Stock market analysis and commentary from a trader's perspective

Tuesday, July 28, 2015

Short Takes

Futures are up. Not surprised. S&P bounced from the 2063 area nicely.

Another possible reason: the Fed.

First, WSJ's Hilsenrath was out with a Fed piece this weekend telegraphing "more clarity" is possible during this Wednesday's Fed meeting.

Then Liesman hinted on CNBC yesterday that the Fed may "walk back" raising rates this year.

Meanwhile, @george_chen, managing editor of South China Morning Post's international edition reported that an Official Xinhua newspaper editorial declared that "Chinese Gov will not let stock market crash like "broken cliff" happen any more!"

With the Dow down over 700 points from its recent highs, take a look at my favorite timestamp from the peak of July 20th.


One would think respected traders would be more humble. Maybe they're respected because they've been right. But when hubris develops, it's time to check one's emotions.

Divergence is an important diagnostic tool. Have never seen a market reverse trend without it.

To put people down for mentioning it is to simply put people down.

Social media will likely continue to become anti-social.

Hopefully the timing of showing this person's unfortunate timing means that the decline is nearly over. But if it isn't, it had better stop before 1980.90.

Because what happened in the Dow is a possible red flag.

And the amount and type of divergence that is present should not be messed with.

Now, off to Lake Winnipesaukee, NH . . .





Monday, July 27, 2015

Vacated

ES Futures:
Down hard.

News:
Blame China.

Shanghai Composite down another 8.48%. The Feb. 2015 3075.91 swing point is coming into focus. Below that could be trouble.

Definitely not posting every day during vacation, but as much as possible to keep in tune.

FX:
Odd day in currency land: EUR notably stronger with EU bourses down hard. USD weaker. AUD stronger not weaker on China trubs. CHF stronger. JPY stronger.

Treasuries:
Yields down across the curve.

Energy:
WTI crude below 48. NG weaker since failed bid for 2.955.

Metals:
Gold & silver slight gains.

S&P Outlook:
Quick read is that after holding 2077 on Friday, today's weakness is a bad sign.

Volume steadily increased last week as the market sold off. Breadth, 52-week highs/lows, TRIN -- all cratered.

78.6% Fib support is at 2063 area along with a down sloping internal trend line from the 2134.72 peak.


If the market breaks further, it's quite possible a complex ABC down is in play.

Friday, July 24, 2015

Friday -- Amazon & The Real Nitty Gritty

ES Futures:
Modestly higher but looking slightly precarious.

News:
Huge earnings beat, finally, by Amazon. The stock should gap higher today (currently indicated up over a stunning 100 points) and form the third gap of a breakaway, continuation, and exhaustion sequence.

In the horse race between Apple and Amazon, I know which jockey I'd bet on.

Even so, there could be something to watch out for.

A 3-gap set up could take a little time, but could eventually target Amazon's lowest gap, 311.78. Who knows why or how. It's just how these work sometimes.

In other "news," as much as I love the Caribbean, I've never spent a summer away from New England. I keep having visions of the green mountains and verdant valleys of Vermont, the shimmering lakes of New Hampshire, and the bold, granite ledges of the coast of Maine.

I find myself daydreaming constantly, just like the boys of Aerosmith when they wrote Last Child.

I'm dreaming tonight. I'm leaving back home...

So heading home for a few weeks with family and friends. Maybe a beer run to Stowe...

Down cross the bridge to my sweet sassafrassy...

Definitely hit Winnisquam & Winnipesaukee in NH's Lakes Region. Certainly some lobster and fog in Maine...

Got to get back to the real nitty gritty...

Speaking of Aerosmith, hilarious video here (with some cool backstory about Led Zeppelin).

Notice it took only 2 minutes for Steven Tyler to mention Vermont and NH. These guys know where the good stuff is.

Home sweet home...



Oh, and the tune itself . . .



FX:
USD higher, EUR lower.

Treasuries:
Prices pointing still higher, yet charts (& yields) still vulnerable to shock.

Energy:
WTI crude remains sub-50.

Metals:
New lows in gold, 1072. Getting ever closer to interesting me.

S&P Outlook:
Reached a modest 38% Fib retracement yesterday, but too soon to tell if it will lend support. Futures, while up, look a bit unconvinced that Amazon will save the world.

Still like the 2077 area -- also noting a gap close by at 2076.62. But this level may be a bit too deep. The decline is looking a little sloppy and labored. Wouldn't surprised if it surprised to the upside.

No trades for me anyway. Gotta get back to the real nitty gritty.

Thursday, July 23, 2015

Thursday -- Not A High Probability Area

ES Futures:
Flat and sloppy looking.

News:
Little news but for continued earnings idiocy (great looking EPS coupled with not-so-great revenue & sales, unless it's a drug company).

Greece overwhelmingly approved the Troika conditions in order to start third bailout discussions, even though they probably have zero intention of putting the conditions into effect.

Ferrari doing an IPO . . . an absolute sacrilege.

FX:
USD weaker, EUR, JPY, CHF stronger.

Treasuries:
Trending toward very slight yield flattening. Not a good trend if it ends up as inversion.

Energy:
WTI crude sub-50. NG no joy yet for 2.955.

Metals:
Gold not finished down.

S&P Outlook:
It is possible that a small ABC correction is in play from the most recent rally highs with B and C still to come.

Or it's close to ending.

Or it's something else entirely.

A deeper retracement would look better, in keeping with the 3-wave structures in place since October. Still like 2077 area.

The point is that the market is not currently in a high probability area.

Internal warning signs continue to mount.

Not confident in yesterday's note regarding the 27th of July.

A better setup may be a rally to new all-time highs into August expiration.




Wednesday, July 22, 2015

Wednesday -- Are Things So Great They Can't Get Any Better?

ES Futures:
New pre-market lows after weakness overnight following weak outlooks by Apple, Microsoft, Chipotle, and other others.

News:
Companies need sales and revenues instead of creative accounting.

Apple is fast becoming a one-trick pony overly dependent on a single device which is seeing erosion.

Chipotle reported good numbers, but same store sales pressure. Down 67 points (panic) then up 80+ points (manic).

Even Biogen is down 4% this morning. Huh, a biotech down?

Maybe things are so great they can't get any better.

Soon, W.D. Hamilton’s "selfish herd theory" may kick in, causing something he called escape panic in which:

- Individuals attempt to move faster than normal

- Interactions between individuals become physical

- Exits become arched and clogged

- Escape is slowed by fallen individuals serving as obstacles

- Individuals display a tendency towards mass or copied behavior

- Alternative or less used exits are overlooked

With higher targets still valid, a "panic" could cause a frothy blow-off top. But, like Chipotle showed, psychology can turn quickly.

FX:
GBP on the move in anticipation of a rate rise. USDMXN new highs. Cervezas on sale.

Treasuries:
Had a good day after I called them junk. Still look like junk.

Energy:
WTI crude did not rally and looks vulnerable. NG still has not reached 2.955.

Metals:
Gold & silver falling under their own weight.

S&P Outlook:
Volume shelves at 2010, 2096, and 2077 area.

2077 looks intriguing because it lines up with a deep 61.8% Fib retracement which would freak everyone out.

Yesterday started to freak people out (wild intraday TRIN) and the market was hardly down at all. Psychology feels on a knife edge.

Though I rarely use them -- and probably should much more -- Fibonacci Time Lines mark Monday, July 27th, as 61.8% of wave 3. Ugh, the first workday of my vacation.

It means -- possibly -- that a top for the ending diagonal pattern could occur that day which would make wave 5 61.8% as long in time as wave 3 was. A larger wave 3 top could occur there and could be followed by a larger wave 4 to 1800. Escape panic would ensue.


Tuesday, July 21, 2015

Tuesday -- No Really, Things Look Great

ES Futures:
Still hanging at highs, though weakening.

News:
IBM seems to have, once again, required financial engineering (GAAP bullshit and buybacks) to "beat" its EPS numbers -- $3.84 vs 3.79 expected -- only to miss on revenues.

This, to me, is the market in a nutshell.

Meanwhile, Ryan Detrick, CMT, noted that "NASDAQ made new all-time high yet had more new lows than new highs. Only other time that has ever happened was April '99."

You know, that's right about where we could be in the market: 1999. See below.

FX:
Quiet again, but for CHF and EUR.

Both are stronger which might mean EU issues about to resurface. Possible CHF safe haven bid, EUR "stronger without Greece" bid.

Treasuries:
These are some of the most highly liquid and most respected debt securities on the planet and they're trading, literally, like junk.

Energy:
WTI crude not looking too clever at the moment, but could be setting up for a bounce. NG appears to have needed more rest for 2.955.

Metals:
Weak bounce thus far for gold & silver.

S&P Outlook:
Some days are best for Timestamping instead of trading, and yesterday was one of them. I cut 'n' pasted some real whoppers from bulls on parade.

Meanwhile the S&P missed its all-time high by 1.9 points and closed with negative 2:1 A/Ds -- twice as many stocks down as up.

Concurrently, "all-US 52-week high-low difference" closed -249, something it usually only achieves on vicious down days.

Getting back to 1999 mentioned above, I think we have some hiccups ahead before the real parties begin.


Notice the 3-wave rally into the March 2000 top. We've been having 3-wave rallies since the October 2014 lows -- the classic tell-tale of an ending wedge formation. Keyword: ending.

Still thinking at some point we have a correction into the October lows (~1800) then a ripping rally to 2300-2500. Then straight back to 1800, a bounce, and then much lower.

In other words, back to a traders' market.

Meanwhile, there is a small Fib target above at 2139.08 and still 2150. Looking to sell most of SPXL at any new high above 2134.72 and will hold a little for higher if it should occur.

Monday, July 20, 2015

Monday -- Things Look Great . . .

ES Futures:
Drifty yet higher.

News:
Gold dumps and there are a million dark "reasons" for it except for this one: technical analysis. The chart has telegraphed the potential for lower lows for months.

Here's where we left off on Friday:



And loved this one:
Source: Stocktwits sentiment reading
Meanwhile the Russell looks like it's forming a large head & shoulders pattern on the daily chart.

Things look great, yet the IMF continues to throw cold water on the European project, and now says that Portuguese debt is unsustainable.

This as investors have pushed 10-year Portuguese bonds to just 186 basis points over German Bunds, as noted recently by Sinclair & Co. This compares to Greece at 1043 basis points and the US at 155 basis points.

Greece is not fixed. It's just first.

FX:
Quiet but for GBP crosses.

Treasuries:
Continue to look stressed.

Energy:
WTI crude & NG still pressured.

Metals:
Gold cracked its 1130 low yet silver did not. Watch this. Not thinking the move in gold is over yet, but that it's a buy soon, eventually below its overnight lows of 1080.

S&P Outlook:
The S&P is another market that I don't think has seen its final move. 2129.87 still waits. As does 2134.72 and possible a test of 2150.

Lower is still possible from current levels even though things look and sound "great." Anything down to 1980.90 is game, technically,

At this point though, a pullback into 2095 might look best before a final up leg to 2150.