Archive for February, 2010

RSI(2)

Thursday, February 25th, 2010

On Wednesday, I wrote:

“SPY’s RSI(2) on the daily chart closed at 15.37 on Tuesday. The last time it dropped that low was on February 4th, and a swing low formed the next day. The bears may not be done mauling the market yet, but the odds have begun to shift back toward the bulls.”

And that’s pretty much what happened. The bears gave the market a vicious mauling on Friday morning, but the over-sold market bounced back. Take a look at this daily SPX chart which has an RSI(2) plot at the bottom (click to enlarge):

The two purple arrows point to the RSI(2)’s plunges in February, and the two blue arrows point to the dramatic reversals that occurred shortly afterward. Those two hammer candles are almost identical. Not bad, huh?

No indicator is a sure thing, but when the RSI(2) gets streched, it pays to be alert for a reversal. Especially in a range-bound market where indicators like this one shine.

Hat-tip to George for telling us about the RSI(2) way back when.

Thursday’s Trading – 2/25/10

Wednesday, February 24th, 2010

This chart in the Wall Street Journal looks awfully similar to my chart that I publish here, does it not? As you can imagine, I will have more to say about this soon.

Wednesday’s Trading – 2/24/10

Wednesday, February 24th, 2010

As UNG continues its never-ending, Wile E. Coyote style plunge off the cliff, you natural-gas bulls can take solace in the fact that part of the internet is now fueled by natty. Google was Bloom Energy’s first customer and is powering one of it’s data centers with Bloom’s magic cubes.

SPY’s RSI(2) on the daily chart closed at 15.37 on Tuesday. The last time it dropped that low was on February 4th, and a swing low formed the next day. The bears may not be done mauling the market yet, but the odds have begun to shift back toward the bulls.

R2K Breadth Triangle

Tuesday, February 23rd, 2010

Russell 2000 breadth has tightened into a coil. Take a look at this 60-minute chart that goes back to the beginning of the year (click to enlarge):

A similar triangle to the current one formed in early January, and had a bearish resolution. The market had a sharp drop before recovering enough for a breadth megaphone to form. And the market plunged the very next day after I posted that megaphone chart. Not bad, huh?

The R2K is poised for a big move, and the rest of the market will likely go with it. Since we are short-term overbought by many measures, I would expect a pullback. Monday morning’s gap-up was very close to being an exhaustion gap, and may yet prove to be one. However, the XLF and the IYT did not fall back into their gaps, and their leadership held the market up. But if you see those two gaps being filled, then the odds will move even more in favor of the bears.

Monday’s Trading – 2/22/10

Monday, February 22nd, 2010

Is it Possible to be Cooler than Apple?
Miami Beach High School kids love to hang out at the Lincoln Road Mall Apple store after school. It’s the new Disneyland. But a mall in Philadelphia has something a million times cooler, though you can’t buy the stock like you can AAPL. At this place, instead of playing video games with wimpy little plastic controllers, you play with realistic replicas of US Army weapons, including Blackhawk and Apache choppers. PBS’s FrontLine did a story here.

Uncle Sam Wants You to Fly his Warbots
At least somebody is hiring… The Los Angeles Times has a story on the real remote-control warfare going on in Iraq and Afghanistan. I knew that we had drones operated by pilots here in the states, but I didn’t realize the scale: over 7,000 drones. I was also surprised that a former F-16 fighter pilot believes that the drones are far more effective weapons than jet fighters. But it’s easy to see because the drone pilots have so much more information.