BKC - Strong BUY

BKC - mmmm... mmm... Burger tasting good. :-)

Burger king has clearly broken the trendline and looking at the various indicators it looks solidly poised to take out $22 pretty soon. As you can see, it has honored the lower TL and it is bound to go up from here. Some consolidation is obviously expected, but one may add more during such period.

Good Luck

Bear Market Resumes???

Please take a moment to look at the Weekly SPX chart above. This chart has been a great precursor to the market direction and as you can see from the circles marked on it, it has been pretty reliable. There are two proprietary indicators that i have developed in the last 2 years that have worked pretty well in predicting long term direction of the market.

If we take BOTH indicators together, the reliability factor zooms even further. This chart has for the FIRST time since march 09 rally, has given a Long term SELL signal. The upper indicator is racing down even faster. This adds credibility to the lower indicator, which is the primary indicator. Now, BOTH of them are in SELL mode.

As you can see, each time this indicator went to 1/-1, trend changed. If the upper indicator too accompanied properly, then we have winner on hand.

This indicator does NOT give targets. It just provides cues to market direction. Currently we have a clear SELL signal.

What does this even mean?

In short it means, if you buy put options or short stocks and come back in say 4-5 weeks or few months, chances are that you will be GREEN by huge margins. Probability of this thing going against you is extremely low as you can see from the chart yourself.

As always, take what it is worth at the face value of it. :-)

Good luck.

The Game - How the big boys play it

Stock market at least until last decade (1990's) used to be a real investing place where folks used to value companies based on their balance sheets and then park money for long term on the faith and belief that they had in companies.

Today, it is merely a game. Let me explain how it is played.

1. Game begins with identifying the trend.
2. Say, the trend is down.
3. Volatility and IV is extremely high in that case.
4. So you make up a FAKE rally and thus crushing on volatility.
5. When that happens, options are priced at peanuts.
   
6. Load up all your puts at rock bottom prices.
7. Continue your descent and that doubles your investment in a day or two. How/why? Not only price is with you during the descent, but IV also works in your favor.
   
8. Next is. Rinse/repeat until you have a fool proof way of playing this game and making money out of the casino.

Gone are the days when fundamental investing used to be "the in thing".

By the way, this game works both ways. Just 2) above changes and accordingly the play.

And please, do NOT take my word for it. Go ahead and check or even monitor this for yourself and you'd know what i am talking about.

Good luck.

IWM - Fib Price and Time Cluster

IWM has the MOST fibonacci price confluence around the 55 and 66 levels. Since we are currently trading below 66 and are most likely headed down, the next solid support would probably be found around 55 levels.

Time wise, the next major Time cluster confluence is on June 7th. It is possible that the current downtrend ends on that day around 55 or that it ends around 66.

Our Fib Price/Time clusters just gives the major confluence areas. Direction is something you need to figure out yourself. IMHO, 55 looks extremely odd at this time within about 10 trading days, so is 66 as well. Let's see how it shapes up.

Short IWM.

Good luck.

GDX - A Buy

GDX has given a clear buy signal today. Next stop could be around the 50 mark where it has a gap that it needs to fill up. If it crosses 51, it will retest previous highs of 54+ in the near term.

Long GDX June 50 call @ 1.65 with a target between 50-100%. 2.6 is the next resistance (gap), 3.12 is the final one after which all hands loose.

Good Luck.

FIb Confluence and Time Cluster

Per my analysis, SPY has the MOST fib confluence around 950 and time cluster is around 6/21. Does that mean we will reach 950 around that time and that is when we should even consider going long? Not really. It just means that lot of fibonacci numbers get crowded around that area and time. And hence there is a lot of weight and importance given to it.

We may and will definitely bounce back in between. However, i do not see any solid evidence of bouncing before that area.

This bodes well with my earlier call of 920 on SPX. Along with that XLF has major support around 13 (lower TL), which too works out well with our 950 SPX call.

So, as you can see, there are too many forces that are coming together and aligning around the 950 area to be ignored. Whether we get it or not is a different matter altogether. But something to definitely bear in mind.

Good Luck all.

Markets and how they work

Please see the above image and we will discuss this further. The above chart shows Trin/arms index (Black line) and S&P 500 (Red line)

From StockCharts.com -
Trin/Arms Index

As a ratio of two indicators, the Arms Index reflects the relationship between the AD Ratio and the AD Volume Ratio. The TRIN is below 1 when the AD Volume Ratio is greater than the AD Ratio and above 1 when the AD Volume Ratio is less than the AD Ratio. Low readings, below 1, show relative strength in the AD Volume Ratio. High readings, above 1, show relative weakness in the AD Volume Ratio. In general, strong market advances are accompanied by relatively low TRIN readings because up volume overwhelms down volume to produce a relative high AD Volume Ratio. This is why the TRIN appears to move "inverse" to the market. A strong up day in the market usually pushes the Arms Index lower, while a strong down day pushes the Arms Index higher.

So as you can see above, BOTH SPX and TRIN have been moving up as siblings. And you call folks at Zerohedge conspiracy theorists from outer planet?

As they say in LV, Place your bets.

GL


Update around 11:20AM.



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