From KhronoStock.com contributor Andrew Cardwell.

Cardwell RSI EDGE
Trader Diary Notes
10/09/09

Stock Futures–
The initial signs that a market is ready to roll over will usually show up as resistance around the
60 level on the hourly charts. I will be watching for resistance at the 60 level or failed PR targets or
resistance at the PRT level itself. I will be especially alert today for intraday PCRP’s on the short term charts to start forming overhead resistance levels. Also note that today is the 9th of the month so we could have made a high yesterday or today and I will be watching for at the least a trading top
and possibly the signs for an intermediate top.

Gold–
The market has gotten a bit ahead of itself. You can now see why I have been bullish for so long and the move up we have had is just the beginning. A correction has been overdue and I think is welcome allowihg the market to adjust before starting anothe leg higher. A corrective selloff down to $1030 to $1015 would work off the overbought situation and off new buying opportunities. Back in June in Pasadena at the “Trader’s Expo”, many of the so called analysts and experts were calling for the demise of the gold market saying the top was in and it would not go back above $1000. Now the question is will it go below $1000 before it tops $1200 and then $1500. I am staying with my targets of $1150 by the end of the year and $1500 longer term (probably by June – August).

Bonds-
Decemeber T bonds ar starting to look toppy to me. Looking at the charts there was a short term PR target at 123.07 which the market could not surpass and should now be considered a key resistance level. I am watching for a good entry point at which to establish a good short position.

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Charts are provided by KhronoStock.com’s contributor Andrew Cardwell.

The US dollar is still hopelessly maintaining its downtrend staying below Andrew’s complex price average “the number”, with a weak RSI below 50. A rally in the dollar is simply out of the question given what is on the chart.

Gold is staying very strong ready to make higher highs. Higher trend is supported by the “the number”. Its RSI seems to be ready to shoot to the upper range of the bull range between 40 to 80. That 1250 target seems within reach in the near term.

SPX definitely corrected its oversold state with RSI plunged from the upper 70’s down to the 50’s. There is still this sign of a bearish divergence with RSI making lower highs while the market climbs to higher highs. If not an major top, at least an intermediate top has been put in place. The fact that gold and the equity market are moving in sync is by itself a divergence.

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I  apologize for not posting on StockTock.com for so long. Anyways, I enjoyed this video from KhronoStock’s contributing analyst Andrew Cardwell very much.  Please submit your comments and questions either on here or on KhronoStock.com. Andrew will try to address them.

Direct Link to Andrew’s video

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In my most recent article for KhronoStock subscribers, I pointed out the fact that Goldman Sachs delivered yet another miracle by earning billions of dollars speculating and day trading during the second quarter of 2009. Its record quarterly profit is mostly attributed to their proprietary trading desk involving equity, derivatives and currency.

Ever since the Federal Reserve approved Goldman’s proposal to continue operating under the “loose” capital reserve requirement despite the fact that the company became an official bank holding company on Feb 5th, 2009, Goldman Sachs went on a risk taking rampage starting in March. Is it any surprise that the stock market began its rally on March 9th?

It was obvious that Goldman knew something that few others did. Thus, they had absolutely no reservation in using its taxpayers’ money and federal credit facilities to make the firm’s biggest long bet on trading markets of all types.

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Once again, this nonsense about professional money managers’ bullish sentiment has possibly reached to the highest since the pre-crisis level when the market peaked in October of 2007. Who cares about these professional money managers? They are sheeps just like the masses – always wrong!  How many professional money managers correctly anticipated the market collapse? I would say less than 1%. The mutual fund business is not about making the correct calls or making money for their investors. It’s all about hugging some benchmark and collect their fees.

We need to look at insiders. Why has insider selling increased to the highest level in several years? Perhaps it is for the same reason as why insider selling reached a record only four months before the market peak in 2007.

People who are chasing this rally is catching the very last bit or nothing at all. The easy money has been made and that is a clear fact. Whenever the masses begin to jump on the wagon, that is usually a sign that the party is over.

Perhaps I will re-post this short note two months from now at the end of October.

22 Comments

- SP500 All time Intray High – 1576.09, SP500 March 2009 intraday Low,

666.79.

- 38.2% retrace of the above levels stands at 1014.14.

- The rally that began on March 9th until now produced a intraday high of 1035.82 surpassing the 38.2% retrace above by roughly 2%.

4 Comments

The current market condition is definitely a challenge for traders and investors of all types.  The important question is that is the primary uptrend since March 9th about to reverse or we are actually on the path of a new bull market. While it is important to analyze the technical patterns such as the likely topping expanding triangle or the megaphone formation indicated by Idan, it is even more important to have the right trading strategy at this crucial moment.

We published a three part investment strategy that we believe is going to be very useful for the rest of this year. The entire article is simply too long and cumbersome to post on here. If you are interested in obtaining a copy of our article, please email dan@short-stocks.com. As you know, Dan is KhronoStock’s partner.

In your heading you can put:

Investment Strategy Article Request – StockTock.com or

Investment Strategy Article Request – KhronoStock.com

Hope the article will help you.

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As an affiliate of theBullbear.com, I came across Tony Cherniawski’s post of the a potential topping formation that is forming right now. I think this is the clearest illustration of what is happening right now.  Please check out the following link:

http://www.thebullbear.com/profiles/blogs/is-something-missing-in

The expanding triangle is very often mistaken for a new bull market. And who can blame for this mistake when the media continues to deliver such nonsense propaganda about a full economic recovery every single day.

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[Added by Unersaettlich]

More discussion of the pattern:

http://www.trending123.com/patterns/reverse_symmetrical_triangle.html

Chart of S&P “Megaphone”:

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Although this post is not related to trading, it is nevertheless relevant to the upcoming market moves. We are frequently asked by subscribers as well as non-subscribers the question “what is the trigger for the next wave of market decline?” or “what news would cause the SP500 and DOW making new lows?” I think the answer to these questions is by now pretty obvious. It is global national bankruptcies and debt defaults. This includes but not limited to the United States and Great Britain. This will in turn cause a chain effect that will also devastate their major creditors such as China, Russia and Japan.

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Hi Guys,

Sorry about the lack of posting from me for the past few weeks. We have been working on some exciting opportunities. Market is not giving up but we have likely seen the top and have a pretty good idea where that top is.

KhronoStock contributing analyst Mike of MoverMike.com recently did a brief trade analysis on JPM. Here is his analysis. The analysis is pretty clear and is straight to the point.

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