ACE: TLT chart shows sudden distribution and price drop! Gold begins to move higher. (8/31/15)

Mike Carleton Has Had Over 50 Followers Rank: 20 Followers: 83 Votes: 43 Years Member: 7 Last Update: 3 September 2015, 0:57 Categories: Momentum Stocks
Trend Analysis
Ratio Analysis

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Three (3) new features of my Chart List are the IBD 50 Stocks, the Spyder Sector ETFs and the 11 Wonders known as the Internet of Things stocks!

The first two pages contain charts that measure perceptions of the overall markets. The main equity indexes (S&P500/ Dow Industrials/ Nasdaq) and key measures of bond markets, the TED Spread, Gold, Currencies, and special ratio charts in the special 'Ace way' that makes things clear and simple to see.

The 9 major Sector SPDR ETFs are tracked with Ace's favorite trend indicators and oscilators! If one understands the trends and cycles of these charts, then they will have a very good grasp of the major rotations of the smart money traders. These charts show up on Page 14 of my Chart List and their symbols begin with the letter 'X'.

The second new feature is a hand-picked selection of the IBD 50 stocks. I use many of my favored indicators on these DAILY charts, including the dynamic 13. 50, 100 and 200 MA lines. (IBD usually shows WEEKLY charts-- you can see DAILY here!) I show the proper bases on these charts as base theory is critical in the IBD 50 stock selection and CANSLIM systems. Of course, IBD 50 and CANSLIM are successful trading systems developed by Investor's Business Daily. These charts start on Page 10. I am not associated or affiliated with the IBD in any way and my charts are interpretations based on IBD theory, Please visit their website to learn more at www.investors.com .

Finally, as of May 24th, I have added a section known as 'the Internet of Things.' These are the 11 wonders identified by many investors as the key stocks leading the internet revolution as we enter the middle years of the 21st century. Cisco's John Chambers has predicted the Internet of Things to be the most profound tech revolution in our lives in the next several years.Now, you can track these stocks with me beginning on Page 11.

Finally, I thank you for YOUR VOTES!

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-0.1 a iShares Barclays 20+ Year Treasury Bond Fund (TLT)

Update: August 30, 2015: We learn that China dumped over $100 billion in US Treasuries last week to prop up their currency and stock market. Heavy selling volume is visible on TLT's chart even as it was topping out after a recent rally. Now, TLT looks precariously propped up....notice the rapid drop in accumulation (A-D) and cash flow (CMF). Watch to see if this can hold up!?

Update April 2015: The TLT bond fund broke decisively through the neckline of a prominent Head-n-Shoulders on September 14th in the wake of the Federal Reserve's decision to begin QE3. However, powerful forces, including the Federal Reserve itself, have managed to support the right shoulder and create a TRIPLE RIGHT SHOULDER as we entered year 2013. Nonetheless, the general H&S pattern remains intact with no change in the general pattern. Major moving average down-crosses have reversed by April 2013 suggesting that the long bonds will be a good bet going forward. If so, then the US stock market could be in trouble. It's no surprise as the Fed is struggling to keep rates low at least until Year 2016 so that they don't have to sell off long bonds at market rates. (See my blog on 'the Twist' by googling 'Ace Talking Stocks' and click on the blog link.) So, will the Fed managed to keep bonds at low interest rates for a long time (as in Japan)?

UPDATE: February 27, 2014: The new up-trend is confirming. US long dated treasuries are making a big comeback, just the opposite of what most market pundits have been predicting for year 2014. The lateral high of the W-bottom has been cleared on a re-test. This also warns that stocks could be in trouble as investors seek US treasury safe haven relief.

-0.1 aa Gold Spot Price (EOD)/ iShares Barclays 20+ Year Treasury Bond Fund ($GOLD:TLT)

August 31, 2015 UPDATE: The Gold-TLT Ratio looks poised to break up through the long-time down-trending wedge line. The 12 month Moving Average Line is next. This break up through the down-wedge line appears to mark a major shift in the markets, and one that likely will NOT favor US stocks or bonds for the next several months!
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June 7, 2014- S&P leaves US Credit Rating unchanged....!

Despite all of the political pressure put on S&P, they have stood by their lower credit rating for US Treasuries according to the Wall Street Journal ( www.wsj.com )....they are keeping the US at AA+ rather than the top rating of AAA. (Both Fitch and Moody's, the other two top ratings agencies have the US debt at AAA still.).

According to WSJ, the US gets 'a favorable rating for the resiliency and diversity of the economy'....but it says the US is 'constrained by political brinksmanship and budget deficits.'

Some of you might remember that in August 2011, S&P cut the US credit rating from AAA for the first time in 70 years, and it caused a massive rally in gold and a rapid sell off in stocks over a few days time before the market manipulators stepped in and convinced people this wasn't the end of the world for us....

Still, here we are nearly 3 years later and S&P is not confident enough in the US to raise our credit rating back to AAA, despite the political pressure on it and the problems with other sovereign nations' finances...

As the WSJ points, out the S&P no longer is convinced that US treasury notes and bonds are among the safest investments in the world....and yet, people and institutions still pile in them, perhaps because most believe there isn't a better alternative in times of crisis or worry...

Of course, if and when one of the other two ratings agencies lowers the US debt, we could see a panic to get out of US debt paper....so, stay tuned...but for no

-0.1 aa Shanghai Stock Exchange Composite Index (EOD) ($SSEC)-Historic

The growing crisis with local Chinese Trust Funds could prove to be China's 'Lehman moment!' Keep an eye on the Chinese stock market in Shanghai! (posted 11/23/13)

This multi-year view shows that the Shanghai Composite Index has peaked and now in a rapid sell-off in mid-2015. I have inserted a Fibonacci graph to show the potential support areas as the index sells off. (posted 7/20/15)

-0.1 aaa db X-Trackers Harvest CSI 300 China A-Shares Fund (ASHR)

This popular China A-shares ETF shows a bearish descending triangle on the daily chart. Though there may be strong rallies at times, the longer term projection is calling for a potential crash of the Shanghai stock market.

-0.1 aaa Dow Jones Industrial Average ($INDU)-400 day line and its meaning

UPDATE: August 20, 2015. As expected, a bounce did follow the 400 day tag, but as I also expected, this one didn't last because it occurred AFTER a Death Cross. Today, the Dow broke the 400 day line support decisively!

UPDATE: August 15, 2015, the Dow Industrials tagged the 400 day line again this past week. I would caution that unlike the last 3 tags of the 400 day, this one occurred after a Death Cross. But so far, the Dow has lifted higher after that 400 day tag. Will the 400 day be the turnaround point like it has been the last several years?

Previous comments about the 400 day tags: The 3 most recent Devil's Crosses (20-100 down-cross) led to significant sell-offs....in fact, each of the previous 3 Devil's led the Dow down to the 400 moving average line. The 400 MA line is the long-term bull/bear line, and usually not well known by amateur technicians. You can see how each Devil led to the 400...and how each tag of the 400 zone led to a bounce-back for the Dow. In some cases over the years, the 400 MA line failed to hold support...examples include the 1987 and 2008 crashes. The 20-100 was the final warning to get out before those two crashes occurred. In early February, 2014, the Devil's Cross was narrowly avoided. However, keep an eye on this in case it should change again.

-0.1 aaaa NYSE - Tick ($TICK)- Weekly 40 Week Channel

May 16, 2015 Update: TICK 40 week lag line hits a multi-year low! The last time it did this was only 3 months before the 2008 Financial Crisis threw its full fury at the markets. We are there again, according to this measure? Does history repeat??? or is this time different? One should never look at one signal in isolation, but this 40 week bottom does make one think twice! Keep in mind you won't hear or see about this signal anywhere else but here! -ACE
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This is another ACE exclusive. You won't find a chart like this anywhere else. The NYSE TICK 40 Week Channel and Line has proven to be a forecast model of market tops and bottoms by up to 2 to 6 months in advance. Tops in the Channel predict market tops--Bottoms in the Channel predict bottoms. The 4-40 crosses can show shorter term trading trends within these larger secular trends.

Ace discovered several years ago that the 40 week lag line of the weekly $TICK index tends to be quite predictive of future stock market action in the major US stock indexes with about a 2 to 6 month window of prediction. What the 40 week lag line does is capture the overall LONG-TERM movement of tick price action. TICK measures the number of trades that go off at the ASK price versus the BID price. Generally speaking, TICK moves higher when the markets are bullish, and TICK moves lower when the markets are getting bearish. This is because buyers tend to chase the ASK price, while sellers tend to chase the bid price.

The 40 week lag line tends to trade in a rather narrow lateral band over many months of time which Ace calls 'the 40 week channel.' Most of the time, the lag line moves through the middle of the channel and the US stock market (NYSE in this case) tends to be mildly bullish to slighthly bearish, but rarely is it in any extreme mode. However, when the lag line gets near the top of the channel, the markets can be said to be reaching a peak %6

-0.1 aaaaa iShares iBoxx High Yield Corporate Bond Fund (HYG)

By Mid-July, the market sensitive HYG had fallen out of its up-channel and lost the 50 day support. Compared to the S&P 500, a negative divergence has occurred which suggests the stock market may soon correct. Mike (posted 7/21/14)

-0.1 aaaaa Russell 2000 Small Cap Index ($RUT)

The Russell 2000 attracts many traders for its high beta stocks, mostly small caps, and many in fast-growth sectors of the market.

-0.1 aaaab NYSE - Tick ($TICK) 5 minute chart (intra-day)

TICK is a market pro's tool for monitoring the under-lying strength in the US stock market. $TICK specifically measures the number of up-tick trades against down-tick trades on the NYSE. By itself, the TICK patterns can be difficult to discern due to high volatility from minute to minute during the trading day. I have developed a smoothing mechanism which helps the viewer to see any trading strength patterns more clearly. From time to time, I have to adjust the trigger trip lines due to the amount of volatility in the markets. In May 2014, I had to adjust the lines inward (closer to the center) due to the lack of volatility (this can be compared to the low readings in the CBOE VIX index).

There are actually two lines to watch on this $TICK chart which updates every 5 minutes during the trading day (though the chart is on a 15 minute delay for viewers). The two lines to watch are the purple (thin) line which is the 8 EMA line and the other thicker line is the 21 EMA line (green). The purple 8 EMA line is the FAST LINE, and this line helps the trader to tease out fast movements within the TICK. The 21 EMA line is the SLOW LINE, though that is a relative term as the SLOW LINE is still capturing the fast rhythms of the market for many traders.

When the 8 EMA line touches either of the two thin dashed lines, then this means the market is either short term over-bought or over-sold. Day traders should focus more on the thin 8 EMA line.When the thicker 21 EMA line reaches either of the two solid horizontal lines, that is more broad market based signal of overbought or oversold. Swing traders and Investors looking for the ideal entry and exit points should focus on the thicker 21 EMA line. To learn more about sophisticated (and yet easy to understand) chart tools like this one, be sure to visit www.AceStockTrader.com where the retail trader and investor comes first!

-0.1 aaaab NYSE Summation Index (Ratio Adjusted) (EOD) ($NYSI)

May 31, 2015: UPDATE - The RSI double dip on $NYSI is a rare and ominous occurrence. Note that NYSI continues to move lower and form a divergence against the stock markets, but for how long can this charade last?
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The Summation Index ($NYSI) is an accumulation of McClellan Oscillator readings which helps to smooth out the volatile swings found in the McClellan. The Summation Index is popular with sophisticated traders for spotting significant tops and bottoms in recent trends.

For me, the key graph on the Summation has always been the RSI(14) oscillator...as you can see, the oscillator tends to call tops and bottoms off of significant multi-day trends.

I watch for readings under 30 (oversold) and over 70 (overbought) and the confirmation is usually provided by a break back toward the middle as the RSI line crosses over the 30 or under the 70 mark. Keep in mind that the NYSI can remain overbought (or oversold) for a very long time. This is because major TRENDS can over-ride the cyclicality of the markets, which is what RSI tracks. When trend continues higher (which reflects herd trading), a mistake that some amateur chartists make is to assume a long or short position as soon as the overbought or oversold position is reached on the RSI. The proper time to go long or short is when the RSI begins to climb back toward the middle space (between 30 and 70), at least with the $NYSI chart, imho! That's why I watch for the confirmation signal (again, over 30 or under 70) to confirm the move out of the extremes. Often, the NYSI moves can mark a divergence from the actual movement of price on the New York Stock Exchange (NYSE), thus offering an early warning system.

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