August 2012 – Andrew Thrasher

The Only Jackson Hole Analysis You Need

Posted on August 30, 2012 by Andrew Thrasher

I’m sure most of you have read enough about tomorrow’s Jackson Hole speech by Bernanke to make your eyes bleed. I agree with Josh Brown in his post, titled “QE3: Shut up, you have no idea.” when he said that no one can predict what Bernanke will say, all of the media pundits that are making calls as if they had pillow talk with Ben the night before is just foolishness and a waste of time.

Just to get it out of the way, my opinion (and it’s just that, Bernanke hasn’t returned my voice mail yet) is that the market will be disappointed tomorrow. It doesn’t seem to me we have the economic data to warrant another round of QE. Now he may hint at something else, like I said before, no one knows for sure so don’t lose any sleep trying to figure it out.

What is important at this point is to take a step back and look at where we are today regarding market structure. The chart below shows the trading range we are currently in. We have defined resistance at 1420, the previous high as well as the rising trend line. On the downside we have the 50-day moving average sitting just a hair above the bottom trend line at 1380.

When turning our focus to other components of the market, we’ve had the 10-year yield drop to 1.62% from the last time we looked at the 10-year on August 22. While the S&P 500 has closed +/- 1 point the past three days, the VIX has risen over 6%. OptionPit put out a great piece on the topic of the VIX this morning, detailing that the rise in the VIX has largely been due to the massive amount of put buying being done on the SPX, causing the volatility index to rise above what he feels its fair value should be (somewhere in the single digits). Buying pressure continues to fall as traders appear to be losing confidence.

However, investor sentiment has created a dichotomy. On one hand we have sentiment data from places like II and AAII that shows bulls outnumbering bears at a wide margin, but when you look at the market commentary being put out, it seems there are an awful lot of bears out there.

Everyone is waiting for tomorrow. Twitter and StockTwits will likely explode once Bernanke takes the podium. At (expected) major market moving junctures like tomorrow it’s important to not forget your trading plan and stick to your risk management principles. Yes it’s possible that what he says could have a dramatic impact on where we go from here, but the Fed isn’t the only game in town, Europe is still imploding and China’s Shanghai index is still hitting new 52-week lows. Lots to think about and digest.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.

The Moving Average Battle Taking Place in Natural Gas

Posted on August 28, 2012 by Andrew Thrasher

I think the setup presently occurring in natural gas is pretty interesting, as you can see from the chart below the commodity is currently bouncing between its 50- and 200-day moving averages, hitting the 50-day as resistance and finding the 200-day as a support almost on a daily basis over the last week.

I last addressed nat gas and its moving averages on August 13th when I talked about whether these two averages could hold as support, although I was seeing negative divergences in momentum and money flow. So far, it appears the 50-day was not strong enough to fight the divergence but the 200-day MA is doing its best to hold on. It seems there might be a little more weight leaning on the downside from here, but any positive news we get on Friday from Jackson Hole could shift the playing field.

New TraderPlanet Contributor

Posted on August 27, 2012 by Andrew Thrasher

I wanted to share with my millions (okay, maybe not millions) of readers that I’ll be posting a weekly (sometimes bi-weekly) article to the newly redesigned TraderPlanet.com financial site. My focus will be primarily writing about interesting technical setups, similar to what I cover here on the blog. Kiri Brecht, who had been with SFO Magazine for 10 years, is now the new Managing Editor at TraderPlanet, I have no doubt she will do an excellent job bringing great content to the site. They are still in the process of tweaking the design, so check it out.

Don’t worry, athrasher.com is still my home and I’ll still be posting here throughout the week. In the meantime, go read my first piece about the Aussie Dollar/Kiwi.

Do You Want To Be Right or Make Money?

Posted on August 23, 2012 by Andrew Thrasher

This is a blog based on technical analysis, using statistical data to measure the movement of price and volume. You won’t see many references to P/E ratios or free cash flow, I leave that to the CFAs of the world.

It is my belief that information can be gleaned from the data retrieved from price and volume movement. But there is no single answer, method, or belief that is the secret key to unlocking Wall Street. There are too many forces at work and emotions involved to have something that works 100% of the time. If it’s your endeavor to prove this theory wrong, I wish you the best of luck.

The Federal Reserve has more money than you, has a louder voice than you, and is better at shifting the tides of the market than you. You are the paddle boat to the Fed’s battle ship. To fight the Fed is a losing battle most of the time, depending on your time frame. We’ve already seen in past years that it just takes Bernanke to whisper the notion of add’l easing to send your paddle boat sailing through the water, whether it’s the direction you intended to head or not. You can shout your opinion of where things are suppose to go and what XYZ stock is fairly priced at. None of it matters. Would you rather be right or make money?

I could show you chart after chart of why I don’t feel this rally has legs to continue, why momentum isn’t mirroring price action, and why buying pressure isn’t anywhere to be found. None of this matters when Bernanke takes to the microphone. You’re not bigger or better than the government, and unless your George Soros taking on the Bank of England, it’s a losing battle.

This is nothing to complain about and it’s not a reason to give up on technical analysis but it is something to recognize and respect. We have Jackson Hole at the end of this month, where we will get another glimpse at what (if any) action the Fed will take. If this aligns with what price and volume are showing us, great. If not, respect it so you may live to see another day.

Golden Resistance

Posted on August 22, 2012 by Andrew Thrasher

We last looked at gold back in July when it was breaking out of a pennant pattern. Gold and silver have both been experiencing some strong price action here recently after the break. Gold ($GLD) has come up to its 150-day moving average at $159.37, which has acted as support and resistance since 2010. It will likely take some strong buyers to advance from here.

The gold miners ($GDX) ETF is also at an interesting level of resistance. The chart below shows a falling trendline that has been support 5 times since 2010 and then was resistance earlier this year. I’ll be watching to see if this resistance can hold or if gold miners can break free.

Between the moving average resistance in $GLD and the trendline resistance in $GDX, gold bulls have a lot of work to do in order to continue this advance.

UPDATE: Once we got the minutes from the last FOMC meeting, nearly all ‘risk on’ assets took flight, including gold. Currently these levels of resistance have been broken but still are likely to be important levels to watch going forward.