Stock market analysis and commentary from a trader's perspective

Tuesday, June 28, 2016

Tuesday -- Hope Springs

S&P E-mini Futures:
Up sharply from yesterday's close.

Sea Of Green™ ...on hope, not fundamentals.

Hope that central banks will roll out a coordinated policy response, hope that Cameron's meeting in Brussels will finalize the UK's exit from the EU, hope that Italian banks will get a bailout, and hope that Japan will embark on more stimulus measures.

No talk of stronger earnings, revenues, or sales.  Just hope for more intervention.

Would love to see global voter alignment to revoke the charter of central banks.

Oh, former Fed chairman Alan Greenspan wants a return to the gold standard.

Don't be fooled. If the dollar were to be re-pegged to the price of gold, it could be devalued overnight, yet again, at will, just as Roosevelt's Gold Reserve Act of 1934 devalued the dollar by 41% when the price of gold was "adjusted" from $20.67 per ounce of gold to $35 per ounce.

GBP higher, USD lower, AUD higher, CAD lower, JPY & CHF weaker. What a day so far.

Volume is contracting as treasuries consolidate at highs. If the next move has still less volume, may look at the short side.

WTI crude made a new swing low last night, but did so looking choppy. NG ripping to new rally highs. Volume drying up.

Sea Of Green™ in equities putting a dent in metals except for copper and palladium thus far.

S&P Outlook:
Some cool voodoo. Price is bouncing from an exact 1:1 price/time match from the February lows which backtested an internal trend line and closed at a perfect 38% retracement of the rally from the February lows. Sometimes market create beautiful symmetry.

While yesterday's chart is still possible (showing a possible wave correction before new all-time highs), not forgetting this one due to the amount of hope in the air.

Yesterday's chart reposted for reference. Today could be wave iv, or possibly the wave 2 low.

Monday, June 27, 2016

Monday -- Hanging Chads, BIS Warns, Boris REBOOTS

S&P E-mini Futures:
Back to Prince territory, yet looking firmer.

Seems the world may experience what Americans went through during the infamous Florida Recount of the 2000 election.

Seems the Brexit vote may not matter until Article 50 of the Lisbon Treaty is triggered, and it seems that Prime Minister Cameron is dragging his heels.

Article 50 states the following:

1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

2. A Member State which decides to withdraw shall notify the European Council of its intention.

Simple enough. Easy to delay. Yet supposedly the EU will not put up with a delay, but that could only be "publicly."

Focusing on Brexit therefore will probably only court confusion.

Better still to focus on central banks. And the central bank for central banks: the BIS in Basel, Switzerland.

The BIS has just released its 86th Annual Report, and once again contains a stark warning courtesy of Bloomberg's summation:

“Monetary policy is running out of room for maneuver,” said Hyun Song Shin, head of research at the BIS, in an interview. “It is not clear how much further stimulus of the real economy can be achieved using monetary-policy tools alone without inviting unwanted distortions.”

God bless London Mayor Boris Johnson, though. He gave The Socionomic Implications Of September Vogue: 2014 its long awaited REBOOT.

In an op-ed Sunday evening, he wrote:

"There is every cause for optimism; a Britain rebooted, reset, renewed and able to engage with the whole world. "

Cheers Boris. Cheers Britain.

USD stronger, JPY stronger, GBP new lows probing 1.32 (started building long position in pre market). CHF weaker, along with commodity currencies.

Nikkei up over 2% last night on fresh stimulus measures in the pipeline according to Shinzo Abe's wishes (who didn't read the BIS report).

Feels like everyone's on the same bullish side of the boat. HSBC Holdings Plc’s head of fixed-income research Steven Major says "we’ll have low and negative rates for a very long period of time.”

Not so sure, especially when BIS is staring to sound downright scary, with some of its similar themes echoed in this Bloomberg article:

WTI crude down in a choppy decline. NG possible 5-waves down, 3-up pattern which could be near-term bearish after its long rally.

Metals higher across the board.

S&P Outlook:
The S&P cash has opened down (at a 1:1 Fib extension in the 2016 area) as futures retest the overnight Prince post-Brexit lows at 1999. Added more XIV in pre market (started adding Friday).

There is a possible 161.8% Fib extension target at 1980 that could shift the tone near term if hit.

Posted a possible bullish chart on Friday intraday that has just been negated due to 2025.91 breaking.

Now thinking a test of the 2000 level or possibly 1950-1980 could see a wave 2 low.

Or a developing impulse to even lower levels. Exciting times.

Friday, June 24, 2016

Friday -- There Will Always Be An England

S&P E-mini Futures:
Sharply down amid historic moves. Currently bouncing after being halted limit down at 1999. Prince lives.

UK votes to leave the EU.

UK Prime Minister David Cameron resigned.

Marketwatch -- ‘Panic’ and ‘bloodbath’ — analysts react to U.K.’s decision to Brexit.

Key words for EU this morning "Political Contagion." Scottish referendum back on the table, as well as similar demands issued by the Netherlands, France, and Italy.

Key moves from central banks: possible global, coordinated policy response.

More stimulus most likely.

Extreme moves.

GBP traded down as much as 12% to 1.32. A 30-year low and all-time record move.

USDJPY down as much as 7%, reached 98.78.

USD higher. Commodity currencies hammered.

Prices went from recent ugly down moves to ugly, manic shifts higher.

WTI crude hammered but stayed above its 45.91 swing point. NG down but firm.

Gold soared above 1362. Silver spiked above 18. Precious platinum up 2%, while more industrial palladium and copper down over 2%

S&P Outlook:
Last order of business yesterday was to buy SPY 204 puts just about 30 seconds after the market closed on its highs.  These will be dumped at the open, in the money.

2000 should be tested today. I will begin to add XIV. The possibility, previously raised by Deutsche Bank, of a coordinated central bank response could do unexpected things to the markets. For one thing, VIX is not up to levels where I would have thought.

In other words, now that the market has provided its upset to bulls, it could easily provide an upset to bears as stimulus aftershocks take place.

Currency moves do not seem to have reached their limits yet and, all things considered, seem a bit resilient. The first tell thus far, along with VIX.

As soon as the waves establish themselves, I will show a chart with a potential wave count.

Thursday, June 23, 2016

Thursday -- Waiting On UK Referendum Vote

S&P E-mini Futures:
Ripping higher but coming off its best levels.

Markets currently appear to be pricing 100% certainty that Britain will remain in the EU, something that feels dangerous.

Especially since the euphoria seems to come from bookmakers' odds which are derived from the total value of bets rather than number of bets. More people could be betting on leave, but a smaller number of deep pockets can skew the odds.

Two items elsewhere should give pause beyond the vote.

French manufacturing and services PMI both came in below 50. Bloomberg TV termed it "ugly."

And in Japan, a majority of the biggest private lenders are "still unwilling to borrow from the market for overnight loans almost six months after the Bank of Japan announced its negative interest-rate policy," Bloomberg noted.

Japan's interbank market is now less than half its size since before negative rates were introduced.

Important to recall that it was the Greek interbank market that seized the morning of the Flash Crash when the S&P dropped 100 points in five minutes.

Meanwhile, as equity markets are jubilant, most sovereign rates are higher.

Here lies the biggest risk to Risk On: a beautiful 5-wave impulse structure up in GBPUSD and a 3-wave corrective structure down in the US Dollar Index.

In other words, the pound may be primed for a correction, and USD may be primed for a rally.

Perhaps, for the pound, the best has already occurred.

Prices continue to push up yields in an ugly way.

WTI crude looked great yesterday morning but was coming off its best levels, something that brought on a sharp correction. NG may have just created a 5-wave structure down.

Gold and silver hovering around up and down. Copper up. Platinum and palladium down.

S&P Outlook:
Speaking of 5-up in GBP and 3-down in USD, there is still 5-down and 3-up in the S&P 500 from the recent 2120.55.

Based on yesterday's price action, this continues to argue for a correction.

Even though futures indicate a strong open, unless 2120.55 is broken, the odds for a correction are still high enough to upset the market.

With gaps as high as 2119.12, there could be quite a rally. And potential for a quite an upset.

What if not? Unless the market moves in a virtual straight line above 2120.55 implying a strong third wave, I've been toying with the idea of a choppy continuation higher that peaks just above 2134.72 but then breaks sharply. Will draw a chart in a few days after the smoke clears.

Remember, no one knows anything until 5pm EST.

Wednesday, June 22, 2016

Wednesday -- Sidelines

S&P E-mini Futures:

New transformers are getting installed in the neighborhood today, so no power from 8:30am -- 5:00pm. And the countdown to the British Referendum vote tomorrow is starting.

Both events push me to the sidelines.

News flow is quiet, inferring many others are on the sidelines too.

Commodity currencies stronger on weaker USD, yet JPY & CHF stronger too, indicating caution creeping in. GBPUSD hanging at highs.

Prices still look unconvincing.

WTI crude recovered 50 on reduced API inventories, but is coming off its best. NG coming off fresh highs yesterday.

Gold and silver down versus platinum, palladium, and copper up.

S&P Outlook:
2092.94 and 2069.51 have stood. Actually the upper level should be 2092.97, but whatever.

The point should be made that the wave structure could still accommodate a higher high which could complete a 5th wave of the ABC correction before a resumption of the downtrend from the June 8th high.

2025.91 would still be the primary target for such a scenario, and, if broken, could lead to a test of 2000 and possibly 1950. Lower levels are possible, but that is as far as I would be speculating near term.

As for higher in something other than a C wave, 2120.55 would be the first target with 2134.72 just beyond.

Tuesday, June 21, 2016

Tuesday -- Once Again: Central Banks Vs. Fundamentals

S&P E-mini Futures:
Crazy overnight action up & down.

Tiny Tilt in ‘Brexit’ Polls Roils Global Markets (WSJ)

To me that headline says it all.

The best take thus far has to be Deutsche Bank (emphasis mine):

"The team note that the outcome of the referendum remains too close to call. But regardless of the result, political uncertainty is unlikely to subside for some time. This comes against a global growth backdrop that remains sluggish but overall little changed since the start of the year. Markets will take their near-term cues from the UK referendum: A material shock would trigger a forceful central bank response; absent a shock, attention should shift back to fundamentals."

In other words, once again it's central banks vs. fundamentals.

And fundamentals aren't looking so good.

Risk On tone remains, except for CHF which is showing possible safe haven flows.

With the amount of bulls calling for materially higher treasuries prices, these instruments better get going soon.

WTI crude giving back some recent gains. NG still hanging near rally highs.

Gold also giving back more gains, and convincing silver, platinum, palladium, and copper to do the same.

S&P Outlook:
Yesterday was a flop but not a complete failure.

Above 2092.94 would likely call for another high at least. And anything below 2069.51 would probably confirm the failure.

2025.91 would then be the target in my opinion, and an even deeper correction could occur.

Monday, June 20, 2016

Monday -- Risk On, For Now

S&P E-mini Futures:
Ripping higher. But only 1.2%...

Markets are ripping on hopes that Britain will now vote to remain in the EU.

Current snapshot.

UK -- 4.4%
France -- 4.6%
Germany -- 4.4%
Italy -- 2.8%
Spain -- 5.2%

Obviously a bigger deal there.

All this on top of a green night in Asia.

Until the votes are counted, however, it's all just speculation.

It could be much worse. Like, if you're applying for a loan in China.

Bloomberg reported on the latest debt phenomenon in China where "consumers willingly give data at levels unacceptable elsewhere" in return for lower interest rates on loans.

Some go a little further.

"University students desperate for cash have been sending nude photos of themselves as collateral to several online lending platforms, according to the official People’s Daily. Typically they get loans of 15,000 yuan ($2,280) -- more if they’re doctoral students or enrolled at a famous university, the report said, and at least one loan had a weekly interest rate of 30 percent. Delinquent borrowers face the threat of their naked selfies being sent to family if they don’t pay."

How's that for transparency.

Today is the Summer Solstice and Full Moon. Happy Longest Day Of The Year.

GBP obviously ripping. USD down. Commodity currencies loving it. JPY weaker.

Yields gapping higher, prices gapping lower.

WTI crude ripping higher. NG fresh rally highs.

Gold down while silver, platinum, palladium, and copper rip higher.

S&P Outlook:
This latest move was forecast days ago by using the Elliott Wave Principle, so I'll be taking most of the XIV position off the table today, having already started in the pre market.

Now it's a matter of either getting confirmation that the count is correct with a sharp reversal at "C" (2185-2100 area) or a continued rally above 2120.55.

Trading levels, not polls.