Your site, your rules. That's it. I enjoy your site and you have my respect. The value you share can not be measured. And, with the responses you get from time to time, I can not help but think of the quote:

It is not the critic who counts. Not the man who points out how the strong man stumbled or where the doer of deeds could have done better.

The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs and comes short again and again; who knows the great enthusiasms, the great devotions; who spends himself in a worthy cause.

Who, at the best, knows in the end the triumph of high achievement, and who, at the worst, at least fails while daring greatly, so that his place shall never be with those cold timid souls who know neither victory nor defeat.

...Theodore Roosevelt 1858-1919

I'm happy to have found you on stocktwits and read your blog everyday. But you are a pussy cat compared to The-Real-Fly when it comes to berating your followers. Keep up the sarcasm. It keeps things real and f*ck em if they don't get it.
cA

IAG after posting earnings gapped up, it looks like it wants to close the gap today. I am Gold should be a good short. Sure it seems to fly in the face of my rant yesterday but it does have like a P/E of 500 which means though a good stock has no business being valued this high.

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http://evilspeculator.com/?p=12388

Skål!

Here is wwhere I'm pretty confident we are and it's wave [2] correcting the down move with an elongated C.

I thought we were going to get a slight pop to complete a LD and then a B wave down before to buy beefore a C wave but apparently the B wave was completed yesterday. This needs a pullbaack, a new high (4 then 5), and then it should be done. Closing lower on the day? Possibly.

http://www.screencast.com/users/mkt_ronin/folders/Jing/media/5c5bc147-ad06-499b-82c8-638a119531b5

Steve

50 is at 1053.6 on the cash. Might be a nifty little scalp from here on retest then long, thoughts?

A:D 4.3:1
net VOL 99.2% of avg

Hey All,

I saw on the post below and the chart shows that we are on the way to having a confirmed buy on the VIX. What happens when the VIX doesn't close outside the bands, but bounces off the inside? What are the trading rules for that? A crossover of the moving average? I can only find information about trading outside the bands.
Thanks

6 points outside hourly boll on SPX

Berk,
Are you looking at MA & GOOG as short candidates ? MA has regained the loss and trying to touch 230..

I have an opinion - too bad...

Thanks Mole...
Though STO, RSI on 3 Months daily is rising, so is it better to wait a day or two ?

This move up is on very low volumes.......you'd think we would get a chunky retrace leading up to FOMC.....

treasuries don't seem to be as euphoric as equities.

Great name.

Yeah, /zn basically identical with equities.

/dx has support at 75.9~ previous wave iv of (iii)

Might give a good entry for loading shorts on higher up....

Yea lets push this market higher.

Is this just aa back test of the 10K on Dow ?

Short ES 1055.25. Perhaps early, but I would expect some volatility going into the FOMC. I got my CCI crossovers and RSI extensions on EUR:USD 3-min, and ES tick chart.

1054 has gone, be careful if short

1065 till FOMC, ratrace to 1050 till tomorrow, rally to 1070/75 till friday/monday....wave 2

I hope not, I just went hugely short at 1058.

don't do it, resistance just broken.

I'm looking primarily at EUR:USD; it looks like it will come down 20-30 pips, should be good for a few ES points. I'm just hoping for a VWAP reversion. This is a pre-FOMC scalp.

I am not a scapler. Ignore me on those.

NP. I did notice in the energy report that refiners are operating at a lower rate than expected. That means they're NOT buying, right?

Correct although I would be careful about that - refining margins are very low so there has been a lot of shut-down production. As margins rebuild, it will start up again.

Its quite bizarre isn't it. It seems like selective cherry picking by collective market sentiment. One is better than expected, one is worse than expected by a similar amount, all are probably within statistical margin for error given the way these figures are compiled and while improving all are far away from levels expected of a healthy economy. But the tape doesn't lie!!!! :)

Manufacturing is a bigger employer than Services so, given that unemployment is a big problem, the improving employment outlook is a big positive. But if Services is still struggling, that gives the Fed the excuse to keep the spigot open. In essence, a sweet spot for equities - things improving but not so much that they are actually good.

So is this the new normal I keep hearing about then? :)

On a serious note, this is then an open acknowledgement that equities have become completely detached from fundamentals. If fundamentals are bad, then the fed will be unable to tighten aggressively, so the liquidity trade continues. If fundamentals looked like improving quickly, then it raises the tightening prospect significantly leading to a flight from risk.

This then raises the prospect of (as has happened in the past) the market crashing when things are actually better fundamentally, probably at the point when retail folks who are starting to feel better about things and getting jobs and so forth, and therefore feel like it might be time to get back into stocks.

Pretty much. The history of the retail investor is not a happy one.

The initial retrace was due to the fact that Reuters published a sub-index first. This created some confusion in the market, and even EUR dipped due to this. When the full result came out, the march up resumed.

Agreed - its rationalization in hindsight galore!

I will at some point be shorting the living crap out of Gold...wait and prey for now. Here's why,

http://danericselliottwaves.blogspot.com/

I respect Daneric, but other factors lead me to say this iii of 5 will end close to 1300

Thanks SSH I will take that into consideration....as I said before I am not an EWer but I tend to take them into consideration with my own analysis....

my EW count is biased on the choice between counts against tops this fast... just warning

What caused the huge spike on the Dow? ISM Services PMI came in worse than expected, it initially dropped 15 points then jumped 50?

what are some of Gold ETFs or stocks we can trade? I just know 2 GLD and GG... are there any other? Also like FCX ( Freeport ), are there any other good material stocks that are up high enough...?

New orders component better

some internal component of ISM probably better than expected

Bad news is good right now as it stops the Fed tightening. Also, New Orders component better so improves outlook

From earlier:
Yields just broken higher, expect equities to follow, ESZ9 to test 1054

testing this level right now

VIX is well on its way to creating the third step necessary for an equity buy signal.

I say we close above 28.81 today....after FOMC we would need a sell off for this to happen....for me sitting on hands today til EOD....

Noticed the DX is almost at Mole or Berk's retracement level of 76. I am adding a few more puts today, especially with the reduced VIX.

I also noticed the VIX is hugging the 61.8% retracement on the weekly chart.

Thank you all for the great analysis. Freeloading rat out.

Props to ya Mole. You have been calling the action damn well lately.

Picked up some Dec 240 puts on ISRG this morning, looking to set up a vertical spread, selling the 220s some time soon for $4.50 or so.

Well rats - hate me or love me but I have been calling every wiggle lately.

And no - not getting complacent - that squeeze is very sobering. If they push it to 1065 I will load up the truck one last time.

But I don't have to watch this shit right now. Berk - send me an SMS when we get to that point.

I'll be fading 1065 heavy on the things the interventionists aren't giving life support to.

You can bet that ES is going to be at the peak of activity once SPX is sub 900. No one has the patience to stay, everyone is used to instant gratification and spoon feeding.

Wow - nice mauling on X ....:(

Still holding those NOV puts? I am thinking about shorting around here.

http://www.cnbc.com/id/33616897
'Mother of Carry Trades' Leading to 'Asset Bust': Roubini
Published: Wednesday, 4 Nov 2009 | 8:19 AM ET
The "mother of all carry trades" that Nouriel Roubini warned of recently is growing and threatening to cause a global implosion, the economist warned in a CNBC interview.
For the second time in as many weeks, Roubini cautioned that investors using cheap US dollars to embrace risk will quickly reverse course once the greenback strengthens.
But he intensified his prediction, saying that the likelihood of the Fed keeping interest rates low and thus weakening the dollar will prolong the carry trade and make it all the more painful when it starts to unwind. Roubini is an economist at New York University and chairman of RGE Monitor.
more at link.....

Fed day, probably will have a sell off after fed anouncement or tomorow, will see, i have ew count about nasdaq crude and Dollar at http://marketrendwaves.blogspot.com/.
regards

another portuguese?

ES is infested with Portuguese....

eheh many portuguese here i see.
onorio whats your short term count in eurodollar? this movement looks like very impulsive.

He didnt break the trendline, its still in the table the possibility of one more high

I have to see better, could be a (a) of 2 or a impulsive to new highs. 1.4840/50 is the key area now.

its easy to label counting as abc since the highs, later i will show the count

IMO the move from the highs is corrective, but if SPX is on a w2 to 1065/70 i doubt EUR will make new highs. Somethink to keep in watch.

I noticed ES did not hit new highs this morning even as EUR hit the HOD at 1.4818. Do you think this divergence is indicative of further equity weakness?

Edit: so much for the divergence. EUR and ES are now powering ahead.

R2 is way up at 1.4903.

No wonder!

http://www.scientificblogging.com/news/germans_and_portugese_least_happy_in_europe

and this blog is run by a german, and there is at least another one...

LMAO!

Mole you got here a unhappy people blog.

So far your EUR:USD call is spot-on, with 1.4805 the high and 1.481 still to be challenged.

IMO we might challenge 1.4840/50 today, might get a retrace arround 1.4810

Yep, there goes 1.481. I have that as Woodies R1.

you too?

yeah!

yes why the question? regards

on the chart, the RSI is "suavizado"

BTW there are a couple of us at ES

You bet!

BTW know any others here? So far there's you, me, killafox, Onorio...

not bad for our relative size...

Niktus also shows up from time to time.

Mole, I love it here! so, I hope you don't close up shop. Personally I agree with GMAK, fewer quality posts is better

Okay - give me the URL of a 'bad post' - you have over 1000 to pick from.

You guys crack me up - I keep calling the market and you complain about my posts?

comments not posts. It's one of the reasons I prefer it here to SOH

yes, the criticism is not directed your way.

I think they are referring to comments and not your posts (or am I wrong?).

You're right. It's the comment posts that we're talking about.

mole,

just wanted to say that I feel that many of us lurk & learn. (obviously you have server traffic logs to confirm the lurker:poster ratio).

I appreciate your efforts, and am happy to take whatever you are willing to give. thanks!

Mole, I only very occasionally post here, but I hope you maintain the blog-zone. 2-way (short-long) blogs are becoming a scarce commodity with this bull rampage.

Yields just broken higher, expect equities to follow, ESZ9 to test 1054

What do you make of the much ballyhooed GS GDP downward revision? Do you think they are now net short equities? If so, it has a self-fulfilling aspect due to the general perception of GS infallibility.

Without getting too conspiracy theory, I think Hatzius was started to get noticed for his remarkable ability to alter forecasts the day before economic releases and be right on the button. At the time, I thought it looked like an attempt to lower expectations. A lot of the Zerohedge stuff is probably nonsense but I do know that as a buyside client, they are the counterparty I trust least.

Excuse me for picking your brains, but it is a sign of respect. Can I ask how the world looked to you in early March before during and just after the market bottom? In real-time, what was your firm's view? Did it change that week, or where you still in crash mode? If the view did change, what was that based on? Given what happened when the markets bottomed, what would need to happen to change the current bullish trend and we can say the market has topped. Looking back, it was hard to believe anything had changed for the better. In hindsight, it seems the market told us things had changed but the lingering skepticism was understandably overpowering for most of us.

To be perfectly honest, we turned bullish in January and did our nuts. However, we were still bullish in March. There were so many variables which had already begun to turn by January. You can go back and check them. This list we published at the end of Jan as reasons to be bullish:

1. Brent Crude had made a capitulation low in Dec and refiners were buying (anecdotal)
2. Copper was rallying
3. Miners relative performance was improving
4. Baltic Dry was rallying
5. Front part of the yield curve was steepening
6. Yields were rising
7. US Index of Leading Economic Indicators had turned up
8. VIX was making a series of lower highs
9. Corporate bond yields were falling

The reason we did our nuts is because the market had one final panic that governments were going to pull the support from the banks and take their equity to zero. Unfounded in the end but enough to cause that one final collapse. But all the above factors were as true in March as they were in Jan.

Thanks for the response. Yes, sometimes markets will do what markets will do regardless of fundamentals. It must have been quite vexing for those 8-10-weeks! I notice some of those indicators are getting slightly wobbly, although many of them are volatile by nature (BDI, miners, VIX, copper). I'd be interested in any current anecdotal information. Are the refiners buying or selling now with oil above $80? I know OPEC has set $65-$75 as their target zone.

My only comment to the above post is that I would rather see fewer comments with a high signal to noise ratio, than see thousands where most are unbacked opinion and "hi"s. Participation will ebb and flow, just like the tides and the market.

Pre-Market warm up
Today is an FOMC day. On a superficial basis the action yesterday and today sure look like a buy the rumour sell the news kind of setup. I think that, barring some startling unexpected FED announcement, that SPX will see weakness into the close for this reason.
Underneath that simplistic statement, though, is the movement of large amounts of liquidity into and out of the financial system. Tomorrow is a TAF maturity day of some $40 bb+. MBS purchase program is still active – but we can’t see how much was done until tomorrow at close. My theory is that the GOLD and risky asset pop from yesterday and going into today is due to the FED putting liquidity into the financial system through MBS purchases. However, tomorrow that liquidity comes out through the TAF maturity (unless it is already out Monday – but that doesn’t make sense, does it?).
If this thesis is correct, then today will be green, but pull back into the close. And tomorrow /Friday will be red. USD should weaken today but strengthen into tomorrow and Friday. My hesitancy is because I don’t yet understand /know the timing of actual money movement vis a vis the MBS and TAF events. i.e. If TAF matures tomorrow, when does the actual switch of toxic assets back to the banks, and cash back to the FED take place? Also, when would the banks take action to ensure they have the cash for the swap back? Has it already happened – hence Monday’s action? These questions are KEY to understanding the gyrations of the market in the very short term. Any answers out there?

Summary:
IF the TAF cash has not been pulled yet from the market, then tomorrow and Friday should be down or sideways days for equities.
The safest play is “buy the rumour, sell the news” on the FOMC day – or stay out of the market all together.
Equity
Asia was green. Europe is green. DAX is green in all sectors (and almost all companies). Sure looks like a liquidity induced feeding frenzy. Am I to believe that pretty much all companies are looking like attractive purchases today versus Monday? Only Consumer goods (red = 17% of companies), Financials (20%), and HealthCare (33%) have some companies in the red – on the order of 1 or 2 each, apparently if I interpret the percentages correctly.
MSM is saying that all this is on speculation that the FED will keep rates low – but they have already said that rates will stay low for the foreseeable future (plus the FED can only set the overnight rate – they can’t set rates along the yield curve). So, this reason makes no sense (what else is new?). My theory is that it is an MBS-driven liquidity feeding frenzy that will come off tomorrow – just based on TAF maturity, not TA.

In SPX daily, the lower Bollinger supported the price. A breach of BIG YELLOW is still needed to confirm the renewal of the upward trend. Otherwise, we are just seeing sideways action and indecision. SPX still has not set a lower low or lower high since the March 2009 low. My 3+1 scenarios are still valid – if it is still not obvious which direction we are going.

ES has marched up in a tight channel since lockup yesterday. Pivots are:
R2: 1055 = around the start of the waterfall (on a 5 min chart) on Friday.
R1: 1048.50 – acting as resistance right now, and some TD indicators are showing that there should be a pullback to the price exhaustion at 1044.50 (tight, I know – but the market is not very volatile). This is also where the short term trend line is.
Neutral: 1037.50 = was some resistance yesterday. Probably now support if we break the short term trend line.
S1: 1031 – haven’t seen this in a while. ES wsa here on Monday afternoon and it was temporary support on a pullback on the way up. My opinion is that if the MBS /TAF theory is correct in its timing and implementation, then ES will get here before the week end. If not, then we won’t be here until the second half of the month (based on my SPX daily chart and the 3+1 scenarios – green, yellow, and red, red).
S2: 1020 = nothing to say here.

FX

USD is weaker, with commodity based currencies (CAD, AUD for example) having moved quite a bit in the last 24 hours.
CAD, EUR, and GBP are stronger. JPY is weaker. The risk trade is on for today – until FOMC.
EUR Pivots:
R2: 1.4905 – big surprise if we get here today.
R1: 1.4814 – overhead resistance, but there is a TD resistance point in the way at 1.4787; At current EUR levels, on the 3 min chart, EUR has put in a wave 4 of 5 down. Bollinger is quite tight at this point.
Neutral: 1.4720 was a bit of resistance after the lock up and into midnight. Probably act as support now.
S1: 1.4630 – Acted as strong support yesterday for the bounce up. That was when I think that many in-the-know parties were able to observe MBS money coming into the financial system through the actions of US institutions.
S2: 1.4536 – just a distant memory until some sanity returns.

I’m thinking of doing a EUR scalp today, and possibly some Geronimo. On the EUR, I will use only TA and not rumours or expectations, I will let my gains run instead of anticipating the market (telling it what it should do). That is my fatal flaw in doomed trades – I anticipate too much when I am winning. I think that I would rather give up some of my gains instead of looking to get out at the optimum point.

Cheers.

I never post unbacked opinions, gmak - and nobody ever complained about the quality of my posts. For unbacked opinions I usually point to fundamental traders :-)

Mole:

I wasn't referring to you, but to the comment about the general quantity of posts. I too favour quality over quantity.

You're a class act, IMHO.




________________________________

Damn - now I have to recall my ninja assassination unit.

Please don't. I need the workout as well as some new black silk pyjamas. lol.




________________________________

I took the liberty of killin... calling them off when they passed by.

I buy you some new ones

gmak was talking about comments ;-), not posts

People like me then :D

Seriously though, at some point everyone is influenced by their view of fundamentals (even if only subconsciously)??

well waiting for long position at 1016-1017 didn't succeed, here is another scenario
http://www.flickr.com/photos/42905134@N08/40742...

thanks for comments

Nothing much has changed in euro/usd from my previous post (below), but I just wanted to throw this idea out there. Triangle turning channel? This would fit well with the retest of the triangle (ie the long term trendline). Otherwise we might get stuck inte the 1.47-1.485 area again.

http://www.screencast.com/t/SEethBkqTx

On a short term basis, I see higher highs and higher lows which suggests, despite the churning, that the trend is up. It does look like a bullish wedge forming, but we are at the lower edge at the time being. TD indicators suggest a move up for 20 or so pips (small scale, I know).

Oon the 30 min, EUR is sitting on the mid bollinger and is indicating sideways direction with a much longer bullish flag to come.

Looks like range bound trading for a while. What else could one expect on an FOMC day before a TAF maturity day?

I agree that its looking bullish from yesterday, but I'm trying to look at a longer perspektive. Right now we're back in chop zone though, so we'll see what happens during the day. Personally I would really prefer it if we were rejected here at the declining trendline.

2 more charts
NDX 100 another leader
http://www.screencast.com/t/DWVn9FdE
http://www.screencast.com/t/zf3FFyA13

For whatever reason right now, NQ is half as strong as ES. Or YM or TF for that matter. F***ing blows for those of us holding long NQ from earlier today.

Madness! Sparta! Which is this?!

how many times did you hear me say "watch nasdaq" for short's hope?

I've been saying "watch AMZN" for nasdaq's hope.

DAX usually the leader in Europe

a couple of charts 15 mins and daily..we are at key levels for a break to upside, but then will it just be a test of the bottom of wedge?
http://www.screencast.com/t/Jsa1bwbLRbz
http://www.screencast.com/t/yV7a8oJigOo

>test of the bottom of wedge?

I'd be delighted if this would be so easy. All the indicators I follow are uniformly positive. Lousy stocks like Commerzbank and Infineon are up strongest today and TecDax is up even more than the regular DAX which implies the NASDAQ will pick up from there later today.

If we go above 5.482, I have the next target at the 5.558 area. This would still be within the context of a downtrend, for me. I'd get uncomfortable if the bounce continues and goes above 5.650.

yes if only it was that easy! But that's the chart, similar targets to yours for upside..FTSE seems to be struggling

On the bearish side, today's bounce does seem a lot weaker compared to the ones we used to get before we broke the 5440 area. Commerzbank alone would have been up to 7.30 by now, instead it languishes between first and second support.

Rumour of Cisco bidding for Infineon.

Nice.

Infineon has earnings coming out on the 19th. Apparently good news are expected. I rarely buy options (much less puts) on specific stocks but in this case I will strongly consider it...

Tim Knight is strong on using log scale. Others prefer linear, sometimes for shorter timeframes.


This Dow Jones Total Market chart shows a point between the log and linear.

http://oahutrading.blogspot.com/2009/11/dwc-log...
And a hell of a confluence of trendlines like a laser war and the DCW index totally tapped its 50% Fib line. Amazing, and thank you Mr. Fibonacci. You rock almost as much as Bernoulli.

Easy EUR short b/c of falling trendline (if it breaks 1.4775, GTFO = get the f*** out):

http://screencast.com/t/FVb4pBuCN

SPX 133 setup from today (just freakin' me out now):
http://www.screencast.com/t/Gb4uCtzuM2T

Hit 1.4777 this morning. It's moving up to that area again. Are you out?

If we break 1.4770 area we might rally to 1.4840 with a possible resistance arround 1.4810

"oscar" not trading financials on FOMC day. May be setting up for bullish soybean day-trade.
http://www.livewithoscar.com/modules.php?name=Daily_Video

From Terry Laundry:
"Nov 3rd Comment: No real Bottom yet. Volume Oscillator trying to make a positive rising bottoms for a rally but it looks weak to me. Think it will break down to the green envelope after this sideways move ends in a few days. Will post hourly chart of small T on Wed morn by 9am. Terry"
http://www.ttheoryfoundation.org/t-theory-calculations.html

Mole - you are obviously fed up with this and fair enough. The main problem with the internet as I see it is that people feel the anonymity of a avatar allows them to ignore normal social conventions, i.e. they are fucking rude. Of course, that did not stop me having a go at someone called Wex yesterday but in my defence he was whining about the output of the blog as though he was a paying customer. I don;t know what the answer is but some of the comments you get on youtube, clusterstock, etc. would normally land you in court.

Anyway, I think you simply need to set out some very clear basic rules of engagement for a blog like this.

First, you are providing your analysis for free so there should always be a basic level of gratitude (which I share).

Second, all trading losses are the fault of the trader, not any provider of advice - that's how it works in the real world so if people want to vent at you, tell them to go fuck themselves.

Third, there will always be valued contributors and blood-sucking lurkers. Don't kill off the former because of the latter. Just don't pander to these excessive demands unless you want to run a professional hand holding service.

I discovered this blog a few months ago and think it is a good one. I am a professional trader myself and a partner in a small european hedge fund. I resolved to try and contribute a bit when I saw issues arise last month. It must get pretty boring doing what you do for no gratitude - I wouldn't do it myself as there is no way I would lift my skirts to the general public. But I will continue to try and post as I get some stuff here which I find useful.

My only complaint is that people on this blog are too resolutely bearish. I am a bear as well but I try to be as pragmatic as possible, i.e. I want to be long when the market goes up! But each to their own. Right now, my models tell me the market is going up s-t. If we can break 1053/54 on ESZ9, then 1090 is on the cards. If not, 1000 is the target where I will get long again.

Nice to see you here Bob.

bearish? yes, blind, no

did you see my post to mole about possible timeframes for nominal craash (hint, stainless steel rat stuff) and current situation?

but it might happen just now, trying to get gol down can do it right away as in september 2008

I didn't see it I must confess - can you post a link and I'll take a look? I'm not saying it is impossible for these to be a crash - but it is not likely right here. My framework is that this is a game. We have created a structure that is dependent on rising nominal asset prices. It's bullshit and I hate it but that is the framework within which we must work. Equities are merely a receptacle for liquidity which seeks to protect itself against currency debasement. For equities to crash with yields at this level requires a conviction in debt-deflation which I don't believe will occur for the simple reason that that is exactly what happened last year.

The next crash will occur when rising yields puncture the liquidity bubble that is currently being generated. But first we need to see a capitulation on debt-deflation expectations. That will be signalled by rising equities, commodities and yields until we hit yield levels under which growth is impossible. The timeframe for that could I think be as early as next year as CPI readings are going to hit 4%, possibly 5% on a headline basis. That will force nominal yields up and could cause the collapse.

But in the meantime, it is standing in the way of a steam train. All the recent retracement has done is sucked in short fuel, forced a lot of hedge funds out of their positions and ensured that the Fed will be dovish tonight. Conditional on this view is that S&P holds 1000 but I think it is more likely we bust out the top of this 1000-1100 range than break the bottom. I am hearing of trades being priced up to reallocate out of corporate credit into equities. When you look at FCF vs bond yields, it makes perfect sense. The risk is of a melt-up, not a melt-down.

Bob, you sound like a very smart guy. Definitely a lot smarter than I am. You make convincing arguments and I really, really want to believe the crash is behind us and the economy is recovering.

Unfortunately, I am hopelessly biased. I will only well and truly "get it" when I see all the factory workers in my area go back to work full-time.

I don't know that the crash is over, I only know that it might be. And if it is, there is a prospect of some decent inflation which will trigger a tidal wave of liquidity out of bond markets and into equities. If the data is correct, it is telling me that factories are about to start again and people are going to get hired. It's hard to believe until you see it but that is what I see right now.

I am actually very bearish - I don't own a house as I still think there is deflation risk and debt is a killer in that scenario. But I would not be short equities here, either short-term or long-term.

That's good to hear, as I believe I'm well-positioned for a recovery. My equity-bearishness is a hedge in case this doesn't happen...

ditto that..here in Spain..people still losing jobs, no sign of ANY recovery yet, only GOVT sponsored stimulus plans, which have a very temporary effect ( massage employment figs etc)...

Bob

I really like your posts, they are very educational to me. I just want to take issue with the steam train analogy, because this is something that continues to really puzzle me. The S&P traded at levels achieved in August yesterday, and closed at early September prices. Many other indices are similar, having essentially gone nowhere in 2+ months.

Yet, there is this steam train perception out there that simply isn't borne out by the facts. If you examine the entire rally from the march lows, and the %'s of gains that were achieved in the first 3 months, vs the next three months, vs the recent past, there is only one conclusion which is that the rally's momentum is clearly waning.

If people are still feeling its a steam train, then they are trading with position sizes too big for themselves, and trying to catch the EXACT top, missing it, covering, market falls 200 points, they think "NOW THIS IS THE BIG ONE", pile in again, get scared on the rebound, cover ad nauseum in this vicious cycle of capital depletion that is fueling the rally further.

I'm not saying this rally can't go higher. I fully appreciate that the game has changed, and we are perhaps fighting forces that are not normal market forces, who have the deepest pockets, and can keep the market irrational for far longer than we can imagine.

But while it may have been a steam train in April to March, and in the rebound from the July lows, its more like a Toyota Prius at this stage, and if people are feeling the pain too much, thats more reflective of their own personal trading and overcommitment than the actual strength of this market.

Just MHO.

In reply to both Hamster and Carrot:

You are both really talking about similar issues - namely that equities are a nominal asset class. Looking at equities is Gold terms is important but it can lead you to the wrong conclusions. It certainly looks as they Equities in Gold terms have not completed a major low yet. If you look at the Dow Industrials in Gold terms all the way back to the 1920's, it always troughs below 5. We have made higher highs in very major top, 1929, 1965 and 2000. 2000 was a 5th of 5th of 5th however you look at it.

But to jump from this to a bearish stance on NOMINAL equity prices is a stretch in my view. First, Gold in my opinion is a suspect asset. It is flavour of the month as both a deflation and inflation hedge. But ultimately it pays no yield and in either scenario, investors still need income. In an inflationary scenario they need real income which is equities. In a deflationary scenario they need nominal income which is fixed income. Gold seems to be the benefit of indecision to me - it has also benefited a lot from a weaker dollar. If you chart Gold vs the DXY to strip out the weak $ effect and take it back to the 1960's, it looks to me that Gold is in a major degree 5th wave. You don't stand in the way of that as it could go anywhere exponentially but we are quite late on in a multi-decade bull market here. I have no interest in buying Gold long-term though it is a suicidal short as I think it goes exponential.

If Gold goes to 2,000 or 3,000 USD, the Dow Industrials could be 10000-15000 and the Dow/Gold ratio would still fufill the sub-5 major low requirement. So a falling ratio is not always consistent with falling equity prices. Also, let's face it - this 'rule' is just an observation. Maybe the ratio has made a low, in which case equities could outpace gold.

Let me add something else to your framework - S&P500 market capitalisation as a percentage of M2 money supply. If we consider equities as merely an asset competing for a claim on capital like any other, this is a critical metric. Equities are a NOMINAL growth asset - i.e. they can go up for real growth reasons or simply increasing money supply. Obviously, a deflationary scenario is bad an I have not yet ruled that out but if you chart S&P500 market cap vs. M2 and take it back a long way then you can see that once again 2000 was a 5th of 5th. But since then, we have traced out a textbook a-b-c corrective process which unwound the ENTIRE bull market from 1982-2000. Even though equity prices in nominal terms did not, in real terms they did. The 2000-2003 initial move was a 52% decline, the 2003-2007 bull market retraced 49% (just in the 38.2%/50% box) and then we had a 58% decline to march of this year. Basically, the 2003-2007 was a cyclical bull within a structural bear. That is why in M2 terms, it was so anaemic. But it now looks like we have completed the pattern.

What is the upside? Well, so far we have retraced a mere 30% of the 'c' wave or 20% of the total. If you think M2 supply is going up (and let's face it Bernanke is doing everything he can to make that happen), the upside for equity markets is huge. Even a 10% rally with flat M2 is no more than the very absolute minimum correction of the 'c' wave. 40% would give us the minimum retracement of the entire 2000-2007 decline.

That is what I think a lot of bears are missing - the fact that we have ALREADY had the crash in real terms. Only rising money supply has made it look as though this has not occurred in nominal terms. The only thing therefore that can cause a true crash from here in nominal terms is a deflationary world. At the moment, I don't think that is going to happen. But that is the bet you are taking - HUGE upside to markets if they can continue to grow money supply, downside only if they cannot.

This is all very big picture stuff - clearly we trade around all the time but we had been short from 1100 and are now long. 1054 is a trigger to the upside, 1100 top of the range. 1000 bottom of the range. 920 target if 1000 breaks but odds favour a break of the top in our view as economic fundamentals are accelerating.

bob, thanks and I agree on many things you said.

nevertheless P/E for a 5 of 5 of 5 crash... seem too high


on the other hand if the 70's was a iv and this is 4 (one of my prefered counts) then you might be closer to the truth

in that scenario I see (at least in s&p) making 1200 before making another 600/800 low, and then rising again to 1000 and droping again to the low

and all that time gold rising in fits to finnaly reach 7/8 k on the final bottom

I don't see this ending before a 2017 low

Bob

I'm not sure we were talking similar issues. I was really just commenting on the steam train perception; steam train implies something that is (if not still accelerating) continuing to move at the same velocity, and IMO the facts show this 6 month rally is decelerating.

On the ratios of equites to gold or any other relativities, I must admit I don't look at stuff from the same high level macro viewpoint as the rest of you guys, which is why I find your posts fascinating.

I prefer to stick to fundamentals, and just intuitively (and my intuition has served me well over the last 10 years, particularly here in Ireland), I feel that the market has gotten way ahead of the fundamentals. The very fact that people are now dismissing P/E ratios and so forth, and talking about ratios of equity to gold, and equities as the only alternative to a zero interest rate environment just has alarm bells ringing in my head, and a dotcom sense of deja-vu.

That being said, until recently I have been a huge beneficiary of this rally, having positive delta until Dow went over 10k. I was confident at that point switching to a net short position because IMO the velocity of the rally was clearly waning.

Can I ask you a question. Do you see a scenario in which this rally picks up acceleration again, similar to the March - June timeframe? I can't see anything from this point other than a halting, stuttering advance, punctuated with periods of huge volatility.

I would have agreed with you a month ago. I could show you our monthly report from September in which we said 1100 would prove to be a top but that would reveal my true identity. You'll just have to take my word for it. We had thought purely on a technical basis there was a chance of 1000, even 920 in a correction. However, the recent economic data makes me think the market (at 1025) is now behind the fundamentals. That is clearly a big change but it is driven by the recent GDP and ISM reports which tell me all my concerns are unfounded. We are about to see a strong improvement in GDP and employment data. As long as the Fed don't talk hawkishly, equities are going up as earnings upgrades are going to accelerate. That is now my base case.

The bearish case would be that companies simply don't bother restocking as they are too scared but that is a view I no longer have any evidence to support.

"I could show you our monthly report from September in which we said 1100 would prove to be a top but that would reveal my true identity"

... BOBthe horse

Robert Pretcher! what an honour!

Not Prechter. I used to read his stuff but I couldn't make money out of it. I think he is dangerous - brilliantly convincing but that is the problem. If you read his stuff, you can't ever buy an equity.

BobtheHorse is taken from a bloke I was at school with who was called Bob and looked like a horse.

I guess I would be more on the Rosenberg side of this; namely that while GDP was a positive on the face of it, stripping out CFC, homebuyers tax credits and increased government spending, all of which are unsustainable, you end up with a negative number for the real economy and the other headwinds (rising unemployment, foreclosures, CRE etc etc etc) will ultimately re-assert themeselves. Whether this is sooner or later, is what I cannot answer :)

It's true that ex-CFC, the GDP report would have been flat. But that's not the point - it's what the report said about next quarter that's important. GDP is the ultimate rear-view mirror indicator. The fact that GDP was basically flat tells us that the strong negatives have stopped. Most of the leading indicators suggest they will turn positive. I don;t think it s sustainable either but there is a chance of GP growing 6%+ on an annualised basis either Q4 or Q1 2010. I quite like Rosenberg but you have to remember he is just a salesman. Most successful Wall Street strategists realise that they have no idea what is going to happen to markets but they work out that having a high profile earns them money. Ultimately, Rosenberg (along with Stephen Roach or Albert Edwards) are no better than Abby Jospeh Cohen - they have just chose to put themselves at the opposite end of the spectrum. When markets fall, they get lots of air time on CNBC. When markets rally, they just say it is wrong. If you actually bought and sold when they said, you would lose everything. Any strategists who gets markets moves to the buy side.

I really don't trade based on any of the mainstream advisors, I just like the way Rosenberg calls whats happening in the real world (like a Denninger or Schiff, but god knows I wouldn't trade based on either of those), as opposed to the rest who essentially believe that because the market is up, things must be getting better. Well time will tell. I'm not overly committed at this point and was hoping for 10,300-10,500 before really going all in, but from here I will be in a pretty good position either way.

I won't bother continuing the gdp discussion any further or getting into examples of declines where economic indicators briefly turned positive before going negative again; suffice to say I'm in the "W" camp (if you hadn't guessed already), and I don't believe that policy makers are making the right choices.

I am totally willing to contemplate that this could lead to another equities bubble before reality sets in however.

Ciao!

it's already on the other page... this was it

talking about stainless steel rat stuff

1. when you posted your mistery chart I mentioned, fractalwise, "to october 2005"
2. october 2005 where we entered iii of "the silent leg down", 10 months where s&p droped from 2.7 to 1.8 ounces of gold (EOM values)
3.nominal s&p did not correct
4. nominal corrected only 2 years latter
5. real s&p seems committed to a meaningful reduction (breached 200MA)


a. we're on month 9, we could have 9 others before repeating the fractal to oct 2007
b. gold is going apeshit, s&p is holding
c.we're approaching inversion/danger zones on bpspx (first one nov.12), inversion will be confirmed by breach of MA13 as reviewed by ultra
d. my channel for an exponential regression (95% R2) on gold price has a higher channel currently close to 1300 right now, this means double bottom at nominal 950

what do you say?

p.s. october 2008 existed also because someone tried pegging all pegs, namely a gold crush that distorted september as an intermidiate high spx:gold

what do they want? how can we dance aroud them?

best regards , i'll be expecting a comment on this one (even tried being clear and concise)

Regarding blog traffic, quality not quantity is always better imo...

I will not be trading on FOMC day, unless i see a nice rally to these levels.

But bear in mind one of my rules is to kick back and watch dont trade these days...that can get you in a lot of trouble.

With that being said here is some of my thoughts for tomorrow opening bell.

http://s657.photobucket.com/albums/uu293/bigelkhorn/es23.png

Mole - I think your posts are excellent and inspiring. Loved the samuri bit today and I'm holding my shorts with you. And back in September when you were adding puts in the face of the oncoming bull you said "don’t do what I do as I’m crazy like that and my bearish disposition approaches the demented." Laughed my ass off! - we rats need shit like this to get through these days.

I'm not a day trader like most of the people on your site so I don't have anything to offer as far as that goes - I'm just certain that what the gubbmint is doing will end in total disaster. Whether the dollar just accelrates its decline from here or we have an equity market crash first I'm a little bit unsure. Anyway, both Chris Martenson and Steve Meyer are warning that something is about to happen imminently so I plan to hold (with some re-positioning) through next week. Chris' latest piece also talks about the importance of the Capmark bankruptcy and how the commercial real estate derivative market is imploding right now with Citi having massive exposure.

Don't throw in the towel now. My stainless steel armor is in tatters and my account in shambles but victory will be ours - I can smell it!

Hey EVIL / MOLE dont do yourself down - you are well repsected here and in other quality blog sites, recommended on other sites in fact. Thats how how I found this site many months ago. Yr analysis is excellent. The fact that the market been so damm hard to trade since March and that it has often confounded chart projections does nothing at all to detract from the qualtiy here. Your time and effort helps to bring some rational into a crazy multi month rally and to provide some light on re establishing some sanity in the near term. Dont fold on us now, your almost at the start of the 'new order'

Boy, there is more drama, intrigue and inuendo on this blog than in any russian play. A cesspool of negative emotions as Charly Brown would say. Nevertheless, for market direction i come here ahead of any other site. Remember old Friedrich ´s saying, mole: Was mich nicht umbringt macht mich stark (Also Gordon Liddy´s favourite)

same here, then I have to diet....

Well, I've been here since the summer last year, whole reason I created a discuss account. Inspired to learn how to trade.

I guess Change, Taxes, and Death.

I'm not sure how thing became so bad, guess i didn't even notice. People can read into things as deep as they want to on the internet, you think whatever you want to think.

So then the real enemy come out, SELF-EGO, hell i catch myself doing it all the time.

I guess that's the ultimate contrary indicator, when the Ultra-Bearish Trading website is in the death throws of shutting down. (I don't get this at all? maybe i'm dumb).


Anyways onto trading:

(use this if you want to open them fast: http://snaplinks.mozdev.org/drupal/forum/Snap-Links-Plus-10-released)


Well something to take note of:

Top Chart: OMFG THERES THE PROOF. SO BULLISH IT HIT 98-99-100% FOR 30 DAYS.

Nasdaq & AMEX: WENT Negative - But it did in July as well.

http://docs.google.com/View?id=dd6gf48g_40gr6dbvfc

I'm still a fighting rat, thought the stainless steal rat mindset, King Rat, well it was good while it was good! Keep it easy all.

All kinds of virus alerts are being flashed from this site. Everybody better have their anti-virus programs updated.

no virus alerts for me, several protections between my 2 PC's

these unsubstanciated claims are starting to bug me.

next time post screen capture and virus name or the hamster eatsyour comment

Off -- maybe YOU have a virus? I haven't seen any warnings. Have Windows Defender and Kaspersky running with Google Chrome browser.

I don't see any warnings either - but then I'm using a macbook...

i think when you called fujisan a train wreck and than dissed on anna was the beginning of the end, good luck in your future endeavors

Mole - having missed scant few of your ES posts over the last 14 months, I remain amazed by the energy & drive required to put out quality analysis on such a daily grind. Damn good job! Any doubters should just go back and read your March 8th commentary.

It's said all good things must come to an end, and so I'm resigned to one day managing without this daily ES "fix". I'll be following till you close up shop, and just hope you may keep at it long enough to ride this P3 into the ground. Having your record documented in real time posts is something you can be proud of.

Yo Mole,

I wrote this 5 months ago after one of your now daily freak outs:

"Mole,
This blogging shit is no joke. You will get the worst kind of looters left over from the Yahoo board, who blow their load when they see you get angry. Hopefully you can apply the 'trader's mindset' to these types of comments. There will also be the ones who cannot accept the short-term ups and downs. System trading just might not be for them. All of these people have subtle effects on your performance. The supporters of the blog may motivate you to work that much harder, while the hecklers will cause you to freak out and throw your hands up in exasperation.

Where would the Ed Seykota’s of the world be if they got furious every time someone questioned their system, or pulled their money out of the account? Methinks you need to suck it up - go bump some Rammstein, go eat Nutella off of Mrs. Mole, throw banana filled crepes at the hecklers, and get back in the game. This blog is the best I’ve seen for analysis, option strategies, and the community. There are plenty of good traders here that support you and want to continue to see this blog thrive. Why would you let the negative people discourage you? "

Sad to say I feel far different 5 months later. Over the past month I've watched this blog self destruct, almost always biting my tongue and eventually just leaving quietly. This used to be the first place I'd visit before the open, and you have some great analysis but your emotional driven rants, insults and total lack of respect have led me to stop posting here as well as stop supporting your products. You say have a tough skin? That's easy mate, many of us do but don't act all bewildered when over half of the regulars leave. That's when YOU need to have a tough skin, pal. Bottom line is there's a long list of savvy traders that have left here either insulted, disrespected, or just plain baffled at your demeanor towards what you'd hope to call "peers". You casually saying these people just decided to leave is revisionist history at best, and insulting to your longtime readers and naive newbs at worst. Pulling this "woe is me" bullshit innocent act and needing your ego stroked every time your comment count is low is downright hilarious. Dude, you're lacking an audience these days because many people just don't want to collaborate or share ideas with you anymore, bottom line. You can point the blame wherever you want but these are some hard facts you just seem to flat out ignore. Seems like just the other day you were smitten with Fuji and praising her (well deserved) for her option strategies and now you're resorting to low blows saying this person or that person can trade circles around her, or that Anna is an attention whore that can't bank coin (remember when you were salivating, posting those "exclusive" pics of her)? What the fuck is making you self destruct like this man? I could go on & on but really what's the point? By now you either "get it" and don't care or you're just in denial. This might seem like I'm trying to be an asshole but I'm really just being honest. You've never lashed out at me I'm just giving you the realness and call it like I see it. I think many of us are not bitter, just sad that this isn't a place that feels like home anymore.

Cheers,
Scrill

hi Scrill

Of course I'm letting your comment run (tough I may think it may do more bad than good)

I must remark one thing, Mole was never, FROM DAY ONE, the motherly love type.

He's more like the F"$#%"ng drill sargeant who wants you to go to war, get back alive and make him proud. And he'll abuse you tirelessly to make sure you do.

Second thing, this is his lair, he chooses "what is fit to be discussed" and what pisses him off, you have elsewhere for the rest.

Third, Mole has a right to rant if he doesn't get enough out of it, the comments and guest posts are his payment and still more of what he provides to everybody.

Yes some people don't like it but it's more than fair on a pro bono effort like ES.

And they can't complain

Indignatio Princeps mors est