May I Interest You In A Bear Market?

For almost three years I have been watching the permabears fall into one trap after the other. Especially on the equities side we have all becoming accustomed to one bearish setup after the other disappear into thin air and turning into a short squeeze from hades. And it’s rather poignant as there are red candles galore if you happen to enjoy trading bear markets.

Maybe your remote ancestors have a Viking or two mixed in and you somehow love to watch things crash and burn. Or perhaps you have a sadistic streak and panic in the market somehow gets you off. Heck, maybe you didn’t get breast fed as a baby – your mommy didn’t love you enough – your dad was a drunk – who cares? Whatever the reason – if you love bearish tape then right now cocoa is your uncle:

That’s right – when’s the last time you saw the SPX close down eleven consecutive days? Well, it only happened twice since 1950. Cocoa however has been on a rampage – to the downside. I posted about it a week or so ago and told everyone to not even think about bottom picking in the commodities market – and now you know why.

NIB is a good ETF for you commodity shy retail rats out there. What I’m seeing here is an exponential curve to the downside. Frankly, I am getting giddy at the prospect of trading the swing up – whenever it’s coming. As soon as I see signs of a reversal I will of course chime in here.

But the lesson to be learned is to not be married to one market only. Commodities are not commonly traded among retail traders but fortunately there are many ETFs out there to match. Depending on volume you may get screwed a bit in the spread but on a big move that’s the price of admission.

But of course you can’t help yourself and equities are what everyone’s talking about most of the time. The S&P 500 bounced exactly where I expected it to – either at 1230 or at 1200. Looks like the bulls got lucky – thus far – I wouldn’t be surprised to see one final drop lower. But either way there appears to be a nice inverse H&S pattern in development, the resolution of which would get us 1380. Let’s wait and see – in the interim I have some commodity setups worth considering, please step into my poorly decorated Christmas lair:
[amprotect=nonmember] More charts and cynical commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero or Geronimo subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
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Precious metals to be more precise. Gold has been bouncing off its daily 1704 NLSL plus we have that 25-day SMA a bit further below near 1675 (and now dropping).

The long term chart is also rather interesting in that the 25-week SMA has served as reliable support – thus far. Thus, not a bad spot to get positioned in either direction – I would be long now and short on a breach of that daily NLSL.

Let me sweeting things up a bit with sugar. First, take a peek at the daily panel – that 23.4 NLSL thus far has been rejected.

If it fails then we have weekly support at 22.26 and monthly support at 22.35 – where is also where both the daily lower 25-day BB and lower 100-day BB line are lining up. Which means I want to be long there – and if breached (my favorite scenario) there’s nothing but air below. Either way – I would very much enjoy seeing sugar trade around 22.3. In case you wonder – a good matching ETF is SGG. There are even SGG options but you could drive a German tank through those ATM spreads.

Cheers,