Shout out to uncleharley for his T/A head and shoulders call

[javajoe]

Shout out to uncleharley for his T/A head and shoulders call on this bitcoin chart at the beginning of the year.  This along with several other charts helped me avoid any btc losses   [note: this is a shout-out to uh regarding classic T/A patterns, and not meant to be about fundamental views of crypto] 

stockcharts.com/h-sc/ui?s=$NYXBT&p=D&b=3&g=0&id=p28279243523&a=858146427&listNum=86

[uncleharley]

Wow!!!! I got one right! If you hit the update icon you will see that we are rapidly approaching the target.

[anitya]

What is the target?  Not interested in buying Bitcoin, partly because I do not want to open an account at another brokerage (e.g., COIN) to buy BTC, but mostly as a proxy for risk.

[uncleharley]

Jun 16, 2022 17:34:06 GMT anitya said:

What is the target?  Not interested in buying Bitcoin, partly because I do not want to open an account at another brokerage (e.g., COIN) to buy BTC, but mostly as a proxy for risk.

There are 2 targets because the pattern has two sets of shoulders creating 2 necklines.  The firsy target is 20,000.00.  The next projection places the target at about 8400. 


 stockcharts.com/h-sc/ui?s=$NYXBT&p=D&b=3&g=0&id=p28279243523&a=858146427&listNum=86

[anitya]

Thanks, uncleharley .

May be 20K is the realistic target because BTC is now dropping lower than QQQ.

But if I were to think about the macro and what the Fed wants to accomplish, the lower (8400) target seems more realistic - we have not had a wash out of the froth.

I also note you sold UTG.  Do you mind sharing if that is a UTG specific call, sector specific call, or the general equity market sentiment call?

[uncleharley]

Jun 16, 2022 19:17:24 GMT anitya said:

Thanks, uncleharley .

May be 20K is the realistic target because BTC is now dropping lower than QQQ.

But if I were to think about the macro and what the Fed wants to accomplish, the lower (8400) target seems more realistic - we have not had a wash out of the froth.

I also note you sold UTG.  Do you mind sharing if that is a UTG specific call, sector specific call, or the general equity market sentiment call?

UTG dropped thru a support level on my weekly chart that I had as a mental stop loss level.  I reviewed the situation and sold the position.  I may buy the position back at some later date, but, for now, I am very happy with the decision to sell.   My largest positions now are ETF's that short the broader market, with cash coming in at #2, and some smaller stock positions.   I rely on a pension and SS for day to day living expenses.

[Deleted]

I am not a technical person, but I just started a position in UTG. From what I understand it is selling at a discount to NAV and has never cut its dividend. I am buying more next week if it falls lower. Still nervous as I have never owned a CEF. I am always on the lookout to add utilities though and this seemed a CEF with a great management record, dividend history and good price. Am I in la-la land?

[uncleharley]

No, you are not in la-la land. You just do things differently than I do. Most people do that.

[Deleted]

Jun 18, 2022 14:28:16 GMT uncleharley said:

No, you are not in la-la land. You just do things differently than I do. Most people do that.

You do those differently things pretty well!  Please ring out if you think UTG is in peril.  

[uncleharley]

Jun 18, 2022 14:32:32 GMT @slooow said:

Jun 18, 2022 14:28:16 GMT uncleharley said:

No, you are not in la-la land. You just do things differently than I do. Most people do that.

You do those differently things pretty well!  Please ring out if you think UTG is in peril.  

The chart I use indicates that if UTG drops thru 28, 23 becomes the next most likely place to find support.  What to do if those things happen is up to you.

[Deleted]

You make a great point - I look at fundamentals, not technicals for buy/sell decisions. So unless it is dropping to 23 because a holding has a PG&E type liability situation or some other business related issue, I will likely buy.

[Norbert]

I think it's prudent to look at both fundamentals and technicals. If they align, that's great. If not, maybe we're missing something?

[anitya]

uncleharley & Norbert ,

Last week I sold some FIF, which is a mixture of energy and utilities. Giving up profits is annoying. If it is not for the large built-in profit, large profits on other securities already triggered this year, and a 40% cash position, I would have sold it a week earlier. Because it is a CEF, no put buying was possible - very few CEFs have options available.

Can I solve that problem by selling short the same security? My idea would be to short in the same account for the same number or fewer shares. I get that I do not have a dollar for dollar hedge because the government takes 40% of any profit I make on the short sale (when I close the short) but sitting naked with a lot of profit exposed to downdraft is painful. Any other ideas would also be appreciated.

If there is an acceptable and feasible strategy, I would like to employ that for other securities also where I have triple digit gains that are always susceptible.  

Happy to open a new "Hedging strategies" thread if that is better.

Thanks.

[Deleted]

Jun 18, 2022 17:49:41 GMT Norbert said:

I think it's prudent to look at both fundamentals and technicals. If they align, that's great. If not, maybe we're missing something?

More information certainly can't hurt!

[Norbert]

Jun 18, 2022 22:36:14 GMT anitya said:

uncleharley & Norbert ,

Last week I sold some FIF, which is a mixture of energy and utilities. Giving up profits is annoying. If it is not for the large built-in profit, large profits on other securities already triggered this year, and a 40% cash position, I would have sold it a week earlier. Because it is a CEF, no put buying was possible - very few CEFs have options available.

Can I solve that problem by selling short the same security? My idea would be to short in the same account for the same number or fewer shares. I get that I do not have a dollar for dollar hedge because the government takes 40% of any profit I make on the short sale (when I close the short) but sitting naked with a lot of profit exposed to downdraft is painful. Any other ideas would also be appreciated.

If there is an acceptable and feasible strategy, I would like to employ that for other securities also where I have triple digit gains that are always susceptible.  

Happy to open a new "Hedging strategies" thread if that is better.

Thanks.

Sounds complicated, plus there's the tax issue you cite.

If you think the broader market is continuing down, I'd short the S&P 500 in a tax protected account using SH; continue to hold positions that you have good reasons to own / not sell.

My guess is that the bottom is lower than here, but it's very possible that the bulls will stage a rally or two before we get there.

I note that the PQTIX managers were short the stock market going into last week, but dumped the hedge before the end of the week. It's very challenging to get the swings exactly right. Still, they're up 24% ytd, which is better than a poke in the eye with a sharp stick.

I do admire Win's and Sara's focus on strong, wide moat, divvie paying stocks for the long term. Unfortunately, I personally am retired and unwilling to give back the outstanding gains of prior years. I have no qualms whatsoever in sitting out most or all of 2022 given the end of "easy money", high valuations, technical signals, and geopolitical risk.

In fact, I quite enjoyed ringing the cash register.

I thought a correction was coming at the start of 2022; now we might be closer to the bottom than the top? Who knows? It's a dangerous market. I'd only risk capital that you can afford to "lose" until the next recovery. Don't like the situation one bit!

N.

[anitya]

Thanks, Norbert .

I have some sector bet ETFs and individual stocks like BRK in a taxable account that do not necessarily behave in sync with the broader market and need to be protected. E.g., FIF. Inverse stocks / ETFs are not available for those. Buying put options sometimes is a possibility but they have time decay. Looking at a very successful hedging strategy using options JHDAX losing 14% YTD does not inspire me that I, a novice, could protect meaningfully using options.  Also, put options are not available for everything I own.  Hence, my thought of selling short.

I do have SPYs and QQQs in the taxable account from GFC, I should have protected using inverse ETFs in an IRA. Once I raised 40% cash, I thought I would just let the broader market ETFs ride, which was a mistake. Inverse ETFs on broader markets is an exercise for me for the next bear market. I think the broader market is closer to the bottom than to the top - not saying much, of course.

As you can see, I have a two different problems.  Need a solution for the first one.  At this point, I plan to ride out the second problem, though it was not a smart choice when made.

[Norbert]

Looking at the S&P 500, I see major support down around 3330-50. Getting there would mean working off all the COVID-19 rally gains. Only 300+ points to go.

www.tradingview.com/x/WOWBjrPl

Last week the index gapped down. Maybe we head towards 3330-50 after first closing the gap?

Uh? Thoughts?

N.

[uncleharley]

The chart I use is this one;    stockcharts.com/h-sc/ui?s=$SPX&p=W&b=3&g=0&id=p35308650206&a=524485138&listNum=86  

It is a weekly chart of the S&P 500.  I also like to look at other major indexes to confirm or dispute what the S&P 500 is telling me.  The current narative that I get from the the S&P is that because of light trading volume at most levels between Fridays close and 3200 there is unlikely to be any support until we reach 3200 and that trip should be fairly steep.  At 3200 we had an increase in trading volume on the way up.  This increase will likely be duplicated on the way down and happens to coincide with the 61.8% Fibonacci retracement level creating some technical support. 


My thought is that the rush to 3200 could or may cause all the Presidents Men and Women to rush out in support of the markets resulting in an excellant escape route from the domestic stock and bond markets.  The efforts of all the Presidents Men will likely spur inflation or the expectation of inflation on and the S&P will continue its journey down to 2200.    

  EDIT:  An alternative, less dramatic, thought is that the technical support at 3200 is adequate enough to develop a consolidation pattern.  Consolidation patterns are usually continuation patterns & the S&P will most likely continue down to 2200 after some period of time.  There are exceptions when a consolidation pattern becomes a bottom or a top, however one must wait for that bottom to develop.  I seriously doubt that the S&P can make a meaningful advance from 3200 while we are in a rising rate environment.

EDIT #2:  After further review of my weekly chart I should also note that widening BollingerBandwidth, which is on the chart, implies that the current trend is accelerating.  This is confirmed by the current pattern of the MACD indicator.  They seem to confirm that my first, more dramatic, thought is the most likely one to matierialize.   We shall see in the fullness of time. 

[Norbert]

uncleharley

Thanks. We both appear to think 3200-3300 is a given. The questions are how directly we get there and whether that support level can hold.

Are you net short equities at this point?

[uncleharley]

Jun 19, 2022 16:09:31 GMT Norbert said:

uncleharley

Thanks. We both appear to think 3200-3300 is a given. The questions are how directly we get there and whether that support level can hold.

Are you net short equities at this point?

Yes, based on data at my fido account I am abt 10% equities, 40% cash, and 50% short against the S&P 500 and the NDX 100.  80% of those shorts are 3x ETFS and 20% 1x.   I rely on a pension and SS for daily living expenses. 

[anitya]

My macro head tells me that equity markets are not going to bottom until Q1 2023 but my market following head tells me that we are going to bottom near 3200. That is a lot of chop to be down only 12+% over six months. It will be great if somebody could reconcile the Q1 2023 bottom with a S&P 500 3200.

[uncleharley]

Jun 19, 2022 23:01:18 GMT anitya said:

My macro head tells me that equity markets are not going to bottom until Q1 2023 but my market following head tells me that we are going to bottom near 3200. That is a lot of chop to be down only 12+% over six months. It will be great if somebody could reconcile the Q1 2023 bottom with a S&P 500 3200.

I cannot reconcile that detail either.  I simply cannot believe that the broader stock market is going to advance while we are in the early or mid stages of rising rates.  That is my fundamental reason for believing that the S&P will test 2200 or possibly lower.  I know there is a bottom somewhere, but currently inflation is accelerating or peaking, The fed has just begun QT,  and stock prices are falling.  3200 will come long before the fed is done. 

[anitya]

One of the difficulties with forecasting the bottom at this time is there is not enough disgust / distress among retail community but the institutional (or smart) money started to panic only two Friday's ago (last Monday) when the CPI and 0.75% Fed rate hike were leaked. The dip buying mentality has not changed materially, notwithstanding all the macro headwinds. Perhaps, as the saying goes, Beatings to continue until morale improves (or in this case, collapses)!

[FD1000]

Jun 18, 2022 17:49:41 GMT Norbert said:

I think it's prudent to look at both fundamentals and technicals. If they align, that's great. If not, maybe we're missing something?

+1.

From Tom Bowley
Quote" Rotation is Turning Bullish; Shorts Beware!

A key rotational change took place in December 2021 as the S&P 500's final high was led by defensive sectors - never a good sign. I wrote and talked about it then as it was a major contributing factor that led me to declare the market top in late December/early January. I then discussed my potential target on the S&P 500 of 3500-3800 at MarketVision 2022, held on Saturday, January 8th. The U.S. stock market is probably THE key leading indicator. When the S&P 500 sets new highs, it's generally a bullish statement about the U.S. economy. But when those highs are led by defensive sectors like consumer staples (XLP) and utilities (XLU), it's giving us quite the contradictory statement as Wall Street is clearly growing more defensive. Many times that can be the "nail in the coffin" for the bulls. Well, the opposite is typically true when the S&P 500 bottoms. New lows on the S&P 500 are a bearish statement on the U.S. economy, but if rotation is moving back INTO aggressive sectors like technology (XLK) and consumer discretionary (XLY), Wall Street is prepping for a bottom and big rebound. From the S&P 500 low on May 20th at 3901.36 to the Friday, June 17th close at 3674.84, this benchmark index fell 5.81%. Here's the breakdown on how the S&P 500, the NASDAQ 100 ($NDX), and our 11 sectors performed over this 4-week period:

First, note the top two performing sectors - staples (XLP) and discretionary (XLY). Why would consumer stocks show relative strength? Isn't everyone now finally talking about a recession (for what it's worth, I was telling EB.com members months ago that a recession is what everyone would be talking about once inflation talk began dying down)? Who would want to own consumer stocks as we head into a recession? Wall Street, that's who! Why did Wall Street turn defensive in December, ahead of a market top? It's easy to answer that question now, isn't it? They were prepping ahead of time for the inevitable drop that I was cautioning everyone about 6 months ago. So now, let me ask you that question again. Why would Wall Street be buying consumer stocks over all others, just as we head into a recession? Here's your answer: This year's S&P 500 performance (-23%) has discounted all the bad stuff already. The price weakness always comes before the awful fundamental news. Now retail traders are extremely bearish, saying the market can't go anywhere, but down. Wall Street disagrees. I'm sticking with Wall Street and calling a bottom here."

Attachments:

[anitya]

This from NY Fed survey of Household Finances Expectations* released a week ago-

The mean reported probability that U.S. stock prices will be higher 12 months from now point to 36.2%. [That does not seem bearish enough to call the bottom now.]


*part of Survey of Consumer Expectations (SCE)