Stock market analysis and commentary from a trader's perspective

Friday, January 23, 2015

Friday Market Update -- Euro & The Anti-Euro Vote In Greece On Sunday

News:
There is a critical election this Sunday in Greece, and anti-EU party Syriza is projected to win. Syriza leader Alexis Tsipras, it is feared, will not honor commitments to EU bondholders and will take the country out of the euro and back to the drachma. (Instant 70% off for vacations in the Greek Islands.)

The King Is Dead: Saudi King Abdullah has died. But his passing likely means zilch to the price of oil.

R.N. Elliott said with regard to news, "At best, news is the tardy recognition of forces that have already been at work for some time and is startling only to those unaware of the trend."

ES futures:
Reached new highs over night but seem to have double topped. Coming off them modestly.

Forex:
It's all about the euro now.




Too many bears, not enough bulls. People seeing disaster while I see what could be the end of a five-wave sequence down. I'm bullish here for a multi-week trade.

Long term, yes, I think the euro is toast. It's a creation by globalists. I want it to fail, along with the rest of their sick plans.

But just as oil is causing fund blow ups and company defaults, be mindful that the euro could inflict even more pain.

Bonds:
Still seeing crazy amounts of volume in 10-year notes overnight. I don't think it's good. This chart of yields on 5s, 10s, and 30s back to 2009 may suggest why:


5s are rising vs. longer-dated 10s and 30s. If this keeps up, someone in the bond market will get spooked, and the Fed cannot afford to lose the long end of the bond market. I think the US dollar is sniffing this out and is telegraphing rising rates many months out.

I've heard too many people say how great it is for the dollar to be rallying. I love it too. But financial markets world-wide are not prepared for it. Somewhere in Basel, Switzerland, you can bet that deep within the bowels of the BIS (Bank For International Settlements), the central bank of central banks, people are flipping out.

Energy:
Wondering now if the surge in crude oil open interest means an increase in shorts at the end of the trend which will soon power a violent reversal.

Note the open interest of natural gas is falling as it declines. Therefore, I could see a turn in NG before CL. But oil will likely be the bigger headline.

Yesterday looked great for a reversal in oil, but it failed. Watching today carefully.

Metals:
Gold continues to take a breather. Sentiment is high.

S&P outlook:
We got the rally to the 2060 area. If there is some backing and filling it would not surprise me. But I will be looking for either corrective or impulsive structure to tell what could be the market's next step. Anything below 2042.88 would suggest to me that the market has issues.





Thursday, January 22, 2015

Thursday Market Update -- Draghi & the ECB

News:
The world awaits the final decision from the ECB today regarding QE. Yesterday they floated a trial balloon of $50 billion per month which is quite small. The reaction in the EURUSD said it all: it rallied, as if to say, is that it?

Interesting that the German DAX is down today (at this writing) while the rest of Europe is up. Reason: the rest of Europe would benefit from QE while Germany would have to pay for it.

The news comes out at 8:30am EST. It should be interesting.

ES futures:
Modestly higher after trading in a tight range all night.

Forex:
Oddly quiet this morning after the surprise rate cut from Canada and the ECB trial balloon. Still looking to trade a bounce in EURUSD. About flat since winning two FXE call trades but losing an entire tranche of FXE calls afterward.

Bonds:
10-year notes continue to display an eery amount of volume in the overnight session. Shorter durations seem to be sluggish which could mean their yields are about to rise which could lead to an inverted yield curve...dangerous.

Energy:
Crude is up 2%. Seeing a large rise in open interest in the March contract. Maybe a bounce brewing into the 55-58 area, but not thinking the final lows are in. The process could take much longer than most are expecting. Using USO calls. 2nd tranche after the first one got totaled.

Metals:
Gold is taking a much needed breather after its rally from the 1167 area. Objective is 1392.60. Have been playing this using Goldcorp (GG).

S&P outlook:
Regarding yesterday's chart:

It occurred to me that wave 2 is not required to probe below 1972.56, In fact, the textbook diagonal from Frost & Prechter's Elliott Wave Principle shows it remaining the prior low. Here's an image I pulled from the web. Note that B of 1 in this case would represent 1972.56.

Source: wavaholic.com
The expectation therefore is for the S&P to rally strongly to a new high (3). A rollover near current levels or stall in the 2060-2070 area with weak internals and punk volume could set up a deeper probe below 1972.56 as mentioned yesterday.


Wednesday, January 21, 2015

New Format For Market Posts

* Please bear with me as I try a new format for these market posts. I want them to be less wordy and more to the point so that they are more easily accessible intraday.
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Outliers & Quick Takes:
Overnight saw China up 4.74%, Natural Gas up over 4%, and 10-year notes trade on huge volume relative to the rest of the futures complex.

The Chief Redistributionist took a victory lap last night by informing us that "the shadow of crisis has passed." Evidently some in the treasury market are saying oh, really?

Elsewhere, doubts seem to be creeping into the BOJ & ECB QE joyride while sentiment remains elevated toward US equities.

Equity Futures:
E-mini futures were down hard but are recovering.

Market Structure:
The S&P cash continues to trade heavy. 2003.89 is a likely bull/bear line for the time being. Keeping above this level may open the door to a retest of the 2060 area. But below it could put 1972.56 in jeopardy which could see anything from the 1960 area to the 1920 area.

However, I continue to see such a possibility as a 2nd wave in a developing 5-wave rising wedge to new all-time highs.






Tuesday, January 20, 2015

News From An Enchanted Isle

The move to Puerto Rico worked out better than expected. I have a new apartment by the beach, and just got high-speed internet hooked up so I can get back to work. I swim every day and feel great.

Packing up and leaving was not easy, however. My family and friends are now thousands of miles away. I have one good friend here, a former classmate who is a native of the island. But other than that, it's up to me to make new friends. No worries.

The guidebooks tell you Puerto Rico is part of the USA, and legally it is, but it's a completely different country -- a different culture, a different language, a different people.

Still, if you want, you can -- and will -- be warmly welcomed.

First, recognize this is a culture of manners. Direct eye contact, a smile, and a simple buenos dias go a long way. This small courtesy, all too easy to overlook, can make a world of difference.

Second, it helps to let go a little in order to get into the flow. There is a bit of island time here. It also helps to trust that you must leap in order for the net appear.

So far it has each time, especially when someone finds out I've moved here. My waitress the other night couldn't believe it. "I'm going to take you surfing with me," she said, after she introduced herself. "You need someone to show you Puerto Rico."

She's pretty cute, too.

The temperature averages 82° all year, the beaches are endless, the food is an incredible mix of flavors and styles from all over the world, but it is the people that make this island great. I've been the recipient of so many genuine acts of kindness that it's hard not to be humbled from it. There is a warmth and a heart-centered spirit here that must be experienced to be fully appreciated.

Puerto Rico is known as La Isla Del Encanto, The Island Of Enchantment. I can now understand (& feel) why. It truly does feel enchanted here.

I wonder if it's got anything to do with the number 19.5 and the large number of anomalies that occur near the latitude of 19.5 degrees North and South throughout the solar system.

For example, sunspot activity and the region of peak temperature of the Sun occurs at 19.5 degrees.

On Venus, the major volcano complexes Alpha and Beta Regio are near 19.5 degrees.

The Lunar Ruins on the Moon reside at 19.5 degrees.

Mars Cydonia sits astride the 19.5-degree latitude on Mars, while the Olympus Mons shield cone volcano is also at 19.5 degrees.

Jupiter's Red Spot "eye" & Moon sit at 19.5 degrees.

Saturn's dark cloud bands are at 19.5 degrees.

On Neptune, a dark spot was discovered in 1986 by Voyager II at 19.5 degrees.

Down here on earth, the same anomalies occur all around the globe.

And right here in the Caribbean, close to Puerto Rico, the Puerto Rico Trench sits at 19.49 degrees and is the deepest point in the Atlantic ocean.

"19.5 degrees is called t, the 'tetrahedral constant', because of its significance in tetrahedral geometry (a tetrahedron is a pyramid shape composed of four equilateral triangular sides): the apexes of a tetrahedron when placed within a circumscribing sphere, one of the tetrahedron's apexes touching the north pole, the other three apexes touch the surface of the sphere at 19.5 degrees south latitude."

In other words, the anomalies are likely due to an increase in energy at these geometric power points.

Source: geometrycode.com, vortexmaps.com

I think Puerto Rico may get a bit of its "enchantment" by being located near 19.5 degrees latitude. Judging by the number of yoga studios nearby, it seems others agree. Anomaly or not, it feels like there is good energy here.

Speaking of the solar system, today is the new moon, so it is fitting to blog about new beginnings. Tomorrow I will restart daily posts about the markets in a more concise format. There is a lot going on world wide. I will be stripping out the prose and just making brief comments about different markets and what I'm thinking rather than crafting a story each day.

I really do use these posts as mini trading plans. Therefore I want to make it easier to go back and refer to what I have committed to in writing each day when I need to, instead of sifting through so many words.







Tuesday, December 30, 2014

Momo Boys, Altitude Jockeys, And The Biggest Inflow On Record

This is starting to get weird.

Dow Theory newsletter writer Richard Russell was just quoted as saying "Look out above" in a Marketwatch story.


Sounds like he and Tepper think it's going to be just like the fun part of 1999.

If so, investors have gotten remarkably prescient, because "they just poured $36.5 billion into stock funds last week, the biggest inflow on record, according to Thomson Reuters," via Marketwatch.

The biggest inflow on record.

Momo Boys, Altitude Jockeys, and New High worshippers may want to study this chart in between drinks over the next several days while making New Year's resolutions.

Source: Investmenttools.com

This is the S&P 500 divided by Vix (Volatility Index) Ratio. If there is a better refutation of the rampant uncontradicted bull dope out there, I haven't seen it.

Generally it's best to be a buyer in the green area. Generally it's best to be a seller in the yellow areas. When you get into the red areas, trouble may come knocking so it's best to take profits and lighten up. If you choose to go all in at such times, make sure you have a strategy for getting all out.

The point is: for those that think, perennially, that new highs are bullish, they are, except when everyone else is bullish.

Everyone else is bullish now.

As measured by Investors Intelligence Advisory Survey, investors are the most bullish since 1987 -- 27 years. The percentage of bears is just 13.3.

Furthermore, at the lows in 2008 the ratio of bulls to bears was 0.41 to 1. Now bulls outnumber bears by 4 to 1.

Also, notice that new breakout highs in 1995 led to a ripping bull market because investors were bearish.

Currently on the above chart, there is a negative divergence building up. While not yet as extreme as 2007, in conjunction with the IIAS figures, it should be watched closely.

With a staggering confluence of Fib levels above the market, the ride may well continue. Below 2038 could be seen as the first indication that things are about to get interesting. 1972.56 should not be messed with or else a larger pattern is in play.



Friday, December 26, 2014

L.L. Bean, Coal For Christmas, And A Reset Still Possible

First things first: the run to L.L. Bean was successful. It was not as crowded as I thought it would be, so it made things much easier, especially parking. I guess I was lucky.

Christmas was great. I was really looking forward to quiet, quality time with family this year and got it.

Our markets got their rally, and Abe got a lump of coal.

Zero Hedge reported some Japanese government data that had a few stunners in it:

Real consumer spending on housing: -20.3% yoy

Real wages (nominal wages less the CPI inflation): -4.3% yoy, the largest decline since the 4.8% recorded in December 1998.

Abenomics is now responsible for the biggest drop in Japanese wages on record.

This is crazy stuff, and with wave counts of both the Nikkei and the yen looking close to completion of what could amount to as bounce patterns, 2015 could be an epic year.

For the record, I still feel that the S&P is still making some sort of third wave high from the 2011 lows. A 20% fourth-wave correction echoing 2011 could see a test of the 1600 area. Then a weaker fifth wave could rally to the 2200+ area.

I highly doubt that the reset or "reboot" suggested by The Socionomic Implications Of September Vogue: 2014 has taken place yet.

However, it's still on track perhaps:


Today I'm watching 2079.77 which should hold for bulls, and 2085.20 which should hold for bears.

Monday, December 22, 2014

Four Things . . .

Four things I thought about all weekend:

1) The big news last week was not that the S&P 500 rallied 100 points. The big news, to me, is that the US dollar rallied above its 2009 highs, and doing so, broke the entire down trend from its double top in 2001-2002. This is a huge FU to central banking worldwide and any sovereigns who have issued dollar-denominated bonds.

2) As the dollar has rallied, high yield credit has tanked. This is risk aversion. Risky bets are being unwound as they become more and more expensive to repay.

3) My friend in the car business echoed this Friday night at dinner. He said that other less financially healthy dealerships in his area are seeing their rates go up. This means they are paying more and more "juice" for floorplan -- which is the interest they pay to have all those shiny news cars on their lots. They don't own the cars; they "rent" them from the automakers.

"This always happens at the end of the cycle," he said. Yet another reason why he wants to get out of the business.

4) Taking all of the above into consideration, it bugged me all weekend that I sort of automatically said that I could see the current market structure in the S&P "lasting until sometime in March." I may want to reconsider that.

The S&P cash did not make a new high Friday while the e-mini did.  If the S&P can't do so on light holiday trading after a nice weekend rest, there may be trubs. At the bottom last Tuesday, the S&P cash made a new low while the e-mini did not, which was the first tell that Janet was about to wrong-foot everyone.

After all, 5s and 10s still don't look that great.

Making the trip up to L.L. Bean in Freeport, Maine today for my annual pre-Christmas ritual. My nieces and nephews will be stoked.