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Monday Fun Day: Or, the Spinning Top.
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Monday Fun Day: Or, the Spinning Top.

by The MoleApril 26, 2010

by gmak

Greece has a week to produce budget plans to reach their fiscal deficit targets or they are not eligible for aid. The economist estimates that foreign banks’ exposure to Greece and Portugal is about E$1.2 trillion. Wednesday, we will be graced by yet another statement from the FED. Given the dissent we have seen from some members, I would love to be a fly on the wall for those meetings. Saturday Night Life has started to poke fun at the unions. Even they can see the farce and ridicule in “pork for life” – so why can’t the unions themselves. So long as they exist in any profession and are able to limit supply, then this will be the norm in this time of sub-employment:

http://tinyurl.com/3xkagno

A congressional groundswell is building to ban proprietary trading at the banks. Non-Commercial Emini (ES) contracts have reached their greatest net short level since November 2008. These are NOT a contrarian indicator – but usually presage a market correction or move up (short and long respectively) through the change from net long to net short, or vice versa.

Tick. Tock. Tick. Tock.

OverNight

Developed Asia was green. Australia was closed. Emerging Asia was mixed with China in the red. The DAX is gren, being led by industrials and Financials – so the risk trade is on. It gapped up considerably at open and is maintaining that level with support at 6300. Looks like another Monday Fun day for the bulls is shaping up.  I don’t know why the rocket, except it looks like the market is responding well to the news that the Treasury will sell up to 1.5 billion shares of Citi stock.

ES followed the DAX but not wth the same degree of violence. Around the Asia open, ES rose to around 1214 where it meandered until the Europe open, then hit 1216ish before following the DAX down and up a bit to currently sit around 1215ish. The interesting part is that on the 5 minute chart for ESM0, TD has 3 risk levels stacked up like planes over Chicago.  They are saying that the risk is down if the recent high isn’t cleared. In other words, we’re starting to see a lower low and,now, what may be a lower high – in to the opn. Pivots:

  • R2: 1224 = This would be around the 62% FIB for SPX, and is a distinct possiblity today – barring unexpected data or news.
  • R1: 1218 = This is where I believe that ES is headed, and it has to make this level to clear all 3 TD risk levels (These arise out of ES reaching SELL countdowns lucky number ’13’ almost simultaneously, from all the consecutvie moves up that have happened over the last week. This is the battle zone for now, and a short at 1218 with stop above would not be a bad move – depndending on the velocity with which ES gets there.
  • Neutral: 1208 = May have been a bit of resistance April 21 and 22. It doesn’t look like this is much of anything in the present environment.
  • S1: 1202 = This has been a suport and resistance level over the last week. If there is a move down, this would probably be the place to polay the swing trade.
  • S2: 1191..50 = Hasn’t really been tested from above as support. It did hold for ES on April 12 and 13.

I believe today will be an up day, simply because it is Monday Funday. Don’t foreget that this is a FED week as well.

I spent some time this weekend checking out what bar shapes occurred the most in tangent just before a local high or top.  The results are interesting, and I talk about them a bit below.

[amprotect=9,1,5,2]

DAILY SPX CHART

The most important points in the SPX chart are:

  1. TD Pressure has moved back to overbought condition – suggesting that unless SPX has an immediate move down, that it looks likely that the 62% FIB at 1228.74 will be tested.
  2. SPX has not yet touched the upper Bollinger (21,2) which usually needs to happen before a move down (but doesn’t necessarily mean a move down).

SPX is now just more than 6% above the 55-day SMA, again.  The histogram shows that above that point, the relationship is getting stretched. When the SPX slope is positive, SPX is more than 6% above the 55-day SMA

As well, the last two bars were a ’45’ and a ’25’. There have only been 5 occurences of this combination since 1982. The majorty (3 times), the third bar has been CLOSE = OPEN, ie in the same segment.  For the ’25’ bar, CLOSE < OPEN (41%); CLOSE > OPEN (49%); and CLOSE = OPEN (10%).

 I would have to go with the 2 bar combination here which suggests that the movement of the SPX will lead it to close near the open – or a spinning top. However, my research outlined below, indicates that today is not likelly to be a local top, and that there is more upside. This is enough to leave me ambivalent towards the possibility of CLOSE = OPEN, and looking for a test of the SPX 62% FIB – possibly this week. 

DAILY EUR CHART

The chart is from Sunday evening. EUR is still struggling to get over the blue line that is the 50% FIB within the channel (if you can see it through all the spaghetti, then you’re doing really really well). It is facing more selling pressure as the future of Greece is in doubt again, and the market still believes that it is all negative for the EU.

RESEARCH

I defined a local “top” as a close at the highest point for the previous 10 bars and the succeeding 10 bars. I’ll probably use the HOD to re-do this analysis, but the CLOSE will do for now. (If you have ideas or opinions as to why one or the other is preferable for defining the local top or high, let me know). Another idea would relate to defining the top by the distance from the lowest points within ‘X’ bars (10 in my current analysis, but can be any number of bars to either side of the “top”).

This relates, in a way, to the Japanese candles where certain combinations are assigned particular meanings.

The results were quite interesting, showing that the pattern has more meaning when it is part of the TOP. i.e. the second bar is the one with the TOP for at least the next 10 bars. I can tell you that the combination ’45’ ’25’ which we just had on Thursday and Friday, have only preceded a TOP on the next day once before. This occurred March 5, 2004 – which was after a sideways move and preceded a drop of  about 65 points (or about 5 – 6%) over 13 trading days.

The combination has NEVER had the TOP on the ’25’ bar. In other words, based on the history since 1982 – this combination has never indicated a local TOP (defined as the highest point of the previous 10 bars and the succeeding 10 bars).  Interesting, no?

Neither Friday, nor Today are likely to be defining a top – the SPX is going higher based on this analysis. Note that Friday’s close was the highest including the previous 10 bars – so it has the potential to be a TOP (except for the shape of the two bars).

[/amprotect]

My Best Regards.


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • roncofooddehydrator

    /ES looks like it's threatening to actually move downwards this morning. I guess we'll see if that actually happens.

  • gmak

    It looks like it's tracking the DAX. The movement isn't that strong, and as I pointed out im the post above – there are 3 TD risk leels above and then the pivot at 1218 (ES). There is a headwind for sure – but the DAX says the risk trade is on and this will likely manifest itself as another attempt 'up' for the ES.

  • Gold_Gerb

    take a look at the EUR/USD..some whipsawing going on right now.

  • http://www.mylifemytrade.com MyLifeMyTrade

    looking for prices upto 1220es today.. no top today IMO.. definitely not before FOMC later this week

  • http://www.mylifemytrade.com MyLifeMyTrade

    As usual TF being the beast.. almost taking out overnight highs.. whereas ES still 2 points below

  • momac

    is zero working this morning?

  • ricebowl

    RIFIN is tanking hard. AAPL is slightly bearish. SPX is rallying?

    Three different stories, but who to believe?

  • http://www.mylifemytrade.com MyLifeMyTrade

    Is ZL down?

  • http://www.mylifemytrade.com MyLifeMyTrade

    believe no one :-)

  • momac

    I think so, it hasn't moved

  • BobbyLow

    Zero is down. Might be a good thing as I need to sit on my hands and let things develop a bit.

    But hopefully it'll be up and running soon.

  • goldpackers

    Buying puts on X again. 50 % now 50% at 62.50 or a break of 58. Five waves down to recent low.

  • AlohaBear

    play X everyday it should be scalped runs with CAT watch out.

  • AlohaBear

    DOW hit Fib 23.6% from 1987 low at 11240.4

  • gsavli

    every dip is furiously bought – now that's a surprise.

  • http://www.mylifemytrade.com MyLifeMyTrade

    LOD is in IMO… TF is monster again

  • BobbyLow

    Russell making new highs again. Watch the continuous rotation as they are able to keep all the dishes spinning in the air.

  • goldpackers

    Thanks! I trade a little longer term. Coud easily see X at 63 but want half position now. Bought at 67 and 63 on first leg down and covered 57/58. Believe we are headed below 56.

  • AlohaBear

    Think X is $26 stock if it breaks 56 easy to see $42 I play it up and down every day/

  • ricebowl

    Yep. I closed all my puts, and I am long FAS right now.

  • AlohaBear

    watching JPM today getting close to 20 day low might shed some light on todays action

  • ricebowl

    I'd like to point out to everyone who is talking about dip buying that we are currently up less than a point for the day. We might make it to 1222 today, but there really isn't much upside here.

  • amokta

    Have we reached the summit yet, or are just at base camp?

  • gsavli

    interstingly enough, NQ is making lower highs, despite all dip buying.

    although, AAPL does look incredibly cheap here just below 270.

  • http://iberianviews.blogspot.com/ catracho

    well it looks like DAX may well be headed to 6500/6600 min ..
    as long as no “black swan event”
    http://www.screencast.com/t/YzFmOWU5

  • http://www.mylifemytrade.com MyLifeMyTrade

    I just did a cash advance $30k on my credit card. The rate of interest is 33% APR… I will buy 1000 shares of AAPL.

    Within 1 year.. AAPL shares will be $600. So, I will have made $33k and I will pay back a years worth of interest which is $10k.

    Do you think I should do this – LOL

  • http://www.mylifemytrade.com MyLifeMyTrade

    No upside.. who are you kidding.. Look at my dog RUT

  • http://www.mylifemytrade.com MyLifeMyTrade

    Just curious, apart from C why are financials weak in general.

  • http://www.mylifemytrade.com MyLifeMyTrade

    LOL… base camp… have you seen those cartoon movies where a cartoon is running up the hill and he keeps running even after he has reached the top of the hill. He stays suspended in the air TILL he looks below… and then it crashes..

    The market is up in the air.. It just needs to look below and it will come crashing down.

  • gsavli

    most defintely, actually, you gave me an idea to do the same. :)

  • rosocecasita

    Senate vote on financial reform,

    Sell the new regardless of if it opens for debate or doesn't

  • http://www.mylifemytrade.com MyLifeMyTrade

    what time does the vote happen ?

  • http://www.mylifemytrade.com MyLifeMyTrade

    why is NQ weak?

  • http://www.mylifemytrade.com MyLifeMyTrade

    Senate Majority Leader Harry Reid has set a procedural vote to begin debate on the bill for Monday at 5 pm EST.

  • rosocecasita

    no idea, its not even a vote -vote, its a 'Should we debate financial reform vote'

  • Rightside_ot_trade

    better call the vet, that puppy is sick!

  • http://www.mylifemytrade.com MyLifeMyTrade

    WTF man.. the ZL is down again… I could've really used it today

  • AlohaBear

    swing day

  • http://www.mylifemytrade.com MyLifeMyTrade

    At some point either today or tomorrow, ES will outperform NQ and TF…

    NQ will continue to be weak IMO

  • http://www.mylifemytrade.com MyLifeMyTrade

    IMO long is not the right trade now

    EDIT: I said the same thing at 850, 950, 1050, 1150

  • http://www.mylifemytrade.com MyLifeMyTrade

    Keep an eye on financials.. If they reverse.. we will go to the moon today.. Still I say “long is not the right trade”

  • amokta

    Fly me to the Moon !

  • rosocecasita

    Woot! I really respect your comments btw, so last week when I got my med turn put I was kinda upset when you where talking about being long!

    I don't mind being to the party early, it means I can eat more shrimp!

  • AlohaBear

    CAT conference call on the hour always interesting. and upbeat

  • ricebowl

    What are you trading, then?

  • http://www.mylifemytrade.com MyLifeMyTrade

    Folks double dip was here.. You all missed it.. first dip was march 2009 666.. The second dip was in march 2010 at 1166.. I read the rulebook.. The two dips dont have to be at the same level – LOL

  • http://www.portfoliotilt.com PortfolioTilt

    The Dow Transports is made up of companies that play an essential role in the the flow of goods throughout the economy, and the world. This targeted collection of industry is an excellent barometer of business activity. When the Transports are thriving, it is a good indication that investors attitudes about future business activity is positive. http://bit.ly/cPMIv8

  • http://www.mylifemytrade.com MyLifeMyTrade

    I never said I was trading.. Did I… I just been saying if long or short is the right side

  • BobbyLow

    Anybody have Zero working?

  • AlohaBear

    CAT's CEO Part of Obama economic team suprise

  • rosocecasita

    shezus, just get to 1223 if its so damn important so we can sell off..

    When the fuck is godot!?!?!?

  • AlohaBear

    CAT actual dealers increase 5% engine sales are flat growth only in asia

  • ricebowl

    Took profit on my FAS calls (+5.8%). Switched into SPY puts at 1219.

  • AlohaBear

    Shell gas boom and latin america ( 2 big orders ) helping company

  • ricebowl

    Patience… you'll get your sell-off — sooner rather than later. I'm shorting the crap out of this turd.

    How're the shrimp?

  • rosocecasita

    Overcooked & dry, and the Koolaid is all gone!

    ./throws_tantrum_for_negative_interest_rate_borrowing!

  • momac

    not for me

  • gmak

    Not yet. I think that this is the same old issue where the source data locks up the system after a Friday. Mole needs to address this, I think – or to resign himself to getting up early Monday AM to reset the system. :-)

  • captainboom

    It's all my fault. I subscribed to Zero over the weekend. Sorry.

  • rosocecasita

    PortfolioTilt… way to shamelessly link your blog around… without actually saying anything of use.

  • http://colechambers.com cc

    $VIX appears to be stalling here on this carry through rally today from Friday. If you are long here, I would at least be aware of the possibility of some end of month profit taking this week. Good luck to all, and thank you Gmak and Mole for the great content.

  • momac

    zero is working now

  • gmak

    you're welcome!

  • gmak

    A quick little update on SPX on the 5 min chart.

    The 9 and 34 pMA are in a bearish cross. SPX is now under the 9 pMA – which is pushing it down some more. I have a support arear around 1215.34 – 1217.72 (SPX), and secondary support at 1214.56 if this lets go (the first range is TD momentum and the bottom of an Ichi cloud. The second number is the price exhaustion if the TD momentum lets go down).

  • http://evilspeculator.com molecool

    Sorry guys – TOS had one of it's Monday episodes again…

  • gmak

    If you're into FX, I'm hearing that decent money is buying EUR and selling AUD and CAD to fund. Looks like a “sector rotation” play.

  • http://evilspeculator.com molecool

    I complained to them already but will do so again. Really sorry guys – I am doing what I can but my current obligations don't permit me to get up at 6:00am. I will again complain to them.

    I have also potted the Zero to NinjaTrader and am considering to host it out of there.

  • momac

    I don't think it missed much, so not to worry Mole. :-)

  • ricebowl

    Why do you think they'll take profit now when they didn't at the end of March or April?

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    a RUN to 1.38 is not incompatible with further downside

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    PT, you've been around so I'll give you some slack, but…

    1. USE TRANSPARENT LINK to your blog
    2. Describe in a nutshell your post

    Best regards from a nice hamster (but the evil hamster has a steel broom and is not afraid to use it)

  • gmak

    Ah yes. the old double negative play.

    ________________________________

  • http://colechambers.com cc

    Hi ricebowl, I think the $VIX is the biggest tell right now that I am really watching. I don't like how the market is making new highs but the $VIX is still up for the day. This tells me their is demand for protection at these levels, and that makes sense to me given the recent rally. Also, I have had some good success following the 60 min stochastic. I think if that rolls over early this week, it could pull down the daily stochastic with it into the end of the week.

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    I just heard a disturbance in the force as if thousands of bulls yelled at the same time

  • rosocecasita

    mmm Hamburgers! remember don't add salt when you make the patties, it drys them out. You want to season the meat, and only salt the outside right before they hit the grill.

    Makes them much less 'ball/chunky'. with less liquid leak when they are done!

    fuck I'm hungry now

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    only salt steaks when already grilling

  • Rightside_ot_trade

    if that continues, look like .9985 is a price support for CAD that could get taken out
    target .995 or .993
    Daily MACD turned down under slow line, rejected twice

  • amokta

    Buy & Hold is back – buy at the top & hold till the bottom

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    bull stampade came earlier (no k0%) ppt?

    1217 = confort
    1219 = limit
    1220 = PPT

  • rosocecasita

    Exactly!

    If you can even get away with no salt, its even better!

    Although I do like a dry rub (no salt) or a marinade for a full 2 days if I can get away with it!

    More Bull, No salt = Delicious!

  • http://www.portfoliotilt.com PortfolioTilt

    My apologies! I am making a note to ensure I use clean links from here on out. Will also provide a clear and concise summary of the content as well. Take care and thank you for being so courteous.

  • BobbyLow

    I'm still carrying a slightly negative delta since the Friday Close.

    Been doing a project outside in my Shed and keeping an eye on the Market from time to time.

    Days like today – up a little – down a little on SPX just try to suck me in with not much to trade on. It has only taken me years to realize that I don't have to make a trade everyday.

    Back to the Shed and we'll see if we get the 3PM Pumperooski for 9 Mondays in a row.

  • momac

    I have a question, how can you know ahead of time that it's going to be a slow day and not worth trading? What signs this morning showed you this? Thanks

  • http://www.mylifemytrade.com MyLifeMyTrade

    say hello to new ES highs by close.

  • http://www.mylifemytrade.com MyLifeMyTrade

    you can look at overnight range AND the range of past few days to get a good sense for how the range of the day might play out.

    With VIX low, I will say that 5-7 point intraday range is reasonable IMO

  • staylong

    “What I'm saying is that if you are a bear there is no sign of light at the end of the bull tunnel when you look at the longer-term picture – I'm talking a year out – for the stock market.

    Yes eventually we will have another bear market. But before that happens we will need to see dozens of sectors go below their 200-day moving averages and fall into bear markets of their own first. Assuming this process was to start today it would take a year for it to get advanced enough for us to worry about a new bear market starting for the major market averages and the entire stock market.

    Forget about the Elliot Wave people who cite some magic numbers where they say the market MUST top out. One got a lot of TV time calling for a crash last October and was wrong. Forget about people's opinions about the economy, the deficit, and future problems that may hit us. The fact is this is a powerful bull market. Maybe those things will become problems later, but they are not problems now.”
    __________________________

    http://www.wallstreetwindow.com/content/node/15255

  • http://colechambers.com cc

    Wow, is anyone else seeing that the FXI and EEM are trading together tick by tick exactly…interesting…

  • AlohaBear

    ABACUS will be the down fall of the market it will come to the light of the tunnel

  • gmak

    Let's see:

    1. You don't trade.
    2. You put binary-condition comments out with no backing, explanation, or charts
    3. You somehow expect people to intuit what you mean and to follow your claim when you have no skin in the game?

    What are you up to? If I am wrong, my sincere apologies. If not…. maybe you should look at another venue for your unsubstantiated “predictions”.

    We like intelligent people with good ideas. You may be one. So show us……

  • roncofooddehydrator

    I don't think we're going to hit highs today. Kinda disappointing to have a down Monday.

  • Tronacate

    RUT leads us lower here……

  • Tronacate

    Need the TF to take out lod and stay there………should be interesting into the close

  • Tronacate

    There we go

  • Thunder44

    These have been a couple of nice daytrade shorts today.http://screencast.com/t/NDFhNzMxZm

  • Thunder44
  • Tronacate

    NQ looks to have really fallen out of a bearish ascending wedge on the 60min……….agree?

  • BobbyLow

    I never know anything for sure in this game.

    The main signs that I used was that the SPX was in a very tight range and had been in one all day. Trading a tight range leads to Whipsaw Action which can be very expensive so I'm better of not doing it.

    I was satisfied with my current position if because it was slightly negative. OTOH, if the Market Bounced up hard while I was outside, it was not going to hurt me very much.

    So for me at that time, it was more productive to work on my project outside and come back in at 3 PM which what I did. I found that my account is slightly positive so all is OK.

    Lastly, after getting beat for so long, I've been trading smaller positions so that also reduces worry levels.

  • skynard

    Next support 1211 then 1197 SPX

  • Tronacate

    NQ….looks like backtest on 5min……chance we could sell off into the close…….eod selloffs have not been the norm lately though……

  • Tronacate

    TF had a higher volume doji on 5 min……..now it looks like it could move lower too

  • jacksoo

    isn't that tantamount to treason….

  • Thunder44

    IT feels like the push to the summit on everest,Come on just a few more steps.

  • Tronacate

    Yeah…..kinda ,eh?

  • Tronacate

    TRIN trend looks to have turned higher…..we'll see

  • http://chartsandthat.blogspot.com/ ultra
  • jacksoo

    One of these days those dips will just keep coming even as the bulls pile
    on….

  • http://evilspeculator.com molecool

    My weekend post is now available to everyone:

    http://evilspeculator.com/?p=15731

  • Tronacate

    TF looks like a small 5th wave coming up on 5 min……

  • roncofooddehydrator

    Thanks mole, great stuff.

  • gsavli

    looks more like a regular channel BS to me:

    http://www.uploadgeek.com/share-EC63_4BD5DFBA.html

  • amokta

    great read!

  • Tronacate

    Nice dist candle on TF 5 min…….see if it takes out LOD by the close

  • Tronacate

    There we go

  • Tronacate

    I expect the NQ to follow suit AH……..

  • Tronacate

    Agree

  • amokta

    Is 'the' top in today? Is P3 starting today?
    It feels a bit zany?

  • ricebowl

    No. I said Friday that Monday or Tuesday would see some selling. My expectation is that we sell a little more tomorrow to get to the 1205-1208 range, and then we set fresh highs. I don't think the top is in. I went delta neutral earlier today, and tomorrow I'm going to be offloading all my puts at the bottom.

    BTW, Mole says that we're headed to 1250 ~ 1260, and Mole is generally right.

  • newbear

    I don't think the top is in still enough bears left so more to go.

  • Gold_Gerb

    nothing is ever CERTAIN.
    however, I have a favorite.
    Open your favorite ticker, and set the candles to 30 or 60 minutes.
    Do you see UP and DOWN candles of similar matching length? and location?
    if so, take the day off. the market is now wasting YOUR time.

  • amokta

    good point. lets see what happens

  • ricebowl

    So if I understand correctly you are saying that when ^VIX and SPX are up, the cost of protection is going up because of a perceived imminent risk of downside?

    I use ^VIX all the time, but unfortunately I am ignorant as to how it works.

  • ricebowl

    I'd say the steaks are almost marinated and ready to grill.

  • ricebowl

    Well played, sir. I wonder how many others could take a lesson in risk management from you. If you can walk away from the screen without worrying every 5 seconds about the market, then you're trading correctly. Sadly, this is the hardest lesson to learn.

  • ricebowl

    Personally, I listen to my barber. He's the most credible source of information on the market I know.

    Outside of Wonderland, though, you would have to be shit stupid to not at *least* anticipate a significant correction from current levels — and that's assuming that we're in a bull market! The current bull market looks absolutely nothing like real bull markets of the past. It's a buying orgy. Using long-term valuations, the market is horribly overpriced right now. Even most of the pundits at least recognize that when rates rise a little more equities will get hit as money pours into bonds.

    Finally, as for Prechter, most of us figured out a long time ago that he's full of shit.

  • rosocecasita

    god I'm fucking hungry, both metaphorically and physically, forgot lunch today.

  • BobbyLow

    Thanks RB.

    And you are spot on about Interest Rates. If a person believes that we are in a sustained recovery “new paradigm bull market” then one also should believe that near 0 interest rates are soon to be history.

    So the longer that the Fed Leaves Interest Rates alone and does not at least change the wording to be more hawkish in their statement, the longer that I'll consider that this “new bull market” is absolute Bull Shit.

    Bulls are about as complacent as they can get right now. So it'll be interesting to see what the future brings for them. LOL

  • skynard

    From “Thechartpatterntrader” stockcharts site. Hope he does not mind me sharing this chart. It is a thing of beauty.

    http://stockcharts.com/c-sc/sc?s=$INDU&p=W&yr=4

  • amokta

    we keep passing fibbonaci retracement levels like lamp posts on a highway to nowhere

  • amokta

    intersting post from SH^RK a month ago: http://evilrefugees.tumblr.com/post/468332355
    “I think we see DOW 12,200ish by Sept 10th but most importantly is to look at the monthly DOW chart and the previous window (from a monthly perspective, traders love symmetry and this resembles 1900s decade and 1970s decade, looks like we will complete symmetry which is around 12/13 candles. As the window starts to close (at the upper BB on dow monthly), there will be tremendous bearish divergence and if you add federal reserve increase rates to that, massive selloff but not a panic. The difference is, tehre will be a relief rally after the selloff but wont make a new high. From there, we are in a bear market for two years, completing october 2012. Cycles cycles cycles if u know cycles and capital flow analysis..u got a leg up on this shyt. Cycles (Business, Economic Confidence, Political). Right now in my reading and writings, im tying together how politics, federal reserve, and stock market tie into together and discovered if you see things through the eyes of a world banker and through “systems”, instead of just United States Patriotism, its a clearer vision. Last but not least, a quick note… Everyone has to face criteria, imposed on us by the uber rich, that will dictate how financially free we will ever be, and its 1) Taxes 2) Debt 3) Inflation 4) 401k (trading and investing elsewhere is a bit different) . IF you think like the wealthy in those 4 areas and learn to be less victimized by them, you stand a greater chance at success. :) SH^RK is going to return to deep water for now to skim the bottom for comode seats and license plates. Peace!”
    -makes a change from 'i see red' comments!

  • vic_vega

    These are very good too, and (a little 'too') similar: http://midasfinancialmarkets.blogspot.com/2010/

  • http://www.portfoliotilt.com PortfolioTilt

    David offers a look at the go-go stocks that have been ripping as of late. First, a brief look at the general indices, followed by an analysis of AAPL ASH CMG NFLX http://portfoliotilt.com/stock-market-analysis/

  • skynard

    Understood, although many institutions do pay attention to these retracement levels.

  • yudhisthira

    Russell 2000 hit the 78.6% retrace of entire 2007-2009 decline today.
    Is everyone expecting an ascending triangle?
    Hourly RUT
    http://screencast.com/t/NGY0YTI0MG

    The nasdaq composite is above the 78.6% retracement
    Quite a bull market.
    Hourly
    http://screencast.com/t/NGYxYmY4NjA

  • http://oahutrading.blogspot.com/ steveo77

    There are boatloads of bearish pattern out there, rising wedges, rectangle tops, pipe tops, ascending triangles (could be bearish, depends on really what wave the stock price is in).

    Check out the chart of charts here — this shows charts actually broken out. There arent ANY bearish ones! But plenty of them ready to break out. The horror, the horror.

    http://oahutrading.blogspot.com/2010/04/pattern

    And of course, investor sentiment is as high as their complacency. Molecool has some secret sauce indicator that incated last Friday a blatant federal manipulation. If you can “backstop” a bank, why not the whole market….

    And for those who want to somehow insist that federal intervention in the market is not being done, why not just read the Federal Reserve notes and speeches from Bernanke, they come right out and say they are supporting the equities market, just as they put a huge bid under the bond market last year also. What I am saying is—they admit it!

    Many timing models say the next 2 weeks is ripe for a turn down, and even some Astro events would imply big volatility soon.

    But the big printing press of the Fed's is unlimited. And “they” can buy every dip, until confidence comes back. A deadly dangerous game they play…the deeper we get, the more there is at risk, which then makes sense to “invest” even more to protect the trillions that have already been thrown at this problem. Trillions invested, a few hundred billion in GDP as the result so far….not a good return on investment IMO.

    But keep in mind….they can keep buying the dips, to “restore wealth”. “Equities” sounds so solid, but it has nothing to do with wealth. A stock price is only a fleeting electron passing through a microchip, that is what our entire system is based on. The current P/E ratio is around 23, that is if you believe the earnings, it might really be around 60 or even 100. PE of 23 occurs at tops, not so called recoveries or bottoms.

    This is all a bunch of hogwash, but standing in front of the printing presses could doom your account.

  • http://evilspeculator.com molecool

    $DJI hit 61.8% fib line today.

  • http://evilspeculator.com molecool

    Enough spamming for you pal… be gone!

  • http://evilspeculator.com molecool

    Sorry MLMT but I agree with gmak – this is becoming unproductive. Last warning to cut down on the noise otherwise I might have to press the eject button.

    Are you subscribed to the Zero at least? It seems you are completely lost mate – are you having trouble interpreting it?

  • http://evilspeculator.com molecool

    Holiday tape – just go long before a holiday week 😉

  • Onorio

    Carefully long AUD @ 0.9240

  • bobthehorse

    You are too US-centric. Look at China – it topped last August. Look at the Baltic Dry – topped in November. Look at Europe Stoxx 50 – topped in Jan, currently at Sep 09 levels, risk currencies like Sterling – topped in Aug and again in Nov, DXY bottomed in Nov.

    The European Banks Index (SX7E) topped in October, now 18.6% off the high.

    If you are shorting the S&P it's been tough as the US is benefiting from the weaker dollar last year which is boosting growth domestically now but you need to look further afield. Where are the big problems in the world? Europe clearly so you would expect that to be reflected there first and within its banks. The second phase will be the growth impact from fiscal consolidation in Europe and that is when it starts to impact the rest of the world.

  • bobthehorse

    Portugal 10yr now at 5.45%. Markets are going to force either a break-up of the EU, default by some of its members or a blank cheque from the Germans.

  • bobthehorse

    Gmak – how long until your post? I can write something here or wait

  • Onorio

    I believe in the 2nd option, so than all Europe can default.

  • gsavli

    you can write it here and then c/p there. better twice than none.

  • fisheggs

    Agreed

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    Nice!

    Some hamster comments (and do feel free to correct and critic any of my views)

    0. About the divergences… remember my first comment a year ago? about november 2008 being bottom and march 2009 being a B gone bad?

    1. The hamster loves expanding triangles, could we have a double bottom of e of 5 of C of GOLD:SILVER to 59 (equities top) and then make new highs i.e. equities drop to fight the war for sub-1050 ?

    2. Bull/Bear might make a crazy above 4 value before we drop

    3. I still think that limiting to 2006 onwards hides the real bear nightmare, the 2003-2004 period that might be the script being replayed

    best regards

  • gsavli

    wooohooo, there is a bid for NQ at 2038.00 for 2400 pcs.

    never seen anything like this before out of regular hours.

  • bobthehorse

    After being broadly absent for a couple of weeks on my volcation in Bangkok, I wanted to update people on my thoughts. We have been running a decent short position since March (when S&P hit 1140) through Eurostoxx at 2900. That is pretty much exactly where the Eurostoxx is now after recent under-performance. I can only justify holding the position this long by explaining again the structure within which I trade.

    Equities are an asset class which represent expectations for nominal growth. So the factors which affect equities are 1) Real Growth; 2) Inflation and 3) Sentiment. Let's look at each of these.

    On the Real Growth side – we have been bullish since Jan 2009. We are in a big inventory restocking cycle – I was banging on about this last year on this site. BUT – a lot of the indicators suggest this is peaking. Leading indicators are losing momentum and the key is the second derivative. It seems clear to me that we have stopped accelerating – this wave of positive earnings announcements reflect what has happened but going forward, we should not expect the same magnitude.

    2) Inflation – this is the big one. The Fed (and others) have been successful in offsetting the deflationary pressure of deleveraging and making markets fear inflation. That has forced cash out of money market funds into inflation protected assets like equities. That can potentially continue further but the key to watch for would be signs of stress in sovereign debt as that would reflect fears that inflation was beginning to get out of control. You saw the first signs of this last month with some poor US bond auctions and the 10yr breaking 4%. Still early days and now the solvency concerns in Europe are causing a flight to 'quality' and US bonds have rallied but we saw the first cracks there.

    3) Sentiment – as noted on this blog, Put/Call, ISEE metrics at all-time highs. Enough said.

    So if growth isn't accelerating, and bond markets are starting to put the pressure on governments to hold back inflation, and sentiment is already at max – what are the odds favouring? Clearly a correction of intermediate-term magnitude.

    The primary reason why I think this could be big is the structure of the EU. It is so inflexible that it prevents countries using a partial (and temporary) devaluation of their currency to stimulate growth to help them grow out of a fiscal deficit. So countries like Greece and Portugal really have very little options other than default or very severe deflation. Deflation is a path to social unrest so I think default is actually the best option for these countries. Preferably outside the Euro-area as then the haircut on the bonds could be lower (although there would also be an FX hit). But looking at the Greek economic numbers, for Greece to get any meaningful benefit from a default, the haircut needs to be at least 40% but most bonds are only pricing in half of that.

    The problem for the world is that Europe growth is going to be very poor. The EU is like a massive company with lots of cross-holdings and intra-company sales. If the PIGS default, it's mainly European banks which take the hit. If the PIGS have a huge fiscal tightening, it's the EU which suffers most as they are all big export markets for each other. Basically, the EU has a big problem unless they can devalue the Euro to help out the PIGS.

    And Europe is still a huge market in global terms and this will start to impact on US. When it does, the S&P will start to reflect the problems which it has so far tried to ignore.

  • fisheggs

    Great post Bob. Good to have you back in one piece.

    Kudos to you for holding your short and your reasoning is sound, however this market is not the reasoning type. I still have hope that the markets will one day reflect what is actually going on rather than living in a parallel.
    Things in Europe will get ugly – No doubt.

    Your thoughts on the Euro Bob? I heard mumblings of Germany (I think) asking Greece to GTFO the Euro(zone). With the remaining PIGS in a similar situation, what does this hold in store for the Euro?

  • http://iberianviews.blogspot.com/ catracho

    How does the UK fit into all this? Possible out-performance if the proverbial hits the fan in Europe…, once election jitters are out of the way?

  • bobthehorse

    Well European Banks are 18% off the high so it's not all markets which are ignoring it. Had we been short S&P futures, it would have hurt for sure.

    I don;t know whether Greece will leave the EU – I think they should and then default but this is about politics. How much do the Germans want to pay to keep the EU together? Can the Euro survive if the greeks default within the EU (I don;t see why not, it just means different funding costs for all). There are several options, none of them great but we just need to see what the politicians choose.

  • bobthehorse

    Well the UK can devalue Sterling which they will have to do so from that perspective they are better off. The UK is not really growing right now and Europe is the main export market so the £ will need to go a lot lower to help the UK. At least $1.20 I think. The election is making things volatile but whatever the outcome, the £ needs to be lower to help the UK.

  • gmak

    I'm going to copy Bob's latest comment to the new post.

    http://evilspeculator.com/?p=15767

    NEW POST
    NEW POST
    NEW POST
    NEW POST
    NEW POST
    NEW POST

  • gmak

    Bob:

    Thanks for your stellar comment. I copied it into the next post as the first comment – with full attribution, if you havent' seen this already.

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