Stock market analysis and commentary from a trader's perspective

Friday, February 5, 2016

Friday -- NFP Vs The Fed

S&P E-mini Futures:
Messy overnight range with down bias after NFP. Could go either way.

News:
NFP numbers were called "unambiguously good" and "about as good as it gets" by economist Mark Zandi on CNBC.

If this is the average assessment, the Fed may have a problem.

So could equities.

Also, seeing research chatter being passed around hyping the potential for debt monetization by the BOJ. Makes great reading, and is surely something that would make a central banker salivate along with the economists who love them, but the problem with theories like this is they regard the market as a system of levers and pulleys and completely disregard the reactions of market psychology.

Elsewhere, Oilmeggedon is now a word...

I remain constructive on oil. Production is being obliterated by falling rig counts and outright cuts as demand holds steady to slightly higher. Doing some DD and T/A on refiners: Marathon, Tesoro, Valero, and Phillips 66.

FX:
A much different day in Fxland. AUD & CAD weaker, JPY & CHF weaker.

USD slightly higher, having closed at almost an exact 1:1 Fib extension from its recent high -- corrective thus far.

Meanwhile, the dollar "toast man" is still at it. Wild scenarios of new epic bull markets in hard assets and the destruction of the dollar. Been shadowing this guy since 2004. Never one word about debt overhang.

Treasuries:
Hanging at highs.

Energy:
WTI crude stalling. Needs to rip higher to escape the possibility of lower lows.

NG rallying where it needs to.

Metals:
Gold, silver, and copper stalling as well. Gold needs a close above 1191.70 to change my view.

S&P Outlook:
Currently too middle-of-the-page for me to find an edge.

Chart of futures looks a little more ominous than the cash chart.

TRIN closer to overbought than oversold.

Would rather reconsider above 1950 or below 1875.

Thursday, February 4, 2016

Thursday -- Toast, Dudley, Subdivisions

S&P E-mini Futures:
Blew overnight gains.

News:
I heard it yet again:

"Get out the peanut butter. Get out the cream cheese. The dollar is toast!"

This from the "trader I like to fade." Same exact thing he said last March before it blew up in his face.

This time though, I'm inclined to agree with one of his points.

He's looking at the same level that I am -- 92.62 -- which if violated, could signal trouble for the dollar, and could be a sign that central bankers may have succeeded yet again.

Dudley's comments from the New York Fed yesterday, warning of "significant consequences" of a stronger dollar, were widely credited with causing the dollar implosion. He's absolutely correct, yes.

The problem for him and his cronies is that if one were to compare the balance sheets of all the central banks in the world, they would pale in comparison to the amount of dollar-denominated debt that overhangs the global monetary system.

So Dudley may succeeded in a short-term weakening of the dollar they despise, but until 92.62 gets smashed, there could be more consequences down the road.

Watch the action in the yen -- it is going the "wrong way" from Kuroda's most recent comments.

As more and more of dollar-denominated debt gets liquidated (at higher and higher prices) yes, the stress level rises and puts more of a bid underneath the dollar (and the yen due to its carry trade dynamics).

Study the Lehman event in 2008. Stocks crashed. Precious metals crashed. The dollar & yen soared.

It had nothing to do with "fundamentals" but was more about liquidating assets to pay off debt. This is what central banks are up against. They're taking on nuclear weapons with a switchblade.

Lawrence McDonald (@Convertbond) says it best:

"This time it's countries and oil companies that are levered up."

That's why central banks are scared, and why the price of oil is such a big deal. And the dollar, And the yen.

FX:
Follow through remains: JPY & CHF strength. AUD & CAD strength. USD weakness. A muddy scenario for risk.

Treasuries:
New highs yesterday on high volume. At least a retest of those levels expected.

Energy:
WTI crude still has not broken out higher. Term structure remains cautionary. NG down over 2%.

Metals:
Gold, silver, and copper each up over 1%.

S&P Outlook:
Yesterday's ABC scenario is still on the table even though the subdivisions of "B" need work. (chart not updated)


Wednesday, February 3, 2016

Wednesday -- Oil, Kuroda, JGBs & ABCs

S&P E-mini Futures:
Found support overnight and built gains on crude oil hopium.

News:
For me, comments from the BOJ's Kuroda dwarf the news flow. The guy truly scares me.

  • KURODA: POSSIBLE TO CUT NEGATIVE RATE FURTHER IF NEEDED
  • KURODA: BOJ NEEDS TO DEVISE NEW TOOLS IF MEASURES INSUFFICIENT
  • KURODA: BOJ WILL DO WHATEVER IT CAN TO REACH PRICE TARGET
Desperation. And a clue just how weird it may get here and Europe and Asia (which both had rough sledding so far). New tools . . . wtf. Just call it State-sanctioned stealing.

There was also this from Nikkei --


"The Ministry of Finance is expected to announce Wednesday the first-ever decision to call off sales of 10-year JGBs."

Crazy.

Interestingly, a way for Japanese individuals, municipalities, and corporations to embrace more debt would be to buy US treasuries. Maybe that's why treasuries have gone straight up for the last month. Maybe the BOJ is buying, too.

If so, there's a catch...

FX:
...it's the USD. More dollar-denominated debt puts a potential bid beneath the dollar when things get weird (just what the global over-debted doesn't want). And things are getting weird fast.

JPY & CHF sensing the weirdness yet again. AUD & CAD up on oil hopes.

Treasuries:
Up here too, not backing off materially.

Energy:
WTI crude term structure still an abject mess, so not buying the hope. NG weak again.

Metals:
Where's the ripping bid in gold -- not seeing volume even though it continues to build on gains as silver and copper do as well.

S&P Outlook:
Currently failing a rally.

1872.70 still in the crosshairs, but if the market wants, it could form a more complex ABC that could include a break of 72.70 and still reach higher.


An alternative is that an ABC has concluded where "A" is shown and new lows are on tap.

For the market to show that the current price action is not a bounce, an epic rally needs to occur...soon.

Tuesday, February 2, 2016

Tuesday -- Alphabet Schooled By Crude

S&P E-mini Futures:
Down again in choppy trade.

News:
Google (Alphabet) reported great earnings results, but it seems crude oil is the bigger worry.

Heard a trader this morning flipping out about how Warren Buffett sold his entire Exxon position. Thing is, Buffett sold last September. And he put it all (and more) into Phillips 66.

The trader also quoted legendary energy investor John Arnold who said "half the U.S. energy industry will be bankrupt in 6 months."

Maybe. Or maybe sentiment is so bad it's good.

FX:
Oil's slide is hammering AUD, CAD, MXN, NOK, and RUB. JPY stronger. Risk Off set up for now.

Treasuries:
Resuming higher after low volume pullbacks. A better sign given today's oil trubs.

Energy:
WTI crude pummeled over 4% -- if below 29.47 could bring fresh lows. NG down over 5%.


One thing of note: oil's term structure blew apart a few days ago (bearish).

Metals:
Gold, silver, and copper treading water lower.

S&P Outlook:
Here's how things looked at yesterday's close. Hmm. Futures down this morning. Hmmmm.


Higher prices could still occur, but moving up the stop for the S&P to 1872.70. Actually, 1920.30 could be a better, tighter one, but the pattern could still sub-divide higher.

How high? I like the 2000 area for market psychology reasons. If achieved, there is also ton of air from 2020-2050.

Otherwise, the S&P could get weird in sympathy with oil.

Monday, February 1, 2016

Monday -- Bad Data, Anti-Cash, Abandoned Mines, Corrective Patterns

S&P E-mini Futures:
Down in choppy trade, correcting Friday's highs.

News:
More bad data out of China keeps the stimulus narrative alive in the financial press, yet it's not yet translating to global equities.

Reuters -- "Chinese manufacturing slowed last month at its fastest pace in more than three years."

Meanwhile, Bloomberg's editorial team is jumping on the anti-cash bandwagon, which makes me want to puke.


Governments, largely run by Keynesians, are getting increasingly desperate. (This may be a glimpse of Michael Bloomberg's platform should he decide to throw his hat in the presidential ring.)

As such, in between this weekend's leisure pursuits (bitchin Sunday bar hopping through the countryside with some friends), spent some time reviewing USGS survey data on abandoned mines here in Puerto Rico (there are hundreds of them) that might make potential repositories for secure private vaults outside the banking system.

Much rather reach for opportunity than react to crisis.

FX:
AUD & CAD weaker, CHF stronger (Risk Off bias). JPY flat to slightly stronger. USD weaker.

Treasuries:
Showing signs of needing consolidation, at the least.

Energy:
WTI crude currently down over 4% from recent rally highs. NG down over 6%, but who leads whom? NG's chart remains a tad more bullish for now.

Metals:
Gold and silver doubting the cashless society, at least for the moment, up. Copper down, possibly on China issues.

S&P Outlook:
Friday the S&P bounced off a modest 1:1 Fib extension shown here last Wednesday.

Wednesday

Friday
Thus, the emphasis is now on 1872.70 as a must-hold level for bulls. Below there suggests new lows below 1812.29.

Higher targets at the 1978 and 2000 levels still exist, but Friday cautions as the pattern currently appears corrective rather than impulsive (bullish).

Friday, January 29, 2016

Friday -- BOJ Goes Negative, Corvette Goes 1963

S&P E-mini Futures:
Higher in tandem with global Risk On due to BOJ decision, but not exactly breaking out.

News:
BOJ went there and adopted negative interest rates. The yen got hammered. The Nikkei ripped higher.

Asian markets loved it -- even China -- and Europe is following suit.

But that's not the real story. Not here.

Social Mood wise, the real story is the newest Corvette and what it may be saying about where the markets are. Try 1963.


The article is a must read for accidental subtext (unintended, subconscious communication).

"Now you can relive the glory of that era."

1963, huh.

Why is this important? Because in 1963 we had just gone through the Cuban Missile Crisis. The world was on edge. Markets had dropped over 25%. Tension was high.

But then markets suddenly ripped over 60% higher into 1966. Are the markets about to get in gear?

"Put it in gear, let out the clutch like it was some kind of weight machine at the gym where you’ve placed the pin way too low and whoosh, you’re off. 1963 never felt so good. The power comes on way down low on the tach. There’s no waiting politely for turbos to spool up or VTEC to do some high-tech whatever. All the power you will ever get — all the power this nation will ever want — is right there on the right. Just step on it."

1963 never felt so good.

"You have to be present and at work for this thing to go. There is no cruise control, no autonomous robotic behavior nanny, no OnStar. There is only you and 550 hp from 1963."

The accidental subtext translation: Be fully present at work. Do not be on cruise control (no more buy & hold). No more systems trading or robotic algos. And don't expect much more help from the Nanny at the Mothership. There's only you and the grand sport of the market.

In other words, central banks may be nearing their effectiveness and we're about to enter a strange new world of unhinged, unsupported markets (note the Grand Sport is sold without an engine or transmission), but probably not until one last whoosh higher.

Also notice that crude is embedded in this story as well. Could crude oil be close to an interim bottom as well?

"The Grand Sport is crude, yes, and brutal, of course, yet powerfully glorious. Push the beefy, meaty clutch pedal down — go on, push it you wimp! All the way! This ain’t no Miata with “lightweight pedal action.” There’s no damned bud vase in here."

Whatever the answer, the message is clear. Man up, traders.

All of this is supportive of the "surprising disappointment" psychology of a 4th wave pullback in Elliott terms.

FX:
JPY pummeled on BOJ's move to negative interest rates. USD higher. CHF weaker as safe haven flows flee.

Treasuries:
Ripping higher as bonds seem to sniff out the possible end game at the Fed.

Energy:
WTI crude up, but not as high as one might expect -- however, NG is feeling it.

Metals:
One might expect a major rally in metals. And one would be wrong. Perhaps crude and metals are seeing well past the present to the hangover after.

S&P Outlook:
None of the above will matter for a bit unless 1921.84 can get filled soon. Futures are up, but don't look that enthused.

Otherwise, to echo the Corvette article, things could get brutal before they get glorious.

The danger is that markets figure out that central banks are becoming desperate yet having less and less effectiveness.

Has the Fed already provided all the power this nation will ever want? 

What if the markets are far more powerful?

Or what if the markets have to run on their own. No engine. No tranny.

The dark side of the Corvette article is that, if it is truly correct, perhaps the markets still need to reach 25% declines before we can relive the glory of 1963.

"Crude, yes, and brutal, of course."




Thursday, January 28, 2016

Thursday -- The Facebook & Its Market Implications

S&P E-mini Futures:
Fighting over a 30-point overnight range.

News:
The Fed tried to sound dovish yet hawkish yet in control yet open to change yet sounded more confused than ever.

Asia seemed to feed on the confusion, ending mixed, and Europe is just red.

The Facebook proved that when your business is advertising, it helps to be able to sell some -- and do so in an insanely targeted way. It blew doors on earnings and most every other metric that works left-brainers & media buyers into a frenzy.

Apple looks like it wants a new low, while The FB looks primed for new all-time highs, having resolved what appears to be an ABC correction which could have broader market implications for the Dow, Nas, Rus, and S&P.

Bullish ones.

It remains to be seen, however, if Apple causes the market to slip on a banana peel one last time.

FX:
Quiet but for AUD, ripping.

Treasuries:
Hanging at highs, suggestive of lower yields.

Energy:
WTI crude appears to be a coiled spring. Volume is supportive. A breakout higher could support a larger Risk On move in global markets.

NG resting just in case.

Metals:
Gold still has a modest bid, yet silver, if the chart is correct (looks like a bad tick, but probably isn't), is a volatile mess. Copper not amused.

S&P Outlook:
Vol also "happened" in the S&P yesterday, but didn't break anything.

What was widely regarded as a dovish statement was not well received. It seems market confidence in Fed omnipotence is waning. That's never been an issue in these pages.

The S&P tested and closed above a volume shelf at the 1974 area. Would not want to see it below there again if it intends to follow The Facebook.

If it chooses to follow Apple, especially if 1859.86 breaks, there could eventually be a spike to new correction lows.

VIX printed a huge doji yesterday -- looking confused as hell. It broke the midline of its 2 standard deviation band and closed slightly above it, making Vixspotting difficult.