Trader Brian returns as the market falters; some thoughts on directions

Folks if you've been following our posts you know that we've been expecting an important swing high in the markets for a very long time now - since December 2009, in fact! Actually since summer 2009 at least based on Terry Laundry's T Theory (Tm). You can quibble if it's yesterday [PS- wasn't it neat to see Mike Korell's warning about the solar event forecast for today, materialize with the predicted bearishness?!], August 21 or 26, or August 31; but the exact date is a minor detail compared to the significance. The real focus has to shift to whether the ensuing low will complete in October, or wave downward for much longer than that. Meanwhile, "Trader Brian" has returned - welcome back from immersion in fatherhood, man! My readers especially swing traders who like specific stocks as well as ETF plays should be happy to see him return. I apologize that he sent this last night and I didn't manage to post until now - but the nature of his time frame is that it's still good. KI$$ swing traders should appreciate that he adds info on target and stop levels. As always, these cannot be "advice or recommendations" so do your own diligence. And don't forget to TMAR (take money and run!) profits when targets are met, even if it's just your own personal goal such as reaping an established percent. After you TMAR, enjoy then chill and refocus because in the markets there's always a new game on!

So, let's see what Trader Brian's doing. Here we go:
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Wednesday, August 18, 8:59 pm

Hey - I've been super busy with the girls, but have gotten back to a little stock action and writing.
We still might have a weak break to SPY 1129ish, but I'll be shorting on the way up.

Long by weight:
SDS (added more),
POT (added another chunk),
CMG (added 1/4),
AUY (10.75 and 11.23 targets),
SXCI 73.38 stop,
MELI 66.37 stop,
X (a break over 50.35 I'll double down until the mid 50s,
APA,
SLT.

Hope trading is good!

Brian

Metals in decision-facing mode include steel - and yes, gold

Steel has something in common with gold today - and it isn't just by being another metal. Both steel and gold are in chart positions that suggest "decisionmaking" junctures. The steel ETF called SLX touched its Fibonacci retracement level of .618 back to its prior high. Gold touched the $1144.80 level, a perfect $100 rally from the swing low of $1044.80, in $GOLD (the continuous futures contract). That's close but no cigar as far as exceeding the intermediate swing high about $1162 that we've been watching to see if it's met. In both cases, price backed down later in the day. Traders' eyes are now on whether price moves and closes under today's low - or can rebound.

I don't read the indicators as guaranteeing one way or the other. My rudimentary understanding of cycles is that there may be another low yet to come. If that happens, then the Elliott Wave count may be either a wave c of a second wave pullback that could make a new low to perhaps $980 in gold. Or more bearishly, that there could be a deeper and bigger wave C to retest $681 in gold. I'm tilting to the first of those two possibilities.

Also if it happens, many position investors will be delighted to buy another low, maybe especially if it's a new low. We want to do the same, especially with gold!

Sentiment and technicals are combining to drive equities higher into a turn window

Sometimes you just gotta believe. Of course, there are some different ideas about the timing (and levels) for the turn we're expecting. One of the major ones is Terry Laundry's "T" date of Thursday, the 21st. While there are indications that this rally leg could persist after that (plus Andre Gratian is weighing some turn date alternatives), I'm planning to retire my last round of swing longs in a couple of days. If only to be on the safe side. But check out the charts below. Sure, sentiment is extended to the bullish side. But on the VIX "opex" today, it kept rolling down under that 20-day moving average (20-dma) resistance. I'll be just as glad if it spends Thursday underneath 17 - will see.

Then there's the advance/decline - using that for Nasdaq (since $NYAD includes so much fixed-income securities trading). The A/D ticked up again but maybe we're seeing a bit of negative divergence in its own RSI, which can help point to a turn soon. And the TRIN - its MA's are all above 1.2, except for its 10-dma (still over 1.1) and its actual closing value was under 0.80. That's a start. I don't see how its MA's can get under 0.80 by Thursday - this may be an early clue that a correction won't be too deep yet (or that the turn might come after 1/21).

Well it remains valid for position and swing traders to be in the mode of selling into strength. Once the turn is in, the game will become selling rallies. A lot of things did well today (even RTH and especially DDS, and M, did well; also USX, healthcare, etc.). But once a turn happens, we can't guarantee it doesn't sweep along many sectors. So traders can trade around all this, and we'll all keep getting or being ready once the market rings its bell (1160-something, it seems?) and the turn we're expecting starts to manifest.

Notes for swing traders to consider for equities and gold (and iron/steel)

Equities investors and traders - in addition to the good updates we received here this weekend, you may also wish to take a look at Terry Laundry's T Theory update (chart and audio commentary) at his T Theory website. He's included some responses to questions (check the prior post about this, including his long term chart, using the "T Theory" label at right or just at his website). His method uses advance/decline (accumulation/distribution) so it's worth considering his views.

Sentiment - there certainly are various sentiment measures, but here's a data point at the ISEE charts and data: the ISE Equity-Only ratio finished Friday at 200. But the one at SentimenTrader looks a little more neutral as of the close Friday.

Historical note - according to a comment just now on Bloomberg TV, on this day (May 26, I suppose) in 1896, the Dow Industrials index was started, with an opening value of $40.94.

Gold investors and traders - I notice that there are two different paths that appear outlined for gold in the near-term. One, an upward path for this week in the ChartsEdge cycle forecast (posted earlier here, and available also at the Chartsedge site). The other, a path that would turn over and weaken but not seriously, in Chris Carolan's Solunar forecast for gold at his Carolan website. So, in addition to puzzling through the Elliott Wave count for gold at this juncture, it will be interesting to see which of these two gold "agrees with" during the week ahead. Depending on which wins out, we may see some type of triangular or diagonal movement set in as gold "decides" whether - or not - it wants to achieve my 1192 possible objective before reaching lower levels.

Finally, there's discussion again about the iron/steel markets. There's an idea that iron/steel may become one of the next bubbles. If that's to be the case, there may be plenty of time to get "with" that trend - if this is right, I'll have to find a better way to chart it than steel company stock prices.

But it reminds me of a similar suggestion about the defense/weapons sector, and I remember looking at the chart of Lockheed Martin (LMT) recently. There certainly are other companies in this sector that may be worth tracking too. At any rate, LMT looked in a consolidation, so if it breaks out to the upside from that, it may be worth going along (with appropriate stop-loss protection of course). Not advice, just something that investors might wish to assess.

Nucor and US Steel may still offer investors value in the steel sector

The steel industry is one of the few areas that some are discussing as a possible bullish sector to be long, so let's take a look at the charts of Nucor (NUE) and US Steel (X). It's interesting how their chart patterns are different, and it's obvious just from the amount of drop off the highs and the OBV (on balance volume) indicator that Nucor does have more relative strength than US Steel. So Nucor may be the better vehicle for playing a rally, even if a rally in this industry could give both stocks a comparable percentage increase from where they are now.

The Nucor long-term monthly chart gives the impression that it may yet move to new all-time highs in an Elliott Wave fifth wave up. Alternatively, if you don't want to assume that and would like a more conservative target, the daily chart does show that Nucor could get to $61 or so, based on the relatively conservative idea that price already put in an A wave, corrected in a B wave, and then C up remains (so C=A at about 61). There are certainly wave counts that would take it higher than that. Note also that Nucor is moving in on its 200-day moving average. If Nucor gets above its 200-day moving average, it will be deemed "above the line" from a trading chart perspective and assumed to be uptrending on that basis alone (at least if the 200-day MA itself moves into an uptrending attitude, which does look possible to happen relatively soon. So, although I don't want to issue any guarantees, an investor might be interested in Nucor, back-stopped by my hypothetical uptrending channel line and the price level of $36.95. If it cannot hold $36.95, then it would be reasonable to sell out and re-assess (in order to protect investment capital).

So here are the Nucor charts, and then we'll look at the US Steel charts:



The US Steel (X) chart is more concerning, because of the depth of the drop and the indicators as mentioned, such as OBV, moved to a weaker position. Yet there do remain Elliott Wave counts in which it could have either a substantial rally, or - less likely but still possible - even get to new highs. Before we get all excited about which of these scenarios it might provide, let's approach it similarly to the Nucor chart - a long position back-stopped at just under $27.49, and in this case let's see if it can even do a C=A type movement up to ~$50. Let alone, whether X could get to its 200-day moving average which is currently about 93 ... but by the time X might get to $50, then its 200-day MA might be closer by:

US Steel looking poor today - investor alert

I don't like US Steel (X) under $28.36. That isn't happening yet, but the drop doesn't look good.

If X did a big triangle similar to the $TRAN we looked at yesterday, and is in some stage of a fifth wave thrust down out of it, then going under $28.36 will be part of that move and I'll stop out of my long position.

Then re-evaluate. Anyone trading on US Steel please note.

Is a bearish TRIN signal coming home to roost?

I just posted the hourly as well as this daily chart of the TRIN, at my UBT site - along with many other current hourly charts of the SPY, QQQQ, VIX, bonds ETF (TLT), dollar ETF (UUP), gold (GLD), oil (USO), euro (FXE), yen (FXY), US Steel (X), and the banking index ETF (KBE). So check that out for an overview of many markets we're keeping an eye on. I'm getting the impression that many of our theses may be playing out - equities weak, bonds searching for a tradable low, euro weak but yen strong, gold potentially weak ... and markets like the banks and steel could work out swing low pullbacks while the broader markets fall off lower. I'm talking about movements taking place over days and into weeks.

Therefore, I agree it's too early to make any great pronouncements. But so far I'm not seeing anything that surprises me. (And you know how I'm viewing each of these if you've been reading here, and/or you can check with the labels to the right both here and at my trading-chart UBTNB3 site.)

By the way, from a fundamental perspective, very good analysis in comments by Niall Ferguson this morning in Alexis Glick's (Fox Business News) interview. Check it out if you have the opportunity.

One of the things we discussed here recently was a way to use the TRIN with its 3-day moving average, and it was flashing a bearish signal that usually kicks in a couple of days later. Today's weakness in equities may be the effects showing up now. Whether it turns into something more, is something I'm evaluating with the Elliott Wave count hypothesis I also reviewed here yesterday, and mentioned with the charts this morning - the possibility that more turbulence lies ahead ... As always, be careful out there, and happy trading all!

Hard to love oil; gold on the line; and a good enough day for US Steel (X)

U.S. Steel (X) had a good enough day with very nice volumes. Now it needs to prove it can uptrend, by just moving on up! (That's called "followthrough"!)

Gold perched yesterday on one of the significant Fibonacci retrace levels I discussed yesterday. Moving under it today didn't look great, even though on light volume (better RSI would have helped). This may be a line in the sand ... moving above it again will be a real positive, or otherwise it may be a line to "trade away from":

As for oil, well, who can love this as a trade?! (This is what lack of "followthrough" looks like!) The indicators don't seem to be telling any better story than the price is telling. Sure, that can change - if and when it wants to.

ChartsEdge map for 1/27; and comments on US Steel

Market Map for Jan 27, 2009

Posted: January 27th, 2009
Author: Mike Korell Filed under: One-Day Market Map »

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A quick comment on steel and US Steel - if you have been reading here for a while, you know that I've been targeting US Steel (X) as being positioned for a potential new bull market in steel and heavy (military) technology. Admitting that it wasn't originally my idea, got it from one of the sources I respect - but see the point, so I've been charting it here. US Steel (X) is being bid up this morning and I re-posted my trading chart on that at my UBTNB3 site. Nucor (NYSE:NUE), United States Steel (NYSE:X), and ArcelorMittal (NYSE:MT) are also considered companies to benefit from a resurgence in the steel industry (which some attribute to Obama's stimulus plan; and may come from other factors also).

Obviously, IF this is going to be the next "bubble," then it will have plenty of room to move! So let's see - and as always, be careful out there, and happy trading!

Gauging technical potential for steel in the industrial sector

I've been posting various COT (commitments of traders) charts (for precious metals, currencies, equities and bonds) today at my UBTNB3 site. Here, I'll post the COT chart for copper (below) and use it as a vehicle to add some observations about the steel market. Why steel? Well, a forecaster I respect has suggested that steel could be part of the next major market direction. Yes, I know - everyone's focused on a kinder, gentler set of market investments such as biotechnology (which actually should be continuing to grow no matter what) as well as alternative energy and green technology. Yet there's another way to assess the future, in which building should resume and more important, other steel uses should ramp up (military and similar industrial technologies come to mind).

Perhaps this would also help the Dow Jones Industrial Average as a whole, or at least help it to perform relatively well compared to broader indices grappling relatively more with the financials and industries still succumbing to the credit market fallout. Steel may also pick up more quickly than other industrial metals, because the ability to stockpile inventories is rather less and therefore any pickup in demand relative to supply should perk up its price more swiftly. I've included "steel" in the news feeds topics (lower right side of the page) - so click that anytime, to help track developments in the steel market.

Without trying to weigh in too strongly on the fundamentals, I'm keeping an eye on US Steel (X) as a way to gauge this. I've stepped in a bit ... but will stop out if we lose critical near-term support ... and will step in more heavily if price and the indicators show improvement. Here are some thoughts I've marked on the charts. The comments about potential targets are quite preliminary. If price gets to targeted higher levels, then I may use that to TMAR (take money and run) on some of a position while playing the rest according to how the Elliott Wave pattern and indicators are showing.






It can be interesting to "cross reference" to the commitment of traders (COT) chart for copper - also a building material, though perhaps subject to more speculation - where the commercial positions as of Tuesday (Jan. 20) actually showed their net long position continuing to increase:

A note about swing trade chart updates

I plan to use my ancillary blogspot at http://ubtnb3.blogspot.com to post my swing trading charts from time to time. This will be a way for me and others to keep an eye on how certain things we're following, are looking on the charts, for managing swing trades in these things. The major focus will be on the S&P 500 (SPX), VIX, bonds (usually TLT or $UST), and oil (usually USO or $WTIC). I just posted swing trade charts of those over there, a couple of minutes ago. I'll also be keeping up with some of our other favorites with swing trading charts there - gold, agricultural commodities, steel (via X), QQQQ, semis (SMH), etc.; plus will probably feature some other things from time to time. Some of the charts will have my markings and trendlines, and they all will have the indicators I've found useful for swing trading.

Maybe we can also use that site for discussions about how to read and use those indicators for managing swing trades - buy, hold, sell points.

I'll still be posting about them here, but generally in terms of pointing out when something particular significant seems to be going on with any of them.

Good luck all and happy trading!

Agricultural commodities into 2009; oil; and steel

If you're among those interesting in going long soybeans, corn, etc., but want the diversity and ease of an ETF, then DAG can be a way to play it. DAG is a double-long etf, meaning it's intended to move twice as much as the underlying commodities value - hurts more going down (AGA is the double-short etf), but rewards twice as much on the way up.

Tony Caldaro includes agricultural commodities among his many charts (you can find under the "other sites of interest" to the right). I don't personally have an Elliott Wave count for this market, but I sure enjoy looking at the RSI bullish divergence showing on his long term (weekly bars) chart, below.
I gather that Tony's count implies a rally, rather than not going to new highs ... well, even a rally can be very playable as a long swing trade, with the idea that it lasts for some months into 2009!

May as well take another look at oil today, too. First, a look at the monthly long-term chart:


And, here's a closeup daily-bars chart, from Tony Caldaro's site - RSI has upturned again so we'll see if it "holds" this time and can move into rally mode:




And I don't want to lose track of steel as a potentially longer-term investment, so here's another look at the monthly chart of U.S. Steel (X):

Quick look at some things we're following

A very quick look at some of the markets we're following ... Here's oil, yes it poked a new low, yuck! It's "supposed" to have good support at 39, or failing that (!) at 33 - bullish divergence still appearing in the RSI, so I won't rework the Fib. retrace lines unless this new low doesn't hold (since the calculated numbers with retrace lines will be off only by pennies):


Bonds ... my big question in the $UST being, is landing 5 cents away from the Fibonacci level, enough to have put in a cycle top? The RSI negative divergence is quite slight - could be enough if the last wave up is counted as a "C", but would expect more negative divergence on a fifth wave (including the fifth wave within a "C") ... will have to look at price and volume action from here to discern the answer:

And steel ... kinda looking for it to make a nice long trade, and it's playing along with light volume on the current pullback. Not to mention, looking like it's tracing out the right shoulder of a reverse Head & Shoulders pattern for an upcoming long entry. Need to play it carefully by the rules, so to speak, including looking for a classic trigger bar for the swing long buy. Maybe it will wait long enough for a nice New Year / portfolio rebalancing entry? or maybe a good entry arrives before the end of December?

Specific markets - oil, steel

Might be time to start thinking about whether a potential play in steel might be relatively "better" than the much-expected (overly expected?) rally in oil...

But I'm not giving up on a decent Fibonacci retracement bounce in oil ... just wondering at this point, given how watched and anemic it is, whether the bounce will provide really good returns on a long trade....


If looking for an entry in X, as a swing trade, then be sure to wait until a pullback is followed by a trigger day up (that goes above, and preferably closes above, the high of the pullback low day).

DAG and X

Don't know if DAG might want to pull back a bit but if so, could be a good entry:


As for steel - whew, doubling off the bottom is a nice way to bounce, don't know if this will afford a pullback entry or if it already did (kinda looks that way ...) and it's just a matter of trying a buy entry with tight stop (just in case there is a deep pullback):

Steel

See anything in this chart that signals "bull market" coming in steel?