One of the perks of being a subscriber of The Entry Points premium content is that Trader Scott sends our members comments every morning about market directions, movements and stocks we are watching for set ups. We release these comments in an edited form afterwards from time to time to allow our visitors a little peak into our premarket information.
10/23: In an uptrend, I look for reasons to buy – setups. This whole uptrend since March 2009, at times when I was concerned shorter-term, it was always about looking/waiting for a really good entry point on the long side – not wildly prognosticating a “crash”. We got a 20ish percenter in late 2015-Feb. 2016. Way too many people when they do their stock market analysis, are completely focused on why the stock market will go down. Or up for that matter. Instead of saying it’s a bull market. And in a bull market, even when some bearish indications (volume/price spread for instance) you just give it plenty of room to “right the ship”. In an uptrend, most bearish technical situations resolve themselves to the upside. I’ve talked about the following concepts numerous times – like distribution morphing into reaccumulation. Yes most participants have no clue what distribution even is, but the “bearish price action” they focus on usually slowly is absorbed by strong hands. Occasionally it isn’t and you get an intermediate correction. And even less often you get a failed secondary rally. That is when to gt much more concerned. But in an uptrend, please learn to give it plenty of “breathing room”.
And again, I don’t care about all of the useless commentary about why “the stock market is a bubble and will crash”. These people are totally missing the huge uptrend, and will continue to, If you’re going to be wrong about a huge bull market, be wrong about how high it will climb, not predicting THE TOP, and how it will crash. And as opposed to most noise out there, why are stocks in a bull market? The huge 10 year accumulation. And why will gold do exactly what stocks are now doing. The huge 19 1/2 year accumulation, plus the current 4 1/2 year accumulation. And why are they both headed wildly higher? The bond market bear. But there could be some tradeable rallies. I traded the December 2016 rally in bonds. Currently, if we take out 122.5 on TLT, I will cover short positions, puts, and it could then set up a pretty good rally.
A couple weeks ago, I discussed that if we are going to have another big push lower and retest of the lows in the $, we would need to push thru, likely upthrust, 94.30 first. To repeat – it is not the $ hurting gold at this point, it is the Yen. In the meantime, the backup in gold is really helping to reset sentiment, and a push below support will setup something much more interesting to me than the Jobs Day low. I said at the time, that low just wasn’t all that impressive. Let’s see how this plays out. Gold is in a bull market.
Stocks –
We love strong stocks, and for this week, we will be watching recent strong stocks – CREE, TEAM, SPPI, QURE, BITA, LLNW, VYGR, MZOR, SKX. AIMT is going to all-time highs on recent very good news.. I’ll be watching into reactions. I’m watching IMGN on a break below 5.10.
Two weeks ago ACRX was on our bounce potential list, and we talked about the first EA, and the need for the lower EA. It was retesting multi-year support. This is how to prepare for some of these with these symbols.
GBT has been a strong stock, and has some news and the shares are down. There could be a bounce potential in there on a backup in accumulation.
10/24: The focus of most everyone is on the stock market, but the size and economic effects of the bond market is immensely bigger than stocks. In December 2015, my belief was we would see a quickening of the pace in the flattening of the yield curve. And I’m not going to get into the economic theories here, as it’s not my forte, but the reasoning behind it was we would continue to see a surge in short-term rates –
“In the Sep. update, I said the Fed would be raising rates soon, even though, all of the way over paid famous talking heads were claiming the Fed would not raise rates, maybe ever. The reason is that my technical work convinced me the short term interest rates were about to explode higher. And explode they have – 3 month, 6 month and 1 year TBills are at 7 year highs – up by 10 -20 times from the lows. And to repeat the Fed does NOT lead the bond market, they FOLLOW. And when the Fed does catch up to the bond market, short term rates will begin to move even higher. Expect to see a flat yield curve within 18 months as the 10 year yield will stay stubbornly low for a while before also exploding higher….meaning higher short term rates will quickly cause higher deficits….Finally, to repeat it is NOT falling, but it is rising interest rates that will lead to increasing inflation.”
So here we are late in 2017 and the yield curve is now the lowest in about 10 years, but I do expect that to slowly start changing. And more and more this will become a huge concern –
“Americans haven’t been spooked by government debt lately, but fate seems to have provided a Halloween-themed wakeup call: the Treasury Department announced Friday that the U.S. government ran a budget deficit of $666 billion dollars in the 2017 fiscal year, which ended September 30.
That devilish number is an $80 billion increase from fiscal 2016. Though federal revenues are at an all-time high, expenditures grew even faster, producing a deficit equal to 3.5% of Gross Domestic Product. This marks the second year in a row that the deficit rose as a percentage of GDP, following steady declines between 2009 and 2015.
According to the Treasury Department, the increase in expenditures was driven by entitlements such as Social Security and Medicare — as well as by the rising cost of financing outstanding debt.
A rise in interest rates paid on the federal debt could drastically change the national conversation on government spending. Public concern about the nation’s budget deficit has waned in recent years, in part because stimulus spending following the financial crisis was deemed a necessary evil by many, but also because low interest rates have made financing the debt more affordable.”
There is not much talk of this yet but there will be, as later in 2017 into 2018, the next leg of the multi-decade bear market in bonds takes hold. I have never had faith in CBs ability to keep rates low forever. It’s baffling why people have been saying that since 2011. even as short-term US rates have exploded higher. The market was already disproving the theory of CB omnipotence over markets. Next year their alleged omnipotence will be put to the test. Why? The rising interest rates on the long-end. Those low rates have made them look truly powerful, but they aren’t. It is truly absurd how few people that talk about the massive nine year distribution in the US long-term government bond market.
And again, like from the December 2015 post, both stocks and gold will eventually rise together, courtesy of bonds. Since that post short-term rates have risen substantially, to ten year highs, yet gold has also rallied (and the stock market). And we still have to go thru the circus of the media and the internet freaking out about gold every time it looks like the Fed has to raise rates. Amazing. Two years ago, I expected rates and gold to rise together. And remember all of the dumb comments from people claiming that the Fed rate increases, or the end of QE, or “balance sheet reduction” would cause stocks to get creamed. Accumulation and distribution are the two most powerful market forces, BY FAR. Do you believe this yet or not?
Six weeks ago I did a post about the Baltic Dry Index, and since then DRYS has had a solid rally, but bashed into resistance. The shippers are putting in long-term bottoms.
10/25: Global government bond yields across the globe are rallying today (prices falling), with the US leading the way. Back at the beginning of the year, with the world bearish on bonds, I started talking about the likelihood of TLT rallying back into the big gap at around 130 for the next shorting opportunity, when the next leg of the bear market will begin (the top). And in the beginning of September, in premarkets I kept talking about using the TLT rally to short bonds, with put options being a good instrument. On 9/7 I bought October and December puts, and covered the Octobers too early, but kept talking about using a break below 122.50 on TLT to cover the Decembers. And that is still my plan. I bought TLT in premarket as a hedge,and may unwind the whole thing today. And will it be too early? Maybe, we’ll find out, but the sentiment is turning quite bearish, as stories are coming out all over about “why” bond yields are surging. A hint to the millions of of the rear view mirror analysts around the world – bonds are in a secular bear market. I said that exact thing even as I was buying TLT into the wildly bearish sentiment in early December. And here is a post with the discussion of the big picture in bonds as related to gold (and other assets) –
“So looking forward, as opposed to what the mainstream talking points are, what is possibly the single main reason why gold is so bullish, long-term? Let’s view the actual history of gold vs interest rates, which you would think is also available to Wall Street and the financial media. US 3 month T-bills bottomed in January of 1940 at .01%, and then they topped 41 years later in May 1981 at 16.8%. Forty-one years later. And gold must have fallen that whole time, right WSJ? Wrong. Gold was generally stable to rising that whole time until January 1980, as it rose from $35 to $875. Hence the conditions/the environment as to why the rates rise is vastly more important.
Why is all this so important now? Bonds and short-term paper go thru humongous long-term cycles. Bond yields had the 40+ year surge into 1981, when the 30 year yield topped at 15.2% on October 26. And one year ago the final “spring” bottom in bond yields set up beautifully with the 30 Treasury yield hitting 2.1% on July 6th, 2016 (arrow). This was the likely end of the 35 year plunge in bond yields (actually, US shorter-term yields bottomed in 2011). This will have enormous effects on all markets when the bond bear kicks back in soon.
After the Donald J. Trump victory last November, we witnessed the mass selling of bonds (and gold) and the spike in yields. So early last December, amid the 100% certainty of a “crash” in bonds, the beautiful set up arose for me to step up to the plate and buy TLT, which was discussed in this post. At that time in early December, the bearish sentiment was simply extraordinary, rarely is there unanimity of opinion as we saw then. Yet many of these same people were some of the most rabid bond bulls in early July of 2016, smack into the yield bottom. Back then, all of Wall Street was extrapolating low yields forever.
But this price rally from the December 2016 lows was just a counter-trend move within a major bear market. So with the big drop in yields (price rally) over the last 6+ months, now it’s once again time (like in July 2016) to start getting concerned about the next bottoming process in yields (top in prices).
Since the first Fed hike in December 2015, bonds and gold have generally been tightly correlated. And analysts have extrapolated this relationship to eternity. But as shown in this post, the positive correlation is not remotely written in stone as Wall Street now believes. There is much, much more to gold price movement than just at a single Fed rate increase, and then freaking out about gold – it’s the conditions/the environment as to why the rates rise which is vastly more important. Those big picture conditions currently are things such as currency destruction (not just the US$), banking problems, consistent military confrontations, the rise of India/China/emerging markets (yes Russia), general commodity bull market, etc.
So sorry Wall Street, but gold is in a huge accumulation area. And as timing is everything in markets, instead of freaking out about interest rate increases, I’ll use the sudden big selling waves/sentiment shift, “caused” by those rate increase fears, to accumulate the shiny metal. Because the slow, steady mass exodus in bonds over the next few decades, will be very bullish for gold.”
In the meantime the Yen (USDJPY) is still hampering gold, but the pair is getting back into that major resistance area, and may be anticipating the ECB meeting tomorrow. I’ll look to use a break in gold if it occurs, and a setup, as a buying opportunity. Gold is in a bull market, backups are for buying.
10/26: Change of character is an extremely important tool. It actually encompasses all other tools. Because to be successful at this is about risk and probabilities, actually they are the same thing. In essence, what is a change in character? It’s really just change in ownership, weak-strong, which is overall bullish (time-frame-dependent) or strong-weak. Change in character, like accumulation (part of a change in character), is NOT a timing tool, but it is a warning to pay attention. Everything we discuss here is about patience (entries), change of character, setups, probabilities, opportunities, and exiting positions. This can (should) be used on any time-frame. So some things related to that. In the video last week about QQQ and the TQQQ short-term trade setup, I said “today’s low becomes the next support area for a short-term spring potential”. So that’s what I was watching yesterday with the break of that support, and I was wanting to see a push into the low gap (arrow), Didn’t quite setup, so I did nothing, but just understanding to have a plan, and also understanding a spring is a change of character, on any time-frame. That trade is over now, but just watching for setups, is the key..
Back in July/August we started discussing the “change in character in DRYS”, “something it hasn’t done in a long time”. That was explained months ago, and discussed several times since. we discussed DRYS, the shipping leader, again in the Baltic Dry Index premarket six weeks ago, and a few times about the long-term bottom in the shippers. It’s doubled since the Baltic Dry Index post. and yesterday DRYS had a monster move into the highs. I didn’t catch nearly enough of the move, and sold too early yesterday, but again “change of character.
For the stock market, every little selloff is “the end/the top/the crash”, but for me, when the volume explodes with the price action, that’s the big warning. And the first thing for me then, is not freaking out, but selling some longer-term positions – remember give a trend plenty of “breathing room”. And that volume needs to be persistent. For now there are some things here and there.
There’s a video about new trades yesterday, OSTK is one of them. It’s in a long-term accumulation area. Other recent positions IMMU, MZOR, scratched AVEO. Today watching GRUB, more new highs, we love strong stocks (during an overall bull). And we watch the relative strength performers during reactions in the overall bull. Also LN, DECK, Novo on reactions, AMD below 11.80, RGSE more orders but a lot of work ahead of it, LRTTF if it ever has a big reaction.
10/27: We all need an edge at this business, the better the edge, the higher our probabilities of doing this business well, over time. Many people who strive to get an edge in this business only focus on their “system”. My belief is we should have several ways to get an edge, Much of that edge has nothing to do with a system, or even trading, specifically. It’s the overall approach, the approach to doing well at anything in life, like the winning attitude, the persistence, the mental toughness, psychology, etc. All of this adds up to – probabilities and actually reducing risk.
Being prepared and being patient to wait for opportunities to set up very well, and doing this consistently over time, and stepping up to the plate. And things will work out over time – probabilities. This is one edge. Most people don’t do this. And learn what accumulation is, what the trend is (time-frame dependent) and what your setup is within that, and things just work out. And remember/realize there is nothing even close to perfection. Our own trading results are never a straight line up, but the goal should be to have it look like an uptrend on a chart, with the waves going upward over time. The people, and there is a horde of them, who for years have been fighting the uptrend in the stock market, have missed so many amazing opportunities. There is nothing wrong with having concerns in markets, but those concerns should be relative to the trend, meaning in a bull market, give it “plenty of breathing room”. Concerns will work out over time – to the upside. We should be looking to buy reactions (with setups of course and time-frame dependent). In the recent video about TQQQ I laid out the potential setup in QQQ, after that rally and into the next reaction, with the break of support as a buying opportunity – spring. It didn’t set up well enough for me, but the point is not freaking out about every selloff in a bull market – they are (potential) opportunities. And certainly don’t impose our own concerns, doubts, fears onto or into the trend of the market itself. I see so many people doing this. They are afraid of – the economy, the elections, the “news”, the President, the “tax reform”, the Mayan calendar, the solar eclipse, whatever – and freak out and then they impose that into a market, and every little selloff “confirms” their own fears. And they miss yet another opportunity. Remember breathing room. There are selloffs in uptrends, just try to judge which ones may have more legs.
The stock market, especially the lagging technology sector, is moving again. May be another short-term topping process today.
With the $, back in late August we talked about the likely formation of a spring, and then talked about a rally thru 94.30. The $ rally is not the problem with gold, silver yes, it’s the $ rally with the Yen weakness. The Yen is affecting gold. The USDJPY pair is closing in on that big resistance area. So again the much better setup in gold for me is the break of….first, And to set it up for me, we need the preliminary rally above the support first, and the trading range, so it can break it and spring it. That’s my setup.
I talked about OSTK a few months ago along with retailers, and a couple times this week and with it’s crypto angle.. Possibly a top today, so I’m watching carefully to sell into the rest of my position. It’s in yesterday’s video along with DRYS trades, etc. Today watching CREE, IMGN (long), MZOR (long), MGTI (crypto), GSAT, see if LN can set up over the next dew days or so, Also LRTTF had that big selloff, so watching over the next few weeks, XNET, LPTH. We lreally like ABBV, BITA into reactions.
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