Stocks still in uptrend, and Scripophily

Stocks still seem to be in a longer-term uptrend, although momentum looks like it might be slowing. The chart above shows the weekly etf of the S&P 500. The red horizontal lines display the fibonacci and 50% retracement levels of the previous down impulse move that started in October of 2007 and ended in March of 2009. I don’t place much predictive value on fibonacci levels, but the 50% retracement levels of major swings seem to create important areas to keep an eye on. So far that area has been a target for the subsequent rally, and now seems to be containing the price action. You’ll notice the blue moving average lines have remained positive even with prices retreating so far this year. Prices did close below the lower moving average (darker blue line) but have since recovered back above both averages, and the averages didn’t cross to the downside. This occurred with the momentum indicator in the lower sub-graph going into the oversold zone, and momentum has since turned back to the upside, at least on the weekly chart.

SP0222dailyThe shorter term trend on the daily chart to the right had turned the trend to the downside, and the rally back up over the last couple of weeks seems to be running into resistance at the breakdown point at the bar on January 21st. You can see the high last Friday and today ran into the red line that is drawn from the low of that big price break bar. The price action during the day seems to still be that price breaks get quickly bought, and then prices spend much time grinding higher. That even seemed to be the pattern today, at least until the very last part of the day when prices finally resolved to the downside. When prices started sliding in mid-January it seemed that the stock market was coming into sync with reality. I had to hold back my bearishness because the weekly trend on a technical basis still looked healthy. The rally of the last two weeks have been in sync with the weekly technical trend, but of course against my basic bearish bias. Sometimes the market just doesn’t accommodate my bias in conjunction with my technical approach. It is rare that everything lines up perfectly. For the moment I’m only trading neutral butterfly spreads with very wide wings.

I suppose the reason I haven’t been updating this blog much over the last few weeks is that I don’t really have an opinion on market direction, and therefore haven’t had much to say. Of course I have plenty to say about politics. I know that annoys some readers. But it is difficult to discuss the markets out of context with the political backdrop. Uncertainty and a massive swing toward socialism can’t be good for the market. The public waking up and the possibility that the progressive leftists (and the progressives on the right) will be voted out of office should be good for the markets. So these background issues must be watched carefully. Last Friday was an interesting day to watch. Obama gave a teleprompter reading in Las Vegas. The market had been doing well until the very minute he started to speak. The instant that he opened his mouth the market started to slide. And the slide continued until the very minute that he stopped speaking. Then the market rebounded. Wall Street had been friendly to the idea of Obama a year ago. Now that Obama is trying to turn Wall Street into a villain I think that favorable attitude has changed. I keep my fingers crossed that more and more people are waking up and this government will soon swing out of the red zone.

TuckerStockA few days ago I had never heard of scripophily. Now I find that I’ve become a scripophilist. Late Saturday I was on the internet searching for a certain gold coin and I somehow found myself on a web site that was offering vintage stock certificates for sale. I’ve had a bit of experience with defunct companies, and their worthless stock certificates. Years ago I speculated in small gold miners. I actually had the stock certificates transferred into my name. That is rarely done today, but I felt it necessary back then. The brokers that dealt in these penny stocks seemed unlikely to remain in business over the long term. Some have gone under, but in most cases the mining companies went out of business quicker. A few did pay off. But I still have a drawer full of old mining certificates. I never wanted to put them up on the wall since I didn’t want to constantly be reminded of the need to use stop loss order. In hindsight it would have been a good idea to be reminded of stops. But I digress. Another passion of mine is rare collector cars. And one of the rarest was made using my last name. Actually they only made about 50 examples. One of my regrets is that I did not purchase one of these cars when nobody wanted them and they were very affordable. Now when they trade hands, which they rarely do, they trade in the mid-six figures. But imagine my surprise when I found an original stock certificate for sale. I snapped it up right away. It is dangerous being on-line with a credit card in one hand and a glass of wine in the other. But I held myself back. They also had a Pierce-Arrow and a Duesenberg stock certificate for sale. I’ll hold off on those for now.

JUST ADDED: I received an interesting link from INO after I did this post, so I’m putting the link below. It is a quick video discussing the silver market. I happen to agree with what is said here, at least in the short term: SILVER VIDEO