Opportunities for mid-termed trades

Today’s blog is going to be short and sweet. Celebrate, for I shall avoid waxing eloquent, and get right to the point! Each of the 4 notations below are encapsulated in a capitalized summary sentence. Here goes:

 

  • Reversals are often signalled by short-bodied candles. Short bodied candles occur when the market rises or falls fairly aggressively (or both) on a given day – then settles in very near the open of the day. Note on the chart below the constancy of market reversals after such candlesticks (green boxes) within the current consolidation pattern. THERE IS A REASONABLE CHANCE FOR A NEARTERMED MARKET RALLY AT THE PRESENT TIME BASED ON THIS PATTERN.
  • The Nasdaq, Small capped stocks and financials experience seasonal strength from around mid-December into the winter (or early spring), according to Thackray’s Guide. This can be especially true if the S&P has drawn back by 4% in December. Research done by sentimentrader shows that markets are higher 83% of the time a month after a poorly performing December. SHORT TERMED TRADERS MAY HAVE AN OPPORTUNITY TO EXPLOIT THESE OVERSOLD SECTORS OVER THE COMING MONTH(S).
  • Beyond a seasonal/oversold rally per the notation above – I would be inclined to be cautious surrounding the former NASDAQ leaders (ie FANGS, etc) after January. Take a look at the similarity in parabolic patterns before the 2001 tech crash and recent NASDAQ activity. BEYOND A TRADE INTO FEBRUARY OR SO, I WILL BE AVOIDING THE FORMER HIGH FLYERS unless the longer trendline proves to hold after a test.

  • In July —I noted on this blog that the USD was poised to rise (CDN$ fall). As you can see on the chart below, it has done exactly that since I wrote that piece. The green trend channel suggested ahead of time that the peak might occur exactly where it actually occurred (0.78). I believe the loonie will find a temporary bottom in January or February, and will rally from there. The trough is targeted to land in the $0.72 to 0.74 area. Below the price chart of the loonie is the seasonal chart. Take note that the tendency is for weakness on the loonie vs. USD until late January. Thereafter the loonie should rise into the spring. This works perfectly with the CDN$ trend channel timing. The loonie is approaching, but not quite at, the bottom of the trend channel. In other words, I am betting that we will see the low on the loonie by late January or so, and that low will reside in the 0.72-074 zone. Should I be correct, I WILL WANT TO CONVERT SOME OF MY USD SECURITIES TO CDN$ AT THAT TIME!

14 Comments

  • I am tempted to tip my toes into the US Financials for a short term trade. What do you think?

    Reply
    • Personally I don’t like the ZUB (BMO US bank etf) too much given its significant breakdown from its trading pattern– but having said that, it looks like almost everything is oversold enough to play for a short termed bounce–the US banks included. The chart suggests the upside is limited compared to other sectors, but still, there is always room for an oversold bounce trade–just be nimble!

      Reply
    • Nope–not for a mid-termed (multi month) trade
      They are broken charts (mostly) as well. Still, lifeco’s probably represent a good play for an oversold trade-you could very well get a nice bounce trade over a few weeks, and possibly get 10% or more out of it then sell. In either case (banks, lifeco) you are best to think short termed for now. Things might change, and it could become a longer trade, but I don’t yet see evidence of that.
      for a mid termed trade im more inclined to look at gold, possibly energy, metals. In other words, the TSX!

      Reply
  • Hi Keith,
    Any chance you would do an analysis of CDW against EUR (euro). I have some money tied up in Europe and I am trying to time the conversion.
    I did send your blog to my son a few years ago. He reads it just like me. It is also part of our routine family discussion on Sunday night dinner.
    Thanks a million.

    Reply
    • Claude–this isnt a deep analysis at all – but for what its worth, the Euro/CDN spread–having seen a decline in early 2018 (Euro down) has been basing since late summer 1.48 Euro/C$ might be the support zone, 1.53 or so might be resistance. The thing to watch for in any base is a breakout either up or down; meanwhile, its a sideways market for that relationship

      Reply
  • Hi Keith,

    I believe you had mentioned a while ago that you were working on potentially creating an ETF. Is there any updates you can share on this?

    Thanks,

    Josh

    Reply
    • Hi Josh–yes–we needed to do a few things to get the ETF going–the first of which was to break away from an IROC licenced model and move to an OSC licenced model (different regulatory bodies, with the latter being the only way to manage money on an external product vs. only individually managed accounts under IIROC)–this was recently completed.
      Because that step took a bit longer than anticipated, we are a bit behind–but it is in the agenda
      Its been a frustratingly delayed process – much due to unanticipated circumstances (I had a family health crises to deal with) – but we are now clear to start looking for an ETF provider.

      Reply
  • This market is really testing those that believe in Dec 15 to 30 seasonal strength. That dojibcandlestick that is supposed to indicate upside looks on the verge of being taken out to the downside. One Trump tweet could maker that happen.

    Reply
    • Interestingly, I needed one more day – that day being today- of the S&P staying above 2630 in order to execute a trade–still hold 13% cash and was looking to spend some of it after the 2630 test + 3 days. This based on the candle, the santa rally, the sentimentrader stats, the neutral Bear-o-meter reading, and the support level (2630) officially holding with a 3 day test. Then today’s beating happens which made the 3 day test fail… this is a good illustration why we need to stick with our system.
      If I see that it was a spike today, and we get reversal then 3 days above 2630, I will step in and buy. But that looks less and less likely. Possible next stop is 2540. If that level breaks—-it will be time to raise more cash. If it holds, i will follow the same protocol (support plus 3 days) to buy.

      Reply
      • Always appreciate your comments/reminders Keith. I am too getting more alarmed at recent weakness. There seems to be more to this than my original assessment in September.
        Merry Christmas

        Reply
        • Friday is day one of the S&P500 going below 2530. Two more days and it suggests a 2540 target. That needs to hold, as noted in prior blogs. On the positive side, if the market reverses after last Friday, it would be considered a mere “spike”, and we might expect a positive Santa rally. The next two days are important. I continue to hold my cash, and will invest if things can stay positive (ie go back over 2630) by Wednesday–if only for a trade.

          Reply
  • Keith; Regarding your currency opportunity a few questions:
    1) What was the event/conditions that caused the 2 significant jumps in Jan 2016 and then in Mayish 2017? In 2019 does there need to be an event that will push the cdn dollar upwards?
    2) 2018 did not seem to have the spike upwards in the first half of the year. What was different in 2018 and could that carry into 2019 by not having the upward movement that seasonally occurs?
    Brooke has flagged silver as a good possibility to rise in it’s upcoming seasonal period. What equity would you use to trade silver? I have used Ishares silver trust before but wonder if there is an alternate one?
    Merry Xmas and rally Santa rally.

    Reply
    • Daddyo–both the 2016 and mid 2017 rallies on the loonie were coinciding with an oil rally. 2018 has seen a relatively flat to bearish pattern for oil throughout the year, which likely contained the loonie. They don’t call it the petro-dollar for nothing! Further, the Fed and its blundering in Canada surrounding carbon taxes an pipeline stupidity puts greater pressure on CDN energy producers – again, not helping the loonie.
      As far as silver–yes, SLV is one way to play it. The other might be HUZ, which has the added benefit of currency hedging, should my prognosis for the loonie rising in the winter be correct.

      Reply

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