Trend Trace Mrkt Update 2011-Dec04

8/3/2019 Trend Trace Mrkt Update 2011-Dec04

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Dec. 4th, 2011 (Sunday) Vol-4/I-59/v01 TrendTrace LLC. 2011 [email protected]

U.S Stock Indexes (Weekly Performance):

www.TrendTrace.com

Trading carries risk, pleasesee last page for Terms of Use

Weekend Brief Market Dashboard Stock Charts Performance Charts

Charts created with TradeStation, TradeStation Technologies Inc. All rights reserved.

MARKET

TREND

TrendTrace Composite Changed to +6 this week from -5 (see page A-1 for the chart)

Index Price Action

S&P500 and NASDAQ daily charts sporting lower-lows and lower-

highs; below their 200 DMAs but made it above their 50 DMAs

MARKET

HEALTH

Accumulation/Distribution Volume

Some accumulation this week, but 20 day rolling number of

accumulation days nearly equal distribution days

Market Internals 60% of the stocks are above their 10, 20 and 50 but only 40% of the

stocks above their 200 DMAs

Leaders Setting-up Markets often dont rally without leaders breaking out or setting to

break out we are seeing few of this as of now

RISK

APPETITE

Volatility Indexes VIX fell to 28 this week from 35 last week but is still slightly elevated

Inter-market Correlation Speculative assets like oil, stocks and gold gained; US Dollar lost

over 1% as did US treasury (TLT)

+6 now from -5 last week*

: Spotlight on S&P500s performance in

December since 1950

* See TrendTrace Composite Chart on page A-1

TrendTrace Composite jumped to a bullish +6 (see Market Dashboard below).

News flows related to attempts of alleviating the euro-zone crisis and improving US economyhelped most stock markets across the world post solid gains this week. After previous weeks USNovember ISM manufacturing index turned higher (from 50.8 to 52.7), this week we had data onBlack Friday and Cyber Monday showing retail sales exceed expectations and ADPs private sectoremployment for November showing improvement with declining layoffs.

The euro-zone stock markets posted rip-roaring gains this week:

This was on the back of the news that (a) ECB is lending money to IMF to help struggling euro-zone nations, (b) the coordinated intervention by central banks lead by the US Fed with the ECBand the Japanese authorities and (c) EU leaders are talking about a possible new or extendedeuro-zone treaty for better fiscal union. These oversized moves in the world markets continue tobe news drivenmore on next page about large (7%+) weekly moves in the US stock market...
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2011 TrendTrace LLC.

www.TrendTrace.com

Charts created with TradeStation,

TradeStation Technologies Inc, All rights reserved.

[email protected] Trading carrier risk, please see last page for Terms of Use

Page:2Dec. 4th, 2011 Sunday

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TrendTrace to friends.

NUMBER OF WEEKS OF 7%+ GAINS OR LOSSES

This week we saw the S&P500 and the NASDAQ gain in excess of 7%. Such gains (orlosses) are not very common:

S&P500

WEEKLY CHARTS SPANNING THREE YEARSBlue bar: 7%+ gain, Red bar: 7%+ loss,

Light gray bar: normal gain/loss

NASDAQ

This data suggests:1. That the NASDAQ can be far more volatile than the S&P500 as it has had more weeks of

7%+ gains or losses2. Years have gone by without the occurrence of such large weekly gains or losses (may be

this is changing now)3. Such moves have occurred more often in the past 11 years then other comparable

timeframes4. Disproportionately large number of such large moves have occurred during bear markets5. These moves typically happen near the bottom and end of corrections if in a bull market

Gains Losses

Since 1961 13 15

2000-11 7 8

Since the2009 bottom

2 1

2008-09 bearmarket

3 4

2000-03 bearmarket

3 3

Gains Losses

Since 1971 25 31

2000-11 17 21

Since the2009 bottom

4 2

2008-09 bearmarket

4 5

2000-03 bearmarket

9 14

NUMBER OF WEEKS OF7%+ GAINS/LOSES

So what is the takeaway? It is tempting to conclude that we may have seen the bottom of thecorrection that started in July of this year - but like most other things about the market thereis no sure thing that one can make an out-sized bet.

Do note the lower than average volume this week, more on the next page

S&P500

NASDAQ
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3/20


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Weekly charts of major US stock indexes

Volume increased this week as the major indexes gained. This is a good sign, especiallyafter light volume multi-week selloff. But volume on most of the indexes (except The

Dow Transport) was below the 10 week average.

S&P500The Dow

NASDAQ The Dow Transport


4/20


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Monthly Weekly Daily

NASDAQ

S&P500

Market trend acrossdifferent timeframes

TrendTrace Indicator:Blue bars indicate a

bullish trend (Up),red bars indicate abearish trend

(Down) and graybars indicate apotential trend

transition (Neutral).

MultipleTimeframe Analysis

Quote of the Week

Hedge funds are having their worst year since 2008. Fund managers can get away withlosing money if stocks end the year lower, but they get fired if they lose money in apositive environment. Being less than half invested on the long side isn't a way to catchup to the market.

-Jeff Macke interviews Jeff Saut (chief investment strategist at Raymond James)

Yahoo Finance/ Breakout Video titled: European Action Is Good Enough for Now: JeffSaut (December 2, 2011)

Link to the article: http://www.spiegel.de/international/europe/0,1518,800775,00.html

Number of stocks making 52 highs and 52 week lows

It has been a while since the number of stocks making 52 week highs (green) rose sharply.

New 52 H/L for AllUS Stocks

* The views expressedhere dontnecessarily reflect the views of the editors/publishers of TrendTrace Market Update
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5/20


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Commodities & Currencies

Emerging Markets

Industrialized Nations

US Sector ETFs

The non-defensivessectors gainedenormously thisweek. Homebuilders'ETF (XHB notshown here) gainedover 12%.

Arrows indicate the defensive sectors

The US Dollar gaveup over 1%, tradersbought commodities(and stocks).

Stock markets endedgreen all over theworld!


6/20


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Daily Chart of NASDAQ with the TrendTrace Over Bought-Over Sold oscillatoris shown in the chart below

The market was clearly in over-sold territory one week ago and this was depictedhere the last weeks market update. It bounced robustly this last week. The magnitudeof the bounce and the accompanying volume suggests that this move upwards may sustainfor some weeks. There is quite a bit of overhead supply to work off so best to be alert forpossible continued volatile action.

Market was over-sold last previous

week and itbounced this week

* The contents in the article above dont necessarily reflect the views of the editors/publishers of TrendTrace Market Update

TrendTrace

Bo

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ark
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7/20


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46 out of the 61 Decembers since 1950 have ended positive for S&P500, that is 75% of thetime Decembers have closed above the close in November.

17 out 21 Decembers since 1990 were positive. 8 out of 11 Decembers since the year 2000were positive.

% gain/loss for eachDecember over the past

three decades:

Average % gains in December in every decade, exceptthe 80s, exceeded the average monthly gain for thatdecade.

Blue Bar: Average gain for DecemberRed Bar: Average gain for all months

Average % gains in December over the past five

decades is the highest compared to any other monthof the year:

Historical performance clearly strengthens the casefor the current season to favor the bulls. Note thattrading only on this information is l ike driving using only arearview mirror. This historical data (like the rearviewmirror used while driving) is one of the many tools to asses

the markets.


8/20


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The case for the Bulls

1. US economic numbers are showingsome improvement (albeit modest)

2. Some investors think the stockmarket is sporting low valuation (PE)

3. Euro-zone leader are trying hard toalleviate the problems there

4. Major central banks across the worldare coordinating their action to add tomoney supply and availability forcredit

5. We are in seasonally bullish months ofthe year

6. VIX, a volatility measure that is oftenconsidered a panic gauge, appears tobe headed down

7. The bounce from oversold conditionsthis week was rather robust and themarket did not lock into oversold

levels as is the case with many

bearish moves8. After the initial drop in the year, the

stock market has been more size-ways than down and given the rathernasty news flows we have had earlierin the year especially regarding theeuro-zone crisis - the market has heldup rather well

The case for the Bears

1. The stocks market indexes are atresistance levels just under majorsupply zones (see page A-1 charts ofNASDAQ and S&P500)

2. The NADAQ and S&P500 are stilltechnically in a downtrend with lower-lows and lower-highs and are belowtheir 200 DMAs

3. European and Chinese PMI havedeclined

4. Euro-zone problems are too complexto be fixed, even a kick-the-can-down-the-road approach is proving tobe difficult

5. Only a modest number of stocks aresetting up with healthy bases; stockslike AMZN and CRM are still sportingbearish head-and-shoulder pattern

6. VIX is still slightly elevated at above25

7. The rather large market movementsup from the bottom and down fromthe resistance the sudden ralliesfollowed by lack of follow-throughhigher-highs appears more l ike bearmarket action

The stock market may be at a critical point either setting up to rally or roll over.It is easy to make a bullish or bearish case in the current technical, fundamentaland economic environment depending on the vantage point one chooses:

A trader who looks at market indexs price based signals alone may trade on the bullish side,while a discretionary trade may choose one or both the sides to start with. But clearly

prudent risk management is critical position sizes, stop-losses and incremental (pyramid)exposure are critical for managing risk. These large moves, while benefitting short-termtraders who use intraday charts can potential ly shred a swing-traders capital with poor

judgment and risk management.

Please share this newsletter with friends and colleagues. Refer TrendTrace.com toothers. Dont forget to tell them to download this PDF as it has more information

than the TrendTrace WebPages.


9/20


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A few things to consider (this is not an exhaustive list) while evaluating potentialtrading opportunities:

Setup, Triggers and ExitsAlways validate that the market direction and trade-setups are as per your tested trading

plan prior to considering any trading idea here. Please evaluate the setup entry, stoploss and target - as per your risk management requirements.

Profit targetConsider taking at least a part of the profit after 10% to 20% gain unless in a very strongleader.

Earning and eventsIt can be dangerous to hold stocks through earnings or major news events. Especiallythose positions with no profit cushion. Earning dates are typical ly not mentioned here andeven if they are please validate on your own.

Moving Averages used:On Daily Charts: 20, 50 and 200 DMAsOn Weekly Charts: 10 and 40 WMAs

Current Positions Held:Long:Short:

Dec 4: Open a partial position around here ($53) with stop-loss at $50.

Relative Performance to NASDAQ100


10/20


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Dec 4: Enter around here at $621 with stop-loss $599.

Dec 4: A break above $121 on good volume should work.Nov 27: RP line at a new high!

Relative Performance to NASDAQ100Relative Performance to NASDAQ100


11/20


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Dec 4: Entry around now ($142) with stop-loss at $133.Nov 27: RP Line continues to ramp-up!

Dec 4: A break above $121 on good volume should work.Nov 27: RP line at a new high!

Relative Performance to NASDAQ100Relative Performance to NASDAQ100


12/20


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Dec 4: A break above $50.25 on good volume should make a good entry.

Dec 4: Entry on pullback at around $410 with stop-loss at $390.Nov 27: RP line is showing that it is outperforming the NASDAQ100.




13/20


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Dec 4: Open partial position now at $79 with stop-loss at $74; add on breakout above $82.52.

Dec 4: Entry around here at $43 with stop-loss at $39; add on breakout above the handle at$45.50.

Nov 27: Shaping a cup-and-handle?



14/20


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Dec 4: Entry on breakout above $71 on good volume, stop-loss at $65.50.Nov 27: Shaping a cup-and-handle? Notice that the current base undercut the previous

consolidation.

Dec 4: Entry around here at $62 with stop-loss at $58.



15/20


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Dec 4: Volume dry in the handle, entry right here at around $85 with stop-loss at $79.Nov 27: Shaping a deep cup-with-handle? Notice that the current base undercut the previous

consolidation. The price action in the past five weeks is looking like a bullish flag.

Dec 4: Broke out on tepid volume best to avoid for now.Nov 27: RP line at a new high.



16/20


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TrendTrace Compositerose from -5 to +6

Neutral

Lower-low and lower-high Above the 50 DMA (thick

line), below the 200 DMA(dashed line)

Near down trendingresistance line

Bearish short term

OBV Neutral

Neutral

Lower-high and lower-low Back above the 50 DMA

(thick line) Near down-trending

resistance line

Bearish for now

OBV Bullish

A-I

TrendTrace Composite Indicator: +4 or more: bullish, -4 or less : bearish, -4 to +4: transitional/uncertain

This reading is displayed on theMarket Direction dial (seeMarket Dashboard on page-1).


17/20


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A-II

LEGEND FOR THE INDICATORS IN THECHARTS BELOW

Percentage of stocks above their:200 DMA (blue)

50 DMA (red)20 DMA (green)10 DMA (black)

About 60% of the S&P500 and NASDAQstocks are above the 20, 50 and 200 daymoving averages.

These market internals improved sharply,but the number of stocks above the 200DMA is still less than 40%.


18/20


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A-III

The panic gauge, volatility index VIX that is normally inversely correlated to S&P500:is slightly elevated above 25 at 28, but it closed down a good seven points from previousweeks close.

It was a risk on week from the get go. US Dollar lost, safe haven Treasury

(TLT) was down and speculative assets such as stocks and oil were up. Goldgained possibly in anticipation of increase in inflation as central bank around theworld committed for coordinated action to unleash money supply.

0-min.ntervalerformance

Chart: Fridaylose toriday close


19/20


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B

U.S. INDEXES SECTORS SPIDER ETFs

EMERGING MARKETS ETFsINDUSTRALIZED NATIONS ETFs

INTER-MARKET ETFsCURRENCY ETFs (vs. US Dollar)

METALS ETFsENERGY ETFs

These energy ETFs may not represented the movement

of their underlying commodities very well.


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Page:20Dec. 4th, 2011 Sunday C

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