog Heaven Chart which was so helpful in 2009/2010 and it shows the Rally has come a long way on its March to Tipperary:

In the next chart I pull my usual trick of doing a “What If”, by looking back to the most recent big correction and pasting the chart pattern at the end of the chart as shown.  It won’t happen exactly like that if the market is to fall further, but you get the concept:

Any further than this to the downside can do much damage to your 401K, so you know the drill by now.  The Russell 2000 is a good chart to keep a beady eye on as if it gets below 750 we might look forward to serious damage:

Understand there is more to this “Good Stuff” than Bucketology, but now for a dose of that to show the two go hand-in-glove.  We see we are now in “Correction” territory, and dangerously close to the Line in the Sand of 291.40 despite the bounce to 298.56:

Now here we have a conundrum and if you have any other bright ideas besides the scenarios I have postulated, let me know:

My concern is that with the anaemic bounce by the end of day which started off with a good deal of promise will not last long:

…And finally one chart on Learning your ABCDE’s that I have dusted off.  I learned this trick from a good “friend” I know as Billy whom I have never met but has taught me how to apply bias to the Industry Group count of Acc/Dist.  I tip my hat to his work:

You can see that the Industry Groups are getting weaker but have not reached bottom as yet.  Beware of Fakey’s when it comes to bounce plays.  Even past solid bounces that take %B up into the safe zone of 0.7 and above have been known to fail.  It is obvious that the general mood in the market has changed, and it will take a miracle to lift things up out of the mire from all the factors that are in play right now.  But, then again the market climbs a wall of fear so keep an eye on the few remaining stars like NFLX that now becomes the Canary in the Coal-Mine.

Best Regards, Ian.