Stock market analysis and commentary from a trader's perspective

Friday, July 25, 2014

Mav, Mickey, Bezos, Tepid, Volatile & Inverted

The S&P closed flat while the VIX closed up 2.78& and A/Ds closed inverted. Inverted may have worked for Maverick, but it doesn't work at all-time highs.

The sanctions game with Russia just reached a new level of hilarity. According to Reuters. Russia will now ban some of McDonald's burgers along with its milk shakes and ice cream.

Take that Amerika!

There are still two volume profile areas at 1970 & 1975. Again, 1970 seems deep, but at this point deep would be rather benign as long as 1965.77 held. Higher is still possible.

Times may be a-changing. Investors may be getting fed up with Amazon CEO Jeff Bezos and his habit of burning through money, more than double the predicted loss for the 2nd quarter. Amazon is down over $40 in the pre-market. It's too early if this represents a shift in animal spirits or not, but it bears watching.

Still watching EURUSD as it closes in on 1.34 now. It looks oversold, but what it does from these levels could say a lot. The 10-year looks tepid again, but not broken. There is a clear difference between it and the S&P since the beginning of June which bears watching as well.

There is a gap at 1973.63 that may be tugging at the market. But then again, tomorrow's new moon (5:42pm EDT) may keep pulling it higher.

I will not be sticking around to participate in the tug of war. Leaving early today for a weekend getaway in Vermont.

Thursday, July 24, 2014

Media Wars, Hidden Weakness, The Summer Of 1975, And Why Higher Prices Are Still Possible

A quick example why it's important to check the Drudge Report: it consistently leans with the trend and often can mark the end of an intermediate one.

Drudge infers endless rally:

While Marketwatch adds the all-important caveat:

Even Jane Fonda jumped in the media war ring today. Jane Fonda on Rupert Murdoch Buying Time Warner: ‘It Would Be a Catastrophe’

The context here is that she feels it would be a political catastrophe. Let's face it, Jane's a lefty and Rupert, the owner of Fox news, is something of a righty.

However, the Freudian or unintended aspect of her statement is telling: Murdoch's bid for Time Warner may, along with the upcoming Alibaba IPO, signal the peak in the peculiar brand of social mood that has developed during this long rally.

A/Ds closed at a tepid 1.33:1 yesterday with the S&P at record highs. Weak. Volume was 15% lighter than the July 17th downdraft. Weak. Caterpillar, a real company with global exposure as opposed some of the junk masquerading as public companies, reported falling revenues. Weak.

Regardless, higher prices are possible. Yesterday's call for a possible 1970 may be a bit deep at this point, with 1975 looking like the better area, but as long as 1965.77 holds, odds are still higher.

Ah, 1975. what an explosion of great music in a kaleidoscope of styles. Walk This Way by Aerosmith, I'm Not In Love by 10cc, That's The Way (I Like It) by KC & The Sunshine Band, Fame by David Bowie, Love To Love You Baby by Donna Summer, You Sexy Thing by Hot Chocolate. The mere thought of any of these tunes conjures up memories of any one of several hot babysitters in my "stable" at that time, haha.

Here's one of their universal faves -- the corniest of the lot.

Love Will Keep Us Together by Captain & Tennille on Grooveshark
Oh, the irony. According to TMZ, Tennille filed for divorce from the Captain on January 16, 2014, after 39 years of marriage.

Wednesday, July 23, 2014

Swing Points, Astrology & Summertime

The S&P got up and over the 1983.94 swing point, made a new all-time high, then closed below the swing point on lighter volume, suggesting a lack of buyers.

Ha, what else is new. The important thing is to honor a stop at 1955.59. If the market's near-term destiny is 2,000+ there should be no reason for such a deep retrace.

However, a retrace to the 1970 area would not surprise me, and would cause me to be a buyer.

EURUSD remains below 1.35, yet there doesn't seem to be any concern over it. In fact, it seems Europe would love a weaker euro and has been green since 1.35 broke. It could be a moot level.

Bill Ackman gave another blowout presentation against Herbalife only to see it blow up in his face -- over 20% higher.

Interestingly, Ackman is a Taurus which in astrological terms is a fixed sign. Let him serve as a warning to those who would be too fixed in their will.

Ackman even alluded to it in a recent interview by NYT's Dealbook:

“I’m an extremely, extremely persistent person. Extremely,” he said. “And when I believe I am right, and it is important, I will go to the end of the earth.”

It's that third extremely that says it all.

Ackman needs to get over the fact that Herbalife is a multi-level marketing company. I dislike such companies, too. But there is nothing illegal about the business model, and it is an effective one as well.

Sadly, Ackman reminds me of Captain Ahab in Moby Dick. I would not be surprised to see him go down with the ship.

Speaking of the stars, though, the New Moon is this Saturday at 5:42 pm EDT. I'll be in Vermont getting my hippie on.

Actually I started yesterday, "cleaning" some of my tools in the bright sunlight. Saturday I'll dunk them in Vermont's White River on my way North. Gotta keep your tools clean, man.

We are entering what I call Little Summer, a brief window roughly from today (the switch over from Cancer to Leo) until around August 10th. It's a mystical period for me when time sort of slows down and becomes dreamlike. I often wonder, this being the halfway point of the year, if it's a mirror of the Winter Solstice when time also seems to slow. Anyway, I try to go on a walkabout each summer at this time, and this year it's Vermont. Maybe I'll write about it a little.

Summertime by Janis Joplin on Grooveshark

Tuesday, July 22, 2014

When The World Downshifts

Chipotle net rises 26% on strong sales

Chipotle reported earnings last night and hit the ball out of the park. This is not bullish.

Yes, its profit rose 26%.

Yes, revenue rose 29% to $1.05 billion.

Yes, same-store sales rose 17.3%.

Yes, the stock ripped over 10% after hours, over $60 per share.

So how is this not bullish.

This chart shows why. Customers are downshifting from $20+ spend to sub-$10 spend.

No more Red Lobster, Olive Garden, or Longhorn. They're headed South where prices are lower. So is Dardens' stock price.

It's even more apparent going back to 2007 when the downshift began. Since 1/1/2007, Chipotle is up 972.6% while Dardens is up 12.5%. These figures will change as soon as CMG opens this morning.

Downshifting to burritos is not bullish behavior. It's the same as shifting expenses onto a credit card in order to maintain the same lifestyle as other costs go up. CNBC may think the corresponding increase in consumer credit is bullish, but that's bull.

Last night I happened to hear Cramer tell his audience "tweet me -- nicely -- at...." Socionomics suggests that social media will soon devolve into a platform for anti-social behavior. It already seems to be happening, which is another warning sign.

Rising negative mood amid rising markets will end up being just as bearish as the world downshifting to fast food.

The underlying cause is the Fed and its misguided policies.

While deflation rages in the credit-debt complex, inflation creeps into stuff like gas and food which in turn has a deflationary effect on spending.

Which is why people downshift to burritos to continue to enjoy the small indulgence of dining out.

This is not what fuels bull markets. What fuels this market is liquidity pumped by the Fed.

The level of interest today is the July 16th Bradley Turn Date high which is 1983.94 on the S&P cash. Staying below that level keeps the pressure on for a retest of the 1960 area, while above it would signal a probable run to new highs, possibly to a measured move target of 2018.32, where there is also a Fibonacci confluence zone from 2002.30-2013.28.

I love burritos. I love tacos. I happily go to Chipotle when I'm away from my favorite places such as Loco Cocos in Kittery, Maine, or Las Olas Taqueria in Hampton, NH. But when the world downshifts, it pays to listen.

Maybe Reservoir Dogs started it.

Monday, July 21, 2014

The Market's Choices After Friday's Pivotal Day

Friday was a pivotal day . . . for the near term. It looks like a triangle was either put in or is building. This would call for new highs.

Only if Thursday's 1955.59 lows were broken would the market be in danger. A/Ds were quite strong, ending the day at 4.67:1, not the sort of reading one would expect of a market ready to roll over.

Volume, though, was especially muted for an options expiration. Ticks were muted, TRIN was non-committal, new 52-week highs were lame, and high yield credit continued to demonstrate it spooky desertion from the advance.

Futures are down an unimpressive amount thus far. However, Europe does not look good. Nor does EURUSD after breaking 1.35 and reversing. Now it looks like it's having second thoughts.

The pattern of the e-mini thus far does look like a possible falling wedge. A deep retracement might be expected, but again, the cash lows need to hold or else things could get ugly for newly sucked-in bulls.

The market now has a choice of the 1985.44 gap above and Thursday's 1958.12 gap below.

Friday, July 18, 2014

What Mood Is Warning & What Markets Are Saying

Sadly, I think we may finally know what happened to Malaysia Airlines Flight 370.

This whole story stinks like hell. We're now supposed to believe that a completely different Malaysian Airlines Boeing 777 was shot down over Ukraine.

Oh, and the missile is reported as Russian made.

Oh, and Russia now has the black box data recorders.

Oh, and during all the confusion Israel started a ground war in Gaza.

This whole story stinks like hell.

Many times it's better to get one's news from the markets. And overnight the markets behaved well except for S&P futures which broke through their July 10th lows.

These lows equate to the 1952.86 swing point mentioned on Stocktwits/Twitter yesterday Breaking it on the cash S&P could target 1935-1940 -- the zone of the 50dma and the 38% Fib.

However, there is a 1:1 Fib extension just below the swing point at 1951.21 that could conclude an Elliott a-b-c flat. Since futures have bounced hard since breaking below their equivalent swing point, 51.21 should be respected if there is any sort of hesitation there.

Overnight, the 10-year, the Euro, and the yen traded fine. Oil and gold are down. So for now the news from the markets is calm.

Here are updated charts of the wedge as well as some rare triple Fibonacci confluence in the 1913-1927.14 zone. While both suggest caution, they could still choose to resolve in a bullish manner for now.

This is a market that has been priced for perfection for a long time. And the thing that should be clear is that mood is shifting negatively as the markets head higher. Mood is providing a very loud warning.

Geopolitics is just the latest example. And the thing about geopolitics is that there rarely are mistakes. Rather there is advanced planning, deception, disinformation, and intentional confusion. Perhaps that's why, as reported by the FT this morning, "Israel warns of widening Gaza ground war."

Does war really need a Twitter account?

Thursday, July 17, 2014

Bradley, Breadth, The Big One & Just Like Yoga

E-mini futures have declined in five clear waves from yesterday's 1978 high. They're bouncing hard, and could easily reach 1972.

The question, as always, is what happens when the S&P cash opens. Anything below 1965.34 might suggest that the Bradley Turn Date may have marked an important juncture.

At the current time, though, it is rather doubtful. A lot can change, and quickly. But unless 65.34 fails, there is still ample opportunity for this market to make new highs.

This action would almost be preferred given the internals, which are weak. Breadth, volume, VIX, TRIN, and the percentage of the S&P 500 above the 20, 50, and 200 day moving averages all suggest a new high should be sold.

This is not to say the Big One has arrived. This is to say the 50dma lurks below at ~1933 along with the lower rail of the rising wedge, and would make an ideal target for a wave 4 low before a final blast off in wave 5 targeting 2000+.

If a new high comes along, great. If not, great. Stay flexible and open minded. Just like yoga.