10/3 Almanac

On Monday, Oct. 3: Manufacturing index.

There are 19 trading days before the October options expire, 47 the November, 75 the December and 110 the January.

On the jump, market stats, econ reports, and the trading calendar . . .

9/30 Covered Calls

This daily posting tracks my covered call plays for October and other base positions.

Covered Calls

sym	phase	trend	adx		200/50	40/10
BIDU
CAR
CNX
COG
CVI
GMCR
HAL
JNJ
KEG
MCO
NOV
SPRD
TKR

I have out-of-the-money puts, as insurance, on BIDU, CAR, CNX, HAL, KEG and NOV.

Other Base Positions

• SPY, October iron condor bounded by $126 and $111.

sym	phase	trend	adx		200/50	40/10
FL			18
SPY			19

9/30 Indicators

Stocks

sym	phase	trend	adx		200/50	40/10
SPY
QQQ
VIX

Bonds

sym	phase	trend	adx		200/50	40/10
TLT
JNK

Tangibles

sym	phase	trend	adx		200/50	40/10
USO
GLD

Global

sym	phase	trend	adx		200/50	40/10
UUP
EEM

9/30 Forex

Ah, my brokerage lives!

On the daily chart, USD/CAD had burst above the 20-day Donchian Channel and has, as yet. not retraced below the breakout level. The uptrend began on Sept. 19.

sym	phase	trend	adx		200/50	40/10
USD/CAD			42

Fascinating to note, the 16 hour decline (with two retracements) of EUR/USD on the hourly chart leaves the pair within the sideways channel that has been in force since 4 p.m. Eastern on Sept. 21. The breakout levels at US$1.3601 and US$1.3383 (with no buffer).

Tech Probs

My brokerage's trading platform, ThinkOrSwim from TD Americtrade, is down, down, down. No posts until they are up, up, up.

9/30 Almanac

On Friday, Sept. 30: Personal income and spending.

There are 22 trading days before the October options expire, 50 the November, 78 the December and 113 the January.

On the jump, market stats, econ reports, and the trading calendar . . .

MOS Watch

The Mosaic Co. (MOS) has set the third in a series of moderately lower lows since Aug. 1. It's not a triangle of any sort, but rather a sloppy sort of downward channel with a sticky top.

It sort looks like a sideways trend, but it's more of a sidewinder wannabe.

sym	phase	trend	adx		200/50	40/10
MOS			34

The top of the price oscillations has remained steady at around $74 for two touches since July 22. The broader downtrend began Feb. 14, and the price has, since then, fallen by 41%.

Today's decline came after the earnings were announced, a dime below the estimated, and the price has pulled back sharply from the low, although it remains down for the day.

For my account, I'm looking at MOS as a bear trend I can latch on to and ride for awhile. But I'm uninterested as long as the lower lows aren't accompanied by lower highs.

A lower low set Monday was followed by a one-day gap up, and then two days of decline to the present new lower low.

A price move above Tuesday's high, $61.90, would suggest that the top of the formation is still sticky, and I would lose interest entirely. A failure to attain $61.90, followed by a new lower low, below today's $52.61, would tell me that there's a real downtrend developing, rather than a wannabe.

GLD vs. GDX

The gold metal exchange traded fund, GLD, and its gold mining company counterpart, GDX, are showing strikingly different behavior on their charts.

sym	phase	trend	adx		200/50	40/10
GLD			28
GDX			24

GLD has performed a three-day, three-gap drop to below the 20-day Donchian price channel, but then gapped sharply back into neutral phase, where it remains.

GDX, by contrast, has shown a clearer downward course that continues today.

Gold is an interesting play, in my book, simply because there are many different ways to play it -- GLD for the metal, GDX for miners, GDXJ for the junior, more speculative miners, DGL for gold futures with some contracts as much as a year out.

Each one behaves a little bit differently from the others, making a chart comparison on all the possibilities a smart move for traders like me interested in tracking gold.

GMCR Watch

Green Mountain Coffee Roasters Inc. (GMCR) has been on a roll since February, gaining 205% at the high on Sept. 20.

sym	phase	trend	adx		200/50	40/10
GMCR			18

But even before the peak things had started to get choppy, and today GMCR dropped below the 20-day Donchian price channel into bear phase for the second time since the rise began.

The intraday drop has been sharp today, 8% from the open with no news to prompt the day's rout.

GMCR's chart is a textbook study in ambiguity.

The phase change comes amid a sideways trend that has held force since late July. The top boundary has been touched three times, in the $111.42-$115.98 range, and there has been a very sloppy lower boundary, that began at $89.01 and was touched once more, a breakdown to $83.50.

That's a wide range, around 30% of the current price, indicating a massive tug-of-war between bargain hunters who are bullish on GMCR and shareholders who want to take the money and run.

The chart shows higher high, lower low, and two moderately higher highs.

The trader of pessimistic temperament will focus on today's sharp drop and the new bear phase to justify a bearish stance (although perhaps waiting for an upward retracement).

The optimistic trader will note that the price is in the middle of the sideways range, concluding that there is no reason to think that the range has been disrupted.

The pessimist will buy puts, and the optimist will open an iron condor, perhaps structured to be profitable from $115 down to $85.

The cautious trader, of course, will simply stay on the sidelines, and thinking about my own account, that may be the best course.

Analysts generally rate GMCR as neutral these days, now that the upward rush is over. The second quarter return on equity is a respectable 18%, with a debt/equity ratio of 0.23 -- a bit too high for a growth stock in my book, but not too awful.

Of course, those numbers came in before the price rise became choppy, and that makes third-quarter earnings, on Oct. 26 a make-or-break event.

GMCR has 81% institutional ownership, and the wide-swinging sidways price action since late July makes me wonder whether some of those institutional owners aren't getting cold feet and reducing their exposure.

9/29 Covered Calls

This daily posting tracks my covered call plays for October and other base positions.

Covered Calls

sym	phase	trend	adx		200/50	40/10
BIDU
CAR
CNX
COG
CVI
GMCR
HAL
JNJ
KEG
MCO
NOV
SPRD
TKR

I'm holding puts as insurance on BIDU, CAR, CNX, HAL, KEG and NOV.

Other Base Positions

• SPY, October iron condor bounded by $126 and $111.

sym	phase	trend	adx		200/50	40/10
FL			18
SPY			19

9/29 Indicators

Corporate high-yield debt (JNK) has dropped below the 20-day Donchian price channel into bear phase, but looks to be retracing back to neutrality.

Stocks

sym	phase	trend	adx		200/50	40/10
SPY
QQQ
VIX

Bonds

sym	phase	trend	adx		200/50	40/10
TLT
JNK

Tangibles

sym	phase	trend	adx		200/50	40/10
USO
GLD

Global

sym	phase	trend	adx		200/50	40/10
UUP
EEM

9/29 Forex

...was doldrums time. -- Hunter S. Thompson.

Doldrums is what I’m seeing on the 54 forex daily charts I follow. No breakouts, a few timid essays at the 20-day Donchian channel that quickly lose heart and retreat.

On the hourly charts,

EUR/USD has broken a third time above a sideways trend in force since 4 p.m. Eastern on Sept. 21. It could be interpreted as a head-and-shoulders pattern, but I think that would be in error, because the second shoulder peaks higher than the first. I’ve set my breakout levels at US$1.3601 and US$1.3383 (with no buffer).

AUD/USD’s sideways trend began at 5 a.m. Eastern on Sept. 22. The channel boundaries are US$0.9904 and US$0.9628.

9/29 Almanac

On Thursday, Sept. 29: Gross domestic product .

There are 23 trading days before the October options expire, 51 the November, 79 the December and 114 the January.

On the jump, market stats, econ reports, and the trading calendar . . .

NLY Watch

High dividend shares be wonders to behold. I mean, it's raining free money, just for owning the stock. What's not to like?

One of my favorite high-div plays is Annaly Capital Management Inc. (NLY), a real-estate investment company. it pays out quarterly, and today went ex-dividend on a 14.3% annualized payout.

sym	phase	trend	adx		200/50	40/10
NLY			27

But this morning, NLY went ex-dividend and gapped down 3.1%, below the 20-day Donchian price channel, into bear phase.

And that's the problem with income stocks. When the issue goes ex-dividend, the price drops by about the same amount. The dividend to be paid amounts to about 3.6%.

That characteristic of high-dividend plays makes them almost impossible to analyze on the chart. Today's drop into bear phase means absolutely nothing about the stock's future prospects.

NLY is trading at the low end of the present sideways trading range that has been in effect since October 2009. The range has been seriously broken only once, with a very sharp downward break after the March 2009 dividend.

I owned NLY at the time, as I do today. On the chart, the initial decline looked like the normal dividend drop. But in this case, it just kept on dropping, and the nature of the decline became apparent only when it was too late to avoid a large shrinkage of the capital value of the shares.

NLY, of course, came back, but there's never any guarantee of that it will -- with any stock.

I can only hold NLY and other ex-dividend play by making them something outside of my chart-based trading system. And that leaves me unable to make any decisions about whether to sell or not in order to protect my base capital. With NLY, I become the worst thing in the world for a private trader: A buy-and-hold investor.

Are there alternatives? Sure. It's easy to construct covered call plays that will return 2% a month -- 24% a year.

Covered call premiums are less reliable than dividends, but the stock can be charted and analyzed, and I can formulate rules for selling in order to avoid capital loss. With dividends, I can only rely on faith that the stock will hold its value and that my fine high dividends won't be wiped out by a capital loss.

Faith-based trading. Not my favorite approach.

DUK Watch

Duke Energy Holdings Corp. (DUK) has peeked above the 20-day Donchian price channel as it resumes a rise that began on Aug. 9. So far DUK has traversed 19%.

sym	phase	trend	adx		200/50	40/10
DUK			23

The question for me, as I think of opening a position, is whether the move has any staying power. DUK has recorded higher highs and higher lows four days running since completing a 3.8%, two-day correction. On the other hand, after setting a higher high today, it has pulled back to the price channel boundary -- a sign the breakout maybe a head fake.

A close above the price channel would be an entry signal for me. Otherwise, I'll wait and see what Thursday's open looks like.

DUK has a moderately OK return on equity, at 8.5%, and carries a fair amount of debt, with a debt/equity ratio of 0.78.

A range rating of 1.6% is not exactly moribund, but also not the mark of a real zipper mover.

But zippy or not, it's the trend that counts. DUK has already set a higher high today, at $20.15. If it closes above $19.85, thereby maintaining a higher low, then it will be in a very near term uptrend, and if it closes above the price channel, whose boundary is now at $19.96, then that would give added wait to entry.

9/28 Covered Calls

This daily posting tracks my covered call plays for October and other base positions.

I’ve added BIDU to my stable of covered calls.

I’ve also closed FL from my other base positions, since it paused at the top of its oscillation channel. I doubt that I’ll ride it down. The open interest on options in insufficient to support the strategy properly.

Covered Calls

sym	phase	trend	adx		200/50	40/10
BIDU			22
CAR			27
CNX			28
COG			17
CVI			22
GMCR			16
HAL			38
JNJ			22
KEG			39
MCO			15
NOV			31
SPRD			40
TKR			19

Other Base Positions

• SPY, October iron condor bounded by $126 and $111.

sym	phase	trend	adx		200/50	40/10
FL			18
SPY			19

9/28 Indicators

S&P 500 (SPY), crude oil (USO), gold (GLD) back in neutral phase.

Stocks

sym	phase	trend	adx		200/50	40/10
SPY
QQQ
VIX

Bonds

sym	phase	trend	adx		200/50	40/10
TLT
JNK

Tangibles

sym	phase	trend	adx		200/50	40/10
USO
GLD

Global

sym	phase	trend	adx		200/50	40/10
UUP
EEM

9/28 Forex

On the daily chart, these major pairs are in the early stages of a bounce off the 20-day Donchian channel boundary back into the interior: AUD/JPY, AUD/USD, EUR/NOK, EUR/USD, GBP/JPY, GBP/USD, NZD/USD, USD/CAD and USD/NOK. Moving in lockstep.

(By major, I mean the 12 most liquid currencies, plus USD/NOK and EUR/NOK.)

There is little of note on the daily charts tracking the currency pairs I follow. Many have bumped against the 20-day Donchian price channel boundary and are pulling back.

On the hourly charts,

EUR/USD has broken twice above a sideways trend in force since 4 p.m. Eastern on Sept. 21, but the first time it pulled back and is in the process of doing so a second time. I’ve set my breakout levels at US$1.3601 and US$1.3383.

AUD/USD, the same. The sideways trend began at 5 a.m. Eastern on Sept. 22. The channel boundaries are US$0.9904 and US$0.9628.

GBP/USD has paused at the 78.6% Fibonacci retracement level, bounding around on either side for 23 hours, so far.

NZD/USD remains paused for a 31st hour at the 38.2% Fib level in an upside reversal from a Sept. 20 to Sept. 25 decline.

9/28 Almanac

On Wednesday, Sept. 28: Durable goods.

There are 24 trading days before the October options expire, 52 the November, 80 the December and 115 the January.

On the jump, market stats, econ reports, and the trading calendar . . .

AMZN Watch

Anyone watching the Amazon.com Inc. (AMZN) stock chart in hopes of finding a price bump in anticipation of tomorrow's product announcement is in for a disappointment.

sym	phase	trend	adx		200/50	40/10
AMZN			30

The price opened high this morning at $234.75, just 9¢ shy of the all-time high set on Sept. 19, but then dropped sharply in the second half hour of trading and in the last two hours has stair-stepped steadily lower.

The rumors are Amazon will announce a relatively inexpensive tablet, the Kindle Fire, to compete with against Apple's iPad, plus maybe two new ereader's -- a $99 wi-fi only Kindle, and a pricier touch-screen G3+wi-fi Kindle.

If the company is indeed set to hammer both Apple and Barners & Noble on price, technology and programming, I would expect traders to be irrationally exuberant. But the chart shows we are, indeed, a dour and pessimistic crowd.

The price rose from $177.10 to $244 and then began a four-day drop that brought the price down to the 38.2% Fibonacci retracement level before recording higher highs two days running. Today's broad price swing has straddled the 23.6% Fib level, running from above to below intraday.

From my standpoint as a technical trader, there is nothing on this chart to encourage me to open a position in AMZN.

The price remains within the 20-day Donchian price channel, and the post-peak trend must count as neutral at this point: A higher low followed by a lower high. It needs a third extreme to define any sort of trend. Moreover, the price reversal has been strong enough to flatten the average directional index.

And the Fibonacci retracement is a bit on the wimpish side. Any Fib retracement worthy of the name will take out the 61.8% level, or at least the 50%, and AMZN has a way to go before it does either.

The Fib levels in play are:

• 23.6% - $228.21
• 38.2% - $218.44
• 50.0% - $210.55
• 61.8% - $202.66

The 23.6% level is just a few cents above the previous peak, set Aug. 19, and that level may well represent some moderately stiff resistance to a further fall.

With a return on equity of 14% and a debt to equity ratio of 0.27, AMZN no longer fits my definition of a growth stock, so my financial bias is not hugely bullish. The stock price has risen immensely since Nov. 2008, when it bottomed at $34.68. The main body of analyst consensus is the AMNZ is a stock to keep if you already have it, but maybe not the best choice for a new position.

If I were to play AMZN this week, it would be purely as a story stock -- buy the rumor, sell the news. The rumors about AMZN's new products began circulating month's ago. They're already priced in to trader's expectations.

The only way I would play it is as a straddle, a long call and long put option with identical strike prices and expiration. With that structure, I profit if the price makes a huge move in response to the announcement on Wednesday. But honestly, I'm sitting on the sidelines for my own account.

9/27 Covered Calls

This daily posting tracks my covered call plays for October and other base positions.

Today’s reversals have stopped out all of my insurance plays. So I presently have no side bets on any of my covered calls.

Covered Calls

sym	phase	trend	adx		200/50	40/10
CAR			29
CNX			30
COG			18
CVI			23
GMCR			17
HAL			39
JNJ			25
KEG			42
MCO			17
NOV			31
SPRD			43
TKR			20

Other Base Positions

• FL, January long $17.5 call.
• SPY, October iron condor bounded by $126 and $111.

sym	phase	trend	adx		200/50	40/10
FL			18
SPY			19

9/27 Indicators

Today’s open is showing a many reversal of directions: That which was up is turning down, and the downward crowd is turning up. In most cases, however, the change is not yet sufficient to alter phase and trend.

S&P 500 (SPY) returns to neutral on the 20-day Donchian price channel with a sharp gap up at the open.

Treasury long-term bonds (TLT) are falling sharply for a third day, but must move to a lower low, below $114.05, before the trend counts as falling.

Stocks

sym	phase	trend	adx		200/50	40/10
SPY
QQQ
VIX

Bonds

sym	phase	trend	adx		200/50	40/10
TLT
JNK

Tangibles

sym	phase	trend	adx		200/50	40/10
USO
GLD

Global

sym	phase	trend	adx		200/50	40/10
UUP
EEM

9/27 Forex

There is little of note on the daily charts tracking the currency pairs I follow. Many have bumped against the 20-day Donchian price channel boundary and are pulling back.

On the hourly charts, EUR/USD has been marching sideways since 4 p.m. Eastern on Sept. 21. I’ve set my breakout levels at US$1.3601 and US$1.3383.

AUD/USD broke above its hourly channel in the last hour and this hour is pausing. The sideways trend began at 5 a.m. Eastern on Sept. 22. The channel boundaries are US$0.9904 and US$0.9628.

GBP/USD has burst through the 61.8% Fibonacci retracement level in an upside reversal from a decline that lasted from Sept. 20 to Sept. 22, although it is now showing signs of remorse as it slides back toward that Fib level.

NZD/USD has paused is pausing for a sixth hour at the 38.2% Fib level in an upside reversal from a Sept. 20 to Sept. 25 decline.

9/27 Almanac

On Tuesday, Sept. 27: Consumer confidence.

There are 25 trading days before the October options expire, 53 the November, 81 the December and 116 the January.

On the jump, market stats, econ reports, and the trading calendar . . .

FL Watch

The shoe-seller Foot Locker Inc. (FL) continues its undulating climb up a rising channel that began on Aug. 9 at $16.84. The lower boundary has been touched four times and the upper boundary, three times, on the rise to a highest high so far of $22.18 on Sep. 16.

sym	phase	trend	adx		200/50	40/10
FL			17

Given the $2.60 height of the channel -- 12% of the current price -- FL is a candidate for an oscillator strategy -- going long on the journey from the lower boundary to the upper, and then reversing for the next leg down.

With an average volume of 2.4 million shares, FL has the volume and the inventory to support such a strategy. The option open interest is smaller than I would like.

An iron condor, which profits within a range and is very low maintenance -- won't work with this chart, because the channel is rising. I like it best as a series of directional plays, which requires close monitoring and can produce one or two trades a week.

There are two dangers with any oscillator strategy -- be it parallel lines linking highest highs and lowest lows, as I have done, or Bollinger bands, which use two standard deviations for the boundaries.

One is shortfalls, where the price reverses in mid-channel rather than continuing to the next boundary. The other is overshoots, where the price bursts out of the boundary in what looks like a breakout, suckering the trader into missing the subsequent sharp reversal back between the boundary lines.

I handle those by using fairly tight stop/losses -- perhaps one or maybe even 3/4 of the average true range -- and staging my reversals by exiting when the boundary is pierced outbound, and re-entering only when it is decisively pierced inbound. If I miss the first part of a breakout that changes the nature of the play, it's not the end of the world.

I also pay very close attention to the intraday half-hour chart when the price is near the boundaries.

FL has excellent fundamentals and analyst ratings. Earnings were released in August, so earnings surprises won't be a factor for awhile. The stock goes ex-dividend on Oct. 12, but the it is only 16.5¢, around 0.8% of today's price -- too small to have a significant influence.

SPRD Watch

The semiconductor manufacturer Spreadtrum Communications Inc. (SPRD) has moved into a downtrend. An uptrend that began July 29 at $12.80 ended on Sept. 20 at $22.39, a gain of 75%.

sym	phase	trend	adx		200/50	40/10
SPRD			46

The decline has moved the price below the 23.6% Fibonacci retracement level at $20.13. The next significant Fib levels are:

• 38.2% - $18.73
• 50.0% - $17.60
• 61.8% - $16.46

The first signficant price resistance -- a two-day pullback in early September -- is at about the 50% Fib retracement level.

The lower boundary of the 20-day Donchian price channel is about at the 61.8% Fib retracement level, but it is rising, and should SPRD drop that far, it is likely to move into bear phase before reaching that most significant level in the Fibonacci analysis.

I hold SPRD as an October in-the-money covered call with a strike price of $17. My best return comes if the option isn't exercised. So if the price rises above the $23.6% retracement level, I'll buy a deep out-of-the-money call (delta between 15 and 25) for insurance, or if it falls below the 38.2%, I'll buy a protective put.

9/26 Covered Calls

This daily posting tracks my covered call plays for October.

SPRD has reversed its upward march and continues to drop in a clear bear trend..

I'm carrying bearish insurance plays on COG, HAL, KEG and NOV -- far out-of-the money puts on all but KEG, which is an in-the-money put.

sym	phase	trend	adx		200/50	40/10
CAR			28
CNX			34
COG			19
CVI			25
GMCR			16
HAL			41
JNJ			27
KEG			44
MCO			19
NOV			30
SPRD			46
TKR			21

GLD Watch

The bounce off a low on gold futures (see my earlier posting) has far greater magnitude than that of the gold exchange-traded fund GLD.

Daily chart

sym	phase	trend	adx		200/50	40/10
GLD			22

GLD gapped down at today's open on the half-hour chart and continued to drop, reaching a low but without any significant retracement so far. Meanwhile, gold futures continue to hover around the 23.6% retracement level.

On the half-hour chart, the decline that began on Sept. 6 at $185.85 hit today's pre-open low of $155.24. (The stock has since then fallen further.)

So what's really going on here? Gold is a global commodity play -- the trading never stops on weekdays. GLD is a stock-market play. It doesn't trade overnight.

The low on the futures came while GLD was not trading, and the GLD low set in pre-market trading came in at 4 a.m. Eastern, 90 minutes after the futures low. By then the retracement was halfway complete.

Round-the-clock markets and time-limited markets don't scale well against each other. And today's gold play is a textbook example.

Calculating a low for GLD based on the futures chart, the significant Fibonacci retracement levels should be as follows, based on an imputed low of $149.70:

• 23.6% - $158.36
• 38.2% - $163.72
• 50% - $168.05
• 68.2% - $172.38

9/26 Indicators

Treasury long-term bonds (TLT), U.S. dollar (UUP), emerging markets (EEM) return to neutral phase within the 20-day Donchian price channel.

Stocks

sym	phase	trend	adx		200/50	40/10
SPY
QQQ
VIX

Bonds

sym	phase	trend	adx		200/50	40/10
TLT
JNK

Tangibles

sym	phase	trend	adx		200/50	40/10
USO
GLD

Global

sym	phase	trend	adx		200/50	40/10
UUP
EEM

GLD Watch

I'm checking out gold futures (the Dec. 5, 2011 issue) while setting up for a possible gold exchange-traded fund GLD play at the open.

Daily chart

sym	phase	trend	adx		200/50	40/10
Gold fut.			28

On the half-hour chart, the decline that began on Sept. 5 at $1,923.70 hit a low of $1,535.00 in the 2:30 a.m. half-hour this morning, during London trading.

The price has since retraced to a Fibonacci 23.6%, at $1,626.70, and paused. The next significant retracement levels are 38.2% at $1,683.50, 50% at $1,729.40 and 61.8% at $1,775.20.

I'll translate that onto the GLD chart after the New York open.

Weekend Postings

Two postings from over the weekend:

A revision of my trading plan and essay on private trading that merges the two into a single document: "How to Be a Private Trader".

Two excellent reads on why the economy continues to be so sluggish in a post, "Why the Recession Continues".

9/26 Forex

The energy plays -- AUD, CAD, NOK, NZD -- among the 54 currencies I track are pounding against the boundaries of the 20-day Donchian price channel, pushing the boundary out but failing to achieve a decisive breakout.

In that behavior the currencies’ charts resemble that of light sweet crude oil futures, which has been marching down a descending boundary to the bear side for three straight trading days.

These are the pairs I noted as I scanned this morning: AUD/USD, EUR/NZD, GBP/AUD, GBP/NZD, NZD/CAD, NZD/USD, USD/CAD and USD/NOK.

I’ll use USD/CAD as an example. The price broke through the channel boundary to the bull side on Sept. 21, rather decisively, and followed through the next day.

sym	phase	trend	adx		200/50	40/10
USD/CAD			39

However, beginning last Friday, it faltered, touching the boundary and then pulling back, and it has done the same today after setting a new high.

Anyone who caught this particular train as it pulled out of the station has had a nice run -- today’s high is 3.6% above the initial breakout point. However, it’s not a play for me now unless I see another breakout above the C$1.0361 boundary that shows conviction.

EUR/USD -- we’re all morbidly waiting for a euro meltdown, yes? -- has continued its sideways trend for a third day, with lows of US$1.3362 and US$1.3385. The highs have been descending for four straight days.

How to Be a Private Trader

Here's the updated trading plan document, combining "How I Trade" with "How to Be a Private Trader." It will be available from the menu bar under the latter title. Enjoy!

Why the recession continues

Economist Paul Kasriel has put together a fascinating presentation on why the economy continues to be so sluggish. The title is a play on Texas Gov. Rick Perry's contention that Federal Reserve Chairman Ben Bernanke would be committing treason if he were to increase the money supply.

Kasriel's presentation (as a pdf): "If some dare call it treason, was Milton Friedman a traitor?".

And NY Times writer Joe Nocera wrote a column about Kasriel's presentation: "Ahem. It's the lack of credit, stupid!".

Both are excellent, thought provoking reads.

9/26 Almanac

On Monday, Sept. 26: New home sales.

There are 26 trading days before the October options expire, 54 the November, 82 the December and 117 the January.

On the jump, market stats, econ reports, and the trading calendar . . .

Weekend Project

Much as the General Theory of Relativity sought to explain everything in the universe, my project this weekend is to do the final work in combining my covered call, income and directional trading into a Grand Unified Trading Plan that covers everything I do.

It's like Einstein, but without the genius.

As part of that work, I'll also be combining "How I Trade" with the "Becoming a Trader" document into a new guide entitled "How to Be a Private Trader".

I've found in trading that when I consider my covered calls and income plays to be separate from my directional speculations, I miss opportunities to profit through side bets on my more static positions. And also, I have a very human tendency to pay more attention to the flashier, high-velocity directional plays than to the boring, old income and covered call positions.

My goal is to remedy those failings by creating a unified theory to govern my trading.

Anyhow, it's supposed to rain on Sunday here in Portland, Oregon, so I'll be motivated to get the work done. Look for the rollout on Monday.

Stocks in General

I've completed my stroll through the 250 stocks and exchange-traded funds that I monitor, and a boring stroll it was.

Whether strongly bullish or strongly bearish on the Zacks list, the issues showed very much the same behavior: A big drop on Thursday, and a bit of retracement today.

So the charts continue to move in lockstep, driven by forces beyond the stocks and funds they track.

SLV Watch

The silver exchange-traded fund, SLV, has fallen in a manner similar to its gold counterpart.

sym	phase	trend	adx		200/50	40/10
SLV			29

The price dropped below the 20-day Donchian price channel on Thursday, and today it sliced like a knife through jello through lower edge of a sideways pattern that held sway, in two parts, since May 6.

The lowest low of the sidewinder was $31.97 on May 12. Today's decline to around $29 (so far) has brought the price to within another long-running sideways pattern lasting from November 2010 to February 2011. That support level doesn't mean the decline is over, but the it may give SLV a moment of reflection before it hurls further into the price abyss.

GLD Watch

The exchange-traded fund tracking gold (the metal, not the miners), GLD, broke below the 20-day Donchian price channel and continued to fall as the trading day progressed. The gold mining funds -- GDX and GDXJ -- are dropping in a similar manner.

sym	phase	trend	adx		200/50	40/10
GLD			18

The price also broke unambiguously out of a trading range that had lasted since Aug. 25, with a low of $165.88 (by one measure), or Aug. 26, with a low of $171.75 (by another measure). Trend channel boundaries, like love, are often in the eye of the beholder.

This is the second major break in GLD's price run-up that began in early July. The first highest high peaked at $184.82 on Aug. 22, and dropped in three trading days to a low of $165.88 on Aug. 25.

The price then ran up to set a new higher high, at $185.85 on Sept. 6, and then drifted downward until Thursday's downward gap.

Today's trading has set a lower low, moving GLD -- the metal gold, which some politicians think of as "real money" -- into a downtrend. (It will be interesting to see how the political discourse changes now that "real money" is on the decline in terms of the "fake money" in our wallets and our brokerage and bank accounts.)

A decline below $142.55 would place GLD below the low point of a sideways pause that lasted from early May to late August.

Prior to that, the lowest low was $127.80 in January. So GLD has a long way to go before it seriously dents the profits of the year.

And it seems so strange to think that GLD, as recently as 2006, was selling for under $60. Bubble, anyone?

9/23 Covered Calls

This daily posting tracks my covered call plays for October.

Four stocks in my stable of covered calls have continued Thursday’s decline, without retracement. They are COG, KEG, NOV and SPRD.

I’m presently carrying insurance -- out of the money long calls or puts -- on two covered-call stocks: HAL and KEG, and am looking at COG, NOV and SPRD as possible insurance candidates.

sym	phase	trend	adx		200/50	40/10
CAR			27
CNX			31
COG			18
CVI			23
GMCR			15
HAL			39
JNJ			27
KEG			41
MCO			19
NOV			27
SPRD			50
TKR			19

9/23 Indicators

Gold (GLD) dropped below the 20-day Donchian price channel into bear phase. The decline brought the price unambiguously below the sideways trend that began Aug. 25, signalling the start of a downtrend.

The S&P 500 (SPY), crude oil (USO), the U.S. dollar (UUP) and emerging markets (EEM) drew back into the price channel following Thursday's breakouts. If they close within the channel, then their phase will return to neutral.

Stocks

sym	phase	trend	adx		200/50	40/10
SPY
QQQ
VIX

Bonds

sym	phase	trend	adx		200/50	40/10
TLT
JNK

Tangibles

sym	phase	trend	adx		200/50	40/10
USO
GLD

Global

sym	phase	trend	adx		200/50	40/10
UUP
EEM

9/23 Forex

Nearly all of the 54 pairs that I follow are retracing Thursday’s dramatic moves.

The exceptions are EUR/DKK, EUR/NZD, GBP/AUD, GBP/NOK, GBP/NZD, GBP/SEK, NZD/CAD and NZD/DKK.

Their commonalities? AUD, NOK, NZD and CAD are commodity plays. EUR and GBP are global players. That leaves the other two Scandinavians, SEK and DKK, as outliers.

I won’t present details of any pairs today. I see np clear opportunities on the daily charts, although I’m sure there are plenty of profitable intraday plays.