What a difference a few days make.
Prices as of the close on Thursday, January 12, 2023.
Early Warning Indicator
June 4, 2022 by
This ‘Shoeshine Boy’ Spots Market Tops |
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By Pete Carmasino, chief market strategist, Chaikin Analytics
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| Just before the 1929 market crash, John F. Kennedy’s father stopped to get his shoes cleaned…But the enthusiastic, young shoeshine boy wanted to offer something more – stock tips.That’s all Joe Kennedy needed to hear. In his mind, nothing could indicate a market top better than unsolicited stock advice from a shoeshine boy.The legend says Joe immediately got out of the market. Then, he “shorted” it and got filthy rich.True or not, this story is an investor favorite for good reason. It sends an important warning about market manias.Put simply… a top is near when the proverbial “shoeshine boys” get in on the action.That’s important to remember right now…You see, whether it was intended or not, global investing giant VanEck created a modern-day shoeshine boy investment. And as you’ll see, it called the most recent market top.Let’s take a closer look… |
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| The VanEck Social Sentiment Fund (BUZZ) launched in March 2021.The idea behind the exchange-traded fund (“ETF”) is easy to understand. It invests in 75 mid- to large-cap stocks based on the amount of hype they’re getting on social media. And it’s based on the Buzz NextGen AI U.S. Sentiment Leaders Index…To be considered for the index, companies need a market cap of at least $5 billion. They also need consistent and diverse mentions on social media over the previous year.From there, any stocks that meet the criteria are ranked. The top 75 go into the index.The idea is to use crowd sentiment to find good companies. Essentially, it becomes a momentum index.In short, the index and related ETF are the collective shoeshine boy…The index’s creators use artificial-intelligence (“AI”) tools to track websites like Twitter and StockTwits. These AI bots decipher between good and bad phrases relating to stocks.But it’s an interesting choice, to say the least…On Twitter, 50% of users don’t have a college degree. I’m willing to bet that a much higher percentage don’t even know investing basics. Plus, 92% of posts come from 10% of users.So there you go… That’s your BUZZ Investment Committee.It’s no surprise that the ETF is effectively a “meme stock” fund. Its largest initial holdings included Twitter (TWTR), DraftKings (DKNG), Meta Platforms (FB), and Tesla (TSLA).Investors couldn’t get enough when BUZZ launched in March 2021. Its assets quickly skyrocketed to more than $500 million.But the good times didn’t last long… Today, the ETF only boasts about $75 million in assets.And more importantly, this proverbial shoeshine boy called the latest market top. Look at how BUZZ sputtered out shortly before the broad market took a nose dive… |
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| The ETF is down roughly 48% from its November 2021 peak. And now, the S&P 500 Index is down around 16% from its all-time high back in January.That tells us the shoeshine boy indicator worked yet again.The moral of the story is simple…A bear market was all but guaranteed when BUZZ launched. But now, this tool directly measures the proverbial shoeshine boy for us.As a result, you’ll want to keep an eye on it.Good investing,Pete Carmasino
The above was written on May 17, 2022, in The Chaikin Analytics Power Feed The following is the current status of BUZZ vs the SPY. It is looking like good news. The momentum ratio is now favorable to BUZZ versus SPY, and BUZZ is on an upswing.
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SHOPify in news
May 9, 2022 by
SHOP has been in the news lately regarding the acquisition of a logistic company.
Prices are as of the close of Friday, May 6, 2022.
As in all previous illustrations, Green lines are periods of LONG, Red lines show periods of SHORT, and Blue lines are periods of NO POSITION.
The weekly is the dominant signal. So in this example, the only possible daily position in the year 2022 is SHORT.
AbbVie Earnings coming next week.
April 23, 2022 by
“Wall Street expects a year-over-year increase in earnings on higher revenues when AbbVie (ABBV) reports results for the quarter ended March 2022. While this widely-known consensus outlook is important in gauging the company’s earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.
The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on April 29. On the other hand, if they miss, the stock may move lower.” Zacks Equity Research, April 22, 2022
The following pictures of ABBV Daily and Weekly show that some expect lower results than projected. Prices are as of the close of Friday, April 22, 2022.
The weekly chart is the dominant position. The green line indicates BUY. The RED line indicates SELL, and the BLUE line indicates CLOSE position.
As in all past posts, When and only when the Weekly indicates BUY, then if the daily is also Green, the position should be long. The BLUE line indicates CLOSE position.
AMC, one of the “meme” stocks in the news.
June 1, 2021 by
There has a lot of news recently regarding so-called “meme’ stocks.
Last Thursday, The Wall Street Journal on B1 stated “Meme Stock Rally Resumes”. The article mentioned GameStop, AMC Entertainment Holdings, and Express Inc.
Meme stocks are those securities that have been discovered by a group of individual investors. The stocks have unusually large short positions, are usually overpriced, and share spikes of rapid growth in a short time period. Actual valuations are not important. The fear of missing out (FOMO) is a large reason to purchase, Volatility increases during times of panic-selling.
One of the most recent mentioned is AMC which recently completed a $230 million capital raise.
The following graphs show the recent price activity of AMC. The last price is as of 12:15 PM on Monday, June 1, 2021.
15 Minutes followed by daily.
Green lines represent times of purchase. Blue lines represent times of closing out positions.
Relative Strength
January 12, 2021 by
In the many past posts, I have recommended that to be successful in swing trading, one has to be aware of the individual securities relative strength as it compares to some index of its peers.
The following chart is an example of OIH which is the oil VanEck oil services ETF. I have compared this ETF to SPY, which represents the Standard & Poors 500 index.
The prices are as of the close yesterday, January 12, 2021.
The rules are very simple, and the action indicated by the up and down arrows reflects the result of following the rules.
- Buy when the target security is stronger, on a relative strength basis than the index.
- Buy ONLY when the target is stronger, has positive momentum, and the index is also going up.
- Close the position when any condition is violated. Shown by blue vertical lines.
- The rules apply to shorting when the actions are the opposite of the buy rules.
Swingtrader Suite for Day Trading
June 7, 2020 by
Many times I have been asked if the PerfectStorm strategy that works so well for swing trading has any use for the thousands of traders who day trade. Perhaps the following illustrations will be helpful. All graphs are as of the close of business of Friday, June 5, 2020.
The above picture is the daily results of BA versus SPY.
The top is BA, and the next security is SPY. The next line represents the relative strength of BA versus SPY. When the line is going up and GREEN, BA is stronger than SPY. When the line is going down and RED, SPY is stronger than BA.
The Vertical lines represent, when GREEN, that BA should be bought. When the vertical line is BLUE, the trade should be closed. When the vertical line is RED, BA should be short. Many hedge funds, when the trade indicates, will be short the opposite security, that is, when indicated long BA, they will be short SPY and vice versa.
The next picture is of BA versus SPY on a twenty-minute basis. I have left off the vertical signal lines, but a careful analysis will dictate the long/short position.
The next picture is of BA versus SPY on a two-minute chart.
There are thousands of “pairs” that can be traded in the same manner. Just ask Medallion Fund, or Citadel, or World Quant or the many other Quant funds.
I can be reached for further information at rfeit@msn.com or (516) 902-7402
Apple
July 11, 2019 by
Apple shares declined on news that sales of the iPhone were declining because of the downturn of consumer spending in China. Whether you believe that spin or realize that the costs of the new models do not offer a serious reason to upgrade the older phones is of little concern. Whatever the real reason, Apple stock went down.
Apple is one of the most widely held and more importantly one of the more actively traded stocks in the world. Share and options are traded with very small bid-asked spreads.
From a swing trading perspective, the following attached charts should be of some interest.
Daily prices are at 8:00 on Thursday, July 11 , 2019:
Relative Strength with Momentum
July 11, 2019 by
Readers of the swingtrader.com blog will have noticed that the overall theme that I have proposed is that to be a successful swing trader one has to understand the principle of relative strength with positive momentum.
I originally proposed the concept in an e-book that I had offered in 2000. Because of my lack of web marketing, it was only downloaded a few times, although it was free.
Over the past few months, I have received multiple offerings of momentum services that offer similar strategies that I have been discussing on my swingtrader.com, relativevalue.com and perfectstormtradingstrategy.com websites for the past ten years or more.
One of the offers was a service, using only four ETF’s, that the provider stated would constantly beat the market.
Over the next few weeks and months, I am going to have on the swingtrader.com website an example, updated weekly or daily if necessary, of my 4 ETF strategy. If followed, the strategy should emulate the best of the services being offered. It is certainly not a recommendation of what to buy or sell, but an example of what can be accomplished by using a relative strength with momentum strategy. It is for illustrative purposes ONLY!
The four ETF’s chosen are the result of my own research. They should portray a representation of the changes in market sector rotation. The four ETF’s have a positive and negative correlation with each other. The ETF’s are displayed here on daily charts.
I will update the daily charts when appropriate.
Remember, Green=XLE, Energy. Red=XLY, Consumer Discretionary. Light Blue=XLU, Utilities. Yellow=XTN, Transportation.
Latest update July 11, 2019, 8:00 AM
Dividend Aristocrat strategy
May 30, 2019 by
Many traders only look for high probability trades without making sure that there is also a high expectancy outcome.
A great example is so-called Russian roulette. Load a six capacity revolver with five bullets leaving one chamber empty. Spin the revolver mechanism and put the gun to your head. Pull the trigger. The player has an 83% chance of not killing him or herself. High probability, 83% versus 13%, but the 13% is a total loss. Not a few ticks or pennies, but a total loss with no possibility of recovery, ever!
Expectancy knows that regardless of the probability, there is a high level of payout that outweighs the losses.
The successful trader realizes that a system of small probability can be very successful if the average trade has a very high payout for wins versus little loss if the trade doesn’t work out. The best strategy would have a high probability AND a high expectancy.
For example, if one flips a coin a few hundred times and receives $300 each time the coin shows ‘heads’ and loses $100 each time the coin shows ‘tails’, the normal distribution of approximately 50% would earn the coin flipper a high expected return. The coin flipper would have high expected return with anything better than a 25% heads versus tails distribution.
An example of a high probability, high expectancy swing trader strategy is derived from an article in Seeking Alpha, December 23, 2016, “The 10 Best Dividend Aristocrats for 2017 And Beyond”. The piece refers to 10 stocks from a wide range of industries which have increased their dividends for at least 25 consecutive years. “Market Watch” reported on September 9, 2016, that Dividend Aristocrats stocks almost doubled the returns of the S&P stocks in 2016. Many other studies of dividend aristocrats show similar results over much longer time periods.
Below are the 10 Dividend Aristocrats mentioned in the Seeking Alpha article. Once again, the relative momentum is color coded to represent the issues that are also color coded.
It is expected that performance will be better if one were to chose only the issues that are exhibiting only positive(above the zero line, purple) momentum.
Higher probability with a higher expected outcome.
VFC=VFC Corp, ABT=Abbott Labs, JNJ=Johnson & Johnson, CAH=Cardinal Health, ABBV=AbbVie.
GWW=Grainger , MDT=Metronic, WMT=Walmart, BDX=Becton Dickinson, HRL=Hormel Foods.
Color coding on bottom chart refers to the color coding of the securities. Yellow=Yellow, etc.
Prices as of the close May 29, 2019