The Trix, the S&P 500 and the Biotech Index

The other day, a friend (even if I don´t know his name), asked me where I thought the S&P 500 would close for the year. I said I did not have a crystal ball or something like that, for the simple reason that I just don’t think that long in advance. I use technical analysis as a way of navigating the volatility more in the short and medium term. So, I typically have a view from a week to a few weeks into the future.

But the question was not only interesting, but at the same time, I realized that many times I do project how high an index or a stock will go up, even if I don’t know the time scale in which this will happen.

As you know, if you are here, I use the Trix as my main basic technical analysis tool. Why? because I have found it to be very good and reliable. Show me something better and I will switch.

Typically, I use the weekly Trix, because it seems to give good signals and because it has a time scale of weeks, which I find convenient to navigate. In my experience, the Daily Trix is not as consistent and the Monthly Trix, you could fall sleep waiting for a good signal to take place.

Let’s look then at the weekly Trix for the S&P 500 and I will tell you how I use it.

SPweekly

This is the weekly trix (the red waivy line). I use the turning points up as buying signals. Thus, all of the vertical lines I drew in blue in this chart since 2013 would be buying points. As you can see, you would have made money in all of them, if you sold when the the trix turned down. Currently, I am fairly positive, because as you can see, there has been a buy signal for four weeks and there seems to be no stop to it. Note that the Trix did quite well in predicting the recovery in October and in February. And indeed on Oct. 8th. I told you to buy en force. And in February 20th. I repeated the buy signal and apologized for making an earlier call a bit ahead of time.

Note that how deep the trix goes seems to give better and longer lasting signals too. So, the lower the red line is, the more powerful the move up will be.

Both times the calls worked quite well. But could I have predicted how high they would go. Well, I didn’t but I must say I told the same friend in October we would see the end of the year near the highs and mentally thought the same after the February bounce.

But what can I say now?

Well, the Trix weekly is turning up, but from a high level, so that all I can say is that we will be moving up for a few weeks. From experience I would say about six weeks and 200 points, the slope of the Trix is not extremely sharp.

But, can I say something longer term?

Yes, but using the Monthly Trix, rather than the weekly Trix:

SPMonthly

This is a 17 year Monthly Trix. As you can seethe signals are quite good too, except for some that did not last long after the Internet bubble in 2001.But even in those, you did not make much money, but the Trix told you to sell in time, by turning down.

What is interesting now, is that the Monthly Trix is also giving a buy signal, much like the weekly Trix. But it is more powerful than the weekly one, because it is deeper. Ad given that it is a monthly indicator, the signal is much longer lasting. Thus, all I expect in six or seven weeks, is for the market to take a rest before resuming its rise. From the slope and the depth of the signal, I would say it will be like 15-20% from the signal or about 2,400 by the end of the year. This should have been the answer to my friend!

Not many people are that bullish!

However, thinking about these issues led me to an index that is even more bullish than the S&P and which is really the reason for this post (besides answering my friend’s question). The index is the Biotech Index the IBB; shown below for its monthly version:

ibb.jpg

As you can see, the Monthly Trix has given five very powerful signals since 2008, all of which were very good. Well, right now, or four weeks ago, the Monthly Trix started turning at a level not seen since 2002 for this index, indicating that a very powerful bull run may be in the works. (note that the IBB Trix has never been as low as that for the S&P 500, its correction in 2008 was almost mild, comparatively speaking

How powerful? Well, two signals at these levels since 2002 have given a 30% rise and an 80% rise.

And the plot says we are barely starting…

As usual, I will write a post if something changes. The Trix is not infallible and news can always turn it the other way, but monthly signals like these have turned out  to be quite robust.

Trix Saying Buy, Not Rushing It This Time

First, I would like to apologize, in my last post, I broke one of the most important rules of technical analysis: Discipline. I tried to be cute and be ahead of the curve, telling you the Trix was saying buy before it really had confirmed it. While it is true that the signal looked good and it seldom gives a fake signal at that point, it id this time. let me remind you what it looked like (You can click on charts to see them better):

sp500

In the blue circle, I show the fake signal that never turned. I assumed that because the daily Trix was turning, that the weekly Trix will follow, but it was not meant to be, there was no confirmation and in a couple of weeks, the Trix turned down and the market followed (or led) for which I apologize.

But, as you can see, the Trix is now giving a buy signal at an even lower level and this time, there is a confirmation, it has turned around (I have actually been watching it all week, but the week closed today and it stayed that way with the string close today). Thus, this time, it is conformed, TRIX says buy and this should take us to the prior levels. At that time, we will see, for now, I see a test of the highs where there is very strong resistance.

You can buy the market, or you can buy individual stokcs. many are turning, but sticking to the discipline, I will only note that have confirmed the buy signal in their weekly charts.

First, one of my usual favorites, $AAPL:

aapl.jpg

As you can see, a very clear signal in the Trix upturning after the stock was beaten down on somewhat exaggerated expectations.

Others giving confirmation:

cbm

$CBM a leader in the previous rise, it dropped quite a bit and now is clearly saying  buy. Or take $NKE, clearly saying buy for a but now:

nke

Or take $PM; old Phillip Morris International, not only showing a strong TRIX, but squeezing and breaking out:

pm

Or, take battered $DIS, a  clear case of sell on the news when the last Star wars movie was released:

dis.jpg

Others are a bit behind, but given the strength (and discipline!) of the $SPX signal, I expect they will confirm in the next week or two.

Hope this time, discipline pays off! If history is any guide, it should!

TRIX Rules, Now What In 2016 For Stocks?

It was very appropiate for me to write the last post, as the TRIX showed once again its power and predicted we were going up short and medium term and that is exactly what happened. and on Oct. 8th., people were really scared. TRIX said: Go for it!

And the market went up with force!

The question is what happens now, almost three months later. Everyone is fairly negative, so I once again turn to the TRIX for wisdom and what I see is fairly positive.

In particular for the S&P 500.

First let’s look at the monthly TRIX for a number of charts. This is really, really long term. For example, the monthly TRIX (red line) for the S&P 500 seems to be turning up as shown in the next graph:

SP500Notice how few monthly signals there are. Two deep ones in 2002 and 2009 and a few clear intermediate ones in 2006, 2010 and 2011. The current one is not yet clear, but if you look at the weekly chart:

sp500wThe weekly TRIX also shows it is turning up, even if it has yet to turn. But if I look at the Daily TRIX:

sp500dThe daily TRIX is turning up, which will drive the weekly TRIX to turn around and so should the market.

Yes, this could all fail, there were two bounces in 2001-2003 that failed, but this is very rare, the higher (much higher) probability is that we will see a short, medium to long  term move up in the SP500, according to the TRIX. That is what the TRIX is telling us at a time of markets being negative, which is very good if you are contrarian.

Now, we all know that the market in the second half of 2014  was driven by the FAANG stocks, which I like to say is the FAANGM stocks since I include $MSFT in the group.So, let’s see what each of them is saying:

$FB Facebok

Monthly:

fbm$FB monthly has not had a very long run. It gave a sell signal in early 2014and a buy in May 2016. The uptrend seems to be intact. Thus, we have to check at the weekly chart to see what it is telling us right now:

fbwWell, as you can see the TRIX is down, has yet to turn, but anytime it has been down like today it has been an opportunity to buy. Thus, I expect from my experience for the TRIX to turn, the daily TRIX (not shown, does not show much, except that the graph shows compressing Bollinger bands.

Let’s look at $GOOG

Well, the monthly TRIX is very nice:

googmit gave a beautiful signal in mid-2015, which has been sustained up to now. The weekly chart is down:

googwBut that is good, if it were up, it would mean the monthly uptrend could be dead. But once the weekly turns, it will certainly continue to go up, just wait for it to turn up.

$AAPL on the other hand is not pretty:

aplmthe monthly chart is not pretty, it is actually ugly, no suggestion that it wants to turn, which contrasts with the market. And the weekly chart is not better:

aaplwThe other “A” in FAANGM, $AMZN is not clear in the monthly chart, it could be toppy:

amznmbut the weekly chart suggests more good times are coming as it has corrected down, but has yet to give a buy, but it looks close. Note in particular, how the scalloped shaped TRIX has guided so well in the jumps so far:

amznwIn contrast, $NFLX is not sending a clear signal on the monthly TRIX:

nflxmbut the TRIX seems to be drifting, very much like it did in 2013, when it was certainly not a sell signal. But let’s look at the weekly indicator:

nflxwwhich is also drifting and telling us very little. Wait for it…

And thus we come to $MSFT, one of the best monthly charts right now:

msftBut the weekly is showing a minor correction on its way to much higher prices ($65?)

Thus, $MSFT and the SPX are showing the best charts at this time. I think $AMZN; $GOOG; $NFLX and $FB, will turn up eventually, the question mark right now is $AAPL. But with the market showing such a strength pattern short and medium term (months) I would not bet against any of them.

As a bonus, one of the strongest patterns I see now is that of Warren Buffet’s outfit $BRK.B, whose monthly looks outstanding:

brk.bmNote how since 1998, $BRK.B a monthly Trix signal has worked well 5 out of five times in 200, 2003, 2005,2009, 2012 and 2014. The sixth time should also be a charm! Base on my experience, this is a powerful signal by the TRIX on this stock.

 

 

 

 

 

 

 

Making a statement as to where stocks are headed

People are scared. They don’t know where stocks or markets are headed. Neither do I. But over the years, I have talked about how useful I have found the indicator called Trix to be. Particularly, when it comes to predicting long term changes in the market.

So, even though the blog has been abandoned for quite a while, here are my two cents: The Trix is saying is time to get back in the Market in on a weekly and monthly basis. In fact, some stocks are giving pretty nice buy signals.

Monthly

First, look at the monthly Trix (red line above) for the S&P (Blue candles) As you can see (you can click on all charts to enlarge graph), it is currently at levels comparable to bounce backs that took place in the past, except for the 2000 bubble and the 2008 financial crisis. Since I don’t believe that we are at a comparable stage, then the fact that the Monthly Trix is at this level, suggests to me we are going to turn soon. In fact, there is even a hint of turning present already. Not compelling? I know it is not, but recall that each candle is one month, this is really a long term indicator.

Why don’t I wait to say anything? Simple, because the weekly Trix, the one I follow the most, has already turned around:

Weekly

and as you can see, the signal has been fairly consistent in the past. This is why I don’t wait the 44 canonical days after a “crash” to call it a bottom.

But you don’t have to rush. According to the daily Trix, we have to rest first, as you can see below:

Daily

the daily Trix is high, suggesting there will be a restful period for 5-8 days before the market resumes its rise.

What to buy?

So many things. Oil stocks, for example, already said buy, like ConocoPhillips (COP):

COP

While tech stocks like Alphabet (GOOG) are barely giving the buy signal now:

GOOG

Buy what you like…I just like the market, thus I am making my statement…

Should You Play Ali Baba?

I am really not updating this blog too much, but since most of the last few posts have been about IPO’s I thought I should say something about the upcoming Ali Baba IPO.

First, the same rules apply. Much like the $FB IPO, what you should do will depend on the first day:

1) If the price “pops” stay with it as long as it keeps above the opening price the first day. If it wilts, get out and wait for a return to that price.

2) If it does not pop, don’t even try it. Wait for it to recover.

What do I think will happen?

I think it will “pop”. There is hype. It is not too expensive. It has real earnings. It has a big “moat” around China. ($FB was not as clear the first day, although it has executed flawlessly)

The problem is, it could pop too much and come back down.

In the long run, $BABA is formidable, it has little competition in China and it will expand all over the world now. Fund managers that like $AMZN; should prefer $BABA with a forward P/E around 30-40, compared to $AMZN’s 200-220. Think about it, $BABA is $AMZN, $EBAY and Paypal combined into one for all of China with over one billion people.

The IPO will start trading on Friday. I expect $90 per share or north of that after being priced around $70-$75.

After that, the market rules and I will update if necessary.

P.S. I should have mentioned that the way to play the $BABA IPO has been thru the $YHOO shares since this company owns 23.5% of $BABA. However, $YHOO is selling part of its stake, so that the pop would have to be large in order for you to benefit if you buy $YHOO shares today

 

 

What’s Up With $TWTR’s shares?

TWTR$TWTR shares have been soaring the last few days. The valuation is simply absurd, but as you can see from the graph, the stock keeps going up day after day. In four days, it has gone up from about $60 to a close of $73.31 today.

The valuation is absurd, but the graph above is the typical IPO graph, in which the stock opens up the first day, goes down, but it is only until it reaches the high of the first and second day that it soars.

And indeed, the day $TWTR went past the $50 of the first day, it just kept going and I suspect it will continue doing so.

Why?

Simple, $TWTR’s float is tiny. Today, 82 million shares of $TWTR traded, but there are only 70 million shares available for trading. So, if 50,000 people and 20,000 institutions decide they want to own 1000 $TWTR shares (and I have had at least four acquaintances ask if it was a good investment), then there will be few shares available for trading and the stock will go up. Like it is doing right now…

Think about it, more and more people want to own 100,200 or whatever shares, they hear it is going up and even more want it. Even if it is absurdly expensive. It may be the beginning of a cult stock and there are few shares to have around.

So, $TWTR goes up, not because of short covering, or because people are speculating, it goes up because its shares are scarce, very scarce.

In fact, the $TWTR IPO has been similar to the $FB IPO; the difference being that $FB did the IPO technical ride up it in slow motion.

A very similar graph occurred with $FB except there were of shares to trade, lots of them, there is almost two billions of shares available for trading. In this case very few shares are available but a sort of cult $TWTR shares is forming.. For those that do not seem the similarity, the FB graph is the same but took a year and a half to do its thing. Sort of like $CUDA, which is doing the same, but very fast.

Here is $FB

FB

So, I think $TWTR will keep going up, and one day it will fizzle, but it seems that that day is not close.

What to do with the Twitter IPO

Everyone wants to know whether the Twitter IPO will be fumbled like Facebook’s. So, I will give you my take:

Read the post on Facebook

and then read this post after Facebook went public, if Twitter goes down on the first day.

The same rules apply: It is expensive, there is hype and you will likely not get any shares before IPO day. So, if it shoots up on day one, you can ride it until it stops. If it goes down, don’t touch it until it comes back up to IPO day trading price.

About the only significant difference between the two is that Twitter will sell fewer shares.

The main difference between the two, is that Facebook was further along the line of generating revenue when it went public and had ore users.

People say the hype is less, but I hear a lot of hype. I hear a lot of “experts” saying that it is cheap, they are excited, etc.

At $17 dollars, Twitter is at what is likely a reasonable price, but I would bet it opens way above that, where it may expensive.

Trade it, don’t buy it…

yet. Like Facebook, there will be a time for that later on.