Stock market analysis and commentary from a trader's perspective

Monday, May 23, 2016

Monday -- In No Mood

S&P E-mini Futures:

News:
Sorry, but I'm not doing this today. My beloved Aunt just passed away and she was a good friend of mine.

Over the weekend I learned that I will miss her memorial service.

It's one thing to deal with the isolation of living on an island in the Caribbean from time to time. It's another thing when business as usual on the island gets in the way of my family life.

I love living in Puerto Rico, and I love the people. But all too often anything to do with business seems to be a concept from outer space.

By now everyone knows the local government here is deep in debt, over $70 billion.

The island's fiscal agency -- which is supposed to advise the other agencies on debt matters -- is so deep in debt that it might need to be shut down.

The two utility monopolies -- electricity and water -- are so deep in debt from hiring middle management cronies that their infrastructure is failing.

And for the past six months I've been dealing with an issue in my apartment that has been put off and put off until my response, quite naturally, was to change apartments.

Now suddenly it's a top priority.

So this week I'm hosting a frenzy of contractors, property managers, landlords, building managers, and upstairs occupants whose schedules all need to be fully coordinated and re-coordinated in a mad dash to keep the owner from going without rent. All before I move out.

My Aunt was a really cool lady and this makes me mad.

My Aunt had a brilliant mind and great energy. She was the office manager for my grandfather's business. She ran the business-side of a thriving commercial farm with her husband, my dear Uncle Bill. She recorded lap times for my cousin's weekend Formula Vee racing. She was a successful long-term investor through decades of ups and downs, just like her uncle before her (my grand Uncle Fred). She was always generous and loving and kind. She adored jazz, and had boundless enthusiasm for life.

She will be laid to rest near her and my uncle's farm in New England, not far from where I used to live, which meant that I could have just bombed over there in thirty or forty minutes and pay my respects in person.

Instead I'm doing it here, thousands of miles away. But close by in spirit.

FX:

Treasuries:

Energy:

Metals:

S&P Outlook:

Friday, May 20, 2016

Friday -- Supply, Heat Wave, Op-Ex

S&P E-mini Futures:
Higher overnight in continuation of yesterday's late day rally.

News:
Oil supply disruptions making news again.

Saxo Bank head of commodity strategy Ole Hansen said, "If we had supply disruptions from places like Canada, Nigeria, Venezuela and Libya like this 5 years ago we wouldn’t be up $5, we’d be up $25 - that is probably a testament to the oversupply still in the market."

This makes today's 1pm Baker Hughes rig count all the more interesting.

Also, coinciding with the full moon on Saturday is the G20 finance ministers and central bank governors meeting in Japan, which could be interesting as well.

Asia was mostly green last night ex-India (where temps reached 123 degrees), and Europe is well up.

FX:
USD pausing slightly giving a slight Risk On tone to others.

Treasuries:
Half-hearted bounce yesterday not inspiring confidence.

Energy:
WTI crude back pushing highs. NG rallying in sympathy.

Metals:
Up across the board as bulls gather themselves post-Fed, possibly taking cues from weak bounce in treasuries.

S&P Outlook:
Today is op-ex, so this morning's rally is not unexpected. It's what comes after that could be.

Shared this chart intraday and using it until wrong. Now thinking 3 may already be in.

It still views current action as corrective and still envisions new rally highs above 2111.05 and possibly 2134.72.

It also only represents "a" of an "abc" correction lower, possibly to 1950.

Thursday, May 19, 2016

Thursday -- Markets Unnerved By New Backbone At The Fed

S&P E-mini Futures:
Trading heavy, down.

News:
The Fed finally got a backbone. Fed Minutes were hawkish. Weird markets around the globe. DAX especially.

FX:
USD loves the Fed of late. Risk Off again in FXland. Commodity currencies hammered, and JPY stronger.

Treasuries:
Terrible recent action got even more terrible post-minutes. Trying to rally thus far today.

Energy:
WTI crude and NG have broken hard from their recent rallies and need to be watched closely.

Metals:
Grim action has continued across the board, taking the potential rate message quite seriously for the time being.

S&P Outlook:
The full moon is Saturday at 5:24pm. Markets could trade heavy into the weekend and (possibly) reverse next week. Not looking like option expiration will have much effect, but who knows.

My bias remains long, but I want to accommodate lower prices. Seeing some positive divergence but not enough yet. Beginning to add XIV against current holdings in UVXY and TVIX and trading puts and calls when opportunities arise.

There is a 1:1 Fib extension target at 2013.27 that lines up with the 200dma currently at the 2011 area.

Based on the recent patterns, have been looking for a test of the 2085-2100 area but yesterday's action clouded that scenario. Feels as though price needs to tip its hand for better odds to be traded.

Wednesday, May 18, 2016

Wednesday -- Fed Minutes, Sanders On Puerto Rico, Scenarios

S&P E-mini Futures:
Bears blew a chance overnight to crush the bulls as key levels held.

News:
Today is Fed Minutes Day. That means tic, tic, tic... until 2pm.

Meanwhile, Bernie Sanders was just in Puerto Rico, doing what he does best.


Sanders also called for the US to bailout Greece during its debt crisis.

Not a fan of bailouts. Period.

FX:
Largely Risk Off with USD strength and AUD/CAD weakness. But JPY and CHF weaker too.

Treasuries:
Thus far, in a word, terrible.

Energy:
WTI crude pushing yet more rally highs as volume seems to evaporate. NG probing lower.

Metals:
Messy today.

S&P Outlook:
Remember this?


And remember this?


I'm looking for a surprise fake-out rally to B possibly on unexpected dovish Fed minutes amid the current more bearish expectations. Then want puts there for another probe lower.

At C, I want to be long if things still line up the way these scenarios suggest.

The above requires price above 2063.41 without new lows. Otherwise a falling wedge may be forming -- others may see a head & shoulders pattern -- with a price objective in the 1975 area. Valid Fib levels could run to 1925.06.

Tuesday, May 17, 2016

Tuesday -- CPI & Gold, Valuations According To Goldman

S&P E-mini Futures:
Rallied overnight, then gave it up.

News:
CPI came in hot, but gold is basically flat.

More conflicting stuff to chew on as we trade range bound for a second year.


"Middle-class Americans have fled the market because they simply don’t have the money."

Maybe they've got a point -- especially when you contrast it with this take on valuations from Goldman Sachs:

"At 16.7x the forward P/E multiple of the S&P 500 index ranks in the 86th percentile relative to the last 40 years. The median stock in the index trades at the 99th percentile of historical valuation on most metrics."

Slightly mixed in Asia (China was down a bit), and more mixed in Europe thus far.

FX:
Turning mixed here as well. AUD higher but CAD lower. CHF and JPY showing possible safe haven flows (though JPY is hugging the flat line currently). USD hanging tough.

Treasuries:
Trying to redeem some upside luster.

Energy:
WTI crude hit a new rally high overnight then reversed in what may be a small five-wave structure. NG continues to look like it's forming a bullish rising wedge, as noted last Friday.

Metals:
Gold and silver up very modestly considering today's hot CPI number, but platinum, palladium, and copper are down.

S&P Outlook:
If things are proceeding to plan, the market should be in a C-wave up to the 2085-2100 level. Today should be a wave 2 correction.

Friday is option expiration. So weakness is not unexpected before positive bias takes over. However, below 2050 would raise significant doubt that the current scenario is correct.

Monday, May 16, 2016

Monday -- The Wooden Skyscraper, Warren Says Yahoo, Eats Apple

S&P E-mini Futures:
Reversed an overnight decline.

News:
Skyscraper, or match stick?


A wooden skyscraper puts a new twist on the Skyscraper Indicator developed by cycles analyst Edward Dewey (1895-1978), who was the chief economics analyst for the US Department of Commerce in the 1940s. Dewey felt that the number (and height) of skyscrapers correlated with human optimism.

"When people are very optimistic, they tend to express their feelings in massive construction projects, especially very tall buildings. Since this extreme optimism is reached at major market peaks, in the economy, severe economic downturns usually follow; not just declines in real estate prices."

In my opinion, a wooden skyscraper in London, the scene of the Great Fire Of 1666, is a dangerous omen of an approaching financial flame out.

Meanwhile, Warren Buffett, who famously side-stepped the late-90s "dot com" bubble, has finally become comfortable enough with the interweb thing to sanction a $1 billion investment in Apple, and has joined a consortium that is bidding for Yahoo's core internet assets.

Again, a potentially dangerous message of a trend ready to reverse.

In short, socionomics is sending some strong clues lately, yet mixed mood is still dominant. Volatility seems to be the suggested outcome.

FX:
Risk-On tone today.

Treasuries:
These are starting to send warning signs that dovetail with the socionomic warnings above.

Energy:
WTI crude ripping higher. NG mirror image opposite.

Metals:
All over the place today. Up, down & all around.

S&P Outlook:
Feeling the same as last Friday. Would only add that the S&P 500 needs to crest 2070.78 in order for the scenario to occur.





Friday, May 13, 2016

Friday -- Retail Surprise

Note:
Down here it's all about the morning, and I need more of it.

So starting next Monday I will be posting during what is usually my down time, 10:15-11:45am EST, the period surrounding the European close, when I normally don't trade.

The sun gets hot so fast that any kind of activity gets unbearable outside of early morning, and I'd simply like to spend more time getting a little sun, swimming, and walking the beach.

S&P E-mini Futures:
Was down in a sloppy, messy decline that just turned higher on the Retail Sales number.

News:
Regardless of this morning's Retail Sales figures surprised -- up 1.3%, the biggest increase in a year -- retail is getting hammered, with upscale heavyweight Nordstrom the latest casualty.

CNBC noted that sales are shifting toward online.

Wondering how long until the retail industry (and the government) turns against Amazon and Bezos ends up with a regulatory nightmare. It might be why he bought the Washington Post.

Asia had a red night, and Europe is looking that way thus far as well.

FX:
USD hit a new rally high last night from its recent lows. AUD & CAD weaker. JPY a bit stronger.

A great point that I agree with: if USD strength recovers in the next several months, China will likely devalue again, and the result could be messy.

Treasuries:
Higher prices continue to look like the goal.

Energy:
WTI crude choppy pullback since its most recent high could be a consolidation before continued advance. NG may be forming a bullish rising wedge.

Metals:
Copper turning positive, with gold, silver, platinum, and palladium lower.

S&P Outlook:
Near-term scenario. Sooner or later, prices head a bit lower. That's my current view. Then sooner or later, prices make new all-time highs. That's my view too.