1/15 Watchlist: The Blue Chip Bears

Blue chip stocks (SPY) are showing a bear signal and have dropped 1.3 percent from the opening price. The price has stalled at very near term resistance. This comes amid falling interest rates on 20- and 30-year Treasury bonds, and falling prices for gold and oil.

In terms of other technical analysis on the blue chips, the stochastic has crossed below the 80-line, a bearish signal. The macd remains in bullish territory. The price was approaching the upper Bollinger band, and the bands were widening, which can be taken as signaling continuation of the upward trend.

The blue chips have been in a strong upward trend since March. This signal is countertrend, and not a trade for me. Especially with so many mixed signals.

Here's what's interesting among high-volume . . .

Covered Call Options: Show Me the Money

Covered calls some days leave me cold. They take a lot of money to implement, compared to other strategies. They limit me to low priced stocks, which often are priced low for a reason. And they lack sex appeal. No one can ever pretend to be a Power Trader dealing in covered calls. What a pleasure it is, then, to crack open Ron Groenke's new book, Show Me the Money: Covered Calls and Naked Puts for a Monthly Cash Income, and have him remind me of why covered calls are such a neat way to trade. They make money month after month. And they aren't hard to do. Consistent earnings without lot of work? What's not to like about such easy money.

Mr. Groenke gets to the heart of what covered calls are all about on page 14:  "Think of it as picking money from a money tree like you would pick fruit from an orchard."  And in 200 pages he tells you how it's done. . . .

1/15 Morningline: The Inflation Puppeteer at Play

The price of the longest-term Treasury bonds, issued for periods of 20 and 30 years, gapped up by 3/4 of a percent this morning. Since trading opened yesterday, the bonds have risen 1.6 percent.

The Consumer Price Index, released today before the start of trading, showed very low inflation. Interest rates on bonds are typically a premium over and above the inflation rate. With expectations of lower inflation, the market prices in lower rates when selling bonds by lower the bond price.

The CPI is a like a gigantic global puppeteer. It pulls one string, and all of the world's economic arms and legs and heads spring into motion. . . .

1/14 Watchlist: Some techs on the move INTC MSFT CSCO ORCL RIMM

The blue chip stocks continue to trade around the top of their recent range. Treasury long bond prices today are rising through most of their recent range (that is, interest rates are falling).

Corporate, high-interest-rate junk bonds are barely moving, despite yesterday's bear signal.

Gold is glistening in place like a necklace on display in a high-end jewelry store window, and oil is standing still like scum on a stagnant pond, gently brushed by flitting dragonflies, after cascading for three days like Multnomah Falls on a rainy Oregon day.

Above all, similes are flying wildly as bored traders seek amusement on the Thursday before January options expire. It's a tough business, but someone has to do it.

The major foreign exchange currencies -- the dollar, yen and euro -- stayed within their recent ranges in forex trading.

Looking at stocks: The techs are on the move. Intel, Cisco, Oracle, Research-in-Motion. Household names all.

Let's see what's interesting among the . . .

1/14 Morningline: A Nietzschean Moment: Awake!!

The stock market, gold, oil, bonds -- long-term Treasuries and corporate junk bonds alike -- all are trading within a very, very narrow range this morning. It's as though someone put a magic sleeping potion in investors' breakfast cereal.

Even the Big 3 foreign exchange currencies -- the dollar, yen and euro -- are relatively quiet at the open.

Things are so quiet, and dull, and risk-free for the moment, even the  financial crisis inquiry commission would approve.

It's a Nietzschean moment: Sleeper Awake!

This morning's numbers . . .

1/14 Lookahead: Crossed fingers for January options

My two remaining January positions move into cross-your-fingers territory on Thursday, with two more trading days left.

I expect LVS, the covered call (-c16) to be exercised after expiry, unless it drops 12.7% to below 16. Not likely.

With 36 trading days left for February options, it's time to look for another covered call or two. That would be a good task for a gloomy winter weekend. . . .

1/13 Morningline: Blue Chips pause; fear, loathing and bullishness

Oil (USO) gaps down to 0.8% below the prior close. The other indicators and the currencies do little at the opening, as though exhausted by yesterday's drama.

Yesterday's potential bear signal on the blue chips (SPY) disappeared at the close of the day. So they remain in bull mode, and given the lack of follow through to yesterday's declines, my bias on blue chips remains bullish, but with a lot of caution, fear and loathing. . . .

1/12 Morningline: Volatility gaps up, bear signs on oil and dollar/yen

Volatility (VIX), the fear index, gaps up by 6% after seven days of decline.

Blue chips (SPY) gap down a bit and bounce off of the day-before-yesterday's opening. The macd, stochastic, money flow index remain bullish. The price withdraws from the upper Bollinger band.

Treasury long bonds (TLT) gaps up by 1.5% and shows a potential pps bull signal, unconfirmed by the macd, stochastic, trend, mfi. The third pps signal in six days.

Oil (USO) shows a potential pps bear signal, as the stochastic dips below the 80-line. The 20-day moving average bumps up toward a cross of the ma50 -- a bullish sign -- and the macd and mfi remain in bull territory.

The yen-per-dollar currency pair (USD/JPY) whipsaws, with a pps bear signal on a decline of about 1%, after the second test of a top. The macd crosses below the zero-line, and the stochastic is plunging headlong toward the 20-line. This morning's decline pierces the Bollinger band middle line. All bearish for the U.S. dollar. See Bloomberg's trade deficit report. This is the third pps signal in six days with mainly sideways price movement.

The dollars-per-euro pair (EUR/USD) opens at the top of yesterday's range and stays put.

Among holdings: A pps bear signal on MRVL and VALE, both bull positions. MRVL remains above support, and VALE gapped down past very near term support.

1/11 Watchlist: SBUX losing it's bite

• EUR/USD keeps its bull signal
• Indicators little changed from the Morningline
• January holdings, possible closes:
  
• KO jumps up toward top of profit range
• SBUX falls toward no-caf, no profit
  

 All holdings that expire in January must be sold, except for those that I intend to allow to expire worthless or whose exercise would be profitable. My LVS covered call (-c16), for example, will be exercised, so no action is needed.

The KO jump  brings it up to 56.13. The iron condor (p50/-p52.5/-c57.5/c60) has max profit up to 57.5.

SBUX is trading at 23.02, about 2% below the profit point. It's a tough decision. There is no pps bear signal, although the macd is in bear territory and the stochastic is moving that way. But, the price bounced a bit off of resistance at 22.87, so maybe there's hope.

Here's what's interesting among the high-volume . . .

1/11 Morningline: Euro Breaks Out; Fear Takes a Holiday

The euro per dollar currency pair, EUR/USD, shows a potential pps bull signal as it breaks out of an 11-day trading range. It will become the current signal if it still exists at the close of the U.S. markets. The dollars per yen, USD/JPY, pair shows no corresponding signal or movement.

The fear index, measuring volatility, gaps down by 6.5% and then falls further. Blue chips open higher and then, counter intuitively in light of the VIX, fall back into yersteday's trading range.

Gold gaps up by 1.8%.

No new signals on the indicators or holdings.

The numbers . . .

1/8 Morningline: Employment Numbers Savage Markets -- Not!

I woke up this morning to National Public Radio reporting a loss of 85,000 jobs in November, in the usual doomday tones that accompany such stories.

Blue chips (SPY) opened this morning -- well, unchanged, in the middle of yesterday's trading range. Illustrating once again that the monthly employment figures are a trailing indicator, showing where we were, and the markets are a leading indicator, showing where we think we'll be.

The dollar  retraced nearly all of yesterday's gains again the yen (USD/JPY), pulling back from resistance set in December and in recent weeks. The decline came the day after a pps bull signal.

January Options Expiry

Some of the options in my holdings expire next week, and Friday is the last day on which they can be traded.

Time to map out a strategy:

1/7 Morningline: New signals on dollar-yen, semiconductors

A new potential pps bull signal on the yen per dollar (USD/JPY) currency pair, on the second day following a bear signal. A potential pps bear signal on SMH, the semiconductors etf, a bull holding.

Blue chips (SPY) remain in bull mode and open barely changed from yesterday's narrow trading range.The price, trending sideways the last three days, is pulling away from the rising upper Bollinger band.

Corporate junk bonds (JNK) continue their price rise (interest rate decline)for the fourth day, as the price marches along an uptrending upper Bollinger band.

1/6 Morningline

The fear index (VIX) opens with little movement, but with a pps bear signal from very late yesterday. Bearish on fear is bullish on the blue chips. The VIX has been mainly downtrending since late October. The 200-50-20-day moving averages are all pointing downward and line up in descending order on the chart, a bearish sign. The macd is also crossing the zero-line back into bear territory.

Treasury long bonds (TLT) shows a pps bull signal from yesterday's close, unconfirmed by the trend, downward since early October, and by the inversed moving averages (200-50-20). The stochastic and macd, however, are peeking through into bull mode.

Neither the indicators nor the currencies nor the shares are showing movement this morning in the few minutes after the start of trading, prior to the 10ae (7ap) non-manufacturing index and the 2pe (11ap) FOMC minutes.

1/5 Watchlist

The Treasury long bonds (TLT) continue to show a potential pps bull signal on a rise from the open today of half a percent. Rising bond prices means falling interest rates (an amazing idea, given how low rates are already). I need to note that this etf fails the trend test. It has been trending mainly downward for a year. On the other hand, the macd and stochastic indicators are pointing in a bull direction.

The yen per dollar currency pair (USD/JPY) continues to show a bear flag, meaning stronger yen/weaker dollar, on a decline from the open of 0.9%.

Other movers today among my indicators and holdings:

• Corporate junk bonds (JNK), up 1.2% (meaning falling rates)
• LVS, a holding of mine in the form of a January covered call (-c16) is up 6.5% from the open after an overnight gap, a rise of similar magnitude, and another gap over the New Year's holiday. New reports are crediting gambling revenues in Macau, where Las Vegas Sands also operates. (What happens in Macau stays in Macau -- you betcha). I'll profit, but I would have profited more with a straight bull position without the covered call.
  
• KO has fallen 2.4% the last three trading days and sits nicely in profitable territory on my iron condor (p50/-p52.5/-c57.5/c60)
• SBUX, a bull holding,  jumped 4.5% from the open, although it has pulled back a bit. This is on the third day since a pps bear signal, with no new bull sig. Earnings is Jan. 20.
• SMH, a bull holding, is down a percent from the open.

Here's what else is interesting among high-volume . . .

. . . exchange-traded funds (etf):

• XLE, the energy etf, is up 2.2% in two days, with the pps, macd and stochastic all in bull mode. The 20-day moving average is slightly below the ma50, and poised for a crossover, restoring the standard 20-50-200 bullish order.
• FXI, the etf that tracks London's FTSE index, gapped up this morning and is trading 2.6% above yesterday's open. The issue fails the trend test -- it is a sideways meanderer -- but the macd and stochastic are in bull mode. The ma20, however, is trading below the ma50 and is trending downward, giving a bearish cast to the chart.
• KBE, which tracks a banking index, is up 2.7% from yesterday's open, the day after a pps bull signal. The trend is sideways, but the macd and stochastic are in bull mode.
• EWM, the Malaysian market etf, showing rise-gap-rise-gap-rise (the infamous rgrgr -- or roger-roger -- pattern, known as the inverse Asian Tiger roar). The trend is rangebound between about 10.40 and 11.20; pps, macd and stochastic all in bull mode.
  

. . . corporate stocks:

• JPM continues its rise after yesterday's pps bull signal
  
• KFT gaps up, and signals, on news.
• T drops below the point where it gave a pps bull signal yesterday. The chart shows a nice uptrend, though.
• CHK breaks past previous upside resistance with bull signals all around (but a sideways trend).
• QCOM gaps up with good trend, macd and stochastic in what appears to be an inverted head and shoulders pattern, which is bullish. Nice uptrend since mid-December and the all indicators are in bull mode. My problem is, when everyone sees the pattern, it kills the uncertainty and therefore the potential for profit.
• DOW with a nice rise through resistance after a pps bull flag yesterday, preceded by macd and stochastic bull signals
• CAL, large rise and a new pps bull flag, confirmed with the macd and stochastic, on a move through resistance and rising trend, and on news about revenue data. So the good news for the bottom line is no doubt already in the price.
• WMT, with a sideways trend, is showing the famous double whiplash pps signal, a bear, a bull and a bear within three days. The macd is heading toward bull territory, and the stochastic toward bear. Confused puppy mode, for sure.
• No new signals on MRVL, but it has a picture-perfect upward trend since late November and is blue sky (no resistance).

Topics:

Treasury bonds, Coca-Cola, Las Vegas Sands, gambling, resort, Starbucks, coffee, semiconductors, dollar yen forex, petroleum oil energy crude, London United Kingdom U.K., banks financial KBW banking index, Malaysia, J.P. Morgan, AT&T telecommunications, Chesapeake Energy, Qualcom, Dow Chemical, Continental Airlines, Wal-Mart retail, Marvell Technology semiconductors.

1/5 Morningline

On the charts,

Blue chips, the 20-, 50- and 200-day moving averages continue to point upward in ascending time order (ma20, ma50, ma200, top to bottom). Prices are making slightly higher highs and lows, qualifying as an uptrend. The macd and the slow stochastic are both in bull mode.

Long-term federal interest rates are a mirror image: Declining moving averages, the longest on top and then descending. Prices continue to make lower highs and lower lows. However, the macd is approaching the zero-line on an upward move, and the slow stochastic is peeking above the lower 20-line. The surrogate TLT shows  potential pps bull signal.

Both show a steady opening at the 1600-tick granularity.

The U.S. dollar is showing a potential bear signal against the Japanese yen, and the price has dropped nearly a percent from the open.

LVS, a holding, gapped up this morning by 2.3% above yesterday's trading range. My position is a covered call (-c16), so no joy in this rise. (Also, no profit.)

The energy etfs USO and XLE opened at the top of yesterday's trading ranges; USO gpped up yesterday, and XLE showed a smart rise. (USO tracks crude, and XLE tracks energy companies -- a real distinction.)

None of the indicators are going much of anywhere from the open:

• Blue chips (SPY) open at 113.26, entered bull mode at close on Jan. 4 (at 113.33)
• Fear index (VIX) 20.05, bull (bearish for stocks), Dec. 31 (22.68)
• Treasury long bonds (TLT) 90.05, bear, Dec. 21 (91.14)
• Corporate junk bonds (JNK) 39.36, bull, Jan. 4 (39.32)
• Gold (GLD) 109.88, bull, Jan. 4 (109.08)
• Oil (USO) 40.25, bull, Dec. 16, (36.74)

Currency pairs:

• Dollars per euro (EUR/USD) 1.4412, bear, Dec. 4 (1.49)
• Yen per dollar (USD/JPY) 92.49, bull, Dec. 15 (89.60)

Holdings, January expiry, no new signals:

• KO, iron condor (p50/-p52.5/-c57.5/c60) 56.85, bear, Dec. 29 (57.74)
• LVS, covered call (-c16) 17.01, bull, Jan. 4 (16.62)
  
• SBUX, bull put spread (p22.5/-p24) 22.96, bear, Dec. 30 (23.31)
  
• SMH, bull put spread (p27.5/-p29) 28.45, bull, Dec. 21 (27.62)

Topics:, S&P 500, SPDR, Spiders, Treasury bonds, gold, precious metals, oil, petroleum, Coca-Cola, Las Vegas Sands, gambling, resort, Starbucks, coffee, semiconductors, energy companies.

1/4 Watchlist

Problem-child SBUX, which I entered as a January bull put spread (p22.5/-p24), continues to trade down. It's about 6 cents above support. If it breaks through, I'll close the position.

The pps bull signal on LVS, which I hold as a January covered call, continues to exist. No impact on the position.

Otherwise, my holdings are where I want them to be.

Among the indicators, SPY shows a pps bull signal, after showing a bear signal on Dec. 31, the last trading day. It is trading slightly high than the previous trading day's high.

JNK continues to show a pps bull signal on an increase, as does GLD.

USO, the oil etf, remains at the level it gapped up to this morning, but shows to signal. The closely related energy sector etf, XLE, shows the gap and a pps signal, but a pretty sorry trend profile. Any bullish position on XLE would be a counter-trend strategy.

Among the currencies, EUR/USD continues to show a pps bull signal, but it is unsupported by the trend.

Scanning the high-volume etfs for those showing signals and a supporting trend

• QQQQ, pps bull signal one trading day after a bear signal
• EEM, gap up on the 5th day after a pps bull signal; stochastic bull
  
• IWM, pps bull one trading day after a bear
  
• VWO, gap up and bull signals on the macd and stochastic while crossing above the 20-day moving average. No pps signal, and the trend is sideways. 

Of these, I find QQQQ to be the most interesting. But, first day of trading, sort of an unusual day by definition. I shall wait and see (while watching the Qs and the oils closely).

I didn't find a lot to like on the stocks. Mainly, there were a lot of gaps up and signals whipsawing bear signals last week, and not supported by the trend. So, no trades. I'll wait and see.

• T, pps bull, also existing bull signals on macd and stochastic
• MS, pps bull and an existing macd bull and ma20 breakthrough; its a counter-trend trade at  this point, but the power of the gap up suggests a new trend forming.
• NVS, significant gap down after a pps bear signal the prior trading day, amid a sideways trend.

Topics:, S&P 500, SPDR, Spiders, gold, oil, petroleum, Las Vegas Sands, gambling, resort, Starbucks, coffee, iShares emerging markets, Russell 2000, Vanguard emerging markets, AT&T telecommunications telcon, Morgan Stanley banking, Novartis Switzerland health care.

1/4 Morningline

The 2010 trading year has begun.


GLD shows a potential bull signal on a 2.4% gap up. It won't become real unless it lasts to the close today, since I'm trading off of a daily chart.

I've added a new indicator, JNK, an etf tracking corporate bonds that are less than investment grade. JNK shows a potential bull signal this morning.

Potential bull signal on the EUR/USD currency pair (but no companion signal on the USD/JPY).

Potential bull signal on LVS (which is a bullish position -- yay!).

Indicators:

• Blue chips (SPY) open at 112.37 and then rose a bit, entered bear mode at close on Dec. 31 (at 111.44); that drop before New Year's in the last minutes of trading in a very thin market wasn't all that serious.
  
• Fear index (VIX) 21.68 and dropping slightly, bull (bearish for stocks), Dec. 31 (21.68)
• Treasury long bonds (TLT) 89.84 and dropping, bear, Dec. 21 (91.14)
• Corporate junk bonds (JNK) 39.15, bear, Dec. 29 (38.31)
  
• Gold (GLD) 109.82 on a 2.4% gap up from the Dec. 31 close, bull, Dec. 17 (108.00)
• Oil (USO) 40.04 on a 1.9% gap up, bull, Dec. 16, (36.74)

Currency pairs:

• Dollars per euro (EUR/USD) 1.4302 and then a rapid 1% run-up, bear, Dec. 4 (1.49)
• Yen per dollar (USD/JPY) 92.98 and declining, bull, Dec. 15 (89.60)

Holdings, January expiry, no new signals:

• KO, iron condor (p50/-p52.5/-c57.5/c60) 57.16 near the bottom of the prior day's trading range, bear, Dec. 29 (57.74)
• LVS, covered call (-c16) 15.60 and rising on a 3.4% gap up, bear, Dec. 18 (15.29)
  
• SBUX, bull put spread (p22.5/-p24) 23.28 within the prior day's range, bear, Dec. 30 (23.31)
  
• SMH, bull put spread (p27.5/-p29) 28.35 on a 1.5% gap up from the prior close, bull, Dec. 21 (27.62)

Topics: S&P 500, SPDR, Spiders, Treasury bonds, high-yield corporate junk bonds, gold, precious metals, oil, petroleum, Coca-Cola, Las Vegas Sands, gambling, resort, Starbucks, coffee, semiconductors

12/31 Morningline

The markets open on the last trading day of the year, with no new signals.

SBUX, one of my holdings, opened comatose at the upper end of yesterday's trading range following a bear signal at Wednesday's market close.

Indicators:

• Blue chips (SPY) open at 112.77, entered bear mode at close on Dec. 8 (at 109.61)
• Fear index (VIX) 19.96, bear (bullish for stocks), Dec. 22 (20.49)
• Treasury long bonds (TLT) 89.76, bear, Dec. 21 (91.14)
• Gold (GLD) 107.98, bear, Dec. 17 (108.00)
• Oil (USO) 39.39, bull, Dec. 16, (36.74)

Currency pairs:

• Dollars per euro (EUR/USD) 1.4337, bear, Dec. 4 (1.49)
• Yen per dollar (USD/JPY) 92.41, bull, Dec. 15 (89.60)

Holdings, January expiry, no new signals:

• KO, iron condor (p50/-p52.5/-c57.5/c60) 57.58, bear, Dec. 29 (57.74)
• LVS, covered call (-c16) 15.08, bear, Dec. 18 (15.29)
  
• SBUX, bull put spread (p22.5/-p24) 23.34, bear, Dec. 30 (23.31)
  
• SMH, bull put spread (p27.5/-p29) 28.20, bull, Dec. 21 (27.62)

12/30 Morningline

Small opening gaps in blue chips and gold. Potential bull signal on the fear index (bullish on fear is bearish on stocks). Here's the rundown:

Indicators, with none showing much movement after opening:

• Blue chips (SPY) open at 112.23 on a 0.3% gap down, entered bear mode at close on Dec. 8 (at 109.61)
• Fear index (VIX) 20.36, bear (bullish for stocks), Dec. 22 (20.49). Bull signal if it remains on the chart at the close.
• Treasury long bonds (TLT) 89.92, bear, Dec. 21 (91.14)
• Gold (GLD) 106.64 on a 1% gap down, bear, Dec. 17 (108.00)
• Oil (USO) 38.95, bull, Dec. 16, (36.74)

Currency pairs:

• Dollars per euro (EUR/USD) 1.4352 and falling, bear, Dec. 4 (1.49)
• Yen per dollar (USD/JPY) 91.98 and rising, bull, Dec. 15 (89.60)

Holdings, January expiry, no new signals:

• KO, iron condor (p50/-p52.5/-c57.5/c60) 57.74, bull, Dec. 29 (57.74)
• LVS, covered call (-c16) 15.22, bear, Dec. 18 (15.29)
  
• SBUX, bull put spread (p22.5/-p24) 23.34, bull, Dec. 18 (23.68)
  
• SMH, bull put spread (p27.5/-p29) 27.61, bull, Dec. 21 (27.62)