Lines in the Sand; The Bonds, REIT and MLP Edition

Last week I wrote an article purporting to highlight significant levels of support and resistance across a variety of financial markets.  Well, it turns out there are more.
More Notes on “Lines”
I certainly look at the markets more from the “technical” side than the “fundamental” side (not even a conscious choice really – I just never really had much success buying things based on fundamentals. That doesn’t mean I think fundamentals are useless or that they don’t “work” – they just didn’t work for me).
Once I settled on the technical side of things, I started reading books about technical analysis.  All the classics.  I learned about chart patterns and trend lines.  By definition, a trend line is a line drawn on a price chart that connects two or more successive lows or highs.
And then I got to work looking through charts and applying everything that I thought I had learned. And like a lot of “newbie” technicians – and a surprising number of seasoned ones – I typically ended up drawing “lines on charts” that would resemble something like what you see in Figure 1.
Figure 1 – “Important” trend lines (or not?) (Courtesy AIQ TradingExpert)
For a technical analyst this is sort of the equivalent of “throwing up” on a chart (and the real pisser was that back  in the day a fresh updated booklet of charts would show up in the mail each week – so you had to “throw up’ all over all the charts again and redraw every #$^& “important” line!!).
At some point I realized that perhaps every “important” line that I was drawing on a multitude of charts was perhaps maybe not so “important” after all. This revelation led me to establish the following maxim (as much to force me to “fight the urge” as anything:
Jay’s Trading Maxim #18: If you draw enough lines on a bar chart, price will eventually hit one or more of them.
(See also The Line(s) in the Sand for Everything)     
True Confession Time
There are certain dirty little secrets that no respectable technician should ever utter. But just to “get a little crazy” (OK, at last by my standards – which are quite low, apparently) I’m going to put it down in print:
I hate trend lines
There, I said it.  Now for the record, up sloping and down sloping trend lines are a perfectly viable trading tool if used properly.  I personally know plenty of people trading successfully using trend lines drawn on a price chart.  Sadly, I’m just not one of them.
So remember the lesson I learned the hard way – “There is no defense for user error.”
The full truth is that I have nothing against trend lines, and yes I understand that there are “objective” methods out there detailing the “correct” method for choosing which two points to connect to draw a proper trend line (DeMark, Magee, I think Pring to name a few).  But I somehow seem to have failed that lesson.
One Line I Do Like
I still draw slanting trend lines from time to time. But the only lines I really like are lines that are drawn horizontally across a bar chart – i.e., “support” and “resistance” lines.  A multiple top or a multiple bottom marks a level where the bulls or the bears made a run and could not break through. Now that’s an “important” price level.  If that price level ultimately holds it means the charge failed and that a significant reversal is imminent.  If it ultimately fails to hold it means a breakout and a possible new charge to ever further new highs or lows as the case may be (for the record, it could also mean that a false breakout followed by a whipsaw is about to occur.  But, hey, that’s the price of admission).
I also like horizontal lines because even if very single horizontal line does not prove to be useful as a trading tool, it can still serve a purpose as a “perspective tool”.  Rather than explaining that theory let’s just “go to the charts.”
More “Lines in the Sand”
Figure 2 displays an index of bond and income related ETFs that I created.  Roughly half of the ETFs have a higher correlation to treasury bonds and the other half to the S&P 500 Index (i.e., CWB – convertible bonds, JNK – high yield corporate, PFF – preferred stock and XLU – utilities all react to interest rates but are more correlated to the stock market than to treasury bonds).
aiq bonds1
Figure 2 – Bond and Income Related ETF Index (Courtesy AIQ TradingExpert)
This monthly chart clearly illustrates the struggle going on in the interest rate related sector.  Interest rates mostly bottomed out in 2013 and have been grinding sideways to higher since.  As you can see, interest rate related securities have been trapped in a sort of large trading range for years.  Eventually, if the long-term trend in rates turns higher this chart should be expected to break through the lower (support) line Figure 2.
Still focusing on interest rate related sectors, Figure 3 displays a monthly index comprised of 3 REITs.  Talk about a market sector trapped in a range.
aiq reit
Figure 3 – REIT Index; Monthly (Courtesy AIQ TradingExpert)
For what it is worth, Figure 4 displays a weekly chart of the same index with an indicator I call Vixfixaverage (code for this indicator appears at the end of the article).  Typically, when this indicator exceeds 60 and then tops out, a decent rally often ensues (one word of warning, there is also often some further downside before that rally ensues to caution is in order).
reit 2
Figure 4 – REIT Index; Weekly (Courtesy AIQ TradingExpert)
Speaking of oversold “things”, Figure 5 displays an index of Master Limited Partnerships (MLP’s).  As you can see in Figure 5, a) divergences between price and the 4-month RSI are often followed by significant rallies, and b) a new such divergence has just been established.  Does this mean that MLP’s are destined to rally higher?  Not necessarily, but given the information in Figure 5 and the fact that everybody hates MLP’s right now, it’s something to think about.
aiq mlp
Figure 5 – MLP Index (Courtesy AIQ TradingExpert)
AIQ TradingExpert Code for Vixfixaverage
hivalclose is hival([close],22).
vixfix is (((hivalclose-[low])/hivalclose)*100)+50.
vixfixaverage is Expavg(vixfix,3).
Jay Kaeppel
Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

70 thoughts on “Lines in the Sand; The Bonds, REIT and MLP Edition

  1. Thank you, I have recently been searching for information about this subject for ages and yours
    is the greatest I’ve discovered so far. However, what concerning the conclusion? Are you sure in regards to the supply?

  2. Hello there! This blog post couldn’t be written any better!
    Looking at this article reminds me of my previous roommate!
    He constantly kept preaching about this. I most certainly will send this article to him.

    Pretty sure he will have a good read. Many thanks for sharing!

  3. Hello there! This post could not be written much better!
    Looking at this post reminds me of my previous roommate!
    He always kept talking about this. I am going to
    send this article to him. Pretty sure he’s going to have a very good read.
    I appreciate you for sharing!

  4. Way cool! Some very valid points! I appreciate you
    penning this write-up plus the rest of the website is also really good.

  5. I like the valuable information you provide in your articles.
    I’ll bookmark your weblog and check again here frequently.
    I’m quite certain I will learn lots of new stuff right here!
    Good luck for the next!

  6. I just want to tell you that I’m very new to blogs and definitely liked you’re blog. More than likely I’m likely to bookmark your blog post . You really come with amazing stories. Thanks a bunch for revealing your website page.

  7. Thanks so much for giving everyone remarkably special opportunity to check tips from this website. It can be very cool and jam-packed with fun for me and my office acquaintances to search your website not less than three times in 7 days to read the latest items you will have. And indeed, I am just at all times fascinated considering the powerful hints you give. Certain 3 points on this page are absolutely the most efficient I have had.

  8. This is a really good tip especially to those fresh to the blogosphere.
    Brief but very precise information… Many thanks for
    sharing this one. A must read post!

  9. hello there and thank you for your information – I’ve certainly picked up something
    new from right here. I did however expertise several technical points using this site, as I experienced to reload the web site many times previous to I could get it to load correctly.
    I had been wondering if your web hosting is OK? Not that
    I am complaining, but slow loading instances times will very frequently affect your placement in google and could damage your
    high quality score if advertising and marketing with Adwords.
    Anyway I am adding this RSS to my e-mail and can look out for a lot more of your respective
    exciting content. Ensure that you update this again soon.

  10. Attractive section of content. I just stumbled upon your weblog and in accession capital to assert that I get in fact enjoyed account your blog posts. Any way I’ll be subscribing to your feeds and even I achievement you access consistently fast.

  11. Thanks for your post right here. One thing I would like to say is that most professional areas consider the Bachelors Degree as the entry level requirement for an online certification. Though Associate Certification are a great way to get started, completing the Bachelors uncovers many opportunities to various employment opportunities, there are numerous online Bachelor Course Programs available via institutions like The University of Phoenix, Intercontinental University Online and Kaplan. Another issue is that many brick and mortar institutions offer you Online editions of their diplomas but normally for a substantially higher price than the organizations that specialize in online qualification plans.

  12. Thanks for your beneficial post. In recent times, I have been able to understand that the symptoms of mesothelioma are caused by the actual build up associated fluid involving the lining on the lung and the breasts cavity. The disease may start within the chest place and get distributed to other areas of the body. Other symptoms of pleural mesothelioma include fat loss, severe inhaling trouble, vomiting, difficulty ingesting, and puffiness of the face and neck areas. It must be noted that some people with the disease usually do not experience any kind of serious signs or symptoms at all.

  13. Hey there! I’ve been following your weblog for some time now and finally got the courage to go ahead and give you a shout out from Austin Texas! Just wanted to mention keep up the fantastic job!

  14. I must show some thanks to you for rescuing me from this type of condition. Right after looking through the online world and finding ideas which were not beneficial, I was thinking my entire life was gone. Existing minus the strategies to the issues you have solved through your main website is a crucial case, as well as ones which might have negatively affected my career if I had not come across your blog post. Your actual understanding and kindness in maneuvering every item was precious. I’m not sure what I would’ve done if I had not come across such a stuff like this. I’m able to at this time relish my future. Thanks a lot so much for the specialized and results-oriented help. I will not hesitate to refer your blog to any individual who would need tips about this area.

  15. Thanks for the sensible critique. Me & my neighbor were just preparing to do a little research on this. We got a grab a book from our local library but I think I learned more from this post. I am very glad to see such wonderful information being shared freely out there.

  16. Very nice article and right to the point. I don’t know if this is actually the best place to ask but do you folks have any thoughts on where to employ some professional writers? Thank you 🙂

  17. Thanks for a marvelous posting! I actually enjoyed reading it, you
    are a great author. I will ensure that I bookmark your blog and will eventually come back in the future.
    I want to encourage one to continue your great work, have a nice weekend!

  18. I must express some appreciation to the writer for bailing me out of this type of dilemma. Right after surfing throughout the world-wide-web and meeting principles which were not helpful, I thought my entire life was over. Being alive devoid of the strategies to the difficulties you have sorted out through the report is a crucial case, and those that could have in a wrong way affected my career if I had not encountered the blog. That know-how and kindness in dealing with all areas was priceless. I am not sure what I would have done if I had not encountered such a solution like this. I can also at this time look forward to my future. Thanks so much for your professional and amazing help. I will not think twice to refer your web sites to any individual who would need assistance on this issue.

  19. Thank you, I’ve recently been searching for info about this topic for a long time and yours is the best I have came upon so far. But, what concerning the conclusion? Are you positive in regards to the source?

  20. It is the best time to make some plans for the future and it is time to be happy.
    I have read this post and if I could I desire to suggest you some interesting things or
    advice. Perhaps you could write next articles referring to this
    article. I wish to read more things about it!

  21. I would like to thnkx for the efforts you’ve put in writing this web site. I am hoping the same high-grade web site post from you in the upcoming also. In fact your creative writing abilities has inspired me to get my own site now. Actually the blogging is spreading its wings fast. Your write up is a good example of it.

  22. I have been surfing on-line greater than 3 hours lately, but I never discovered any interesting article like yours. It¡¦s lovely price enough for me. In my opinion, if all webmasters and bloggers made excellent content as you did, the web will likely be much more helpful than ever before.

  23. Hey would you mind letting me know which hosting company you’re using? I’ve loaded your blog in 3 different internet browsers and I must say this blog loads a lot faster then most. Can you recommend a good hosting provider at a honest price? Thanks a lot, I appreciate it!

  24. Thanks for every other informative web site. Where else could I am getting that type of info written in such a perfect method? I have a project that I am simply now running on, and I have been on the look out for such info.

  25. We’re a group of volunteers and starting a new scheme in our community. Your web site provided us with valuable info to work on. You have done an impressive job and our whole community will be grateful to you.

  26. F*ckin’ tremendous things here. I’m very satisfied to look your post. Thanks a lot and i’m having a look ahead to touch you. Will you kindly drop me a mail?

  27. Thanks for all your valuable work on this site. My mum enjoys carrying out internet research and it is easy to see why. Most of us learn all relating to the compelling form you offer informative tips and hints by means of this web blog and therefore boost response from other individuals on that matter then my daughter is without question learning a great deal. Take advantage of the remaining portion of the year. You are carrying out a splendid job.

  28. I’m still learning from you, but I’m making my way to the top as well. I absolutely liked reading all that is written on your blog.Keep the tips coming. I liked it!

  29. Hi, i read your blog from time to time and i own a similar one and i was just wondering if you get a lot of spam comments? If so how do you protect against it, any plugin or anything you can advise? I get so much lately it’s driving me mad so any support is very much appreciated.

  30. I know this if off topic but I’m looking into starting my own weblog and was wondering what all is required to get set up? I’m assuming having a blog like yours would cost a pretty penny? I’m not very internet savvy so I’m not 100% positive. Any tips or advice would be greatly appreciated. Many thanks

  31. hi!,I really like your writing very a lot! share we communicate more about your article on AOL? I require an expert on this space to resolve my problem. May be that’s you! Looking forward to peer you.

  32. Youre so cool! I dont suppose Ive learn anything like this before. So nice to search out somebody with some authentic thoughts on this subject. realy thanks for starting this up. this website is one thing that is needed on the net, someone with a bit originality. useful job for bringing something new to the web!

  33. Also I believe that mesothelioma is a extraordinary form of cancer malignancy that is normally found in people previously subjected to asbestos. Cancerous cells form inside mesothelium, which is a protective lining that covers a lot of the body’s areas. These cells usually form inside the lining of your lungs, abdominal area, or the sac which encircles the heart. Thanks for sharing your ideas.

  34. The following time I learn a weblog, I hope that it doesnt disappoint me as a lot as this one. I mean, I do know it was my option to learn, but I actually thought youd have one thing attention-grabbing to say. All I hear is a bunch of whining about one thing that you can fix for those who werent too busy searching for attention.

  35. whoah this blog is excellent i like studying your articles. Keep up the great work! You recognize, many individuals are searching round for this information, you can aid them greatly.

  36. I have to show my appreciation to the writer for bailing me out of this particular situation. After exploring through the internet and coming across notions which were not pleasant, I figured my life was over. Existing devoid of the answers to the problems you have resolved as a result of your main review is a critical case, as well as the kind which could have in a wrong way affected my career if I had not encountered your blog. Your actual skills and kindness in handling almost everything was invaluable. I am not sure what I would have done if I hadn’t come across such a point like this. I can also at this point relish my future. Thank you so much for the reliable and results-oriented guide. I will not think twice to refer your web site to anyone who ought to have recommendations on this subject.

  37. Iím impressed, I need to say. Really not often do I encounter a weblog thatís each educative and entertaining, and let me inform you, you have hit the nail on the head. Your concept is excellent; the issue is one thing that not sufficient individuals are speaking intelligently about. I am very blissful that I stumbled throughout this in my seek for something referring to this.

  38. I relish, lead to I discovered just what I was having a look for. You have ended my 4 day long hunt! God Bless you man. Have a nice day. Bye

  39. Doubtful two bed way pleasure confined followed. Shew up ye away no eyes life or were this. Perfectly did suspicion daughters but his intention. Started on society an brought it explain. Position two saw greatest stronger old. Pianoforte if at simplicity do estimating.

  40. Good post. I study something more challenging on completely different blogs everyday. It’s going to all the time be stimulating to learn content from different writers and apply just a little something from their store. I’d desire to make use of some with the content on my weblog whether you don’t mind. Natually I’ll provide you with a link in your web blog. Thanks for sharing.

  41. Thanks a lot for the helpful content. It is also my belief that mesothelioma has an particularly long latency period of time, which means that warning signs of the disease might not emerge until 30 to 50 years after the primary exposure to asbestos fiber. Pleural mesothelioma, that is certainly the most common variety and is affecting the area around the lungs, might result in shortness of breath, chest pains, as well as a persistent coughing, which may result in coughing up bloodstream.

  42. I do trust all of the ideas you’ve presented in your post. They are very convincing and can certainly work. Nonetheless, the posts are very short for novices. May you please lengthen them a little from next time? Thank you for the post.

  43. I have observed that in the world these days, video games would be the latest fad with children of all ages. Occasionally it may be extremely hard to drag the kids away from the activities. If you want the best of both worlds, there are many educational games for kids. Good post.

  44. Hey There. I found your blog using msn. This is a really well written article. I will make sure to bookmark it and return to read more of your useful info. Thanks for the post. I’ll definitely return.

  45. I have been exploring for a little bit for any high-quality articles or blog posts on this kind of area . Exploring in Yahoo I at last stumbled upon this web site. Reading this info So i am happy to convey that I have an incredibly good uncanny feeling I discovered just what I needed. I most certainly will make certain to don’t forget this website and give it a glance regularly.

  46. What i do not understood is in reality how you’re not actually much more smartly-appreciated than you might be now. You’re very intelligent. You know thus considerably in terms of this matter, produced me individually imagine it from a lot of numerous angles. Its like men and women aren’t involved until it’s something to do with Lady gaga! Your personal stuffs outstanding. All the time care for it up!

  47. Someone essentially help to make seriously articles I would state. This is the first time I frequented your web page and thus far? I surprised with the research you made to make this particular publish incredible. Great job!

Leave a Reply

Your email address will not be published.