Stock market analysis and commentary from a trader's perspective

Wednesday, March 4, 2015

Wednesday -- Charts of S&P Scenarios

ES Futures:
Holding above yesterday's low. Key.

News:
JGB yields higher again.

FX:
USD may be getting ready for a slight pullback. Moves in Scandie currencies looking close to pullbacks as well. Euro ticks away from fresh lows.

Was looking for a bounce in the Aussie, but not like the weak one that has transpired thus far. Will stand aside anticipating further lows.

Treasuries:
Dec. 24th lows in 5s and 10s holding and with any luck, these will rally to new highs which could finally mark the end of the line.

Energy:
NG looks better than Crude, but is rallying on very light volume. Both are still in low odds areas for me.

Metals:
Gold basically in the same place as yesterday.

S&P Outlook:

This scenario argues for a wedge to about the 2300 area
then an extremely sharp pullback.

This scenario argues for a little pain now for more gain later,
up to 2300 or possibly even 2500.



Tuesday, March 3, 2015

Tuesday -- Housing, Vampires, JGBs, Limburger & The Automatic Add

ES Futures:
Off yesterday's closing highs, but not looking like an impulsive decline as yet. ES 2100.05 stop.

News:
It seems the market does not like rising home prices this morning, because it keeps pressure on the Fed to raise rates. Housing price increases and rising wages, while great for Main Street, are like daylight to Fed vampires.

What the market still doesn't seem to care about is the action in Japan's JGB market where liquidity sounds even worse than our Treasury market.

The market will soon care about a lot it things that it doesn't currently.

FX:
Quiet again as USD hangs at highs.

Treasuries:
Due to some particulars regarding June rollover which the CME Group has done a very poor job of explaining (meaning I don't buy their bullshit), charts of 30-year bonds and 2-year notes are completely whacked.

For the time being -- which could last until the next rollover -- I'm only charting 5s and 10s...neither of which look that well of late.

I think US and Japan treasury markets are currently the two most important things to monitor.

Energy:
Crude and NG still trade like limburger.

Metals:
Same with gold.

S&P Outlook:
Given the setup in the ES this morning (for now buyers are stepping in), 2109.19 should hold in the cash S&P. If not, 2103.75 is the far more important stop.

Should both levels fail, the market is probably far weaker than it appears and could sell off hard -- raising the possibility that it is not in the third wave of an ending diagonal but possibly a larger "b" wave with a possible target of 1925 -- which could paradoxically mean even higher highs to come.

What I'm gaming is a new marginal rally high then a sell off, but one that remains above 2041.88.

VIX in the 12s is an automatic add.

Monday, March 2, 2015

Monday -- China Cuts Again, QE Deflation, Six-Sigma Event Warnings

ES Futures:
Aimless wandering overnight, currently pressuring Friday's lows.

News:
China's second rate cut in 3 months was met with a benign rally.

Citigroup's Matt King (via Zero Hedge) put out some fascinating work about how central banks may be creating deflation by trying so hard to avoid it. A great quote by a Citi client summed it up perfectly:

“By lowering the cost of borrowing, QE has lowered the risk of default. This has led to overcapacity (see highly leveraged shale companies). Overcapacity leads to deflation. With QE, are central banks manufacturing what they are trying to defeat?”

Some people mock Zero Hedge. I'm thankful for them and for their connections. The information they share is a much-appreciated the antidote to never-ending bullshit.

Elsewhere, the Center for Financial Stability is out with a warning (also brought to us by ZH) about the recent six-sigma event in the 10-year and how it may be a canary for more six-sigma moves. The Swiss franc comes to mind. As does potentially the VIX and the S&P 500 . . .

Could oil be sending us a message too?


FX:
Euro is firmer today after USD is backing off after a new rally high.

Treasuries:
Prices are down this morning, with 10-year volume, once again, dwarfing the overnight Globex action. This could still be a major game changer at some point.

Energy:
Crude oil and NG are both under minor pressure. Still waiting for higher odds.

Metals:
Gold is recovering from its correction from the 1300 level but has a long way to go to prove itself.

Special Situations:
Given the above six-sigma topic, the VIX will remain an accumulation trade for me for the foreseeable future.

S&P Outlook:
The chart is in No Man's land currently. Here too higher odds need to appear. I'm interested in either buying the 2050 area or selling another weak high (by getting rid of some SPY calls and adding more UVXY).

Amazingly, 2103.20 had held. If it breaks, the more important level is 2085.44. A break of that level could open the door to 2050.

To the upside, there are still multiple Fib targets that should be taken seriously.


Friday, February 27, 2015

Friday Market Update -- 5s Vs. 30s: Now Greenspan Is Onto It

ES Futures:
Tight range overnight, in levitation above yesterday's session lows.

News:
It's a good thing that Greenspan is back to writing books rather than trying to confuse everyone. In fact, with the lucidity of his appearances now, it seems he may be trying to atone for his sins of deliberate obfuscation while Fed chairman.

Regardless, he just spilled a lot of truth serum in his latest interview on CNBC. It's must-see tee-vee as he admits that the markets have been juiced by none other than the Fed as the economy remains in a "Great Depression"-like condition. Buybacks may goose EPS yet do nothing for the economy.

The coolest part was when he chimed in on the action in the 5-year note versus the 30-year bond, because this is something I brought up back in January.


Anyway, give it a look. Hat tip to Zero Hedge for finding it.



FX:
Quiet after yesterday's action in the euro and USD. Maybe the euro bounces for a month or so before hitting new lows. Maybe not. All I know is that it's nowhere for me now. My interest may soon be shifting back to long Aussie soon.

Treasuries:
Rollover has shifted the volume into the June contract with a huge discrepancy in price in the 30-year bond. Overall, the treasury complex did not have such a great day yesterday after Tuesday's strong gains.

Energy:
Crude broke 48.43. It snapped back well enough, but must tip its hand soon. NG corrected violently into an area that I like, but did so with huge volume. Here too I am less inclined to step in until the structure clears up. There are just too many competing scenarios.

Metals:
Gold feels like crude and NG -- drifting. Better trades will come.

S&P Outlook:
Window dressing still feels active, but perhaps a crack or two has appeared. 2103.20 held for the second day in a row, this time by a mere 56 ticks.

This pullback does not feel impulsive, yet I wonder if it could be a developing "B" of an "A-B-C" of "3" -- or -- a developing "A" in an "A-B-C" of "4" which could mean a larger pullback. Confused?

Here's a diagram:

Here's a chart:


This is a rough idea of the "3" scenario. Not enough time to do the other one, but you can figure it out. Definitely do not use this chart for timing (like with options).

Special Situations:
Volume is drying up as the Facebook is nearing its 83.70 Fib extension target. Monthly volume has gone from a rally high of 2 billion to this morning's reading of 444 million.

The same is occurring in Apple which printed highs in 2012 on 2.3 billion shares and is approaching multiple Fib targets and multi-decade trend resistance on 1 billion shares as of this morning.

This is what NASDAQ 5,000 is built on. Time to watch Greenspan finally admit how the game is played.

Thursday, February 26, 2015

Thursday Market Update -- Window Dressing Or Window Breaking

News:
Feels like capital flight from Greek banks may outrun their reforms.

ES Futures:
Not seeing an impulsive move from yesterday's sell off, so perhaps more weakness to come.

S&P Outlook:
Tweeted a stop on Stocktwits yesterday -- 2103.20 -- which is still valid, for me anyway. The current pattern is tough to read: maybe one more high to come, or a hard decline today, or perhaps a mix of both.

Next week should resolve whether the market is in a "b" wave or wave "3" of a wedge. Chart to follow in a day or two.

Window dressing could keep the markets up, but if 2103.20 breaks, the dressers may have their work cut out for them.

FX:
USD still poised for higher highs even though it's a very crowded trade. With the break of 1.12609, EURUSD is poised for new lows.

Treasuries:
These remain well bid, but must achieve new highs to lessen the chance of a topping pattern.

Energy:
Crude and NG remain unconvincing even though both are extremely oversold. Still do not see a compelling trade in either, however, if 48.43 holds in crude, there may be a strong rally.

Metals:
Gold has rallied above 1200 but still lacks follow through.

Special Situations:
Accumulating UVXY. This will take a while.

With VIX getting into the 12s yesterday along with frothy term structure, I have begun adding UVXY while continuing to buy SPY calls on dips. 2103.20 remains the current stop for any more calls.

VIX recovered well from its new lows and made a small bottoming tail on a candlestick chart.

Wednesday, February 25, 2015

Wednesday Market Update -- Norway, NASDAQ, Yellen's Finger

News:
Take a look at what falling oil prices can do . . .


That's over a 45% hit from an already downwardly revised number.

It is doubtful that these consumers are rushing out to consume more because the price of gasoline is less.

Meanwhile, CNBC, yes CNBC (using data from Factset), notes that as the NASDAQ closes in on historic, all-time highs all of the year-to-date gains are concentrated within just five stocks.

Source: CNBC

It is equally doubtful that reaching the 5,000 level will suddenly mean everything's been healed from the tech wreck in 2000, but that central bank liquidity injections really do work.

Gains resting on just five stocks is the same exact set up that caused the tech wreck in the first place.

ES Futures:
Flat, yet poised for higher highs.

S&P Outlook:
Closing above 2114.42 keeps pressure on 2133.38. The structure is wedging, however, as A/Ds, ticks, TRIN, and volume continue to signal weakness. The VIX is also closing in on significant lows (12s) where I will be a buyer.

FX:
USD buckled during Yellen's senate testimony yesterday, but did not break the consolidation structure it has been in.

Also, this is Yellen not so subtly reminding the Senate what the Fed thinks of "auditing the Fed." This sort of arrogance will backfire on them in the aftermath of the coming debt liquidation


Bonds:
Bounce mode for now. With any luck, 2s-30s will make new highs for an epic shorting opportunity.

Energy:
Crude and NG remain in a sort of No Man's land from a risk/reward standpoint.

Metals:
Gold's rally must extend far beyond it current gains if it wants to get traction.

Special Situations:
Regarding the NASDAQ Fab 5:

As AAPL closes in on the 141 & 144 Fib targets, it's also closing in on a 8-year trend line, and volume is drying up as the mantra becomes the world's first trillion dollar company. Then what. Cars?

AMZN is rocketing higher on very little volume and has a multi-decade Fib extension target in the 460 area which could be muted if it gets above 408.06 with much less than 81 million shares.

BIIB is wedging into a Fib extension target at the 417 area.

GILD looks primed for new highs yet has lots of supply at the 85 area.

NFLX looks extremely wobbly and any new highs above 489.29 should be approached very carefully.

Bonus:
Investors Intelligence is out with their latest readings -- the bull/bear ratio is above 4X.

This chart, by must-follow @Not_Jim_Cramer, is possibly his best insight ever.








Tuesday, February 24, 2015

Tuesday Market Update -- Yellen Vs. USD, Treasuries & Gold

News:
Yellen 10am EDT.

Syriza submits reforms. Vows to crack down on the very citizens it promised to protect from the man. Eurogroup (the man) loves it.

ES Futures:
Flat waiting for Yellen.

S&P Outlook:
Continues its weak march higher, although if it fulfills the expected rising wedge, patience will be rewarded. Two near-term Fib targets above are 2114.42 and 2133.38.

FX:
Quiet. USD firm.

Bonds:
Heavy volume overnight in 5s and 10s as prices are again pressured.

Energy:
Crude holds below its rising wedge trend line, NG pulls back. Neither present compelling odds at this moment. This could change quickly, however.

Metals:
Gold continues to flirt with sub-1200 levels.

USD, treasuries, and gold hinting, regardless of what Yellen says, that higher rates are on the horizon.