After The Bell-Mid-Day Update Risk On TMV Dec 20

These days when setting up your next swing trade, a trader has to look at EVERYTHING. By that I mean everything: Europe, Asia, Currencies, Bonds, commodities, headlines, etc. It's not enough anymore just to go thru earnings reports for US companies and make your picks.

This market rewards EXTREME Reversals and nothing else. The name of the game today is being ready to FLIP FLOP just as the EXTREME sentiment for a particular direction sets in.

TMV is a BEAR ETF that moves in inverse fashion of the 20 year T-Bill. As the market sells bonds (risk off) in order to buy stocks (risk on) TMV moves higher.

Going thru dozens of ETF stock index charts-the frustrating thing is they are directionless. Both the BEAR and BULL ETF trackers trade basically right down the middle of their ranges. So for trading clues, we have to look at other stuff.

TMV is currently showing a nice divergence in the direction of the stock, which is down, verses some technical indicators.

Looking first at RSI<2>, a short term indicator we use for swing trading, we are seeing the same divergent set up as in Winter 2010. Notice in 2010, the extreme low readings in RSI<2> began to rise, even as TMV price continued lower. This was your first clue to the weakening downtrend and possible reversal.

ADX(the black line) in our next indicator was our next clue. As the TMV downtrend progressed, the ADX line that was neutral, began to pickup momentum. ADX reflects strength of trend up to a certain point. Remember trends tend to exhaust into completion, so extreme ADX readings, signal a trend that is coming to an end.

OBV indicator gives us no signal.

Bring forward to today, winter 2011, we see the exact same set-up forming; although a little latter in the year.

The last move was 5 months up in 2010, however that was with QE2 at our back.

Here we are looking at the US dollar ETF to try and piece this puzzle together. The reason I point this chart out is because of the ADX. Notice unlike TMV, ADX for UUP has not signaled a direction change.

Conclusion: TMV seems to be forecasting a change of current trend, risk off, to a risk on trend. This also backs up my SPY forecast to move higher into 2012. The question becomes, if correct, is this another 5 months of upside as in 2010?

UUP adx however just points to a simple pull back and then continuation of uptrend. This will continue to be the trigger to bring about wave 3 sell off.

I stick with my forecast for a strong impulsive down wave soon; the biggest bull trap in 90 years.

Tim Kathlina