1/12 Watchlist: SPY, many etfs show bear signals; Fear flies;

Blue chips (SPY) show a pps bear signal on a decline of 1.1% from Monday's close. The mfi and stochastic are falling toward their respective 80-lines. The macd remains in bull territory. The price remains above the 20-day moving average.

The decline is consistent with a minor pullback within an uptrend that began in early March 2008. A decline below the ma20 would suggest a larger decline, such as that seen in June and July last year, as well as in September, October and November.

The blue chips' bear signal coincides with a gap up and sharp rise in volatility (VIX, the fear index). It is trading 9.2% above Monday's close.

Gold (GLD) also shows a bear signal and a 2.2% drop from yesterday's close, with the 20-day moving average below the 50-day moving average but the price above the 50-day. Oil (USO) shows a similar pattern with a pps bear signal.

Bear signals all over the major exchange-traded funds. See below

Otherwise, the signals on indicators and currencies remain as described in the Morningline.

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

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.

Monthly Breakouts

I'm following up my discussion on Dec. 31 on long-term trading.

In my year-end review, I showed the blue chips (SPY) on a chart showing prices by month and analyzed them using a 12-month simple moving average.

The result showed that four trades based on that method would have turned what was a 23% loss for the decade of the 20-zeroes into a 78% gain.

The rules are:

• If  the bar (or candlestick) during a month crosses the 12-month moving average, then 
• Open a bull position if the closing price on the last day of the month is above the moving average.
• Open a bear position if the closing price on the last day of the month is below the 12-month moving average.
• Close the position under one or more of these circumstances:
  
• The price closes on the opposite side of the moving average from the price at which the position was opened.
• The price crosses a stop/loss set at a distance from the opening price of twice the average trading range over the last three months.

I scanned the high-volume etfs and company shares for new signals:

• etfs:
• TBT, bull
• shares:
• XOM, bear
• KR, bear
• RIMM, bull

I also scanned for etfs and shares that, having given signals within the last nine months, were trading around the entry price:

• etfs:
• EWJ, bull
• USO, bull
• shares:
• WFC, bull
• MS, bull
• WMT, bull
• USB, bull
• KFT, bull

I haven't done a rigorous back-testing of this method. It looked like a pretty good match on SPY, but any moving-average crossover method will give whipsaws on occasion, and of course entering months after any signal is a riskier proposition.

Still, I think it's an interesting approach, and one worth looking at if you have some money that you're wanting to park for the longer term.

One ideal use would be to enter and exit a high-dividend fund, like JNK, which tracks junk bonds and is presently yielding 11.18% in dividends, or AOD, which also seeks dividend income and is yielding 16.14%.

You would profit from the dividends during bull periods, as well as, in theory, from capital gains, and also avoid the capital losses that wipe out dividend profits.

(I own both AOD and JNK for the longer-term money that I don't use for trading. My entry was after the bull signals, with little price gain between signal and entry for AOD and an 11% gain for JNK.)

Topics: Exxon-Mobil, Kroger, Research in Motion, Wells Fargo, Morgan Stanley, U.S. Bancorp, Kraft, oil, petroleum, groceries, Blackberry, bank, bonds, Ultrashort Treasuries, SPDR, Spiders, S&P 500, 401(k), IRA, Individual Retirement Account.