Stock market analysis and commentary from a trader's perspective

Thursday, July 31, 2014

On Impressing Buyers And Sellers

I remain as unimpressed with the recent downside action as I often am with the upside action.

Futures are down hard this morning, though not quite a full percent. Europe is down over a full percent however. And that may be heading our way.

While volume did expand yesterday, I'll be watching how A/Ds act, which are are not yet showing a market that is ready to crumble.

The 50dma is 1951.71 as of yesterday's close and is rising moderately. If the S&P breaks the 1955.59 swing point, the 50day should be there to break the fall. But what if that breaks.

It looks like 1940s are then the next support -- the 38% Fib level sits at 1944.31 and 1940 has a large volume shelf.

If it needs to be said, I'd love to be impressed by this market to the downside at any time. It would go a long way toward bringing back a dose of reality.

But unless that happens, I'm still looking to be a buyer. Especially if 1955.59 holds.

Meanwhile, Whole Foods may be an early indicator that consumers are not willing to part with their whole paycheck anymore. It closed down over 40% from its all-time high yesterday and is down another 5% in the pre-market.

I want to keep an eye on this company as real estate begins to wobble again (which it is correlated with). The CFO announced that WFM is adding stores with free cash flow and is buying back shares. Buybacks are a fine way to goose EPS but are a waste of cash ahead of a contraction. And for a company to be burning cash on new stores five years into the weakest expansion in history as the liquidity is receding is just plain short sighted.

There is ample room for a bounce in WFM but there are volume areas in the $13-15 that look mighty tempting.

Wednesday, July 30, 2014

Trading Plan Vs. Government Figures

Early stop for today is 1967.31 -- with futures well bid after a strong GDP #, if the pattern includes a 5th wave to 2000+ it should most likely start now.

1955.59 remains key and should not be violated for the current proposed pattern to remain valid.

Regarding the latest GDP figures, according to Zero Hedge, the Commerce Department announced that Inventories and Trade, the two biggest components of the GDP beat, were estimated. If true it makes the whole thing highly suspect.

According to the government, inventories alone accounted for 1.7 pts of GDP.

I will not be altering my trading plan based on government figures.

Tuesday, July 29, 2014

Price & Pattern: Keeping It Simple Before A Two-Day Fed Meeting

The Fed begins a two-day meeting today with a statement at 2pm EDT on Wednesday. It is uncertain -- as ever -- whether it will contain hawkish or dovish overtones. Perhaps a bit of volatility appears.

What matters to me -- as ever -- is the pattern of the S&P. This is what I think is going on: another wedge.

If wedges seem to predominate the analysis for the past year or so, it is true. In my opinion it shows just how tired many markets are, only to be continually "stimulated" into action. This only works until the addict collapses.

Like a good friend on the path of addiction, the higher the S&P goes, the more unrecognizable it becomes. Rather than attempt to fit the most recent pattern into an overall count, at this time it is best to keep it simple and just count what is identifiable. That's all this is.

That said, should the S&P get to "5" I would look to sell it hard. The cumulative advance/decline line (not just the intraday one that I chart) is starting to roll over on a daily and weekly basis. The 10-year is screaming that something is not right in the world of risk. And the VIX may have put in a bottom recently at 10.28.

Yes, I played BTFD once more yesterday but am already out. Today the S&P first needs to get above yesterday's high while staying above 1973.23. If it makes a new high in this manner, I may jump back in on a dip. My view of 1965.77 has changed and I'm back to 1955.59 as the more important stop level.

Monday, July 28, 2014

A Weekend In Stowe

This past weekend was a pilgrimage to Stowe for insight and reflection.

I've mentioned previously that this time of year -- Little Summer -- is special to me. It's when time actually seems to slow down just like it seems to do around the winter solstice. I think it's got something do with the balance of time itself, with the switch over into Leo being something like a mirror, or bookend, to the winter solstice.

For some reason, the summer solstice has no effect on me other than a sense of sadness when the days start to shorten before summer has even had a chance to bloom in northern New England. I never feel anything around that time but a pronounced sense of melancholy.

On the other hand, Little Summer gets better and better the more I celebrate it.

Nestled in the clear air of the Green Mountains and fed by the meandering Little River, Stowe feels fresher to me than almost anyplace else. Even the pace feels altered as if it is somehow slower than the rest of the world.

Vermont is not called the Green Mountain state for nothing, and Stowe, being surrounded by hills and mountains, feels as if it resonates with subtle energy.

Perhaps it's no accident that the von Trapp family settled in Stowe after fleeing their native Austria just prior to World War II. It reminded them of home.

As their song went --

The hills are alive with the sound of music...

This makes it one of my favorite places to get my inner hippie on.

. . . . . .

The fun started, as it almost always does, just over the State line in South Royalton, with a stop at The Worthy Burger. No food this time, just a beer.

Seeing this sign a lot as more and more establishments opt-out of ridiculous 3% credit card processing fees.

Said to the bartender, "Listen, I'm trying to do some drinking and driving. Do you think you could pour me a short one?"
A short one. Sip Of Sunshine IPA
from Lawson's Finest Liquids, Warren, VT

It's not Vermont until you see the ubiquitous Couch On The Porch somewhere.

Getting ready to wash the stones in the river (after cleaning them in the bright sunlight the other day).

That's the White River, man. It was in the path of Hurricane Irene in 2011, and its intense flooding devastated much of Vermont. The scars are still apparent in many places.


How did the gas station know I was on a road trip?

Next stop was Prohibition Pig in Waterbury. Cask-conditioned Gose from Lost Nation Brewing in Morrisville, dry-hopped with galaxy hops and sour oranges. A lively taste that went boom. Thank God the waitress mentioned it, just minutes after the cask was opened.

She also mentioned, after I told her I was on my way up to Lost Nation, that she and a waitress there send notes to each other, little poems and things. I think she had writer's block because she was nowhere to be found once I was ready to leave, so I couldn't help her out.

The weekend's standout vegetable: blackened string beans paired with grilled kielbasa and kimchi hot dog.

At Lost Nation, took a flight and said hello to Jenny, who is the friend of Andrea, the waitress from Pro' Pig. Jenny did give me a note to give to Andrea on my way home. Banged it out in under two minutes and handed it to me folded in one of those football shapes I recognized from grade school.

Logo for Mountain Bike Vermont. Hilarious.

Yeah Baby's, just down the street from Lost Nation.


Special treat of decaf the next morning because I really like this spot but I don't drink coffee anymore.

The view from the porch at the inn where I stayed. Right in the heart of town.

Went blading along the Stowe Recreation Path -- 5.5 miles of bucolic awesomeness.

One of the many bridges over the Little River which meanders through Stowe.
It can and does flood. And can turn into a Not So Little River.

As I've said before on this blog, I don't find blackberries. Blackberries find me. Apparently it works for black raspberries, too.

Happened upon a cool sushi place along the path called Sushi Yoshi and really wanted to have lunch there, but it was very early. Needed a place to spend some time until it opened. Found a cool sculpture garden (West Branch Gallery & Sculpture Garden) and Zenned out for a while, which made me even hungrier for Japanese food.

Also caught a bit of a lacrosse exhibition, but it was so crowded and busy that I didn't stay long. Just long enough to see this funny tagline.

Knew this was the place for me the moment I happened upon it.

Zen bliss, right on the recreation path. Worth the wait.

And this small reminder that, yes, I was on the right path.


The light at the end of the tunnel.

Tequila Mojito at Plate restaurant (walking distance from the Inn, haha).

Pomegranite Gimlet (with tequila instead of gin).

Dinner was grilled skirt steak ("on the rare side of medium rare, please" which the grill dude caught perfectly) with grilled summer vegetables. No photo (didn't dig the vintage plate it was served on which seemed to compete with the food photography, dig?)

The next day after check out the clouds rolled in and heavy rain started. Hit the road and headed back down to Waterbury to deliver the note that was entrusted to me from Jenny to Andrea.

Jenny's cute note.

As if a small reward after doing a good deed, the clouds parted and the sun came out, so I roared back up the valley to the Trapp Family Lodge for an Austrian-style pilsner in their beer garden.

The perfect beer at the perfect time in the perfect place.

Thank you Stowe, and to all the friends I made. See you soon again.


A few tunes that put me in a Vermont state of mind every time.

Asleep From Day by Mazzy Star on Grooveshark Flowers in December by Mazzy Star on Grooveshark Rhymes of an Hour by Mazzy Star on Grooveshark Halah by Mazzy Star on Grooveshark

Why BTFD May Be Ending Soon

Surprise, surprise . . . the S&P finally had enough of weak highs and tested 1975.

The 1973.63 gap remains open, futures do not look impressive in the overnight and pre-market sessions, the S&P cash looks like it wants another low, and 1970 is still just sitting there, waiting.

If there is a test of 1970, though, it could represent a great buying opportunity IF 1965.77 holds. That's a reasonably tight stop, and one that I'll be taking seriously. Because, in addition to pattern breakdown, there is also a Paul Montgomery-style editorial warning in play as of this morning.

Buying on Dips Pays Most in Five Years as Stocks Rebound

In other words, for our socionomic benefit, Bloomberg has just noted:

"Not since the bull market began has buying dips in the Standard & Poor’s 500 Index been a surer way of making money."

Just as Paul Montgomery of Universal Economics has observed that magazine covers tend to highlight trends just as those trends are ending, financial news headlines can be an early, if somewhat weaker, indicator.

This suggests that BTFD will be over soon.

But if 1965.77 holds, it may live a little longer.

Again, that's a big IF. But if so, SPY 197 calls would work just fine.

Vermont was a lot of fun. I'll be putting together some pics in a later post.

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.