Intra-Day Update: Happy Halloween!

UPDATE 10:26am EDT: I don’t expect much excitement in the next few hours, seems we’re range bound as of now. The stars lined up very nicely for the bears this morning, but I presciently smelled a fake out and stayed out, which I’m very thankful for right now. Berk and I have been mostly in cash for a week now, and it’s getting boring – could have taken the week off or worked on my devious plans for market domination.

Watch the 1333 pivot on the NQ and the 9200 on the YM right now, if we breach those with confidence we might see some fireworks.

Anyway, while we watch the paint dry, here is this:

UPDATE 11:01am EDT: In the last few days I have come across two articles which opine that the smartest move for homeowners underwater might be to just walk away. Here’s one by Barry Ritholtz and one by Karl Denninger. I admire both of their work, and if I was sitting on a underwater mortgage right now (which I am not, since I am equipped with the rare ability to solve mathematical equations) then I would seriously consider doing this. Saving all those mortgages might be politically desirable but from an economic prospective a majority of the mortgages written after 2005 need to fail – they are not sustainable and I don’t know why anyone would want to pay $3k/month on a mortgage that’s worth $1k/month at best.

UPDATE 11:16am EDT: Those pivots I mentioned were just breached. Let’s see if we get a retest, but maybe we’ll see a bit of a rally now.

UPDATE 12:32pm EDT: Nothing much to report on either side – bull or bear. As expected, we’re just gyrating around today. Two notable events however: Light Sweet Crude is at 71 and Mr. VIX dropped below 60.

UPDATE 1:41pm EDT: I stepped out for a while and returned just to realize I had missed out on a nice rally. I’m seeing a few pivots overhead:

YM: 9400
NQ: 1356
ES: 983 – there’s also a 993 retracement level.

If we breach those we should rally hard, although at this very moment some of my other ‘mystery indicators’ are telling me that momentum is abating. This might change of course – seems the bulls are in full control at this point – I don’t see any significant selling pressure.

UPDATE 2:28pm EDT: We just put in a nice a,b,c and seem to be rallying higher – the probabilities for a drop are greatly diminished in my view. Assuming 972 holds it’s possible we see 983 or even higher before the close.

UPDATE 3:02pm EDT: Just wanted to let you guys know that the daily effective Fed Funds Rate today was 0.3%. It’s basically free money. Ponder on that over the weekend.

UPDATE 6:21pm EDT: Just got an email from ThinkOrSwim announcing the new version of the TOS desktop, which will be available tomorrow early morning. One salient feature will be the ability to export/import Prophet watchlists – something I have been clamoring for all year. THANK YOU TIM KNIGHT! This will allow us to share watchlists right here from our the EvilSpeculator blog. I’m even considering writing an export module that would produce a watchlist on the fly. Being a tech nerd and all, I’ll have to do some reverse engineering tomorrow once I get my meddling hands on an output – will keep you posted on what I find out ;-)

UPDATE Saturday 5:02pm EDT: Okay, I just checked and I won’t have to bother writing a TOS import module. What’s being exported/imported into Prophet charts is a simple CSV file (comma separated values). Actually there is a carriage return after each symbol just like this:

GOOG
BIDU
MA
CCJ

Stick this in a file but make sure you use a plain text editor. On the Mac I prefer Aquamacs Emacs since that one guarantees not to add any hidden characters like for instance Word would. On Windows you can either use the Notepad or any other text only editor (again, not M$ Word). Save it as filename.csv and you’re ready to import. Easy cheesy lemon squeeze.

Chop Chop!

I’ll be very brief tonight – at least I’ll try to – we all know how this usually turns out. Today’s tape gave me plenty of opportunity to catch up on some tasks I had put on the back burner. Among other things I grudgingly relented to pressure and added that coveted medium term indicator the majority has been voting for (damn all of you!). I also produced two new and improved icons for the short term (daily) and medium term (weekly) indicators. Let’s do a quick icon roll call:

Up/Down:

When you see this icon it is expected that the market rallies in the morning but then descents before the close.

Down/Up:

When you see this icon it is expected that the market drops in the morning but then ascents before the close.

Mixed:

We don’t want to make things more confusing, but it has become apparent that the current market conditions are not always well expressed by the ‘mixed’ icon.

Sideways:

Sometimes we expect mostly sideways action (like today) and this is the icon expressing such a market. I loath sideways markets, but I do like this icon :-)

Down:

That’s the theme icon for the bears and by far my favorite. Red means profits.

Up:

Bullish this means – and of course it’s green. Beanie’s favorite and we use it sparingly – at least for now.

On to the charts. Nothing really has changed since Tuesday when I posted this the first time, except for the percentages. Although today’s tape didn’t really get us anywhere the bulls seemed to control most of the action. The Yen was a trooper at first, giving us a shot at a bearish swing trades, but then fell apart after lunch – must have been some bad sushi.

However, buying was consistent and increased markedly in late trading. Thus, barring any catrastrophic news overnight, the triangle case scores the 50% tonight, which puts us into (c) of 4. 20% go to the flat scenario Berk talked about yesterday, which would require that we breach the upper resistance line I’m showing on the chart. But I’m still leaving a 30% chance for a drop into {iii} of minor 5. Why, oh why, handsome and omnipotent Mole, do we have to keep enduring the bearish plunge scenario while the market keeps pushing up?

Because the credit markets are screwed, for a lack of a better term. First, TED spread is not narrowing:

And the spread between the Moody’s BAA yield and the 30-year T-bond yield is holding and might actually be widening (again, I always have to wait one day for the data on the Moody’s) – I counted 5.22% this evening. Unless I see this puppy narrowing I have a hard time accepting the bullish case.

The Baltic Dry Index is screwed – nobody is shipping.

So, I would be completely bearish, if it wasn’t for my ‘shiny mystery indicator’ which works on a weekly basis. It’s usually spot on and hasn’t failed me yet. And as you can see, to my chagrin it’s screaming that a rally is just getting started. Unless it swings down in a very short order I have to keep entertaining the notion that we might be pushing up from here.

At least Gold is doing what it’s supposed to – nothing really new to report here. You know the drill – grab short positions on GLD, GDX, or any other precious metal related ETF on rips. Start taking profits once we breach 640.

That’s all I got for my stainless steelrats tonight – tomorrow (or actually the weekend) should bring us closer to some much needed clarification. I would love to be able to disqualify one of the three scenarios above.

Cheers!

Bonus Clip for you Karl Denninger fans:

Also, read more about Karl’s latest ‘evil plan‘ – you have to respect his devious line of thinking.

Intra-Day Update: Toe Dipping

UPDATE 11:19am EDT: As you know Berk and I dipped our toes into a few short trades. The Yen seems to want to rally right now. It it can push through its NEXT pivot at 1.027 it’s rock & roll time. Below watch the 1.021 pivot – if that one is being breached I think we’re getting a strong rally in equities today. The TNX is dropping slightly after bouncing up in the morning. We are cautiously bearish right now, but this might of course change on short notice as there is a battle going on this morning.

BTW, the TED spread widened again – not good for the bulls, no matter where equities go today.

UPDATE 11:31am EDT: This is the list Berk posted this morning: BG, BIDU, CF, CHK, GOOG, FSLR, ICE, MA, RIMM. Honorable mentions would be WYNN, POT, and AAPL. I’m holding the ones in italics.

BTW, we appear to break important pivots on the YM (9020) and the ES (939). I expect a retest but this strengthens the bearish case right now. Again, we remain cautious.

UPDATE 1:09pm EDT: I just closed out my short trades as I see the Yen fail the upper pivot. Stochastics are a bit worn out as well, so we could get a bounce in equities now. I expect to jump back in once the Yen has dropped in my stochastics and is ready to swing back up.

UPDATE 12:24pm EDT: Am I good or am I good? ;-) Nailed the low and cashed out. Now we wait… BTW, based on the latest poll I learned that I will have to write that medium term indicator this weekend, and that many of you have short penises.

UPDATE 3:26pm EDT: I added that coveted medium term (weekly) indicators you leeches asked for. FYI – if his drop has any teeth Berk and I might grab some BIDU and MA. UPDATE: Not trusting this and we’re staying out for now.

Karl Denninger strikes again – if you’re currently underwater with your mortgage, then you need to read this.





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