Any Given Sunday

Any given Sunday I pull a chair and sit down at my desk, deep somewhere in the murky depths of the evil lair, and think about what I’m going to tell my rats about the coming week. Often my mind is filled with a furball of information I want to convey, so I just start hacking and it somehow all falls into place – a chart here and a chart there. By the time I’m done I’ve spent five hours or more and ever so often there is a message there, something to hang on to, a game plan for the coming week. It’s not a crystal ball by any measure, but if nothing else I hope that I have been able offer key technical analysis preventing a sudden game change from completely wiping you out. My claim to fame for last Sunday’s post should probably be this chart:

Bear trap indeed…. Of course I didn’t expect to find the Spiders at 94 the following Friday either – but at least I hope that I kept you guys from getting snapped in half.

But today’s post will be different. I won’t post a lot of charts – most of them are conflicting at best and useless at worst right now. Technical analysis has its limits and although I am going to offer three high probability scenarios they should not be considered the core message of this post.

What is a lot more important tonight – what I want to ingrain into your puny rodent brains – is the bigger picture. I have seen a lot of fellow bears falter in the past few days. Blog traffic is slowing down, most of you are angry and frustrated. One renowned high profile bear, who I shan’t name as I deeply respect him, has even gone so far to consider the possibility of a new bull market and that 666 might have been the end of this recession. Of course, nothing could be further from the truth – but even the staunchest bear might in a moment of crisis be seduced by the dark side. On Saturday my bullshit sensors I installed last fall in the evil lair issued a code red  – I stepped in immediately and performed an emergency exorcism on that said individual, and I am happy to announce that the demon was successfully expelled and trapped in a device I managed from the Ghostbusters set back in the late 80s:

BTW, does someone have a 2GW fusion energizer pack? The batteries on this one are running out… oh boy…

Anyway, here’s today’s exercise: Just for a moment I want you to forget about your charts – forget about last week’s bear squeeze rally – the money you might have lost – the anger you felt when the Feds threw us one curve ball after the other or changed the rules in mid game. Forget about all those consolidations that bounced back way ahead of their expected potential – forget about the IOU you just received instead of your eagerly awaited tax return – the lay-off notice you were handed from your employer. Forget about all that for a moment.

Just fade out the noise.

We are getting closer – I can smell it – just watch bubble vision these days. Resident CNBC court jester Dennis Kneale recently announced on his freak show that the ‘recession ended in June’. Meanwhile Goldman is shoveling out huge (tax payer sponsored) bonuses for the past quarter. It really didn’t take much – did it? After extreme pessimism in early March good ole’ greed and irrational bullish exuberance have returned in four months flat. Which is exactly what I predicted late February, remember?

The 2007 bubble mentality is back with a vengeance! We’re back to business and the status quo has been preserved. Yeeeeeehaaaaaa!!!!

Unfortunately it’s all an illusion – it doesn’t exist. What you see on your SPX chart is not a reflection of the state of the economy or even the stock market – it’s pure investor sentiment – or as Robert Prechter calls it: socionomics. This rally has been fueled by hope, wishful thinking, blatant and unlawful market manipulation, tax payer backed private bailouts, high frequency trading bots, and perhaps even the tooth fairy. I’m not going to waste time and energy rehashing the myriads of reasons of why this rally has been running on vapor.

I think I’ve made myself abundantly clear in the past few months and nothing, absolutely nothing, has changed since then. We are in a depression and the SPX will breach its 666 low within the next 12 months – maybe even before this year comes to a close.

Which is why I have told you guys over and over again to keep your powder dry. That’s also why I have played it very small and never had more than 20% of my assets in the market since late February. Of course it’s easy to get sucked into trades here and there – we can’t help it – that’s what we do. But even if you took a hit in the first half of this year – forget about it. Focus on what’s ahead.

The golden rainbow lays beyond all the hype and the noise you hear from those bullish pundits. Let them celebrate and let them pop the champagne as we breach their silly moving averages and watch them push the tape one last spike to the upside. None of that matters. What matters is that you are ready to short the shit out of this market at the end of this summer – and then grab a cigar and watch the freak show unfold – I’ve got front row seats reserved for all of you.

In the meantime it’s important that we act as a team and support each other. I want all of you to be focused like samurai swinging his katana:

Let’s not bitch, let’s not moan about whatever gyrations we might see in the weeks ahead – let’s devote ourselves to a single purpose, which is to collect as much evidence as possible so that we’ll be able to get our asses into short positions close to the top. If we miss it by a week or two – it won’t matter. What will matter however will be six months that will follow this sucker rally – if you play this one right you might still have a fat gut or a bitching wife, but cash in your trading account will not be one of your problems.

I feel like a coach right now – we are so close and I see you guys suffer so much. Some of you are distraught and ready to throw in the towel. But we are so close, rats – I can smell it! So, what I really think you guys need today is a good pep talk. If I was so lucky to be Al Pacino just for one day (I’d give one of my limbs for his voice for sure) – this is what I would say:

Either we win as a team – or we die as individuals. Hell yeah – every time I listen to this clip I want to go out there and tackle somebody! 🙂

BTW – we are only three weeks away from preseason – ’bout fucking time! Would you believe it – I actually helped build this site – the video section was part of what I helped put together during the NFL.com site redesign. But that’s a story for a different day…

Alright, let’s pull together and focus on the mission, rats – fade the noise – keep your powder dry – focus on picking the top. We have time – there is no rush. But – make no mistake – if we miss this one we will have a tough time trading in a year from now because deep inside of us we will know that we missed the shorting opportunity of a lifetime. So, let’s not fuck this up, ladies and leeches, shall we?

In the meantime we of course trade the long side when we see an opportunity – but this is not where you should expect to make the big money this year. We have come a long way and maybe we’ve got another 30% to go – but that’ll be monopoly money compared with what we’ll rake in later this year. Just watch me…

As a side note: Can you imagine the panic that will set in later this year when the public is starting to realize that they all have been had? How will the public respond when GS and other large banks suddenly start logging record losses again? It’s gonna get coyote ugly and I’m going to enjoy every fucking minute of it. Yes, maybe I am truly evil – but some people only learn the hard way (plus it’s so damn entertaining seeing idiots suffer).

Monday should be pretty straight forward – either we drop into a fourth wave right away (Soylent Orange) or we push a bit higher to scare out the last remaining hobby bears (Soylent Green). If we get the latter I think 952-955 should be where we hit the proverbial wall. In both cases we should not drop much further than 920 or 912 – a lot of resistance there and the bulls will have little tolerance for having their coveted 900 mark being challenged yet again.

And yes, I agree with Fujisan that the Head & Shoulder is not dead and buried yet – on the chart that would be Soylent Blue. For this one to play out we would need to start dropping hard and fast, starting Monday and without major interruptions pretty much all next week. The open interest in the August SPY option chain she posted is quite interesting and it would do wonders to all the puts I held going into the weekend.

This is the only ‘momentum chart’ I will post today and it’s actually my favorite. In all my time trading and analyzing the markets I have never ever seen anything like the current readings on the NYSE New Highs/Lows Index. But after several weeks of looking at all three MAs paint a flatline I now believe that I know what it means. In a nutshell – the day we start seeing these MAs detach and move to the downside – no matter what direction equities are taken at that time – will be when we should start thinking about long term short positions. The 10-day will be first – then followed by the 20-day – once the 50-day starts sinking we should be close to the peak or slightly beyond it.

Thanks to some very supportive rat minions I am now able to provide up to date charts on my extra evil BAA-TYX spread chart, which pleases me in a big way and going forward should give us up to date clues on where the tape is heading. Thus far it’s clear that the spread continued to narrow, and a narrowing credit spread between what’s considered one step above junk bonds and the (supposedly) safest treasuries available points towards either Soylent Blue or Green.

The magic number I see looking at this Dollar chart is 76 – seems that we’re dropping into a 5th wave here – as I suggested last week. It’s been taking a lot longer than we hoped for this one to play out but I think the ‘powers that be’ wanted to keep this one in the box as part of the suprise party we walked into last week.

I’m unclear about the count in the 10-year treasury but it seems to me that we should see a bounce around the 115-20 mark. At least that’s where I’ll probably grab a few calls just for shits and giggles.

Silver is on a bear squeezing mission right now and we’ll leave it alone until about 14.25 – that’s where I’ll short the proverbial shit out of it.

A great way to perhaps gauge a peak in the current Silver and Gold rallies will be a u-turn in the Gold:Silver ratio. Keep an eye on this thing and if it starts pushing to the upside you know what to do.

That’s all I got for tonight – sorry for the late post but it took me several hours to put it together.

Cheers,

Mole