Stock market analysis and commentary from a trader's perspective

Friday, April 24, 2015

Friday -- A Small Detour

ES Futures:
Hanging tough after yesterday's weak close.

News:
Allow me a small detour today before my parents and I head to Palm Beach. Palm Beach is very dear to them because of dear friends there. I have no real connection to it other than my great uncle who lived there years ago, whom I never met.

My Dad has often said that I remind him of his uncle. He was single, he liked the ladies, and he traded stocks. Apparently, he had vision, too. Concerned by the rumblings from Germany in the early '30s, he loaded up on Curtis Wright and Remington shares, made a bundle, and retired to Palm Beach. Right on the Ocean.

We're visiting the exact location today. I simply want to touch the ground where he lived. He's in my blood.

I never met his brother (my grandfather), either. My relocation to the Caribbean was a first step toward carrying on something that both of them held dear, the rebirth of their father's (my great-grandfather's) spice company that was lost in the depression.

This connection may be where I get my love for travel and for food -- in other words, there could be spice in my blood as well.

Last night I was flipping through Palm Beach County at 100 and found some fascinating tidbits. Times never change.

"How heady were the boom years in Palm Beach County?

Look at the numbers: In five years, from 1920 to 1925, West Palm Beach's 
property value increased five-fold, to $61.7 million.

In Boca Raton, buyers rushed to grab the first lots offered for sale there 
in May 1925 and set a sales record: $2.1 million in one day."


Loved this one. Classic.

I AM THE RENDEZVOUS OF THE RICH

EACH PASSING DAY SEES A NEW ERA IN MY EXISTENCE

I AM THE DREAM OF A GENIUS

THE MATERIALIZATION OF A MAGICAL MIRAGE

I AM THE SUN PORCH OF AMERICA

I AM BOCA RATON IN 1927

~From a Mizner Industries brochure promoting 
Addison Mizner's Boom-era developments in Boca Raton

Mizner filed bankruptcy that same year.

Other data reminded me of Private Equity's foray into real estate just before 2007:

1929
West Palm Beach's property value at boom high of $89 million.

1930
West Palm Beach's property value plummets to $41.6 million.

1935
West Palm Beach's property value hits bottom at $18.2 million.

That's a 79.55% decrease, peak to trough.

FX:
Anytime JPY gets stronger, I notice. Today is one of those days. I think USDJPY could eventually test the lower 117s before making a run for slight new all-time highs.

Treasuries:
Prices are bid across the curve this morning.

Energy:
WTI crude remains stalled at the 23.6% retracement. Whether it's stall speed or a simple rest remains to be seen.

Metals:
Stall speed seems more descriptive of gold & silver.

S&P Outlook:
Google may have become the new canary last night. Advertising is the first to get slashed in a downturn. It makes sense that Google would be the first to see it. This could turn out to be an important leading indicator.

Meanwhile, the S&P made a new all-time high yesterday after taking a breather since February. It lasted FOUR minutes.

Futures look well enough such that it's not yet doom & gloom. But it simply was not an inspiring move.

2125.40 is still open. 2091.05 is the stop I'm using.


Thursday, April 23, 2015

Thursday -- Spooky European PMIs

ES Futures:
Shaky. Recovering after an overnight plunge.

News:
China & European PMI misses spooked the markets.

FX:
Nothing extraordinary.

Treasuries:
30s broke their April 13th swing point, now a target for 2s-10s. The March 6th swing on 30s -- 154'27 -- should not be messed with if yields are to remain lower for longer.

Energy:
WTI crude has now retraced 23.6% of the decline since last June. The 38% level is the 67 area. A stall at current levels could bring out the bears.

NG still weak.

Metals:
Gold. 1189. Still fighting gravity.

S&P Outlook:
Even with the overnight rout in futures, yesterday's 2091.05 swing point was not broken.  If that were to break, 2072.37 would be under pressure and should not fail unless bulls want to see some fireworks.

The closest Fib extension target above sits at 2125.40. The market has rested since February and it still sits untested.

I'm still in the camp that there will be a higher high. But it needs to happen soon.

Wednesday, April 22, 2015

Wednesday -- The Apple Market, From Purgatory To Nightmare

ES Futures:
Down slightly, looking corrective.

News:
More subconscious communication, which, if true, means that the market is far worse than most realize.


It's bad enough for the market to be a single stock. But minutes later, though . . .


Why get biblical?

FX:
Notable action today in EUR, GBP, CHF, AUD.

Regarding JPY, the last word you want to hear from a former top currency official is nightmare . . .


Highly levered cowboys will likely focus on the bolded statements (emphasis mine) as proof all will be OK for a while.

"Japanese government debt twice the size of the economy will make exiting stimulus a nightmare for central bank Governor Haruhiko Kuroda, according to the nation’s former top currency official.

"Makoto Utsumi, who oversaw foreign-exchange policy at the Ministry of Finance from 1989-1991, said the Bank of Japan’s expansion of its balance sheet into debt with an average remaining maturity of up to 10 years makes it impossible for Kuroda to pare stimulus “for the foreseeable future” without causing bond yields to surge. Speculation that the BOJ will accelerate its note purchases helped push two-year yields below zero percent on Wednesday for the first time since January.

“The thought of exit itself is a nightmare for Japan, not whether it’s premature to talk about it,” Utsumi, 80, said in an interview in Tokyo on April 15. “There is no choice but to keep issuing bonds for financing, and with buying of longer dated JGBs, a natural exit is out of question as is unwinding.”

Treasuries:
The longer prices act the way they've been acting, the more I get concerned.

Energy:
WTI crude looks coiled for more upside. NG looks ready for more confusion.

Metals:
Gold. 1198.

S&P Outlook:
Sticking with the new all-time high thesis. 2072.37 should not fail if tested.

A/Ds were weak at yesterday's spike high. More rest needed. At some point some Fed jawboning may be required.

Tuesday, April 21, 2015

Tuesday -- Default, Drowning, Trading Range

ES Futures:
Strong continuation of yesterday's rally.

News:
Red flags from China continue to inspire Risk On as Reuters reported news of a potential third bond default there. Now that China is playing the Easing For Equities game, bad news suggests more stimulus -- which further suggests that markets are still not able to thrive without help.

Bloomberg's candy-colored news website handled the following headline in a way that made me want to puke:


"Banks in the euro area can now get paid to look after each others’ cash for three months as the European Central Bank’s bond-buying program floods the region’s money markets with excess liquidity."

Can't figure out why they didn't add an exclamation mark to that sentence. Awesome!

However, in a world that runs on credit and debt, banks being paid to borrow means no one else is borrowing, which, like a shark that must swim or drown, does not bode well for the shark.

As a reminder, here's how things continue to look on this side of the Atlantic. Drowning in debt.

Call a lifeguard
FX:
Quiet today.

Treasuries:
Still unimpressive, but still in the game.

Energy:
WTI crude appears as a high-level consolidation. NG seems to have tipped its hand with yesterday's weakness (getting below 2.545) and goes back into the bounce category for the time being.

Metals:
Back below 1200.

S&P Outlook:
Seeing as there are still so many Fib extension targets overhead that it's difficult to pick just one, yesterday's bounce back from Friday's swoon -- even though it was on pitiful volume -- keeps it in the game, just like treasuries mentioned above.

There are Fib targets below, too. But targets don't mean much unless tested, and bears may have blown their best chance in weeks.

In that I'm in Florida all this week, the best gift the market could give me would be more trading range. I do not want to act unless there is a new all-time high or a test of 2039.69.

Monday, April 20, 2015

Monday -- Yay China, Corzine Returns, The Antidote

ES Futures:
Up 10 points overnight. Yay China.

News:
China reduced its bank reserve requirement. Everyone's a Keynesian now.

Jon Corzine is starting a hedge fund. Everyone's nuts now.

The dude should be in jail, not out peacocking.

FX:
USD strength, EUR & JPY weakness. Back to *normal.*

Treasuries:
Still trying for lift off but wrestling with gravity

Energy:
WTI crude correcting recent gains. NG tremendous gap down, may have broken its nascent up trend (if below 2.545).

Metals:
Gold back below 1200. Still under the spell (and the tug) of the weekly chart which points lower.

S&P Outlook:
Speaking of weekly charts . . .


This chart plots a two-week moving average of NYSE advancing issues (yellow) against weekly advancers (white). The lower trend line (blue) goes back to 2011. The upper trend lines go back to 2007.

As shown, the lower trend line was broken last week. With the S&P 500 closing price just 1.81% below its all-time high, breadth continues to erode.

This is not a timing tool -- as opposed to tracking intraday A/D readings -- merely another bullshit antidote. I still see higher highs until the wave structure tells me otherwise.

But this simple breadth measure tells me to sell those highs.

Friday, April 17, 2015

Friday -- Narratives, Bond Chats, Watch Insanity

ES Futures:
Sharply lower overnight, but no swing points broken yet. Hilarious narrative about the catalyst being an outage on Bloomberg terminals worldwide. Bonds traders not able to use chat to chat.

When markets go up on weak internals, they don't need a catalyst to come back down.

News:
China may be trying to pop their stock bubble. China's Securities Regulatory Commission announced it will allow fund managers to lend shares for short-selling, and will also expand the number of stocks investors can short sell.

Europe is down hard, possibly on more Greek banking stress. Their bond yields aren't looking too clever, either.

The Fed may be backing off from a June rate hike. At some point (perhaps today?) the markets will get spooked when they realize none of the Fed's actions have done a thing for the economy other than make asset prices go up.

Speaking of Bloomberg, here's their contribution to the latest string of subconscious communication:


Remember that word insane when reading about used watches priced from $10,000 to over $200,000. It's a great social mood clue.

FX:
USDJPY broke 118.711 which is the wrong way for Shinzo Abe's Big Plans as well as the rest of the financial markets.

Treasuries:
Yield curve looking a little stressed today without the Bloomberg chat room.

Energy:
OK, so I'm mad. WTI crude and NG have had nice moves without me in them. NG getting ever closer to punching through 2.719.

Metals:
Hovering at 1200 area.

S&P Outlook:
2083.24 needs to break if there is to be a rout. NY Composite printed a doji at its all-time highs, so not thinking the end of the world just yet. Still thinking the S&P 2154 area (or at least an attempt) or below 2039.69 are valid. Much else may be noise for the time being.

Thursday, April 16, 2015

Thursday -- Druckenmiller On Markets, Deutsche Bank On Loosing Control

ES Futures:
Sharply lower after yesterday's tag of the 2111 volume shelf on the cash S&P. Chatter that Greece might stiff the IMF.

News:
Absolutely must watch:


More subconscious communication, Fed edition:


Remember The Long Boom: A Vision For The Coming Age Of Prosperity from 1999? Boom usually means bust. And a bust can sound like a boom, when it implodes.

Also, Deutsche Bank in its annual default study report explains why it's so important to watch the yield curve (my emphasis):

"Why does the YC impact the default cycle?

Steep YCs tend to create maximum carry conditions which usually lead to net loosening in lending standards and a weakening in issuance quality in capital markets as overconfidence builds.

As the YC flattens, carry becomes slowly less compelling and while stretching for yield/risk might actually intensify first, eventually a flat yield curve leaves the weakest entities looking much more vulnerable than they did at the YC's peak.

Bank/investor risk tolerance reduces as the opportunity cost of carry trades increases and the risk-reward falls. This cycle does have a long lag but has been a repetitive feature of modern financial markets."

A great description of where we are now.

Also, there was another nugget. Replace "as many barrels of oil" with "as much currency" in the paragraph below and it becomes easy to understand why the globalists have worked so hard to create the euro, which is really the blueprint for a global, single currency.

"Simple game theory helps us to understand their behavior: without a cartel and an ability to affect prices, each individual producer's best survival strategy is to produce [as many barrels of oil] as possible given the limited financial resources to be able to cover its revenue shortfall to the largest extent."

A central bank is basically a banking cartel. A group of central banks working together affects the price of money. When the cartel breaks down, so does control. Participants scramble to protect their interests. This is why common currencies are doomed to failure.

Maybe that's why former Fed chairman Ben Bernanke is joining Citadel as an advisor and why the NY Fed is moving a group to Chicago -- to better control S&P futures . . . to better control the markets?

Regardless of their efforts to keep the good times going, competitive currency devaluation will continue, in my opinion, as countries & central banks try to "cover their revenue shortfalls to the largest extent" as the illusion of "control" lessens dramatically.

FX:
AUD ripping higher. EUR still seems to trade as if Greece is kicked out. JPY still acting weird -- 118.711 getting ever closer.

Treasuries:
Again, not reaching escape velocity.

Energy:
WTI crude is correcting recent gains. NG continues to look firm.

Metals:
Rallied off 1183.50 but has a long way to go to shine.

S&P Outlook:
The New York Composite index, one of the broadest market indexes there is, made a new all-time high yesterday. It will be extremely important to watch how it acts now.

Does it mark time while waiting for the Dow & S&P to catch up? Does it break out? Or does it break down?

With futures down after testing the volume shelf and the trend line from the February high, this is where the S&P needs to show strength. Breadth was good. Volume increased. Good signs, but still keeping its options open. Backing and filling could be expected.