10/12 Indicators

The S&P 500 (SPY) broke above the descending price channel that has been in place since Sept. 1.

The Nasdaq 100 (QQQ) set a higher high, moving the trend to neutral. Under my present rules, it needs a higher low to qualify as an uptrend.

The U.S. dollar (UUP) has moved from a higher high to a lower low, changing the trend to neutral.

Emerging markets (EEM) has broken above the descending price channel that it has been tracing since early August.

(Tech note: SPY and QQQ set lower lows and now have set higher highs. Is the trend ambiguous or up? By my current rules, it’s ambiguous, because there has been no higher low. On the other hand, a strong upward impulse can go a long ways without retracement. At a certain point, it becomes ridiculous to call the trend ambiguous. My trend-calling rules need more clarity.)

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
JJC

Global

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

10/12 Forex

Beginning today, I’ve expanded my universe of currency pairs tracked to approximately 120. The change gives better representation to currencies outside of Europe and the former British Commonwealth.

AUD/CAD has broken above the 20-day Donchian price level into bull phase. The pair has been in a wide sideways trend since early August.

EUR/USD has jumped to the next Fibonacci retracement level, in an upward move that could be taken from a high-school physics illustration of quantum leaps. The pair is retracing the decline that began Sept. 15. The sharp upward move carried the price, in less than three hours, from the 61.8% retracement to the 78.6% level, where it has settled for more than five hours.

HKD/JPY has pushed sharply above the 20-day highest high for the first time since Sept. 9.

Other yen Donchian breakouts: USD/JPY and PLN/JPY to the upside.

USD/HKD has moved below the 20-day lowest low, a price level that has provided strong support twice before. The pair has been trading in a sideways range since mid-June.

10/12 Almanac

On Wednesday, Oct. 12: FOMC minutes.

There are 10 trading days before the October options expire, 38 the November, 66 the December and 101 the January. (Corrected)

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

Market Watch

Just an observation on what I saw in my walk through the daily charts.

A large number of stocks hit peaks on Sept. 20, declined to lows on Oct. 4 or 5 or thereabouts, and then have since bounced up sharply.

Technically, however, by my rules none of these are playable. They've yet to set a higher low, so I can't draw a trend channel. And they haven't yet broken through the previous high or the 20-day Donchian level, so I can't call a breakout.

Absent at least one of those criteria, I'm left with a pretty chart but no signals. That keeps me sitting on the sidelines, and with earnings announcements on top of us amidst a swamp of negative forecasts for the broad economy, perhaps the sidelines are the best place to be.

TXN Watch

Texas Instruments Inc. (TXN) has been climbing a channel since it bounced off of a low on Sept. 6, at $24.34, and has since touched the top of the uptrend twice in its journey to Monday's high of $30.15, an increase of 24%.

sym	phase	trend	adx		200/50	40/10
TXN

The price today pulled back to within the trend channel but has risen intra-day.

The uptrend runs counter to the wisdom(?) of analysts, who tend to be somewhat bearish. However, return on equity is an impressions 28%, and the debt/equity ratio, 0.32, while higher than I like in a growth stock, is still not in the crippling range. Institutional ownership is 84%, so the big guys are on board.

TXN announces earnings after the close on Oct. 24, and goes ex-dividend on a 17¢ quarterly payout on Oct. 27.

The consistency of the upswing this past month has been impressive, but TXN in my book is a short-term ride. Given the analysts' negative views, I wouldn't want to hold across the earnings announcement.

If the price rises persistently above $30.15, it's a breakout and worth a bull play. The next upside resistance iat around $32, or 8% above the present level.

If it bounces lower -- perhaps below $29.25 on a down day -- then it may be worth a bearish swing play. The far side of the channel today is at $26.68, which is 8.7% below the present level.

For my account, I won't play it today, but I will consider it depending upon what happens Wednesday and Thursday.

10/11 Covered Call

A change in the chart: I’m finding a need to distinguish between a sideways trend (yellow) and a neutral trend, which is really the same as an ambiguous trend. See CVI and HAL in the discussion below for examples. From today, I’ll be coding neutral, or ambiguous, trends as grey.

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

CVI, HAL turn to a neutral trend as they touch the area of the previous high. A rise above the highs would suggest an uptrend that would require confirmation by a higher low. A bounce down would indicate a sideways trend.

TKR moves to an uptrend with a decisive break above the previous high. The trend needs a higher low for confirmation.

I’m carrying out-of-the-money insurance puts on MCO and a bull put on BIDU.

The last trading day for October covered calls is Oct. 21. I have earnings risk on four stocks in my covered calls portfolio: BIDU, 10/20 after the close; HAL, 10/17 before the open; JNJ, 10/18 before; and TPX, 10/20 after.

Of those, I’m near-term bullish on BIDU, slightly bearish on JNJ and neutral the rest. BIDU, HAL and TPX have all broken above declining channels, and JNJ is in a near-sideways trend -- just a slight decline.

So, how to insure? These stocks would all be exercised at today’s prices. A bullish surprise and price move does me no good. These are deep in-the-money covered calls. A bearish surprise and a drop below the covered call strike price would increase my profits over time.

So, good news is meaningless and requires no insurance, and bad news is worth insuring in out-of-the-money puts, since non-exercise means I’m left holding a losing stock.

All in all, an interesting question.

Covered Calls

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

Other Base Positions

• None.

10/11 Indicators

A change in the chart: I’m finding a need to distinguish between a sideways trend (yellow) and a neutral trend, which is really the same as an ambiguous trend. See SPY and UUP in the discussion below for examples. From today, I’ll be coding neutral, or ambiguous, trends as grey.

The S&P 500 (SPY) exceeded its high of Sept. 27, and by setting a higher high has moved to a neutral trend. A higher low would signal an uptrend.

The Nasdaq 100 (QQQ), however, has so far fallen short of a higher high and so remains coded as a downtrend.

Treasury long-term bonds (TLT) bounced off the level of the previous low, establishing a sideways trend.

The U.S. dollar (UUP) has moved to neutral trend after setting a lower low. A lower high will signal a downtrend.

Emerging markets (EEM) has bounced slightly off of the level of its prior high and I’ve switched the analysis to sideways trend. But it’s a bit ambiguous still.

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
JJC

Global

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

10/11 Forex

EUR/USD paused after a five-day rise after retracing a Fibonacci 61.8% of its decline from Sept. 15 to Oct. 3. On the hourly chart, the pair today is drifting slowly down toward the 50% retracement level in what appears to be a nobody’s interested move.

USD/CHF, although pausing after a strong two-hour rise, is trading in the middle of an uptrending channel and so does not represent a breakout.

EUR/CHF shows a similar pattern.

AUD/JPY has broken above a downtrending channel that began in mid-September. The hourly chart shows a shallow decline for the past 15 hours.

10/11 Almanac

On Tuesday, Oct. 11: Nothing of consequence.

There are 11 trading days before the October options expire, 39 the November, 67 the December and 102 the January. (Corrected)

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

Market Watch

The Dow Jones Industrial Average is up 280+ points intraday, prompting the usual after-the-fact flood of emails touting the new bull market. ( I mean, where were these people on Sept. 3, when the most recent rise began?)

After taking a deep breath to regain my equilibrium after such heady fare, I'll break from my normal habit of using the S&P 500 exchange traded fund SPY as my vehicle for analysis. Instead, I'll look directly at the DJIA.

sym	phase	trend	adx		200/50	40/10
DJIA

First, the 10-day average true range -- how far the daily price moves -- is at 279, so a price move of 280 is simply normal behavior for the index at this point in history. Back in July, the range was around 140, so, yes, volatility has increased. But we trade in the now, not in the yesterday, since times past are beyond our reach.

Secondly, a move that began July 22 carried the price from 12,741 down to 10,604 on Aug. 9. So Aug. 9 is our base point.

Since that date, the price has zig-zagged up to a series of lower highs and trend-ambiguous lows, that bottomed at 10,404 on Oct. 4. The subsequent five-day (so far) rise has carried the price to today's high (so far) of 11,395, a new post-decline higher high.

A price channel clarifies the analysis. Sept. 1 at 11,717 is the new post-decline high. Drawing a channel from that point to the next significant high, Sept. 20 at 11550, sets up the upper boundary of the channel. The lower boundary is set at the subsequent Sept. 12 low, at 10,825.

After the first reversal, the upper boundary has been touched twice, on Sept. 20 and today. Today's high is lower than that of Sept. 20.

To call the Dow as being in a bull move, I would have to see a significant and persistent breakout above the channel, better yet, one that exceeded the Sept. 20 high of 11,550, and best of all, one that exceeded the Sept. 1 high of 11,717.

Only then could I call it an uptrend, and it would be nice to have a higher low to confirm it. But as a practical trader, I'll take a breakout above 11,550 as a new trend. Coincidentally, that level marks the 20-day Donchian price level, so a breakout would also constitute a change to bull phase.

10/10 Covered Calls

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

Trend turns up on CAR and HAL.

I’ve closed my insurance puts on CNX, CVI, HAL and KEG..

I’m carrying out-of-the-money insurance puts on MCO.

Covered Calls

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

Other Base Positions

• None.

10/10 Indicators

Crude oil (USO) has exceeded the previous high, set Sept. 27, and has moved to an uptrend.

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
JJC

Global

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

10/10 Forex

On the daily chart...

AUD/USD has broken decisively above its declining price channel in force since mid-September. A drop below US$0.981 today would bring the price back within the channel.

All AUD/--- pairs are showing a similar rise, beginning Oct. 4, and EUR/AUD and GBP/AUD display an inverse declining pattern.

EUR/USD has broken above its declining price channel that began in mid-September. The current channel level is US$1.350.

10/10 Almanac

On Monday, Oct. 10: Bonds take a holiday; stocks don't.

There are 12 trading days before the October options expire, 40 the November, 68 the December and 103 the January.

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

KSS Watch

Kohls Corp. (KSS) continues to set new 20-day highs in a sometimes hesitant rise that is starting to gain some momentum.

sym	phase	trend	adx		200/50	40/10
KSS

The present rise began on Sept. 12, at $42.14, and has to date gained 21.7%.

Today's upward move fills in a downward gap that preceded the most recent earnings report.

The average directional index is just below 25 and is rising.

The decline ended a long-running sideways movement that began in early January, and the price is again trading within that sideways range.

Should the price reach $57.39 and then reverse, I would conclude that the sideways trend was continuing, and the breakdown below the lower boundary of Aug. 4 was an extended overshoot. A persistent push beyond that level would code as a new uptrend. A failure to reach that level would suggest, to me, that the downtrend is continuing after a retracement.

The price, at today's high so far of $51.37, has retraced to the 61.8% Fibonacci level and has since pulled back to just above the 50% retracement.

The key retracement levels:

• 61.8% - $51.59
• 50.0% - $49.79
• 38.2% - $47.98

In terms of financials and analyst sentiment, I'm mildly bullish on KSS. The return on equity is a respectable 15%, although I find the 0.49 debt-equity ratio to be a bit high for my taste. Institutional ownership -- always a plus in my book -- is at 87%.

KSS will announce earnings before the open on Oct. 28. The most recent quarterly dividend was 25¢, an annual rate of 2% of the current price.

SPY Watch

SPY, the exchange-traded fund that tracks the S&P 500, has bounced strongly off of the 78.6% Fibonacci retracement level and is 31¢ away from again touching the 61.8% level on its way down.

sym	phase	trend	adx		200/50	40/10
SPY

The retracement frame is on the decline from Sept. 27 to Oct. 4.

The key Fib levels:

• 78.6% - $117.13
• 61.8% - $115.01
• 50.0% - $113.52

The present decline and retracement are really quite minor in the context of the larger scale decline that began from $137.18 on May 2.

In that context, the recent break below a sidways trend that began in early August is a simple overshoot, and SPY can be seen as still being a sidewinder. A strong and persistent break above $123.40 would mark a breakout to the upside.

Channels: A Change in Terminology

True confession: My current terminology relating to channels is quite confusing.

I refer to the "Donchian price channel" in discussing the phase a stock is in. This terminology is taken from the Turtle trading method.

I talk about "trend price channel" is discussing the trend a stock is in. This is classic chart analysis. I learned of it years ago in reading Robert Prechter, the premier Elliott Wave analyst.

A Donchian price channel is composed of horizontal lines marking the highest high and the lowest low over the past however-many days. The Turtle traders use a 55-day periodl. I use a 20-day period.

A price trend channel slopes in the direction of a trend. For a downtrend, the upper boundary is set first, connecting the highs, and then the lower boundary is a parallel line set at the first lowest low of the downtrend. For an uptrend, the lower boundary is set first.

So, essentially, I'm now using the same phrase -- "price channel" -- for two different beasts.

Going forward, for the Donchian construct I'll use the term "price level" or "Donchian price level". In practice, it will probably come out in my reports as "SPY pushed below the 20-day low price" or "below the lowest price of the past 20 trading days" or some such thing. The word "level" will mainly be implied but unwritten.

This puts me at variance with the Turtle traders, but so it goes. I mean, they're Turtles, for heaven's sake!

My trend price channel usage will remain unchanged: "downtrend price channel" or "the channel set by the downtrend that began last week" or some such.

I think this will increase the precision of my terminology, eliminating a lot of confusion. And since imprecision and confusion are both enemies of profit, eliminating them is all to the good.

10/7 Covered Calls

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

All of the downtrending issues are moving up the past few days but have not yet set higher highs -- by exceeding the previous retracement high in the downtrend. That’s why I continue to code them as downtrending. A higher high would signal a move to neutral, and a subsequent higher low would trigger coding as an uptrend.

The one exception is NOV, which has exceeded the previous high, set Sept. 27.

I’ve closed my insurance puts on COG, CAR and TPX.

I’m carrying out-of-the-money insurance puts on CNX, CVI, HAL, KEG and MCO.

My remaining insurance puts are on stocks that are at or approaching the upper boundary of their downtrending price channels. Should that boundary be exceeded, then I would close the puts.

Covered Calls

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

Other Base Positions

• None.

10/7 Indicators

Gold (GLD) has moved to a neutral trend. This is something of an ambiguous call. The price has been moving sideways for eight trading days, but it can also be seen as an extended pause in a downtrend that began Sept. 7. The chart also raises the question of how many trading days does it take before a pause becomes a sideways trend -- I’ve not set a standard for that in my own trading.

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
JJC

Global

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

10/7 Forex

On the daily chart...

AUD/USD has touched the top of its declining trend channel that began Sept. 8. A breakout persisting above US$0.985 would be a tradeable under my rules. A reversal into the channel would has a potential drop down to the lower boundary, at around US$0.925.

EUR/USD is in a similar positions. The downward trend channel began Sept. 15. A persistent rise above US$1.354 would be a breakout. A decline opens the possibility of a decline to the lower channel boundary, at around US$1.310.

Nothing of interest on the hourly charts.

10/7 Almanac

On Friday, Oct. 7: Employment and unemployment.

There are 15 trading days before the October options expire, 43 the November, 71 the December and 106 the January.

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

10/6 Covered Calls

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

TPX, having set a lower low, is now in a downtrend.

These holdings have moved to neutral phase within the 20-day Donchian price channel: BIDU, CAR, CNX, COG, CVI, GMCR and JNJ.

I’ve closed my insurance puts on BIDU and NOV, which broke above their respective downtrend channels. CAR and TPX are close to breakouts and need close watching.

Covered Calls

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

I’m carrying out-of-the-money insurance puts on CAR, CNX, COG, CVI, HAL, KEG and TPX.

Other Base Positions

• None.

10/6 Indicators

The S&P 500, (SPY), Nasdaq 100 (QQQ), the fear index (VIX), Treasury long-term debt (TLT), corporate high-yield debt (JNK), crude oil (USO), the U.S. dollar (UUP) and emerging markets (EEM) returned to neutral phase within the 20-day Donchian price channel for a day.

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
JJC

Global

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

10/6 Forex

On the daily chart...

GBP/USD has dropped below the 20-day Donchian moving average, but just by a bit. It’s the second touch of the US$1.53 level in 11 trading days. A significant break below that level would signal continuation of the decline that began Aug. 19.

On the hourly chart...

The GBP/USD decline happened in the 7 a.m. Eastern hour, with no follow-though in the two hours that have followed. The EUR/GBP chart shows a similar sharp move to the upside, and GBP/JPY and GBP/CHF to the downside.

EUR/USD is toying with a break below the somewhat sloppy sideways trend that has been in force since 9 a.m. Eastern on Tuesday. A persistent decline below US$1.3259 would constitute a breakout. A move below US$1.3112 would break below the downtrend channel that began Sept. 15 on the daily chart.

10/6 Almanac

On Thursday, Oct. 6: Jobless claims.

There are 16 trading days before the October options expire, 44 the November, 72 the December and 107 the January.

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

Almanac Late

The Almanac, which normally is posted about 10 minutes after the New York market close, will be late today. i can't give a time estimate at this point.

SPY Watch

An observation on the broader stock market. The S&P 500, as tracked by the exchange-traded fund SPY, has retraced a Fibonacci 50% of the six-day decline that began Sept. 27.

Tuesday's meteoric rise in the closing hour of trading brought the price up to the 38.2% retracement, and today's move did the rest.

If SPY retraces 61.8% -- a common occurrence -- it will reach $115.01, or an additional 1.1% above the present trading level.

10/5 Covered Calls

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

I’ve switched the trend on MCO from uptrend to downtrend. The price closed below the trend channel on Monday, set a lower low on Tuesday, and has yet to set a higher high. A higher high would be above $32.26. However, MCO is trading back within the channel so I’m not planning to buy insurance puts at this time.

GMCR: The 10-day moving average has crossed below the 40-day average.

SPRD, retracing the rise from July 29 to Sept. 2, has bounced off of the 61.8% Fibonacci level and is now trading just above the 38.2% level.

Covered Calls

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

I’m carrying out-of-the-money insurance puts on BIDU, CAR, CNX, COG, CVI, HAL, KEG, NOV and TPX.

Other Base Positions

• None. All were stopped, although profitably, during Tuesday’s upside reversal.

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

10/5 Indicators

I’ve added the exchange-traded fund that tracks copper, JJC, to the Tangibles section. Copper is widely used in many products and so demand for the metal is a reasonable leading indicator of industrial activity.

Tuesday’s explosive late day rise was insufficient to change the trend or the phase of the S&P 500 (SPY) and Nasdaq 100 (QQQ). Returning to neutral phase requires that the issue trade entirely within the 20-day Donchian price channel for a day. A change to an uptrend requires a higher high and higher low. Neither definitional requirement has been met.

The situation is similar with Treasury long-term debt (TLT), corporate high-yield debt (JNK), crude oil (USO), the U.S. dollar (UUP) and emerging markets (EEM).

The QQQ 10-day moving average has dropped below the 40 day average.

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
JJC

Global

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

10/5 Forex

Nothing of interest, actually, on the daily or hourly chart. No doubt Tuesday’s late-day reversals have made us all a bit cautious as we wait for the next move.

The reversals, as seen on the hourly chart, affected all of the majors, with the exception of EUR/GBP and GBP/CHF.

AAPL Watch

Watching Apple Inc.'s (AAPL) stock price during Tuesday's news conference to roll out the new iPhone and other products was a bit like watching a political focus group using the hand dials where they can register how much they like or dislike what's being said.

sym	phase	trend	adx		200/50	40/10
AAPL

During the first 85 minutes, the price dropped steadily, at one point losing 4.8% from when the newser started. The price only picked up when CEO Timothy Cook began to talk about the new iPhone's built-in voice-activated assistant (sort of like the old Microsoft Office's Clippy on steroids).

If I were Apple's new CEO, I would worry a bit about that.

The decline broke out below the 20-day Donchian price channel, putting AAPL in bear phase, and set a lower low, marking the start of a downtrend.

It touched the 61.8% Fibonacci retracement of the price rise beginning June 21 from a low of $310.50 up to the high on Sept. 20 of $422.86.

10/5 Almanac

On Wednesday, Oct. 5: ADP employment, ISM non-manufacturing index.

There are 17 trading days before the October options expire, 45 the November, 73 the December and 108 the January.

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

10/4 Indicators

The S&P 500 (SPY) broke into a downtrend, ending a sideways movement that began Aug. 10. The indicator also moved into bear phase, dropping below the 20-day Donchian price channel.

The Nasdaq 100 (QQQ) ended its climb that began Aug. 23. The trend will count as neutral until the price breaks below $50.06, the starting point of the upward movement. A decline below the Donchian price channel has set the indicator’s phase to bearish.

The fear index (VIX), which measures S&P 500 volatility, has broken above a sideways trend that began Aug. 18, although it is as yet a small breakout.

Treasury long-term bonds (TLT) have moved above the Donchian price channel into bull phase.

Crude oil (USO) has broken below a sideways trend that began Aug. 10, swinging into a downtrend.

The U.S. dollar’s (UUP) uptrend strengthened as the average directional index topped 40.

Emerging markets (EEM) declined below the Donchian price channel into bear phase.

And what of gold? The shiny preserver of value beloved by Ron Paul and others who doubt the wisdom of fiat money and the liquidity it brings, has done -- hardly anything. GLD continues to trade within a range -- $155.56 to $162.29 -- as it has for six days. It’s not behaving like a safe haven, the destination of choice when money flees to quality.

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

10/4 Forex

On the daily chart...

AUD on a downward track, with AUD/CAD piercing the lower 20-day Donchian channel, AUD/SEK pushing the lower channel boundary lower, and GBP/AUD the upper boundary higher, for a fifth straight day, and AUD/USD continuing its decline below a seven-day sideways range.

USD/CAD continues its rise that began 10 trading days ago -- it was interrupted by one, three-day correction. CAD/DKK has executed a nice bounce off the lower Donchian channel, although the follow-through seems to be weakening at this point in the trading day.

NZD/USD continues a fifth day of decline that is pushing the lower Donchian channel boundary still lower.

On the hourly chart...

EUR/USD has traded essentially sideways since 5 p.m. Eastern on Monday, with the exception of a sharp decline at the start of London trading. The decline from Sept. 28 (at US$1.3689) stalled at the bottom of a high-low channel that began Sept. 15. A multi-hour drop below the channel -- now at US$1.3165 -- would suggest continuation of the decline. A persistent break above US$1.3226 -- the high of current sidewinder -- would suggest a reversal of the decline.

10/4 Almanac

On Tuesday, Oct. 4: Factory orders, Bernanke testimony.

There are 18 trading days before the October options expire, 46 the November, 74 the December and 109 the January.

Almanac changes: I've added an implied volatility trading range on SPY and slightly reworded the bond yields implied inflation graf.

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

10/3 Covered Calls

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

CNX, COG, CVI drop below the 20-day Donchian channel into bear phase.

I’ve reinterpreted the JNJ trend as down, but it’s an awfully weak down and a close call. It could almost as reasonably be called a sidewinder.

I continue to code SPRD as being in an uptrend, despite a 61.8% retracement from the Sept. 21 peak. I would call it a downtrend if my time horizon were shorter, a week or less.

I’ve added TPX to the list. It has been in the portfolio since I loaded up for October covered calls, but I omitted from my tracking list.

Covered Calls

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

Other Base Positions

• EUR/USD, bear.
• SPY, October iron condor bounded by $126 and $111.

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

10/3 Indicators

Nasdaq 100 (QQQ): Trend turns neutral in a possible transition to a downtrend.

Fear index (VIX) trades above the 20-day Donchian price channel, moving to bull phase. However, the breakout lacks conviction.

Corporate high-yield debt (JNK) has dropped below a sideways channel in force since early August and is now in a downtrend.

Crude oil (USO) has traded below the Donchian price channel and is in bear phase.

The U.S. dollar (UUP) has broken above the Donchian price channel into bull 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

10/3 Forex

EUR/USD has broken below a sideways range that began Sept. 22. On the hourly chart, the breakdown began at Monday’s open -- 5 a.m. Eastern -- and since then the movement has been fairly narrow, but with a second lower low set in the current (8 a.m.) hour.

EUR/CAD has bounced down from the upper 20-day Donchian price channel (at C$1.3986) as part of a series of broad swings: A high of C$1.4378 on July 8, a lower high of C$1.4312 on Aug. 23, and a second lower high of C$1.4131 on Sept. 30. The two lows have been fairly horizontal, straddling C$1.3400.

USD/CAD is continuing the rise that began Sept. 19, expanding the upper Donchian channel. However, today’s movement so far lacks conviction, as it shows a spinning top Japanese candlestick, but one that is trading within the prior day’s range and so fails the test of an evening star reversal pattern.

AUD/USD has dipped below a burgeoning sideways range that began Sept. 23, but has quickly retraced back to within the borders. The lower boundary is around US$0.9628.

See EUR/DKK for an analogous move.

USD/DKK has broken above the 20-day Donchian price channel after 14 days of chopppiness.

Almanac: Something New

I've added a new item to the daily Almanac: A calculation of SPY's closing range over the next 30 days, based on the implied volatility -- the VIX.

The item for Monday's Almanac (posted Friday) looks like this:

"Implied volatility suggests a 68% chance that SPY will close, 30 days from now, between $99.22 and $127.08. "

Now, important caveats. Implied volatility isn't really a predictive tool. It represents the collective opinion of traders now about what will happen in time to come. Opinions change. And tomorrow's implied range can surely differ from today's, sometimes by a significant amount.

Still, it's an interesting statistical tool, and since it is the opinion of traders that create ranges, their opinion about what the range is likely to be must carry some weight.