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Archive for January 2012

30
Jan

Bar-by-bar Analysis – Week 4

Week 4: January 23-27, 2012

For our fourth weekly analysis of 2012, we examine bar-by-bar for the following index:

  • S&P 500 Daily chart - Last week was a choppy week, but the end of the week activity is showing signs of bullishness for the upcoming week.

Prices advance to new highs last week, but came right back down to test support levels. During this test, volume is noticeable lower, which is bullish for this situation. Full details on the bar-by-bar analysis below.

Note: When we say “Demand”, we refer to active buying, and when we say “Supply”, we refer to active selling. During an up-trend market, a lack of supply alone would allow the prices to trade higher without the need of Demand present. During a down-trending market, a lack of demand alone would allow the prices to trade lower without the need of Supply. Read more »

22
Jan

Bar-by-bar Analysis – Week 3

Week 3: January 17-20, 2012

For our third weekly analysis of 2012, we examine bar-by-bar for the following index:

  • S&P 500 Daily chart - A bullish weak ends with clues that sellers are not letting the bulls push the markets higher. Stay cautious.

After a see-saw week of bullish and bearish days, the week concluded with warning signs of sellers preventing the market from going higher. This hidden selling gives us the hints that it’s likely a good time to begin selling some longs. However, it’s not bearish enough to start a short, but definitely a good area to sell longs at attractive, high prices. Full details on the bar-by-bar analysis below. Read more »

18
Jan

Huge Arbitrage Opportunity in Platinum


PTM and PPLT are platinum ETF/ETNs that track the Platinum index. PTM tracks the front-month platinum futures prices while PPLT tracks the market valuation of physical platinum in a vault. Both symbols should have very similar values at all times with the exception that PTM’s price should fall slowly over time due to backwardation (i.e. the opportunity cost of borrowing money (Futures yield curve), which is roughly 0.25% a year (today’s risk-free interest rate).

PTM: The investment seeks to replicate, net of expenses, the UBS Bloomberg CMCI Platinum Total Return Index. The index measures the collateralized returns from platinum futures contracts. It is designed to be representative of the entire liquid forward curve of platinum contracts. The index, which is rebalanced monthly, is comprised of the platinum futures contracts eligible for inclusion in the CMCI with a single target maturity of three months.

PPLT: The investment seeks to reflect the performance of the price of physical platinum, less the expenses of the Trust’€™s operations. The fund designed for investors who want a cost-effective and convenient way to invest in platinum with minimal credit risk. Advantages of investing in the Shares include Ease and Flexibility of Investment, Expenses, Minimal Credit Risk.

The Opportunity

Currently, there exists a huge deviation (arbitrage opportunity) between PTM and PPLT, one of the magnitude never seen before. Since the deviation is not due to future prices deviation from the physical price of Platinum, the arbitrage opportunity comes from an artificial imbalance in PTM itself, which we can profit from it.

Of the 520 days of data we can use to detect an arbitrage opportunity between the two symbols, there were only 14 days of total arbitrage days that you could have made money shorting PTM and longing PPLT. Of these opportunities, the average arbitrage gap was 5%. However, we’re looking at a 20%+ arbitrage opportunity today (4-5X normal deviations). Opportunities like these occur about 2.5% of the time in PTM:PPLT, but never of this magnitude. The deviation should only lasts a matter of days, and the gains are large enough to make this a very sweet opportunity to rake in a profit. Read more »

16
Jan

Portfolio Allocation

Articles for this section coming soon…For now, take a look at our portfolios:

Portfolio 1 – YoutualFund
http://www.youtualfunds.com/fundSRGB

16
Jan

Swing Trading

Articles for this section coming soon…

Please use the link below for the top stocks ranked by AlphaCloud using relative performance. This is a custom database ranking system created from scratch that analyzes raw data and synthesizes results into objective, actionable stocks rankings. We are currently publishing lists for the top stocks in:

  • Sectors
  • Countries
  • S&P 500
  • Nasdaq

Click here to see the lists

 

16
Jan

Bar-by-Bar Analysis – Week 2

Week 1: January 9-13, 2012

For our second weekly analysis of 2012, we examine bar-by-bar for the following indices:

  • S&P 500 Daily chart - Due to the lack of buying demand, it’s best to sell some of the long positions that were bought from the lower prices a few weeks ago. There is no short-entry neither. Stay cautious.
  • Dow Jones Industrials Daily chart -  The DJIA showed more weakness than the S&P 500 index. However, we remain focused on the 12,250 key support area that we mentioned last week. Buying at this level is recommended if there is no sell-off with high volume (high supply).
  • 30-year Treasury Bonds (TLT) Daily chart – Recent bond selling pressure is a positive sign for a bullish S&P 500.

We conclude that there is a slow down in the market’s rally. Based on a variety of clues, we expect some kind of retrace lower before continuation of the rally. Watch for the Dow Jones Index 12,250 level as a support level for a potential long entry into the broad equity markets. If this support area fails, we will have a trend change. Otherwise, we can expect a continuation of the rally, which is our expectation. Detailed bar-by-bar analysis can be found below in the chart annotations and notes.

Note: When we say “Demand”, we refer to active buying, and when we say “Supply”, we refer to active selling. During an up-trend market, a lack of supply alone would allow the prices to trade higher without the need of Demand present. During a down-trending market, a lack of demand alone would allow the prices to trade lower without the need of Supply.

Read more »

13
Jan

Market Valuation Using the M/O Ratio (Updated)

An interesting study using the M/O Ratio, which is the ratio of people in the Middle (40-49 years old) vs. Old (60-69 years old) age cohorts, reveals two things:

1) High correlation/predictability of the market P/E ratio during the last 50 years.
2) Future market valuation will come at a lower P/E valuation.

Read more »

8
Jan

Bar-by-bar Analysis – Week 1


Week 1: January 3-6, 2012

For our first weekly analysis of 2012, we examine bar-by-bar for the following indices:

  • S&P 500 Daily chart – While off to a strong bullish start, the buying quickly faded and now is struggling to make gains.
  • S&P 500 Weekly chart – The weekly chart broke out of resistance during the new year, and any signs of lack of sellers will automatically allow prices to trend higher.
  • Nasdaq Composite Daily chart - Nasdaq is stronger than S&P 500 so far, but is in a critical resistance level that it has not cleared. Expect a test here to identify the true balance of supply and demand before it goes higher. 2,615 is a key support that needs to get tested.
  • Dow Jones Industrials Index Daily chart 12,250 is a key support that needs to get tested.

We conclude that the stock market is ready to test key areas, most evidently in the Dow Jones chart, before moving higher. The overall trend is bullish, but the lack of buying demand during the first week of the year sets up the stage for testing support areas. If this support area fails, we will have a trend change. Otherwise, we can expect a continuation of the rally. Detailed bar-by-bar analysis can be found below in the chart annotations and notes.

Note: When we say “Demand”, we refer to active buying, and when we say “Supply”, we refer to active selling. During an up-trend market, a lack of supply alone would allow the prices to trade higher without the need of Demand present. During a down-trending market, a lack of demand alone would allow the prices to trade lower without the need of Supply. Read more »

3
Jan

FOMC Decision Change

The next FOMC meeting may be the beginning of high transparency communication. The Fed plans to communicate on concrete information regarding  the state of the economy and the timing of interest rate changes. The Fed will officially publish to the public exactly when and why they would raise/cut rates in the future, an unprecedented move that will change how markets respond to FOMC meeting decisions. The FOMC regularly meets 8 times per year; the next decision will be on Wednesday, January 25, 2012 at 2:15 pm EST.

Read more »

2
Jan

Bar-by-bar Analysis – Week 52 (2011)

Summary

The markets rallied on low volume during the last week of trading. Without the increase of demand, it would be difficult to break resistance. So far, only failed attempts at the resistance of the high of bar 6. It was a good opportunity to take some longs off the table. However, it is not recommended to take a short position based on this action since the price fall is due to lack of demand rather than supply coming in. The first day of trading in 2012 will be a key day. Either demand comes back and we break resistance or we will go down due to the lack of demand and sellers will emerge. For now, there is no short term trade. Read more »