Stock market analysis and commentary from a trader's perspective

Tuesday, September 30, 2014

Fibonacci Snapshot, Bull/Bear Levels, And A Potential Euro Trade

 Fibonacci is alive and well.

Here is a chart of the December e-mini contract. It's a beauty, and shows the elegant proportion of the market regardless of protests in Hong Kong or whatever news-of-the-day "caused" the markets do whatever.

Hope you noticed that each rally has reached exact Fib levels (38% and 61.8%).

Sticking to the cash market, there is still a gap remaining at 1982.85 that was not reached yesterday. And a bigger one remains at 2010.40.

The structure of the pattern since the Alibaba top it starting to feel corrective. Getting above 1986.37 would only add to the corrective nature. However, the market would need to exceed 1999.79 in order to close the door on an impulsive trend change.

One point to be made, though: currently the market has very little edge and is very middle-of-the-page.  I would like it either higher or lower before I put some funds to work.

Yet in FX land, the euro is getting to a point where I may trade it for the first time in nearly five years. Even though it would look better at around 1.245, I may take a counter-trend trend in it first using FXE calls, then using euro futures options, and then using FX contracts. Can you tell I don't like trading the euro?

Still, when there's a trade to be had, it must be taken. Sentiment figures are incredibly lopsided, with percentage bullish readings at the lowest levels since 2008.

Target: 1.30.

Monday, September 29, 2014

Turn Off The News

Democracy protests intensifying in Hong Kong. Independence referendum in Catalonia, Spain. I hear these things and think GOOD.

Yet we're told these things are bad. That they're the reason for the overnight rout in futures.

Yeah, right.

Go back to Friday and you'll see a weak, low volume rally. Even "more" low volume than the massive decline the day before.

Turn off the news. Listen to the market.

Friday's S&P rally got a mere 3 ticks above an exact 38% retracement of the entire Alibaba decline. The 1:1 Fib target remains at 1959.16.

If no follow through, I'll be buying calls. But lower targets are possible too.

Friday, September 26, 2014

The Possibility For A Lot Of Fun

NYSE volume was lower yesterday (when it tanked) than the day before (when it rallied). Think about that.

There are some really cool wave counts being tossed around this morning showing the potential for a larger ending diagonal. The triangle is out, but an ending diagonal would be awesome.

And it could explain the lower volume.

Lower volume relative to an up day has been very rare in this market since 2009. It's doesn't matter that total volume is 40-50% lighter than it was pre-crash. It matters what volume is relative to specific points in the market.

There is a 1:1 Fib extension target at 1959.16. There is also an area of Fib confluence at 1948.51-1952.86.

Failure to reach these levels, especially with lighter on-pace volume, improving A/Ds and ticks would have me buying calls.

The caveat today is the 10-year. It's heading the wrong way today. If it persists, there may be a problem in Equity Land.

If not, an ending diagonal to new highs would be a lot of fun.

Thursday, September 25, 2014

A Straightforward Set Up & The New Slavery

A very straightforward set up currently: there is a gap at 2010.40 -- the market should at least attempt to fill the gap without getting below 1989.65 beforehand.

Getting below 1989.65 before extending higher could potentially set up a very bearish pattern. With the market having created a five-wave decline from the Alibaba top, this potential should be watched carefully.

On the bullish side, neither the Dow, the NASDAQ, or the S&P broke their respective Sept. 15th swing points, with the Dow showing the most relative strength. So the markets could be gearing up for a larger triangle of some sort that could project new all-time highs. But in order for these to occur, it's important for the above 1989.65 scenario to hold.

Elsewhere, there is a disturbing story today, an eerie reminder of the biblical saying The Borrower Is Slave To The Lender.

Miss a Payment? Good Luck Moving That Car

Repo Man has gone high tech. But Otto would probably hate it.

Let's Have A War by Fear on Grooveshark

Wednesday, September 24, 2014

Art Records, IPO Records, World Bank Records

Not only are some measures of investor sentiment setting records for all-time high levels of bullishness (such as Investors Intelligence), ebullience is also being shown in the art market.

The contemporary art market just broke through the $2-billion mark for the first time, up 40 percent on the previous year.

Meanwhile, ever wonder where the World Bank gets all its money? It borrows it, just like anyone else. Oh, also it takes fees from its member countries (from which it also extracts sovereign immunity from all legal actions arising from its inept policies), but it's subject to the same social mood forces that drive others.

So it's interesting to note this small tidbit from American Banker:

The World Bank and other so-called supranational financial organizations have raised about $219 billion on global debt markets this year, the largest amount since records started being kept. Part of the reason for the surge is the amount that was raised for European bail-outs. But the amount is up also because of the demand for high-quality bonds.

I added a little emphasis.

The point is that social mood is what makes people confident enough to see into the future . . . and borrow against it.

When mood craters, the process reverses. It's conceivable that organizations like the World Bank and the IMF could cease to exist in an extended downturn. Sounds bizarre, but it could happen.

Not yet though. At the high end mood is still fostering more more more, while at the other end of the spectrum it seems to be inspiring less less less.

It makes sense that IPOs have set a 10-year record issuance, according to Renaissance Capital, while money is essentially free. It also makes sense that the Baltic Dry Index (which basically measures stuff moving around the globe) is still nowhere as the rest of the world, which can't borrow to make ends meet, is simply buying less.

I keep an eye on the Baltic Dry Index for that reason. It gives a truer read and can't be manipulated by the Fed or anyone else. It just is. And it ain't pretty.

Still the e-mini had a chance to break its 1968 swing point yesterday at the close and was saved by 25 ticks. Someone slammed over 100,000 contracts during the final 10 minutes and still couldn't break it.

I see a market possibly under the temporary influence of the 50dma and a 38% Fib level. If the September 15th swing point holds (1978.48), the S&P could be in the process of forming a triangle before higher highs. I may try to make some call buys using 1982.77 as a stop.

A break of 82.77 could see a quick test of 78.48.

Tuesday, September 23, 2014

Euro Zone PMI, IPO Supply & The Slam Dunk On Hold

Euro area composite PMI readings were released in the early hours of this morning and are still going nowhere fast.

S&P futures didn't seem to like these figures which were mixed and mediocre at best. But it seems as if it may set up the cash market for a lower buy sometime during today's session.

Below 1978.48 would be cause for concern to bulls and could expose the market to the 1948 area which few seem prepared for after the world's largest IPO was supposed to blast everything to the moon.

If IPOs are simply supply, then this market is well supplied.

The 38% retracement is at 1975.53, just below 1978.48, so people need to keep some perspective if the market tests lower.

The much larger level is 1904.78 with the added magnetism of the 200dma just below it, currently at 1894 and rising. These levels are really not that far away.

There are still higher Fib confluence targets, but the market has options now, more so than it's had recently. It's not such a slam dunk higher. And that's probably a good thing.

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