Top Advisors Corner

August 2014

Top Advisors Corner

Martha Stokes: How to Enter Breakout Patterns Before HFT Price Action

by Martha Stokes

Below is a Daily Chart for Tim Horton, Inc. (NYSE: THI), which is in the restaurant consumer cyclical sector. This stock had a lengthy platform pattern. Using Bollinger Bands, several compression areas are exposed during the platform-development phase. Unfortunately, however, if only Bollinger Bands were used, technical traders would have encountered whipsaw trade action with potential losses. The red arrows show how Bollinger Bands compressed, and remained compressed, during the middle months of this intermediate-term quiet accumulation by Dark Pool giant funds. Numerous attempts to sell Read More 

Top Advisors Corner

David O. England: Market Tops - Answers

by David England

Previously, I analyzed the 2000 and 2007-2008 market tops, along with the current market action.  During all time periods, my trading system gave correct trading signals.  This week, I am answering your question: our blue-line sell signal is around 1830 -- a 170-point difference from the current trading.  Do you have a closer signal line for S&P 500 traders?” To answer your question, I designed today’s chart exactly as the previous weeks, using the $SPX (S&P 500) from 2012 to the current (monthly) timeframe, with the SPX value in the top box and important momentum Read More 

Top Advisors Corner

Tom McClellan: Small Cap Relative Strength

by Tom McClellan

 The Russell 2000 Index has had a good month so far in August 2014, rebounding more strongly than the NYSE-dominated indices.  But that seeming strength just within August conceals what happened before in July 2014, when the Russell 2000 had a pretty bad month. Comparing indices based on just a single month’s statistics can mislead investors and analysts.  For that reason, some type of relative strength analysis is in order.  One of the easiest ways is with a simple relative strength ratio.  The ratio in the chart above is calculated simply Read More 

Top Advisors Corner

David England: Market Tops III

by David England

Previously, I analyzed the 2000 and 2007-2008 market tops.  During both time periods, my trading system gave correct trading signals. This week, we will see what my trading system is telling us in real-time action. I designed today’s chart exactly as the previous weeks, using the $SPX (S&P 500) from 2012 to the current (monthly) timeframe, with the SPX value in the top box and important momentum indicator in the lower box.  I have my blue signal line front and center.   Let’s review. When the SPX crossed down and closed under a multi-month (green slotted) Read More 

Top Advisors Corner

Tim Ord: The Ord Oracle - August 21, 2014

by Tim Ord

Monitoring purposes SPX: Sold long SPX on 8/14/14 at 1955.18 = gain 2.39%.  Long SPY on 8/7/14 at 1909.57. Monitoring purposes GOLD: Gold ETF GLD long at 173.59 on 9/21/11 Long Term Trend monitor purposes: Flat Above is the tick trin chart for the NYSE and the top window is the SPY chart.  This chart goes back to late December 2013 and shows the times (marked with blue arrows) when the Tick index closed greater than +700 which is a rare occurrence. As you can see when the Ticks closed above +700 in all cases a pull back was evident within two days. On Monday the Ticks closed Read More 

Top Advisors Corner

Martha Stokes: Finding the Best Momentum Breakout Patterns

by Martha Stokes

The New Breakout Trading Strategies of Professional Traders With all the changes to the market structure and venues for trading stocks by the various market-participant groups, many strategies of the professionals have been adjusted or reinvented in order to fit the new realities of trading. These new strategies are also something retail and technical traders can use in order to help them keep up with the new technical patterns and sudden momentum runs, which are both expected to be the norm this fall and winter. Professional strategies are considered best when they Read More 

Top Advisors Corner

Gene Inger: The Inger Letter - August 18, 2014

by Gene Inger

It didn't happen' - was Friday's ultimate response from Russia's Foreign Ministry, to the multiple confirmations of Thursday's reports we shared from 'The Guardian', before virtually any US media (they mentioned it only 'after' an upward opening in Friday's stock market; hours after it was confirmed by Reuter's; by AFP; by Kiev; and by London). (Ed note: and on Saturday Kiev says 3 heavy rocket launchers crossed the Russian border into Ukraine.) The market of course plunged when NATO confirmed the 'incursion' and the defensive Read More 

Top Advisors Corner

Tom McClellan: Grains Down, Beef Up

by Tom McClellan

 Grain prices have been falling, as expected.  But cattle prices have been rising, which might not be as expected. There is a lesson in this difference. Gold prices give us a year’s warning about what grain prices are likely to do.  That is counterintuitive, since grain prices are often dependent upon climatic growing conditions, while gold prices are dependent upon monetary conditions as dictated by the Fed and similar agencies. So how is it that gold could know a year in advance the direction that grain prices will go?  THAT is one of the fun and enduring mysteries Read More 

Top Advisors Corner

David England: Market Tops II

by David England

Last week, I analyzed the 2000 market top. Today, I break down the market action during the 2007-2008 market top to see any similarities using my trading system.  Last week, I explained that market tops usually take longer to form and can make three to four highs before the market corrects. Let’s see if that is true during this 2007-2008 time frame. I designed today’s chart exactly as last week, using the $SPX (S&P 500) during the 2007-2008 (monthly) timeframe, with the SPX value in the top box and important momentum indicator in the lower box.  I have my blue signal line Read More 

Top Advisors Corner

Tim Ord: The Ord Oracle - August 13, 2014

by Tim Ord

Monitoring purposes SPX: Long SPY on 8/7/14 at 1909.57; stop 1930. Monitoring purposes GOLD: Gold ETF GLD long at 173.59 on 9/21/11 Long Term Trend monitor purposes: Flat  This week is option expiration week which normally has a bullish bias.  There is a large open gap that formed from the July 30 close to the open on July 31.  Normally the bigger the gap the more likely that gap will get filled.  It has been a bearish sign for a market for a gap to get tested on lighter volume.  The July 31 gap on the SPY had volume of 183 million shares and if the market Read More 

Top Advisors Corner

Martha Stokes: Bounce & Reversal Candlesticks in a Downtrend

by Martha Stokes

How to Identify the Different Types of Bounce and Reversal Price Action in Candlestick Charts One of the key elements of successful selling short, and also for bargain hunters or those using buy-on-the-dip strategies, is to be able to properly identify which of the many types of upside price action is prevalent and what each means for the next day to few days of price action. These are commonly called “bounces,” where the price moves up during a downtrend for a day to a few days. “Reversals” refer to the final low that turns the stock back to the upside. There are Read More 

Top Advisors Corner

Chad Karnes: Here's Why the Euro has Topped

by Chad Karnes

The day June 5th was a very important day for Europe (NYSEARCA:FEZ). That was the day Mario Draghi pulled out all the stops and started to backup his words that he would do “whatever it takes” to prevent the Euro from continued strengthening. During the June 5 ECB meeting Draghi lowered the deposit rate facility to an unprecedented (-0.10%), revealed a package of targeted LTROs (longer term refinancing operations to banks) to the tune of 400 billion Euros, and is preparing for asset backed security purchases and the Eurozone’s version of QE. Usually such Read More 

Top Advisors Corner

Tom McClellan: 2nd Presidential Years Are Different

by Tom McClellan

 By now most who follow the stock market know that the first two years of each presidential term are basically flat, but the good times come in the 3rd year which is nearly always an up year.  What a lot of people do not know is that it matters a lot in the 2nd year whether you have a first term president or a second termer.  This week's chart helps to make that point.  To create each plot, I took the historical data for the SP500 (or its predecessor the Cowles Index) going back to 1936 and chopped the data into 4-year chunks, starting at the beginning of November in Read More 

Top Advisors Corner

Tim Ord: The Ord Oracle - August 7, 2014

by Tim Ord

Monitoring purposes SPX: Neutral Monitoring purposes GOLD: Gold ETF GLD long at 173.59 on 9/21/11 Long Term Trend monitor purposes: Flat  The bottom window is the rate of change (ROC) of the VIX.  Short term lows in the market have been found when the ROC of the VIX is over 10% and over the last several days we have two ROC readings above 10%.  We have panic in the Tick readings with a close last Tuesday at -949; Wednesday  at -419 and Thursday at -522.  Our studies in the TRIN suggest worthwhile lows in the market form when the TRIN panic’s to closes above Read More 

Top Advisors Corner

Martha Stokes: Recognizing A Rounding Top Pattern

by Martha Stokes

MMM Stock Chart Shows A Rounding Top Developing Topping patterns are critical to recognize prior to the stock turning down, especially in the modern market structure, where HFT algos can trigger sudden price collapses within seconds of the market open. Often times, the new topping formations, which have begun to show up more regularly on stock charts, are not as easy to identify as the Head-and-Shoulders and inverted V- or M-Top formations. The Rounding Top is becoming more widespread, and it is much more difficult to recognize if the technical trader is not looking for this type of top Read More 

Top Advisors Corner

David England: Market Tops I

by David England

Today, I answer many of your questions concerning market tops. For a better understanding on how market tops form, I will dissect the 2000 market action using technical analysis (charting). It is not called “technical” for nothing. Please read through the explanation to the end to get the full flavor of my explanation. One of the first things I learned when starting my journey in the stock market is that many times market tops take a lot longer to form and can make three to four tops before the market corrects. In turn, market bottoms are usually V shaped and act just the opposite Read More 

Top Advisors Corner

Tom McClellan: A Scary Valuation Indicator

by Tom McClellan

July 31, 2014 If you want to get worried about long-term stock market valuations, this week's chart should do the job.  I saw a version of this chart recently in a research report by Daniel J. Want, who is Analytics Director for Prerequisite Capital Management in Queensland, Australia. What is unique about this indicator is that it combines two separate data series into one indicator.  When I first saw the version of this chart in Daniel Want's report, I thought it was just wrong to put the CAPE data together with the Moody's Baa yield, since the two are actually strongly Read More 

Top Advisors Corner

Gene Inger: The Inger Letter - August 1, 2014

by Gene Inger

Canaries chirping away - have been ignored by markets, 'as if' the birdies were in a coal mine; rather than screaming warnings about disconnects and divergences, that threaten the overall trend, if not carrying systemic risk too. The average Russell 2000 stock is - 20% under it's 52 week high The financial press generally disdains questioning the underpinnings of the market; though they're starting to come-around just a little (they have to with a large number of stocks 10-20% off their highs, and with Goldman primarily their leader, having contracted their optimism, this is the Read More