SPY showing signs of toppiness

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Choppy to lower prices ahead.

1. Low readings on VIX             imply that investors are complacent. A spike in VIX             up 5 points would create a tradable bottom for 3-5 days.

2. Crude Oil             is at the high end of its historical range and it has a lagged, negative effect on the overall stock market.

3. The long slide in metals, specifically silver             , shows that investors have thrown away their silver             together with their bonds. After stocks outperform relative to metals, it is wise to expect a different tune for at least a month or two.

4. Earnings yields are at their lowest levels in 20 years relative to 12-month trailing returns on assets in the S&P500             . The median return on the S&P500             is roughly a 3.5% return on assets. That is not worth taking the risk of a 20%-40% decline the value of your holdings in order to return 3.5%. More on this in later updates.

I wish I could tighten the stop closer, but using roughly 3 average daily trading ranges is about as tight as I am comfortable with. If we see a spike up in VIX             of 5 points, I would recommend cutting the short position and re-positioning on a bounce.

Tim 2:15 PM EST, Wednesday, August 14, 2013            
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I agree with this one. I'm planning to enter short E-mini S&P500 but tighter stop just above the maximum
Have a quick question.On the chart where u mark the blue arrow, the lagged prices (blue curve) went lower from that point on while the SPY continued higher (Nov prices were near SPX high 1475ish). In the current scenario that high on SPY is 169, the lagged curve is pointing lower but you suggest that prices will follow lower it this time? Isn't that a contradiction in looking at lagged SPY w.r.t earnings, while I'm bearish I'm not sure I see lagged earnings as a good "causal" factor for a decline here.
Thanks for the question "at" about the "blue line". I am looking at that line as a reference to where the market was one-quarter ago (63 days). There is no simple rule to follow here. The market might follow its lagged price or it might not. Since the market has had a positive 3 month rate of change since January, perhaps it will have at least a slightly negative rate of change for a little while. The interesting thing about 63-day rates of change is that it makes an interesting "trending indicator" - for example - if a stock is above its 63-day lagged price, then it is in an "uptrend". This doesn't preclude me from looking for a trade against the uptrend. I hope this reply helps a little.
at timwest
I thought looking at lagged price was quite interesting, then I realized stocks are forward looking. Which then meant two things
1. Current price relative to past quarter expectation of future earnings are really just confirming that outlook today.
2. As on the chart, the price may or may not continue in the direction of lagged prices, so the current outlook is what drives price in the sense of price peaks (eg your comment about Walmart)
3. As far as a trend indicator, this may be more insighful than the 50MA and 200MA folks use. And knowing that three quarters of earnings reference definitely helps as a frame of reference (esp when considering market tops). Which I think is a neat.

I may not be seeing something here, I'll think about it some more.

Thanks for replying :)


at at
fyi, this was what i was looking at ..
SPY(4h) - finally wedge plays out
Congrats Tim on getting your chart featured and as always, great work!

As I would agree that the markets are showing signs of toppiness, I'm not sure that it's ready. One thing I do know is that the markets will always surprise you.

I think the big question is what will happen in October. Often people associate October with crashes but October can also be a bear killer. Not sure if this will embed but here is a interesting video from back in 2011. Link: http://www.dailymotion.com/video/xlj8vd_october-the-bear-killer_tech

<iframe frameborder="0" width="480" height="270" src="http://www.dailymotion.com/embed/video/xlj8vd"></iframe>

It's been an amazing year for traders. Just keep doing what you've been doing but keep everything a bit tighter as we approach the 9/11 anniversary and of course the treacherous month of October. Best of luck traders.
Thanks Barker. I typed out a nice reply last night to you on my ipad but it didn't publish, so I'll reply again now.

I've been trading since working as an assistant to a brokerage firm in 1984 and I've tried to just find times when it seems like everyone is thinking one way and has stopped acting on that line of thinking. Then at that time, there is a strong chance of a dramatic move in the opposite direction to the existing price trend. It isn't perfect and it isn't using seasonals, rather, just watching the tape and watching the action of the leading stocks.

Thanks for all the great work you are doing here at TradingView. Your charts are excellent and you are one of the few that I follow. Keep it up!

Wishing us all well to ferret out good trades with group input and to get rid of bad trades faster. Group trading works and I'm happy to be part of it here at Tradingview.

Barker timwest
Curious. What stocks would you consider leading? I have noticed certain large cap stocks showing signs of weakness recently. Some examples. XOM IBM KRFT INTC MON ect. ect. Many of which, by the way, are very attractive here.
!!!!! Wanted to open this trade yesterday but decided to wait.......

BTW what happened here?
Believe or not , the market is down on good economic data. Jobless claim is down , but the market fears that improving economic data might prompt the FED to reduce stimulus.
Well, Walmart changed its forecast for much lower earnings and Cisco announced earnings and was down 10% overnight. Trouble in Egypt added some turmoil and frankly, the market is severely overvalued relative to other investments and is vulnerable to some profit taking. So, we shall see how this decline unfolds.
admin PRO timwest
Thank you for the explanations, really appreciate.
wait for the next bounce!

That is what I was looking. Neckline test well underway today.
Great work, clean simple and to the point.
nice chart from one day ago man ... close to this crazy idea from ... 10 days ago ;)))
Hanging Man ...
, what is your comments ... welcome here
admin PRO martinex
Nice. Did you actually sell short?
any my ideas are following with real trades , SL also ;) ... time to bed , GN
admin PRO martinex
Good trade. GN and take care.
It would have been helpful to have this email arrive BEFORE today's trading, instead of AFTER, as the Dow and SPY tumbled (the Dow down over 200 points).
timwest PRO Ed-LEd-L
Hello "Ed-LEd-L", sorry if you received the chart much later than when I posted it just after 2:15 PM EST (note on the chart "Tim 2:15 PM EST, Wednesday, August 14, 2013"). I wonder if you can change your settings so you receive chart updates immediately. Another idea is to check into Tradingview each day before the close, perhaps at 3:45PM EST, to see if there are any interesting trades that you could consider taking or exiting. Wishing you the best. Tim

PS - I put an alarm on my phone that rings to alert me each trading day just before the close, just in case I am away from the market or get side-tracked. Hope this helps.
Amazing how you analyze fundamental information with technical info and get it right.
Dear Timwest
Do you remember me ?

... Fed Wins

That works
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