Before The Bell-TVIX 3 Pattern Set Up Jan 24th

From ZeroHedge Jan 24th:
S&P Warning Of Imminent Greek Default Again, But Promises All Shall Be Well, Dallara Speaks

You have heard history repeats? It's True.

Looking at TVIX, the power of the pattern suggest a historical repeat of 2011. Not only does the chart suggest that, but we can take 2011 headlines, such as the one above by ZeroHedge, and change to 2012; they all read the same.

Again we are trading TVIX because it offers the most, and quickest upside once a decline begins and it also provides a well defined low. Unlike ALL OTHER bear ETFs, that can go down and reverse split forever, the volatility index generally only goes so low.

TVIX exhibits what I believe are 3 repeating patterns, with Pattern 2 about to be embarked on soon. I expect the shares to jump up to $30, followed by headlines out of Europe that all the problems are solved, sending the shares sharply back below $20, which then sets up the final Pattern 3 scenario as we realize the sh_t is about to hit the fan.

This time, unlike last time however, I expect TVIX to go much higher. The reason being a full 5 wave up cycle will have been completed in the S&P by the time P3 begins, ushering in the start of P3 bear that will ultimately take the S&P to sub 600.

Conclusion: History is repeating as central planners believe doing the same thing, only more of it, will bring about a different result.

We added to TVIX position today, will probably scale that back at $30, then look to re-enter on the final pull back below $20, all in.

Tim Kathlina

Before The Bell-German DAX-Tail That Wags the Dog Jan 22nd

From Reuters today:
"German Finance Minister Wolfgang Schaeuble on Sunday rejected pressure to beef up the euro zone's permanent rescue facility, saying Berlin would stick to the agreement made in December for a lending capacity of 500 billion euros ($646 billion). "We are sticking to what was agreed in December," Schaeuble told public broadcaster ARD. "In March we will check whether that is sufficient."

Notice the key word in the news release is "lending capacity". This is not a gift, its a LOAN, on top of the LOANS that can not be paid back already. The world has gone fing mad. 

Looking at the DAX we can see a clear bear DOJI set up right at the calculated R2 line. This is backed up by the negative divergence in the %B indicator. Notice RSI<2> has rolled over as well.

Conclusion: This is a tail that wags the dog situation, the USA being the dog. The DAX technically is at a point of at least short term potential reversion; that coincides with this week being a potential price and time turning point for a top. Expect the dog to be wagged by the tail should a free fall in Europe commence.

It's clear that Europe will deffer to the US Fed to hang Europe's debts on the US Taxpayer, since we have the worlds reserve currency and can monetize like theres no tomorrow. The problem is a declining tax base in the US, along with food and fuel inflation, causes money printing to produce negative returns on economies world wide.

The natural order of markets and economics will prevail, its a question of when? US traders and bond funds are convinced the FED on Tuesday will begin pumping cash into the system; it seems Germany is in agreement.

Clearly stocks have already priced in this potential Fed action; the jury is out as to what the reaction by markets will be, since everyone is all in already.

Tim Kathlina

Before The Bell-CROX Update-Name Brands That Got Crushed Jan 19th

CROX is on our Name Brands that Got Crushed Trade list. Fund managers look to get long these type of household names, once established price discovery base has been identified. (Balance between sellers and buyers)

CROX got crushed down to $15 last October. The shares have not gone a penny lower since, thus price discovery.

The last two candles have formed a Bullish Engulfing Pattern, defined as:
Bullish Engulfing Pattern is a pattern characterized by a large white real body engulfing a preceding small black real body, which appears during a downtrend. The white body does not necessarily engulf the shadows of the black body but totally engulfs the body itself. The Bullish Engulfing Pattern is an important bottom reversal signal.

Volume interest seems to be picking up slowly as noted by a slightly rising 20 day moving average. I use the ema20 over volume to determine buy interest. If the ema begins to upswing, either reversing a down slope or a flat slope, this is a good indication elephants are moving in.

Tim what is the catalyst to move higher?? Glad you asked.
CROX reports earnings on Friday 20th. Looking at numbers posted on Yahoo, analyst expect a 20% decline, eps of .04cents, reduced from .06cents. Last report, CROX beat estimates by 150%.

The mean 1year price target by analyst is $25.50, or 38% above current price. Call options that expire Friday, have largest open interest at $20.

Conclusion: CROX seems to have a few big players moving in ahead of earnings. With a solid base at $15, and still 38% below its yearly mean price target, the downside risk of $3 for a reward of almost $10 seems like a decent bet.

The best way to play is a buy above $20, which will confirm the Bull Engulfing Pattern and move past call option resistance.

Tim Kathlina

After The Bell-Mid-Day Prepare for Increased Volatility Jan 18th

Let me share with you a truth about the markets-Low volatility preceds high volatility. When looking for points/profits-sometimes you have to start with facts that you know, then try to fill in the blanks.

What we know is the market has been struggling higher amidst low volatility and increasing bullish sentiment.

Looking at the XIV etf which moves opposite the VIX, we see a 5 day struggle to move higher. The %B indicator, an indicator I use to look for divergence from the BBands, is showing lower highs.

The VXX is the old formula. We see the same thing as the XIV, 5 days unable to move lower and a divergence in %B indicator.

TVIX same pattern, 5 day support with %B divergence.

Conclusion: As noted last week, I believe Semi earnings will kick off the start of volatility either by missing earnings or bringing about the final exuberant exhausting high because they blow away numbers. (The 1st scenario is more likely)

Either way, we are averaging into TVIX for the ride higher that's about to begin.

Tim Kathlina

After The Bell-NETFLIX Mid Day Update NFLX Jan 18th

On Jan 12th I noted a Bullish Doji that made a successful test of the zero number 90. The DOJI was confirmed by the positive price appreciation follow thru the following day.

Today we get this from Analyst:

FORBES

Netflix: Bernstein Cuts Target-Sees Slowing Sub Growth

Bernstein Research analyst Carlos Kirjner this morning chopped his price target on Netflix to $71, from $79, well below yesterday’s close at $94.72

The market got word of this downgrade prior to market open. The stock has fought off this news and is now positive. The shares have formed a bull flag while trading against a spike.

Conclusion: NFLX shares continue to exhibit bullish trends despite market attempts to keep the shares down. Shares have formed a bullish flag against a negative backdrop of analyst downgrades.

I continue to believe the turnaround is on the way and expect the shares to reach $150 to $200 over the next 3 months.

Tim Kathlina

AFTER THE BELL-BULL AND BEAR DOJI PATTERN SET-UPS JAN 12TH

DOJI:
The appearance of a Bearish/Bullish (Doji) Star Pattern in an uptrend/downtrend shows that buyers/sellers are now losing control and the market is moving to a deadlock between buyers and sellers. This deadlock or balance between buyers and sellers may result because of a diminution in the buying force or an increase in the selling force. The star tells us that the strength of uptrend/downtrend is now dissipating and the market is increasingly vulnerable to a setback/advance.

Conclusion: These patterns require follow thru confirmation. Note however, Transports, large caps, mid-caps are all backed up by low RSI<2> readings.

As noted in yesterdays Semiconductor post, I believe Intel earnings report will bring in a short term top of some sort. Either an exuberant exhaustion style high, based on good numbers, or a disappointment ceiling, based on bad numbers.

The question remains, will this be the high of the year????? Not sure yet.

Tim Kathlina

AFTER THE BELL-OIL TO $120, SPY, EURO/DOLLAR UPDATE JAN 11TH

ZeroHedge Jan 11th-Iran Interest Rates Raised To 20% To Fight Hyperinflation; Iran Nuclear Scientist Killed In Street Bomb Explosion.

Americans will not support an invasion of Iran without provocation by Iran. History is well documented that governments in order to achieve an objective will create circumstances, under the radar, to pressure an identified enemy to make the first attack.

As FDR did enticing Japan to attack Pearl Harbor, George Bush urging Saddam to attack Kuwait, Obama is now boxing Iran in to entice them to attack US interest. Nothing helps re-election like war; foreign and domestic: Oklahoma City-Bill Clinton, 911-George Bush, Iran-Obama.

Looking at Light Crude, the daily chart seems to have an Inverted Head-n-Shoulders pattern. IF this pattern breaks the neckline upward, then the calculated upside is between $110-$120. If this breaks the neck line based on Iran/US military encounter, sky is the limit. Either way, as of today, it seems the path of least resistance for OIL is HIGHER.

December thru many fund managers under the bus because the decoupling of the Euro from the S&P. Prior to December, fund managers could count on the currency to move lock step with the US index. The majority of fund managers missed the 1290 S&P upside that we called for due to this decoupling.

Looking at the Euro, the chart looks to be in a bear wave 3 on the daily chart. I project the ending of this 3 wave between $123-125. Generally a 3-wave, an impulse wave, will extend 61% of wave one.

Wave one was 12 points top to bottom. 1.61%x12 is 19. Subtract 19 from wave 2-top of 142, gives us a price target between $123-125. At this price, we will buy the Euro.

Here the dollar/spx in December began running together. Again, this shows the appetite for all things US. Money will always go where its treated best.

Conclusion: Inverted H-n-S pattern in oil, plus Obama desperate to win re-election, almost ensures escalation of Iran conflict towards war, and higher oil prices. (Nothing is ever a sure thing)

For now, money is flowing into all things American, its the lesser of two evils. The question is as everyone seems to be all in USA, will the EURO bottom as we project, money move out of US stocks/US dollar; moving into EURO, GOLD, OIL, SILVER, etc? Or will a rising tide float all boats, and everything goes higher on extreme bullishness? This we do not have an answer to yet.

So, we will go long the EURO at the calculated bottom, wait for the response by US equities. Our next TVIX insurance purchase is coming within days.

Tim Kathlina