What's going on with commodities

A great conversation was brought up on twitter last night about how is it possible that bonds, stocks and commodities all rising.  Well, as always, the bond market is right.  The rise in the CRB is a weather driven illusion and has nothing to do with an improving economy.

First of all, industrial metals are the most significant sub group in commodities we watch for signs of economic strength.  For more on this check out John Murphy's intermarket analysis books.

Yeah the CRB is up 10% YTD, but notice how little industrial metals have participated.  It's clear, especially of late, the true economic strength isn't there.  This is complete breakdown city.  Clearly, industrial metals aren't driving the move.

Furthermore, notice how dr. copper has traded since bonds started rallying at the new year.  The action is highly inversely correlated, just as one would expect.  Again, signaling a weak worldwide economic backdrop.

As far as CRB is concerned, it can keep rallying for who knows how long, this is has been an insane winter.  Hell, it's a record low negative 20 degrees in mid-Michigan as I write this.  BTW, It's March tomorrow!  

At the end of the day though, the markets have already tipped there hand.  The global economic backdrop isn't positive. 

Re-capping the setups shared today

This ALNY head and shoulders bottom setup is still active and swingable versus that 85ish low.

This HZNP bull flag caught a bid after sharing this morning.  I've held it for a month now and there are just no sellers anywhere.
 

NOAH was hot out of the gate off earnings.  It broke this bull H&S and ripped higher.

Piper finally came to play.  Over 42.50 gives this a long term thumbs up.  

NAT has a fantastic head and shoulders bottom setup going into tomorrow. 

Noting some options activity

I've decided I need to use more option trades to enhance information flow and my trading along with it.  Here are a few observations from today's trading.


If you aren't familiar with ToS, the data is lined up:  

time of day, class traded, # traded, price+exchange, bid x ask spread

STAA - somebody opened the June 15-17.5 call spread.  There was notable open interest in 17.5's, but not 15's.  I'm guessing bought given the trade prices in relation to the B/A spreads.

Note the stock ripped after this hit the wires

MPC had a trade of 8000 March 90-92.5 call spreads.  They appear to have been bought this afternoon just after the stock hit it's low of the day.  These guys are surely a benefactor of all the cold weather this winter as propane/fuel stocks have been depleted

This has a great longer term look here too

NAT had 1.5x open interest March 10 calls trading today.  Most traded around the same time through various exchanges on the offer.  The chart boasts a head and shoulders bottom near a breakout.  They

Mystery Trade of the day

PODD somebody fired this one off today with earnings tonight.  Note there was already size in the Mar 40 C but no notable size in the others.  We can guess the call spread was bought, but no idea about the angle here.

Wrap up 2/26/14

Topics:

• Pot stocks
• New buys
• Market participation
• Stock Setups

Pot stocks are starting rip after a month of basing.  CANN got a mention on CNBC's show fast money and ripped from 24-34 in ten minutes.

This CBDS had a nicely crafsed bottom.  It measures to about 15 but who knows how hard these things can run.    

I purchased FSPM at 5.35 after the major CANN rip.  The tight setup looks explosive.  We'll see how it goes.  I've already raised the stop on this to breakeven.

I also added AWAY at 46.10 this morning.  Two days in a row it's found stakes in the ground at 45.  Under 45 is the stop.

The other thing I bought was this UVXY as a way to hedge longs.  Things like SOX and IYT are struggling at key levels so figured it was worth having some protection.  We'll know soon enough if it's needed or not. 

Market Participation

Notice smoothed TRIN is no where near a topping zone.

The Nasdaq A/D line was pretty perky today just under new highs

Both the Russell 2000 / Dow and Wilshire 5000 to S&P 500 ratios look stellar, suggesting a healthy market.

The consumer ratio suggests they're still healthy for the time being.  Keep an eye on the rising wedge though

Stocks

STAA had earnings last night (2/26).  Weakness might be buyable

FIX has pulled in pretty hard since breaking an 8 year base.  It's finally seeing signs of stabilizaton.  If you can be patient this is the type of stock that'll see 25 later this year.

EBAY is the new hotness.  If you're gonna buy it, now is the time.  Whatever happens between the board and Icahn doesn't matter as long as it doesn't lose 53.

I also posted MIC and NMRX as investor setups on twitter.  Notes on the charts

Faro had earnings 2/26 PM.  This could be a real ripper.  The December high is the key to the chart.  Over that and it's likely a 100 roll candidate later this year.

Position update

I took two partial positions off the table today to raise cash  Why?  Two reasons

We've seen now 3 days of heavy selling end of day(when we've had positive action throughout the days) , and significant bifurcation of price action across the board.  Certain momentum names with everyone's attention are blasting through the roof while the rest of the general market is acting toppy.

Also, there are a handful of very interesting setups out there that i'm looking to enter.  Some include POWR, STAA, and ATTU shared here.  Others include EBAY, FENG, TEX, SCOR, EPIQ

I reduced VIMC back to half size.  It's likely to either keep basing or break down over the next few days.

MTW has had a great run from the mid 22's entry, but it's time to harvest some gains.  I sold half of it for a nearly 35% win.  You can see it's still trading well!  

Here's a look at the updated holdings.  We're back down to 55% long.  Cheers!

Top Quotes from Steven Pressfield's: The War of Art

Working on yourself is the biggest piece of the trading puzzle.  It's also undoubtedly the shittiest and least sexy part.  It's so painful that most of us (myself included) don't even bother looking in that direction until we lose our shirts and there's nowhere to look but in the mirror.

This book sounds like it's intended for writers and artists, but it's a great read for anybody trying to tackle a challenge.  Here are a few quotes relevant to trading and twitter etiquette.  Enjoy!


The ego doesn't want us to evolve.  The ego runs the show right now.  It likes things just the way they are.

The professional cannot allow the actions of others to define his reality

The professional learns to recognize envy driven criticism and to take it for what it is: the supreme compliment

He is prepared, each day, to confront his own self-sabatoge

The professional knows that fear can never be overcome

The sign of the amateur is over-glorification of and preoccupation with the mystery

The more resistance you experience, the more important your work is to you

If you find yourself criticizing other people, you're probably doing it out of resistance

MACRO review 2/23/14

IWM is finding resistance at the long term trendline lost in the January correction.

The transports larger head and shoulders top also has a smaller head and shoulders bottom forming on the right shoulder.  This will be a huge tell.

ICLN is a green energy ETF.  The structure is very bullish, but it may need some time.  This is a good place to look on weakness.

Commodities are now outperforming all bonds and stocks.  This has major implications for the markets.  Mainly, bulls want to see TLT maintain strength.

Base metals have coiled and coiled for nearly 2/3 of a year.  It looks headed higher, but when?

Some short term sell opportunities are lining up in ETF's outside of the US markets.


Singapore is finding resistance at the lost support line from 2013.  It appears to be a great short opportunity.

EWQ is also offering a short entry at the top of this broadening wedge.

EEM is finding resistance at a prior support trendline

Saving the most important for last, semi's couldn't close the week over the resistance from the mid 2000's.  This a huge deal and could be a great space to look short with downside followthrough.

Swinging for the fence 2/23/14

Here's some stock swing trade ideas for the coming days and weeks.  Regardless of the overall market, we have plenty of awesome stock action to play!

POWR - broke an 8 year range, look for continuation setups

MGIC - cup with handle setup at the 2011 highs.

STAA - trying to find it's footing after a monster long term breakout.

FENG - trading in this consolidation for 4 months now.  Can it break out?  The risk is down to 10.  I'm conservative and will wait for this to break past 12 and the Jan high.

ENT - recently broke above a head and shoulders top setup.  A momentum play at this point.  Volume last week was impressive.

RPTP - this is backing and filling after a 10+% gap up last week.  If it can hold the gap at 15 we can look for a re-test of that 17.70 and possibly higher.  The larger technical pattern is bullish.

ATTU - trading near the highs.  You could get long it here vs 11.  There is a fib confluence around the 13 area which is the next immediate target.  15 is another level to keep an eye on.

Good Trading!