Stock market analysis and commentary from a trader's perspective

Monday, September 22, 2014

Back In The Saddle

The 1997.65 bull/bear line was exceeded last Tuesday which paved the way for new highs.

From Monday's 1978.48 low a new Fib extension target of 2018.60 replaced the previous 2014.18 target. The S&P reached 2019.26 on the Alibaba IPO and closed below the Fib target after declining in five waves, a potentially bearish sign.

Sadly, the Alibaba IPO is the latest sign of a market gone mad. This is a company whose own SEC S-1 filing plainly admits that 80% of its revenues come from the sale of phone cards, video games, home furnishings, and baby products.

Hardly a business model with a high barrier to entry.

There are still higher Fib targets, yes, but the market now needs to be watched carefully. 1904.78 should not be messed with in any way.

Friday I dumped the entire SPXL position from June after adding to the UVXY position that I've slowly been building. I still hold SPY 201 calls expiring this week that are fully paid for.

I still see higher potential unless 1993.29 fails.

The 10-year note just barely held 123'12.5 while I was away. It does not look like it will last, but it very well could. This level may become my new bull/bear line for the near term.

I had a very successful trip and learned a ton. More on that later. For now it's good to be back in the saddle and not trying to trade from a smartphone.

Back in the Saddle by Aerosmith on Grooveshark

Sunday, September 14, 2014

Away All Week

I'll be away all week investigating more favorable climates, both weather-wise and tax-wise. I may or may not be able to do some blog posts, but have no idea what to expect. So even if I do, they most likely wouldn't be very long ones. But I will do a full recap upon my successful return.

Keep an eye on the bond markets. The new bull/bear line that I'm using for the S&P is 1997.65.

Friday, September 12, 2014

Scotland, The 10-Year, And The Bull/Bear Line

Yesterday's large down tick at the open worked itself out with a lower low on lighter ticks for a classic positive divergence set up. Doing so it also created a bullish three-wave structure that should bode well for higher prices. Again, 2000.47 is the key level, though, and I am using it as a bull/bear line.

Failure to break above it could keep pressure on lower prices down to the 1970 area. A break above it should clear the way to eventual new all-time highs. Those highs, anywhere in a range from 2014.18-2081, would be seen by me as areas to get short.

Of course it looks as if the timing will once again occur when I'm away from the screens. I'll be out all next week. I'd rather not be trading from a phone, but if I have to, I have to.

For now, the 10-year note seems to be important to monitor, as it remains above 2.5% and price has not bounced yet.

Elsewhere, it is hard to understand all the hand wringing over the succession vote in Scotland. This is simply what happens, according to socionomic theory, in bear markets -- things break apart.

In bull markets, they come together. Socionomics points out how the EU finally came together in a bull market after centuries of warring.

The mere vote in Scotland to leave the UK -- regardless of the outcome -- could be seen as a bear market indicator. Yes. Just because the stocks around the world are at nominal highs doesn't mean that social mood can't be turning negative at the same time. It's a possible indication of a very large turn.

Thursday, September 11, 2014

In The Middle Of The Page

The S&P is in the "middle of the page" currently. It needs to get above 2000.47 to rule out an impulse down, and even then it could still create other patterns.

The point is that it still hasn't broken the uptrend. And while it had every chance to do so yesterday, its internals were too weak to do it. Or, you could say they were too strong.

This morning opened with a large down tick (-1286 per Tradestation). These usually take a while to work off. Still, price is acting as if there is support by buyers.

Also, the 10-year looks like it wants to rally, which could also help the markets.

A drop below 1982.99 could open the door to the previously cited 1970 area.

Wednesday, September 10, 2014

Market Rolls Over On Light Volume, But Rates Rise

So the market did roll over, all the way to 1984.61. The 1988.40 gap was filled and the close was just four ticks above it. Volume was light.

Light volume going up is one thing -- bearish. But light volume on the way down is pretty hard to achieve unless the market is getting ready to turn around and head higher.

Still feeling the market wants to do just that -- head higher. But there are lower areas it can test first. 1970 is the area of the 38% Fibonacci retracement from the high measured off the 1904.78 lows. 1970 also has a small volume shelf too, so there may be another test of it, in which case it should not be seen as a big deal.

What would be a big deal, to me at least, would be a break of 1964.04. It would not spell doom, but it would be an early warning. Getting below 1944.90 might spell doom, though, and suggest that maybe a rather significant high was put very quietly at 2011.17.

As of right now, things would look a lot better if the market got back above 1992.14. But things can change as soon as it opens...

The only thing not to like thus far is the US 10-year yield which is back above 2.5% this morning. The Fed likes to pretend that it controls the bond market (helped along by the financial press), but it really only influences the shorter durations. If the Fed were to lose the 10-year at this point (resulting in higher yields), they could be forced to follow the market higher.

And those rates would not be rising for the right reasons.

Elsewhere, Apple unveiled its latest phone yesterday along with a watch. The New York Times was enthused.

Apple, Under Tim Cook, Is Back and Better Than Ever

Let the market decide.

Tuesday, September 9, 2014


It's starting to feel like Neverland.

Back in early July, there was this opinion:

The SPY Is NOT Extended and May NEVER Pull Back

A month later the S&P 500 was nearly 100 points lower.

Today, there was this one:

Why this stock market will never go down

One more would make a Hat Trick and suggest that the relentless rally is becoming a bit over-believed. I must add that I like seeing a cluster of these around the upcoming Alibaba IPO. Amid all the mixed mood messages, it feels as if the deck chairs are finally sliding to one side of the boat.

To be clear, I am still gaming for higher prices. As was posted yesterday, there are tight areas of Fibonacci confluence up to 2081. Call me a greedy bear, but in weak markets, the higher it goes, the harder it falls. Cheap calls are a bull's best friend...until vol kicks in and all hell breaks loose and OEX puts go ballistic.

Until then, fine. Mohammed Ali used to do the rope-a-dope. So can we.

So can the market. This is a shot from the new Chanel campaign that I noticed while doing the September Vogue post. Kind of like a market on the ropes.

Market wise, it feels like either the S&P gets with it and continues building on yesterday afternoon's rally, or it rolls over into the 1987 area. I was a buyer yesterday; I'd be a buyer there.

The Harder They Come by Jimmy Cliff on Grooveshark

Monday, September 8, 2014

Fibonacci Calling

There is a weekly 61.8% Fib extension target that has been repeatedly cited here at 2014.18.

There is now a daily/intraday 61.8% Fib extension target from the 1904.78 lows targeting 2014.90.

There is a daily 100% Fib extension target at 2028.03 coinciding with an intraday 100% Fib extension target at 2030.22.

Just above, there are two 100% Fib extension targets separated by several months that share the same target within six ticks -- 2018.75 and 2081.81.

It appears Leonardo may be trying to get out attention at this juncture. These targets will likely coincide with intense euphoria over the upcoming Alibaba IPO.

This means that it may finally be time for me to start building a large position with a downside bias.

The Alibaba IPO values the company at $155-160 billion. Reuters has reported that 80% of the company's revenue comes "from prepaid phone and game cards as well as lottery tickets, home furniture and baby products."

I must say I like the odds of this record-setting IPO marking a significant, sellable high in the market.